POSCO-India Pvt. Ltd, Bhubaneswar V. ACIT, Bhubaneswar

CO 66/CTK/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9684 (ITAT-CUTTACK)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B K MAHAPATRA
• Assessee Lawyers: K AJAY KUMAR
• Keywords: Business income; Transfer pricing; Opportunity of being heard; International transaction; Capital receipt; Revised return; Revenue expenditure
• Section: 14A; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 401/CTK/2013 (ASSESSMENT YEAR-2009-10) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(2), BHUBANESWAR (APPELLANT) VS. POSCO INDIA PRIVATE LIMITED 7 TH FLOOR, FORTUNE TOWER, NAYAPALLI, BHUBANESWAR. PAN:AADCP6735B (RESPONDENT) C.O. NO. 66/CTK/2013 ARISING OUT OF ITA NO. 401/CTK/2013 (ASSESSMENT YEAR-2009-10) POSCO INDIA PRIVATE LIMITED 7 TH FLOOR, FORTUNE TOWER, NAYAPALLI, BHUBANESWAR. PAN:AADCP6735B (OBJECTOR) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(2), BHUBANESWAR (RESPONDENT) APPELLANT BY : SHRI K. AJAY KUMAR, DR RESPONDENT BY : SHRI B.K. MAHAPATRA, AR DATE OF HEARING : 30/04/2014 DATE OF PRONOUNCEMENT : 27/06/2014 O R D E R PER BENCH: THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A)-BHUBANESWAR, DATED 26.03.2013 FOR THE ASSESSMENT YEAR 2009-10 AND C.O. HAS BEEN FILED BY THE ASSESSEE. 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE INTEREST OF RS.3,26,68,414/- EARNED BY THE ASSESSEE ON SURPLUS FUNDS WAS NOT TAXABLE AS INCOME AND WAS TO BE CAPITALISED. 2. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE CONTENTIONS OF THE ASSESSEE AND NO ACCEPTING THE FINDINGS OF THE AO IN VIOLATION OF RULE 46A OF THE IT RULES. 2.1. THE BRIEF FACTS OF THE CASE THE ASSESSEE COMPANY, POSCO-INDIA PRIVATE LIMITED (POSCO) IS A COMPANY FORMED TO UNDERTAKE A GREENFIELD PROJECT FOR SETTING UP AN INTEGRATED STEEL PLANT. DURING THE YEAR THE ASSESSEE HAS FILED THE OF INCOME OF RS. NIL. THE ASSESSEE COMPANY HAS NOT YET STARTED THE BUSINESS OPERATION, BUT HAS DERIVED INTEREST INCOME DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE IS A FOREIGN COMPANY, SINCE THE INTERNATIONAL TRANSACTION MADE BY THE ASSESSEE DOES NOT EXCEED RS. 5 CRORES, THERE WAS NO NEED TO REFER THE CASE TO THE TRANSFER PRICING OFFICER U/S. 92CA OF THE I.T. ACT, 1961. THE ASSESSEE HAS SHOWN GROSS INTEREST OF RS. 3,26,68,434/-, THE ASSESSEE HAS SHOWN THE TOTAL INCOME TO NIL FOLLOWING THE DELHI COURTS DECISION IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED VS. ITO 315 ITR 255 (2009)(DEL.) THE ASSESSEE CONTENDED BEFORE AO THAT DUE TO THE LAND ACQUISITION PROBLEM THERE WAS A DELAY IN IMPLEMENTING THE PROJECT. THAT BEING THE REASON THE SURPLUS WITH THE ASSESSEE COMPANY TEMPORARILY DEPOSITED WITH BANKS AND EARNING INTEREST THEREON. THE A/R RELIED UPON THE DECISION OF DELHI HIGH COURT AND CLAIMED THAT THE INTEREST INCOME WAS A CAPITAL RECEIPT AND NOT TAXABLE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DECISION OF DELHI HIGH COURT HAS HEAVILY RELIED ON THE DECISION OF THE APEX COURT ON THE DECISION OF COMMISSIONER OF INCOME TAX VS. BOKARO STEEL LIMITED 236 ITR 315 (SC) WHILE THE AO HAS HELD THAT IN THE CASE OF BOKARO STEEL LIMITED 236 ITR 315 (SC) THE ASSESSEE HAS GIVEN THE FUND TO THE CONTRACTOR WHILE IN THIS CASE THE FACTS ARE SIMILAR TO THE DECISION OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. 227 ITR 172, THEREFORE, FOLLOWING THE DECISION OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD., THE ASSESSEES INCOME WAS TAXED U/S. 56 OF THE I.T. ACT. 2.2. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 3. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. 3. BEFORE ME, THE AR OF THE APPELLANT HAS NOW FILED A CONSOLIDATED ORDER OF THE ITAT, CUTTAK BENCH, CUTTAK IN ITA NOS. 186, 462 AND 461/CTK/2011 DTD. 14.02.2013 IN THE CASE OF THIS VERY APPELLANT FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09 (THE THREE ASSESSMENT YEARS IMMEDIATELY PROCEEDING ASSESMENT YEAR IN APPEAL BEFORE ME). IN THIS ORDER THE ITAT HAVE TAKEN SLIGHTLY VARYING STANDS, ONE FOR THE IMMEDIATELY PRECEDING YEAR I.E. 2008-09 AND OTHER FOR THE EARLIER TWO YEARS I.E. 2006-07 AND 2007- 08. FOR ASSESSMENT YEAR 2008-09 IT HAS BEEN HELD THAT INTEREST FROM THE DEPOSIT CANNOT BE TAXED AS INCOME FROM OTHER SOURCES BECAUSE THE WHOLE INTEREST IS TO BE TREATED AS CAPITALIZED. FOR THE OTHER TWO YEARS, THE ISSUE WAS RESTORED TO THE FILES OF THE AO FOR A DENOVO CONSIDERATION AND FINDING. THE AO WAS DIRECTED TO EXAMINE THE STAND OF THE APPELLANT TAKEN BEFORE THE ITAT REGARDING THE EXACT NATURE OF THE DEPOSIT (WHETHER PARKING OF SHARE CAPITAL OR PARKING OF SURPLUS GENERATED IN BUSINESS) AND TO TAKE AN APPROPRIATE DECISION. 4. SINCE THE CASE OF ASSESSMENT YEAR 2009-10 IS SIMILAR TO THE CASE OF 2008-09, I HAVE TO DIRECT THE AO TO FOLLOW THE STAND TAKEN BY THE ITAT FOR ASSESSMENT YEAR 2008-09. ACCORDINGLY, THE INTEREST EARNED DURING THE YEAR SHOULD BE ALLOWED TO BE CAPITALIZED AND IT CANNOT BE TAXED AS INCOME OF THE YEAR 2.3. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS RELIED UPON THE DECISION OF THE ASSESSEES OWN CASE IN ITA NOS. 186, 460 AND 461/CTK/2011, A.Y.2006-07, 2007-08 AND 2008-09. WE HAVE GONE THROUGH THE DECISION OF TRIBUNAL WHEREIN THE TRIBUNAL HAS CONSIDERED THE VARIOUS JUDGEMENTS OF SUPREME COURT INCLUDING THE DECISION OF TUTICORIN ALKALI CHEMICALS & FERLILIZERS LTD VS. CIT AND BOKARO STEEL LTD. 236 ITR 315(SC) AND ULTIMATELY TRIBUNAL HAS HELD AS UNDER : 5. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF CASE AS BROUGHT ON RECORD BY THE AUTHORITIES BELOW, WE ARE INCLINED TO FIND THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE APPROPRIATE TO THE EXTENT THAT IT WAS NEVER A CHANGE OF STANCE ON THE FACTS REMAINING THE SAME BEGINNING FROM ASSESSMENT YEAR 2006-07. IT WAS A MISCONSTRUCTION OF THE FACTS FOR THE PURPOSE OF FINDING APPLICABILITY OF THE PROVISIONS OF ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD V. CIT (SUPRA). THE LAW ENUNCIATED IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD V. CIT(SUPRA) CANNOT ALONE BE CONSIDERED AS FAVORING REVENUE INSOFAR AS IT ALSO TALKS ABOUT CAPITALIZATION OF THE INTEREST AND THE CIRCUMSTANCES, WHICH CIRCUMSTANCES HAVE BEEN DEALT WITH BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA OIL PANIPAT POWER CONSORTIUM LTD V. ITO (SUPRA) AND FURTHER MORE IN THE CASE OF NTPC SAIL POWER COMPANY PVT. LTD., V. CIT DECIDED ON 4. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. 17.07.2012 IN ITA NO.1238/2011 (COPY PLACED ON RECORD) WHICH HAS ALSO BEEN RELIED ON BY THE LEARNED COUNSEL OF THE ASSESSEE. THE LEARNED COUNSEL OF. THE ASSESSEE HAS SUBMITTED THE FINANCIAL STATEMENTS DULY AUDITED UNDER THE PROVISIONS OF THE I.T. ACT AS WELL AS UNDER THE COMPANIES ACT WHICH HAVE BEEN VERIFIED BY THE ASSESSING OFFICER REQUIRING NO REFERENCE TO BE MADE TO THE TRANSFER PRICING OFFICER UNDER THE PROVISIONS OF SECTION 92CA. IN OTHER WORDS, NO BUSINESS INCOME HAS BEEN GENERATED BY THE ASSESSEE. THE EXPENDITURE CLAIMED THEREFORE WAS ONLY FOR THE PURPOSE OF SETTING UP THE PROJECT ENVISAGED AND THERE IS NO METHOD FOR BALANCING INTEREST, IF ANY, PASSED ON TO THE SHARE HOLDERS ON ACCOUNT OF DIVIDEND OR BUSINESS INCOME BY THE ASSESSEE. THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE ACTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUSINESS AND THE FUNDS WHICH ARE GARNERED ARE INEXTRICABLY CONNECTED TO THE SETTING UP OF THE PLANT. THE CLUE IS PERHAPS AVAIL-ABLE IN SECTION 3 OF THE ACT WHICH STATES THAT FOR NEWLY SET UP BUSINESS THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS. THEREFORE, AS PER THE PROVISION OF SECTION 4 OF THE ACT WHICH IS THE CHARGING SECTION INCOME WHICH TO AN ASSESSEE FROM THE DATE OF SETTING OF THE BUSINESS BUT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDING ON WHETHER IT IS OF A REVENUE NATURE OR CAPITAL RECEIPT. THE INCOME OF A NEWLY SET UP BUSINESS, POST THE DATE OF ITS SETTING UP CAN BE TAXED IF IT IS OF A REVENUE NATURE UNDER ANY OF THE HEADS PROVIDED UNDER SECTION 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFIED AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IT WOULD HAVE TO BE AN ACTIVITY WHICH IS IN SOME MANNER OR FORM CONNECTED WITH BUSINESS. THE WORD BUSINESS IS OF WIDE IMPORT WHICH WOULD ALSO INCLUDE ALL SUCH ACTIVITIES WHICH COALESCE INTO SETTING UP OF THE BUSINESS. ONCE IT IS HELD THAT THE ASSESSEES INCOME IS AN INCOME CONNECTED WITH BUSINESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF THE FINDING OF FACT BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE MONIES WHICH WERE INDUCTED INTO THE JOINT VENTURE BY THE KOREANS WERE PRIMARILY INFUSED TO PURCHASE LAND AND TO DEVELOP INFRASTRUCTURE THEN IT CANNOT BE HELD THAT THE INCOME DERIVED BY PARKING THE FUNDS TEMPORARILY WITH BANK, WILL RESULT IN THE CHARACTER OF THE FUNDS BEING CHANGED, INASMUCH AS, THE INTEREST EARNED FROM THE BANK WOULD HAVE A HUE DIFFERENT THAN THAT OF BUSINESS AND BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS WELL-SETTLED THAT AN INCOME RECEIVED BY THE ASSESSEE CAN BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES ONLY IF IT DOES NOT FALL UNDER ANY OTHER HEAD OF INCOME AS PROVIDED IN SECTION 14 OF THE ACT. THE HEAD INCOME FROM OTHER SOURCES IS A RESIDUARY HEAD OF INCOME IN THE INSTANT CASE, IT WAS CLEAR UPON A PERUSAL OF THE FACTS AS FOUND BY THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR A SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINESS COULD NOT HAVE BEEN CLASSIFIED AS INCOME FROM OTHER SOURCES SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS, IT WAS IN THE NATURE OF CAPITAL RECEIPT AND, HENCE, WAS REQUIRED TO HE SET OFF AGAINST PRE-OPERATIVE EXPENSES. WE ARE INCLINED TO FIND A MEANING TO THE INSERTION OF THE PROVISO TO SECTION 36(1)(III) THAT INTEREST PAID, IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFESSION WAS BEING ALLOWED AS DEDUCTION ULS.36(1)(III) OF THE ACT AS 5. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. REVENUE EXPENDITURE WAS AMENDED W.E.F. 1.4.2004 WHEN THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFESSION WHETHER CAPITALIZED IN THE BOOKS OF ACCOUNT OR NOT FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION, HOLDS TRUE FOR THE INCOME INSOFAR AS ONCE HAVING IDENTIFIED THAT THE INCOME FROM INTEREST IS FROM THE BANKS WHERE THE SHARE CAPITAL WAS PARKED WAS TO NOT EARN INTEREST TO BE BALANCED INTEREST ON CAPITAL BORROWED WHEN THE ASSESSEES OWN FUNDS WERE BEING UTILISED FOR THE PURPOSE OF INCURRING THE PROJECT COST WHICH TOOK UNDUE DELAY DUE TO GOVERNMENT AND OTHER INTERFERENCE. IN THE CASE OF TUTICORIN ALKALI CHEMICALS FERTILIZERS LTD V. CIT (SUPRA), HONBLE APEX COURT HAS HELD - IF THE COMPANY, EVEN BEFORE IT COMMENCES BUSINESS, INVESTS THE SURPLUS FUNDS IN ITS HANDS FOR PURCHASE OF LAND OR HOUSE PROPERTY AND, LATER SELLS IT AT PROFIT, THE GAIN MADE BY THE COMPANY WILL BE ASSESSABLE UNDER THE HEAD CAPITAL GAINS. SIMILARLY, F A COMPANY PURCHASES A RENTED HOUSE AND GETS RENT, SUCH RENT WILL BE ASSESSABLE TO TAX UNDER SECTION 22 AS INCOME FROM HOUSE PROPERTY. LIKEWISE, A COMPANY MAY HAVE INCOME FROM OTHER SOURCES THE COMPANY MAY ALSO, AS IN THAT CASE, KEEP THE SURPLUS FUNDS IN SHORT-TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTEREST WILL BE CHARGEABLE UNDER SECTION 56 OF THE INCOME TAX ACT. SUBSEQUENTLY HONBLE APEX COURT IN THE CASE OF CIT V. BOKARO STEEL LTD (SUPRA) HELD HOWEVER, WHILE INTEREST EARNED BY INVESTING BORROWED CAPITAL IN SHORT-TERM DEPOSITS IS AN INDEPENDENT SOURCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVITIES OF THE ASSESSEE, THE SAME CANNOT BE SAID IN THE PRESENT CASE WHERE THE UTILISATION OF VARIOUS ASSETS OF THE COMPANY AND THE PAYMENTS RECEIVED FOR SUCH UTILISATION ARE DIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP THE STEEL PLANT OF THE ASSESSE. THESE RECEIPTS ARE INEXTRICABLY LINKED WITH THE SETTING UP OF THE CAPITAL STRUCTURE OF THE ASSESSEE COMPANY. THEY MUST, THEREFORE, BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION. MERITS FOR CONSIDERATION AS BROUGHT ON RECORD FOR THE AYS IN APPEAL BEFORE US ARE AS UNDER:\ RS. IN LAKHS PARTICULARS. AS ON 3 1.3.2006 AS ON 3 1.3.2007 AS ON 3 1.3.2008 1.SHARE CAPITAL 22500.00 22500.00 22500.00 2.LAND (CWIP) 307.00 664.74 1440.85 3. IN BANK DEPOSIT. 19190.00 1289.00 - 4. INTEREST FROM BANK 637.44 1,04.17 432.67 PRE - OPERATIVE EXPENSES. 629.76 3736.28 5280.69 THE RETURNS FILED BY THE ASSESSEE FOR THE AYS 2006-07 AND 2007-08 CLEARLY INDICATE THAT THE ASSESSEE AT NO POINT OF TIME WAS HAVING INCOME FROM OTHER SOURCES 6. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. IRRESPECTIVE OF THE ACCOUNTING OF THE INCOME HAVING BEEN CAPITALIZED WHEN THE CLAIM OF EXPENDITURE OF 10% WAS PURELY ON ESTIMATION WHEN APPARENTLY IT WAS NOT THE BUSINESS OF THE ASSESSEE TO EARN INCOME BUT PARKING OF ITS FUNDS WHEN THE INTEREST INCOME SOUGHT TO BE CONSIDERED EXEMPT FOR COMPUTING EXPENDITURE UNDER THE PROVISIONS OF SECTION 14A FOR THE PURPOSE OF I.T.ACT. THE LEARNED COUNSEL OF THE ASSESSEE, THEREFORE, HAS CLARIFIED THAT THE ASSESSEE CANNOT BE SUBJECTED TO TAXATION IN THE IMPUGNED ASSESSMENT YEAR ON THE INTEREST INCOME CAPITALIZED AND AT THE SAME TIME ALLOW AMORTIZATION THEREOF IN THE HOPE THAT PROJECT WILL SEE THE LIGHT OF THE DAY IN THE YEARS TO COME WHEN THE I.T DEPARTMENT WILL ALLOW LESS DEDUCTION THAN OTHERWISE CLAIMED WILL BE MULTIPLICATION OF ASSESSMENTS FOR NO FAULT OF THE ASSESSEE APPELLANT. WE ARE THEREFORE INCLINED TO HOLD THAT THE LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED A BULK PAPER BOOK WHICH INTER ALIA CORRELATES TO EARNING OF INTEREST ON THE AMOUNTS DEPOSITED IN THE BANKS TO BE UTILISED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AS PER THE PROJECT ENVISAGED AND AS PER THE PROJECT APPROVED BY THE GOVERNMENT OF ORISSA BUT TAKEN TIME DUE TO REASON BEYOND THE ASSESSEES CONTROL INSOFAR AS SANCTION AND AUTHORIZATION HAVE TAKEN ITS TOLL WHEN THE FACT FINDING IS WHETHER CAPITALIZATION BY REDUCING THE PREOPERATIVE EXPENSES COULD BE ISOLATED FOR THE PURPOSE OF TAXATION AS INCOME FROM OTHER SOURCES FOLLOWING THE CASE LAWS ENUNCIATED BY HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD V. CIT (SUPRA) WHEN AGAIN HONBLE APEX COURT HAVE CLARIFIED THE STAND IN THE CASE OF CIT V. BOKARO STEEL LTD (SUPRA) WAS WHETHER THE BUSINESS OF THE ASSESSEE WAS TO CLAIM THE EXPENDITURE INCURRED FOR EARNING OF SUCH INTEREST HAVING BEEN ADJUSTED AGAINST THE OTHER EXPENSES INCURRED RATHER LEANS IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE INTEREST WAS INEXTRICABLY LINKED TO THE EXPENDITURES INCURRED WHICH PROJECT COST DID NOT REQUIRE FURTHER APPROVAL BUT WAS TAKING TIME WHICH TIME EARNED INTEREST TO THE ASSESSEE WHEN RECORDING EXPENDITURE HAVE BEEN CLAIMED FROM THE INTEREST EARNED FOR CONSIDERATION OF 10% THEREOF WAS NOT TO BE DISTURBED AT ALL. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED VIEW THAT FOR THE ASSESSMENT YEAR 2008-09 THE INTEREST CANNOT BE TAXED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE AND THEREFORE, THE SUBSEQUENT DISALLOWANCE OF EXPENSES CLAIMED AT 10% TO EARN THAT INCOME HAS BEEN INFUSED IN THE TOTAL PROJECT COST CANNOT BE DISALLOWED INSOFAR AS THE WHOLE OF THE INCOME HAS BEEN CAPITALIZED WAS RIGHTLY CONSIDERED FOR REVISION BY THE ASSESSEE BEFORE THE ASSESSING OFFICER FILING NIL RETURN. THE APPEAL FOR THE ASSESSMENT YEAR 2008-09, THEREFORE, IS ALLOWED ON THE BASIS OF FACTS AND FIGURES BROUGHT ON RECORD BY THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) AND AS MENTIONED ABOVE. HOWEVER IN VIEW OF THE PRINCIPLES LAID OUT ABOVE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE ASSESSMENT TO CONSIDER THE CASE OF THE ASSESSEE DE NOVO ON ESTABLISHING THE FACT THAT THE INTEREST HAS BEEN EARNED ON THE PARKING OF SHARE CAPITAL AND NOT ANY SURPLUS GENERATED AS WAS CONSIDERED BY THE HONBLE APEX COURT INSOFAR AS THE EARNING OF INTEREST HAS BEEN CAPITALIZED BY REDUCING THE PROJECT COST TO BE AMORTIZED HAS TO BE CONSIDERED AS A NULLITY AFTER VERIFICATION. NEEDLESS TO SAY, AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BE GRANTED TO ESTABLISH THE FACT AS HAVE BEEN NARRATED BEFORE US IN THE LIGHT OF ASSESSMENT YEAR 2008-09 WHEN IT IS NOT A CHANGE OF STANCE AS CONTESTED BY THE 7. ITA NO.401/CTK/2013, C.O. 66/CTK/2013 (A.Y.2009-10) ACIT VS. POSCO INDIA PVT. LTD. LEARNED DR BUT ON THE SAME SET OF FACTS THE INTEREST PORTION CANNOT BE ISOLATED FOR THE PURPOSE OF TAXATION. 6. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 IS ALLOWED AND THE LEARNED ASSESSING OFFICER IS DIRECTED TO ACCEPT THE NIL REVISED RETURN AND THE APPEALS FOR THE AYS 2006-07 AND 2007-08 ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN THE LIGHT OF OUR DECISION FOR THE ASSESSMENT YEAR 2008-09 ABOVE. THE SAME ARE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSE. FROM THE ABOVE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008-09, THE CIT(A) HAS HELD THAT THE FACTS OF THE CASE THAT IS THE INTEREST INCOME WHICH EARNED BY THE ASSESSEE IS CAPITALIZED FOLLOWING THE DECISION OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD V. ITO (315 ITR 255. THE FACTS OF THIS YEAR IS SIMILAR TO ASSESSMENT YEAR 2008-09, THEREFORE, TRIBUNAL IS BOND TO FOLLOW THE DECISION OF ASSESSMENT YEAR 2008-09. THEREFORE, WE HAVE TO FOLLOW THE DECISION OF TRIBUNAL AND AS THE FACTS ARE SIMILAR, THEREFORE, WE FOLLOWING THE DECISION OF TRIBUNAL WE DISMISS THE APPEAL OF THE DEPARTMENT AS WELL AS C.O BECAUSE C.O IS ONLY SUPPORTING THE ORDER OF CIT(A). 4. IN THE RESULT, THE APPEAL FILED BY DEPARTMENT IS DISMISSED AND C.O FILED BY THE ASSESSEE IS ALSO DISMISSED. 5. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTAK IN THE OPEN COURT ON 27.06.2014. SD/- SD/- ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 27.06.2014 P.S.- *PK* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER