Adani Power Ltd., Ahmedabad V. The Dy. CIT.,Circle-1, Ahmedabad

ITA 1686/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8044 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Diversion of income; Question of law; Capital receipt; Revised return
• Section: 32; 56

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.1663/AHD/2014 / ASSTT. YEAR: 2009-2010 DCIT, CIR.1 AHMEDABAD. VS. ADANI POWER LTD. ADANI HOUSE, SHIKHAR BLDG. MITHAKHALI SIX ROADS NAVRANGPURA AHMEDABAD 380 009. PAN : AABCA 2957 L ./ ITA NO.1686/AHD/2014 WITH CO NO.252/AHD/2014 / ASSTT. YEAR: 2009-2010 ADANI POWER LTD. ADANI HOUSE, SHIKHAR BLDG. MITHAKHALI SIX ROADS NAVRANGPURA AHMEDABAD 380 009. PAN : AABCA 2957 L VS. DCIT, CIR.1 AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR, AR REVENUE BY : SHRI V.K. SINGH, DR ! / DATE OF HEARING : 26/06/2018 '#$ ! / DATE OF PRONOUNCEMENT: 28 /06/2018 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE AND THE ASSESSEE ARE IN CROSS APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)-6, AHMEDABAD DATED 2 5.3.2014 PASSED ITA NO.1663/AHD/2014 AND OTHER WITH CO 2 FOR THE ASSESSMENT YEAR 2009-10. ON RECEIPT OF NOT ICE IN THE REVENUES APPEAL, THE ASSESSEE HAS FILED CROSS OBJECTION ALSO BEARING NO.252/AHD/2014. 2. FIRST WE TAKE APPEAL OF THE REVENUE. GROUND NO. 1 AND 2 ARE INTER-CONNECTED WITH EACH OTHER. REVENUE HAS PLEAD ED THAT THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 1.97 CRORES WHICH WAS DISALLOWED BY THE AO WITH THE HELP OF SECTION 40(A) (I) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 23.9.2009 DECLARING TOTAL INCOME AT RS.2, 59,19,961/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE HAS PAID A SUM OF RS.1,97,20,629/- TOWARDS CONSULTANCY AND LEGAL SERVICE CHARGES. THE LD.AO OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE ABOVE PAYMENT. THEREFORE, A SHOW CAUSE NOTI CE VIDE ORDER SHEET ENTRY DATED 8.12.2011 WAS ISSUED TO THE ASSES SEE INVITING ITS EXPLANATION AS TO WHY THIS SUM SHOULD NOT BE DISALL OWED AS PER SECTION 40(A)(I) OF THE ACT. THE LD.AO ULTIMATELY OBSERVED THAT PAYMENT MADE BY THE ASSESSEE IS TO BE CONSTRUED AS IF FOR TECHNI CAL SERVICES UNDER SECTION 9(1)(VII) OF THE ACT AND THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS. SINCE IT FAILED TO DEDUCT TDS, THE AMOUNT IS TO BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. 4. DISSATISFIED WITH DISALLOWANCE, THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). IT WAS CONTENDED THAT THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT AND OPERATION OF POWER PLANTS. IN THE YEAR UNDER CONSIDERATION THE POWER PLANTS WERE IN THE PR OCESS OF BEING SET UP, AND THEREFORE, THEY WERE IN PRE-COMMENCEMENT ST AGE. THE ITA NO.1663/AHD/2014 AND OTHER WITH CO 3 ASSESSEE HAD CAPITALIZED ENTIRE EXPENDITURE AND DID NOT DEBIT ANY AMOUNT IN THE PROFIT & LOSS ACCOUNT BECAUSE THE PRO FIT & LOSS ACCOUNT WAS NOT PREPARED. THUS, DISALLOWANCE UNDER SECTION 40(A)(I) COULD NOT BE MADE. THE LD.CIT(A) HAS ACCEPTED THE CONTENTION S OF THE ASSESSEE AND DELETED THE DISALLOWANCE. 5. BEFORE US, THE LD.DR RELIED UPON THE ORDER OF TH E AO, WHEREAS THE LD.COUNSEL FOR THE ASSESSEE RELIED UPON ORDERS OF T HE ITAT IN THE CASES OF SONIC BIOCHEM EXTRACTIONS P.LTD. VS. ITO, 35 TAX MANN.COM 463, SMS DEMAG P.LTD. VS. DCIT, 38 SOT 496 (DELHI) AND SUMIL ON INDUSTRIES LTD. VS. ITO, ITA NO.3296 AND 3297/AHD/2008 ORDER DATED 12.11.2010. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 40(A)(I) OF THE ACT CONT EMPLATES THAT - NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (A) IN THE CASE OF ANY ASSESSEE (I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSU ED FOR PUBLIC SUBSCRIPTION BEFORE THE 1 ST DAY OF APRIL, 1938) ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPAN Y OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCT ION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED I N SUB- SECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER TH E DUE ITA NO.1663/AHD/2014 AND OTHER WITH CO 4 DATE SPECIFIED IN SUB-SECTION (1) OF SECTION139, SU CH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 7. THIS PROVISION PROHIBITS GRANT OF DEDUCTION IF T DS WAS NOT DEDUCTED BY THE ASSESSEE OR AFTER DEDUCTION HAS NOT BEEN PAID. THE STAND OF THE ASSESSEE IS THAT IT HAS NOT CLAIMED EX PENDITURE THAN WHAT TO DISALLOW. IN THE CASE OF SONIC BIOCHEM EXTRACTI ONS P.LTD. (SUPRA), THE ASSESSEE HAD PURCHASED CERTAIN SOFTWARE. THE A O WAS OF THE VIEW THAT AS PER EXPLANATION 2 TO SECTION 9(1)(VII), THE ASSESSEE HAS PURCHASED COPY-RIGHT SOFTWARE, AND THEREFORE THE PA YMENT MADE BY IT WOULD COME IN THE AMBIT OF ROYALTY. SINCE THE ASSE SSEE FAILED TO DEDUCT TDS ON SUCH PAYMENT, A DISALLOWANCE UNDER SECTION 4 0(A) WOULD BE MADE, CONSEQUENTLY, DEPRECIATION ON SUCH AN ASSET U NDER SECTION 32 WOULD NOT BE ADMISSIBLE. THE TRIBUNAL DID NOT APPR OVE THIS LINE OF REASONING ADOPTED BY THE AO AND HELD THAT DEPRECIAT ION CANNOT BE DISALLOWED TO THE ASSESSEE WITH THE HELP OF SECTION 40(A) BECAUSE SECTION 40(A) IS APPLICABLE IF THE ASSESSEE HAS CLA IMED DEDUCTION OF EXPENDITURE MENTIONED IN THE SECTION. OTHER DECISI ONS REFERRED BY THE LD.COUNSEL FOR THE ASSESSEE ARE ALSO TO THIS EFFECT . THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE ITAT, WE A RE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE, AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A). 8. GROUNDS NO.3 AND 4 OF THE REVENUES APPEAL ARE I NTER-CONNECTED WITH GROUNDS NO.1 AND 2 OF THE ASSESSEES GROUNDS O F APPEAL, AS WELL AS GROUND NOS.2 TAKEN IN THE CO. IN BRIEF, THE CONTRO VERSY INVOLVED IN ALL THESE GROUNDS RELATES TO QUANTIFICATION OF INTEREST INCOME RESULTED TO THE ASSESSEE, AND WHETHER SUCH INTEREST INCOME WAS CAPITAL RECEIPT WHICH IS TO BE SET OFF AGAINST PRE-OPERATIVE EXPENS ES OR NOT. THUS, WE TAKE ALL THESE GROUNDS OF APPEAL TOGETHER. ITA NO.1663/AHD/2014 AND OTHER WITH CO 5 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A S OBSERVED EARLIER, IS IN THE BUSINESS OF DEVELOPMENT AND OPERATION OF POWER PLANT. IN THE YEAR UNDER CONSIDERATION THE POWER PLANT WERE IN TH E PROCESS OF BEING SET UP, AND THEREFORE, THEY ARE IN PRE-COMMENCEMENT STAGE. THE ASSESSEE HAD INTEREST INCOME AT RS.8,17,60,319/-. IT HAS GIVEN BREAK UP OF THIS AS UNDER: INTEREST ON FDS KEPT FOR ISSUANCE OF AMOUNT (IN RS.) BID BONDS FOR THE PURPOSE OF PPA 1,46,60,271 BANK GUARANTEE (AGAINST LC) 3,65,88,790 OTHER FDS 39,52,073 TOTAL 5,52,01,134 6. THE SOURCE AS WELL AS BREAK UP OF INTEREST INCOM E OF RS.2,41,55,630/- IS GIVEN AS FOLLOWS: SOURCE INTEREST (IN RS.) FROM EQUITY/OWN FUNDS 48,68,282 FROM BORROWED FUNDS 192,87,348 TOTAL 2,41,55,630 7. INTEREST ON NSC OF RS.1,317/- IS NOT A PART OF I NTEREST INCOME OF RS.8,17,60,319/- AS IT HAS BEEN OFFERED T O TAX ON ACCRUAL BASIS. 10. THE ASSESSEE HAS FURTHER GIVEN BREAK OF INTERES T INCOME WHICH IS OUT OF THE ABOVE AMOUNTS, AS THE ASSESSEE HAS ADMIT TED INTEREST INCOME OF RS.2,41,55,630/- IN THE RETURN. FURTHER, BEFORE THE LD.CIT(A), THE ASSESSEE HAS CONTENDED THAT THIS AMOUNT IS ALSO NOT TAXABLE. THE LD.AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESSE E ON THE GROUND THAT THE ASSESSEE HAS NOT FILED ANY REVISED RETURN. HE MADE REFERENCE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA LTD. ITA NO.1663/AHD/2014 AND OTHER WITH CO 6 VS. CIT, 284 ITR 323. THE LD.AO RELIED UPON THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS & FERTILISERS LTD., 227 ITR 172 (SC). 11. ON APPEAL, THE LD.CIT(A) THOUGH NOT GIVEN ANY I NDEPENDENT FINDING ON ANY OF THE ISSUES, RATHER, FOLLOWED THE ORDER OF HIS PREDECESSOR PASSED IN THE ASSESSMENT YEAR 2008-09. THE LD.CIT(A) HAS BIFURCATED INTEREST INCOME AS SHOWN BY THE ASSESSEE . WHILE DEALING WITH THE INTEREST INCOME AT RS.1,46,60,271/- EARNED BY THE ASSESSEE FROM BID BONDS FOR THE PURPOSE OF PPA, THE LD.CIT(A ) HAS OBSERVED THAT APART FROM INVESTMENT ON TEMPORARY SURPLUS FUNDS, T HE DEPOSITS WITH ELECTRICITY BOARD, LOAN TO THE EMPLOYEES ALSO PROVI DED INTEREST INCOME TO THE ASSESSEE WHICH WAS NOT CONSIDERED AS A PART OF THE PROJECT, BUT TREATED AS REVENUE RECEIPT TAXABLE UNDER SECTION 56 OF THE INCOME TAX ACT. ACCORDING TO THE LD.CIT(A) THE ASSESSEE MADE INVESTMENT IN BONDS FOR THE PURPOSE OF ENTERING INTO POWER PURCHASE AGR EEMENT. REVENUE IS FLOWING FROM INVESTMENTS IN BONDS AND NOT FROM IMPL EMENTATION OF PROJECTS OR PURCHASES OF PLANT & MACHINERY. THUS, ACCORDING TO THE LD.CIT(A) DEPOSITS AS SECURITY FOR POWER PURCHASE A GREEMENT IN THE FORM OF BONDS WOULD NOT MEAN THAT SUCH INVESTMENT W AS LINKED TO THE IMPLEMENTATION OF PROJECTS AND IT IS A DIFFERENT ST REAM OF REVENUE GENERATION. THEREFORE, THE LD.CIT(A) DID NOT TREAT THIS REVENUE RECEIPT AS CAPITAL WHICH IS TO BE SET OFF AGAINST PRE-OPERA TIVE EXPENDITURE OF PROJECT. THE LD.CIT(A) HAS CONFIRMED THIS ADDITION . THIS CONFIRMATION OF ADDITION IS BEING CHALLENGED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL BEARING NOS.1.1 TO 1.2. THE LD.CIT(A) THEREAFTER SEGREGATED OTHER INTEREST INCOME AMOUNTING TO RS.39,52,073/- ON FDRS . AND RS.17,63,014/-. WITH REGARD TO INTEREST EARNED AGA INST LIC ON BANK GUARANTEE AMOUNTING TO RS.3,65,88,790/-. THE LD.CI T(A) HAS TREATED THIS AS A CAPITAL RECEIPT WHICH IS TO BE SET OFF AG AINST THE PROJECT IMPLEMENTATION COST, THOUGH HE DIRECTED THE AO TO V ERIFY THIS CLAIM, AND ITA NO.1663/AHD/2014 AND OTHER WITH CO 7 THEREAFTER GRANT BENEFIT TO THE ASSESSEE IN ACCORDA NCE WITH ASSESSMENT YEAR 2008-09. 12. THE ISSUE BEFORE US IS WHETHER THE ALLEGED INTE REST INCOME OF RS.8.17 CRORES CAN BE DISSECTED IN DIFFERENT PARTS AND PARTLY IT IS TO BE HELD THAT CERTAIN INTEREST INCOME WAS NOT EARNED BY THE ASSESSEE FROM THE INVESTMENT WHICH IS INEXTRICABLY LINKED WITH PR OJECT IMPLEMENTATION AND IT HAS INDEPENDENT SOURCE OF SUCH REVENUE FROM FDRS. ETC. OTHER ASPECT WHICH IS TO BE LOOKED INTO IS, WHETHER WITHO UT FILING REVISED RETURN, THE ASSESSEE CAN RAISE NEW PLEA BEFORE THE LD.CIT(A) IN ORDER TO EXONERATE ITSELF FROM TAX LIABILITY. 13. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT SO FAR AS OBJECTION OF THE AO THAT REVISED RETURN W AS NOT FILED IS CONCERNED, THIS ASPECT HAS BEEN DEALT BY THE TRIBUN AL IN THE ASSESSMENT YEAR 2008-09 AS WELL AS CONSIDERED BY THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MITEX IMPEX, 46 TAXMAN N.COM 30 (GUJARAT). HE PLACED ON RECