M/s Nabha Power Limited, Patiala V. ACIT, Mandi Gobindgarh

ITA 139/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8351 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: DEEPAK CHOPRA PIYUSH SINGH
• Keywords: Additional evidence; Capital receipt
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.139/CHD/2015 ( ASSESSMENT YEAR : 2009-10) NABHA POWER LIMITED, VS. THE A.C.I.T., PO BOX NO.28, CIRCLE MANDIGOBINDGARH. NEAR VILLAGE NALASH RAJPURA. DISTT. PATIALA. PAN: AACCN5223H (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI DEEPAK CHOPRA PIYUSH SINGH RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 18.02.2016 DATE OF PRONOUNCEMENT : 16.03.2016 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 26.11.2014, RELATING TO ASSESSMENT YEAR 2009-10. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.2,14,35,2 13/- OUT OF FDRS WITH HDFC BANK AND STATE BANK OF PATIA LA 2 (IN SHORT SBOP). THE ASSESSING OFFICER DURING TH E ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA D NOT COMMENCED ITS BUSINESS IN THIS YEAR. DURING THE Y EAR, THE ASSESSEE HAD ALSO PAID INTEREST OF RS.26,87,93, 950/- TO PUNJAB STATE ELECTRICITY BOARD (IN SHORT PSEB) AS INTEREST ON LOAN BORROWED FOR ACQUISITION OF ASSETS . SINCE THE ASSESSEE HAD NOT COMMENCED ITS BUSINESS, THEREF ORE, ALL THE EXPENSES INCURRED DURING THE YEAR WERE CAPI TALIZED AS PART OF ITS CAPITAL WORK IN PROGRESS. THE ASSES SEE STATED BEFORE THE ASSESSING OFFICER THAT IT HAS EAR NED INTEREST ON SHORT TERM DEPOSIT HELD WITH HDFC BANK LTD. AND SBOP AND THE INTEREST PAID WAS ON FUNDS BORROWE D FROM PSEB IN CONNECTION WITH SET UP OF THE POWER PR OJECT. IT WAS ALSO STATED THAT THE INVESTMENTS ARE IN THE FORM FIXED DEPOSITS WITH HDFC BANK LTD., PATIALA AGAINST COMMITMENT BANK GUARANTEE WHICH WAS ISSUED IN FAVOU R OF M/S SOUTH EASTERN COAL FIELDS LTD.(SECL) FOR ISSUAN CE OF COAL LINKAGE FOR RAJPURA THERMAL POWER PROJECT. TH IS BANK GUARANTEE WAS ESSENTIAL TO ENSURE FUEL LINKAGE FOR THE POWER PROJECT. SINCE THE AGREEMENT WITH SECL W AS A PRE-CONDITION TO GET FUEL LINKAGE FOR THE POWER PRO JECT, IT WAS STATED THAT SECURING SUPPLY OF COAL IS AN INTEG RAL PART OF CONSTRUCTION OF POWER PROJECT. RELIANCE WAS PLA CED ON THE FOLLOWING JUDGMENTS : I) INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. ITO (2009) 315 ITR 255 (DEL) II) CIT VS. BOKARO STEEL LTD.(1999) 236 ITR 315 (SC) 3 III) NTPC SAIL POWER COMPANY PVT. LTD. VS. CIT, ITA NO.1238 OF 2011 THESE JUDGMENTS WERE CITED FOR THE PROPOSITION THAT WHERE THE INTEREST OR ANY OTHER INCOME IS EARN ED ON FUNDS WHICH ARE INEXTRICABLY LINKED TO THE SET UP O F A PLANT, THEN SUCH INTEREST IS REQUIRED TO BE CAPITAL IZED AND SET OFF AGAINST THE EXPENDITURE INCURRED FOR THE SE T UP OF SUCH PLANT. THE ASSESSING OFFICER, HOWEVER REJECT ING ALL THE CONTENTION OF THE ASSESSEE HELD THAT THE INTERE ST EARNED IS TO BE TAXED UNDER THE HEAD INCOME FROM O THER SOURCES AS THE SAID INCOME IS NOT RELATED TO THE B USINESS ACTIVITY OF THE ASSESSEE, WHICH IS NOT COMMENCED IN THIS YEAR. RELIANCE WAS PLACED ON THE JUDGMENT OF THE H ON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICA LS & FERTILIZERS LTD. VS. CIT, 277 ITR 172. 3. BEFORE HE LEARNED CIT (APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER. IT WAS EMPHASIZED THAT THE INTEREST EARNE D WAS NOT ON THE INVESTMENT OF IDLE OR SURPLUS FUNDS. RA THER THE INTEREST EARNED WAS ON THE FDRS, WHICH WAS KEPT WITH HDFC BANK AS MARGIN MONEY THEREBY ENABLING THE BANK TO ISSUE NECESSARY BANK GUARANTEES IN FAVOUR OF M/S SE CL I.E. SUBSIDIARY OF COAL INDIA LIMITED, WHICH WAS ES SENTIAL FOR SECURING COAL LINKAGE BEFORE SETTING UP OF ITS THERMAL POWER PLANT. AS REGARDS THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE JUDGMENT IN THE CASE OF TU TICORIN 4 ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA), IT WAS SATED THAT THERE ARE A NUMBER OF JUDGMENTS BY THE HON'BLE APEX COURT AFTER THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA), IN WHICH A DIFFERENT VIEW HAS BEEN TAKEN. THE CASES ARE AS UNDER : I) CIT VS. BOKARO STEELS LTD. (1999) 236 ITR 315 II) CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD. (2000) 243 ITR 2 III) CIT VS. KARNATAKA POWER CORPORATION (2001) 247 ITR 268 IV) BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. CIT (2001) 251 ITR 329 IT WAS STATED THAT THE HON'BLE SUPREME COURT HELD THAT THE DECISION OF BOKARO STEELS LTD. (SUPRA ) HAVING BEEN FOLLOWED BY THE HON'BLE SUPREME COURT IN TWO C ASES, NAMELY CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD. (SUPRA) AND KARNATAKA POWER CORPORATION (SUPRA), IT IS NOT POSSIBLE TO TAKE ANY VIEW DIFFERENT FROM THAT TAKEN IN CIT VS.. BOKARO STEELS LTD. (SUPRA). THE LEARNED CIT ( APPEALS) FORWARDED THE SUBMISSIONS OF THE ASSESSEE TO THE ASSESSING OFFICER AND A REPORT VIDE LETTER NO.1283 DATED 15.11.2014 WAS RECEIVED BY HIM FROM THE ASSESSING OFFICER BASICALLY RELYING ON THE ORDER OF THE ASSES SING OFFICER. 4. AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, REMAND REPORT AND ANALYZING ALL THE JUDGMENTS IN D ETAIL, 5 THE LEARNED CIT (APPEALS) HELD THAT THE BANK GUARAN TEE AGAINST FDRS WITH HDFC BANK ARE GIVEN TO SECURE COA L LINKAGE I.E. FOR SUPPLY OF COAL TO RUN THE PLANT. THEREFORE, THIS BANK GUARANTEE IS GIVEN FOR OPERATION OF THE P LANT AND NOT SETTING UP OF THE PLANT. IN THIS WAY, THE LEA RNED CIT (APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESS ING OFFICER. 5. AGGRIEVED BY THIS, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFIC ER ('AO') IN ASSESSING THE INTEREST INCOME ON FDR OF RS.2,14,35,213/-UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE BANK GUARANTEE GIVEN BY HDFC BANK AGAINST THE FDR IS IN RELATION TO OPERATIO N OF THE PLANT AND NOT SETTING UP OF THE PLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE INTEREST EARNE D ON THE FDR IS INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLANT AND HENCE, THE SAME OUGHT TO BE REDUCED FROM T HE COST OF CAPITAL WORK-IN-PROGRESS. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL AND IN THE ALTERNATIVE, THE COMMISSIONER OF INCOME -TAX (APPEALS) ERRED IN NOT GRANTING DEDUCTION FOR THE 6 CORRESPONDING AMOUNT OF INTEREST EXPENDITURE ON TH E FUNDS BORROWED FROM PUNJAB STATE ELECTRICITY BOARD TO THE EXTENT OF THE INTEREST INCOME ON AMOUNT DEPOSIT ED IN FDR. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN COMPUTING INTEREST UNDER SECTION 234B OF THE ACT AMOUNTING TO RS. 32,78,621. 6. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE FILED AN APPLICATION FOR ADDITIONAL EVIDEN CES UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES. IT WAS STATED IN THE APPLICATION THAT THE FACTS OF THE CASE REMAIN SAME AS WERE STATED BEFORE THE ASSESSING OFF ICER AS WELL AS THE LEARNED CIT (APPEALS). HOWEVER, THE ASSESSEE WANTS TO FILE ADDITIONAL EVIDENCES, WHICH ARE NECESSARY CORRESPONDENCE AND OTHER DOCUMENTS EVIDEN CING THE FOLLOWING : I) LETTERS EXCHANGED BETWEEN SOUTH EASTERN COALFIELDS LTD. AND THE ASSESSEE. II) BANK GUARANTEE CONFIRMATION LETTER III) OTHER DOCUMENTS IN RELATION TO THE SAID AGREEMENT 7. IT WAS STATED THAT THE SAID EVIDENCES CLEARLY ESTABLISH THE FACT THAT THE BANK GUARANTEES AGAINST FDRS WITH HDFC BANK ARE GIVEN TO SECURE COAL LINKAGE. T HUS THE GUARANTEES ARE ESSENTIAL TO ENSURE FUEL LINKAGE FOR THE POWER PROJECT AND THAT THE INTEREST BORROWED FUNDS 7 TEMPORARY PLACED IN FIXED DEPOSITS ARE INEXTRICABLY CONNECTED WITH THE CONSTRUCTION OR PROJECT ACTIVITY . REFERRING TO THE RULE 29 OF THE INCOME TAX APPELLAT E TRIBUNAL RULES, IT WAS STATED THAT THE TRIBUNAL WOU LD BE OBLIGED TO EXERCISE ITS DISCRETIONARY POWERS FOR CA LLING ADDITIONAL EVIDENCE AND HAS INHERENT POWER TO REQUI RE ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMIN ED FOR PRONOUNCING ITS JUDGMENT OR FOR ANY SUBSTANTIAL CAUSE WHILE ADJUDICATING THE ISSUES BEFORE IT. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS AND PARTICULARLY, T HE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MUKTA METAL WORKS (2012) 20 TAXMANN.COM 774 (P&H) AND THAT OF DELHI HIGH COURT IN THE CASE OF CIT VS. TEXT HUNDRED INDIA (P) LTD. (2 011) 197 TAXMAN 128 (DELHI). 8. THE LEARNED D.R. VEHEMENTLY OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCES. HE STATED THAT IN RULE 29, IT HAS BEEN VERY CLEARLY STATED THAT THE ASSESS EE CANNOT SUO MOTO FURNISH ANY ADDITIONAL EVIDENCE. I T IS ONLY WHEN THE TRIBUNAL REQUIRES, THE ADDITIONAL EVI DENCE CAN BE PRODUCED. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSES SEE HAS EARNED INTEREST OF RS.2,14,35,214/- AND ALSO PAID I NTEREST OF RS.26,87,,93,950/- DURING THE YEAR. THE BUSINES S OF 8 THE ASSESSEE HAS NOT COMMENCED. THE ISSUE IN QUES TION IS WHETHER THE INTEREST EARNED IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD BY THE ASS ESSING OFFICER STATING THAT THE BUSINESS ACTIVITY OF THE A SSESSEE HAS NOT COMMENCED IN THIS YEAR. THE ARGUMENT OF TH E ASSESSEE IS THAT THE INTEREST HAS BEEN EARNED ON FD RS, WHICH WERE DEPOSITED IN HDFC BANK AS MARGIN MONEY, THEREBY ENABLING THE BANK TO ISSUE BANK GUARANTEE I N FAVOUR OF M/S SECL WHICH WAS ESSENTIAL FOR SECURING COAL LINKAGE BEFORE SETTING UP ITS THERMAL POWER PLANT. 10. THE JUDICIAL VIEW IN THESE CIRCUMSTANCES COMIN G OUT OF VARIOUS JUDGMENTS OF THE HON'BLE SUPREME COU RT AS WELL AS THAT OF VARIOUS COURTS IS THAT INTEREST EXP ENDITURE CAN BE SET OFF FROM THE INTEREST EARNED DURING SETT ING UP PERIOD IF THE SAME IS INEXTRICABLY LINKED FOR SETTI NG UP OF PLANT. THE ASSESSING OFFICER RELIED ON THE JUDGMEN T OF HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA). HOWEVER, WE SEE THAT I N A VERY LATEST JUDGMENT OF DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA). THE HON 'BLE HIGH COURT HELD THAT ULTIMATE TEST IN SUCH CIRCUMST ANCES IS WHETHER THE ACTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUSINESS AND THE FUNDS WHICH ARE GARNERED ARE INEXT RICABLY CONNECTED TO THE SETTING UP OF THE PLANT. IN THIS CASE, HE HON'BLE HIGH COURT HAS ALSO REFERRED TO THE JUDGMEN T OF SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHE MICALS & FERTILIZERS LTD. (SUPRA). HOWEVER, IT WAS ALSO OBS ERVED 9 THAT THE VIEW HAS ALSO BEEN TAKEN ON THE SAME ISSUE BY THE APEX COURT IN THE CASE OF BOKARO STEELS LTD. ( SUPRA), EXPLAINING THE SAME THE HIGH COURT OBSERVED AS UNDE R : 5. IN OUR OPINION THE TRIBUNAL HAS MISCONSTRUED TH E RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD.'S CASE A ND THAT OF BOKARO STEEL LTD. THE TEST WHICH PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICO RIN ALKALI CHEMICALS & FERTILIZERS LTD.'S CASE IS THAT IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THEN BY VIRTUE OF THA T CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS TH E INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. ON THE OTHER HAND THE RATIO OF THE SUPREME COURT JUDGMENT IN BOKARO STEEL LTD.'S CASE TO OUR MIND IS THAT IF INCOM E IS EARNED, WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH ARE OTHERWISE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PREOPERATIVE EXPENSES. 5.1 THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE A CTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUSINESS AN D THE FUNDS WHICH ARE GARNERED ARE INEXTRICABLY CONNECTED TO THE SETTING UP OF THE PLANT. THE CLUE IS PERHAPS AVAI LABLE 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 BUSINES S. THEREFORE, AS PER THE PROVISION OF SECTION 4 OF THE ACT WHICH IS THE CHARGING SECTION INCOME WHICH ARISES TO AN ASSESSEE FROM THE DATE OF SETTING OF THE BUSINESS B UT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDING ON WHETHER IT IS OF A REVENUE NATURE OR CAPITAL RECEIP T. THE INCOME OF A NEWLY SET-UP BUSINESS, POST THE DATE O F ITS SETTING UP CAN BE TAXED IF IT IS OF A REVENUE NA TURE 10 UNDER ANY OF THE HEADS PROVIDED UNDER SECTION 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFIE D AS INCOME UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION' IT WOULD HAVE TO BE AN ACTIVITY WHICH IS I N 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. SEE MAZAGAON DOCK LTD. V. CIT & EPT [1958] 34 ITR 368 (SC), AND NARAIN SWDESHI WEAVING MILLS V. CEPT [1954] 26 ITR 765 (SC). ONCE IT IS HELD THAT THE ASSESSEE'S INCOME IS AN INCOME CONNECTED W ITH BUSINESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF THE FINDING OF FACT BY THE CIT(A) THAT THE M ONIES WHICH WERE INDUCTED INTO THE JOINT VENTURE COMPANY BY THE JOINT VENTURE PARTNERS WERE PRIMARILY INFUSED TO PURCHASE LAND AND TO DEVELOP INFRASTRUCTURE - THEN IT CANNOT BE HELD THAT THE INCOME DERIVED BY PARKING TH E FUNDS TEMPORARILY WITH TOKYO MITSUBISHI 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 FR OM OTHER SOURCES' ONLY IF IT DOES NOT FALL UNDER ANY OTH ER HEAD OF INCOME AS PROVIDED IN SECTION 14 OF THE ACT . THE HEAD 'INCOME FROM OTHER SOURCES' IS A RESIDUARY HEAD OF INCOME. SEE S.G. MERCANTILE CORPN. (P.) LTD. V. CIT [1972] 83 ITR 700 (SC) AND CIT V. GOVINDA CHOUDHURY & SONS [1993] 203 ITR 881 (SC). 5.2 IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUND B Y THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR A SPECIFIC PURPOSE OF ACQUIR ING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE , THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINESS COULD NOT HAVE BEEN CLASSIF IED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS 11 EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINES S IT WAS IN THE NATURE OF CAPITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSE S. IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILA BLE WITH THE ASSESSEE IN THAT CASE WERE 'SURPLUS' AND, THEREFORE, THE SUPREME COURT HELD THAT THE INTEREST EARNED ON SURPLUS FUNDS WOULD HAVE TO BE TREATED AS 'INCOME FROM OTHER SOURCES' . ON THE OTHER HAND IN BOKARO STEEL LTD. SO CASE WHERE THE ASSESSEE HAD EARNED INTEREST ON ADVANCE PAID TO CONTRACTORS DURI NG PRE-COMMENCEMENT PERIOD WAS FOUND TO BE 'INEXTRICABL Y LINKED' TO THE SETTING UP OF THE PLANT OF THE ASSES SEE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PERMITTED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. 11. IN THE ABOVE CIRCUMSTANCES, DELHI HIGH COURT HAS CLEARED THE SITUATION THAT EVEN RELYING ON THE DECISION IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTIL IZERS LTD. (SUPRA), BOKARO STEELS LTD. (SUPRA) AND OTHER JUDGMENTS OF THE APEX COURT, THE SITUATION REMAINS THE SAME THAT THE FUNDS ARE TO BE SHOWN BY THE ASSESSEE TO BE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLAN T IN ORDER TO GET THE SAID BENEFIT. 12. IN THE PRESENT CASE THOUGH THE ASSESSEE HAS STATED THE CIRCUMSTANCES UNDER WHICH IT HAS TO PAY THE INTEREST BOTH BEFORE THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS) AND THE SAME CIRCUMSTANCES HA VE BEEN ELABORATED BEFORE US ALSO, HOWEVER, IN ORDER T O BUTTRESS THE SITUATION, HE NOW WANTS TO FILE ADDITI ONAL EVIDENCES, PLEADING REMAINING THE SAME. 12 13. RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES READS AS UNDER : 29. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL.- THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFORE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENTS TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS ORDERS O R FOR ANY OTHER SUBSTANTIAL CAUSE, OR, IF THE INCOME- TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRIBUNAL, FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. 14. AS PER THE READING OF THIS RULE, THOUGH THIS I S NOT AN INHERENT RIGHT OF ANY PARTY TO THE APPEAL TO PRODUCE ADDITIONAL EVIDENCE. IT IS THE PREROGATIVE OF THE TRIBUNAL TO REQUIRE ANY ADDITIONAL EVIDENCE TO BE PRODUCED. HOWEVER, IN THE LATER PART OF THE RULE, IT HAS ALSO BEEN PROVIDED THAT AFTER RECORDING REASONS FOR THE SAME, THE TRIBUNAL MAY ALLOW ANY SUCH ADDITIONAL DOCUMENT TO BE FILED. RELIANCE PLACED BY THE LEARN ED COUNSEL FOR THE ASSESSEE IN THE CASE OF TEXT HUNDR ED INDIA (P) LTD. (SUPRA) IS NOT OUT OF PLACE, WHEREBY IT HAS BEEN CLARIFIED THAT: 5. NO DOUBT, THE TRIBUNAL HAS STATED THAT IF THE EVID ENCE PRODUCED BEFORE IT IS NOT ALLOWED, THERE WOULD BE FAILUR E 13 OF JUSTICE. HOWEVER, IT HAS NOT AT ALL ADDRESSED ITSELF THE QUESTION (AND THEREFORE, NOT ANSWERED) AS TO WHETHER IT IS PERMISSIBLE FOR A PARTY TO FILE THE APPLICATION FO R ADDUCING ADDITIONAL EVIDENCE HAVING REGARD TO THE LANGUAGE OF RULE 29. AS PER THE LANGUAGE OF THIS RULE, PARTIES ARE NOT ENTITLED TO PRODUCE ADDITIONAL EVIDENCE . IT IS ONLY WHEN THE TRIBUNAL REQUIRES SUCH ADDITIONAL EVIDENCE IN THE FORM OF ANY DOCUMENT OR AFFIDAVIT OR EXAMINATION OF A WITNESS OR THROUGH A WITNESS IT WOULD CALL FOR THE SAME OR DIRECT ANY AFFIDAVIT TO BE FILED, T HAT TOO IN THE FOLLOWING CIRCUMSTANCES: (A) WHEN THE TRIBUNAL FEELS THAT IT IS NECESSARY TO EN ABLE IT TO PASS ORDERS; OR (B) FOR ANY SUBSTANTIAL CAUSE; OR (C) WHERE THE INCOME-TAX AUTHORITIES DID NOT PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE. 15. IN THE PRESENT CASE, WE SEE THAT IN ORDER TO BRING OUT THE FACT ON RECORD WHETHER THE FUNDS ARE INEXTRICABLY LINKED TO THE SETTING UP OF PLANT OR N OT. THESE EVIDENCES WHICH ARE FILED BEFORE US UNDER RUL E 29 ARE VERY IMPORTANT. THE FACT REMAINS THAT THE ASSE SSEE HAS NOT TAKEN ANY NEW PLEA AND THE SAME HAS BEEN TA KEN ALL ALONG BEFORE THE LOWER AUTHORITIES. WE FIND TH AT THERE IS A SUBSTANTIAL CAUSE FOR ADMITTING THESE EVIDENCE S AND WE HEREBY ADMIT THESE EVIDENCES AND SEND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSID ER THE SAME AND DECIDE THE ISSUE AS PER LAW. IF IT IS FOU ND THAT THE FUNDS WERE DEPLOYED FOR SOME REASON WHICH IS INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLAN T AND NOT FOR RUNNING THE PLANT, THEN RELIEF BE GIVEN TO THE 14 ASSESSEE, OTHERWISE, THE STAND TAKEN BY THE ASSESSI NG OFFICER IN FIRST ROUND MAY BE CONFIRMED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH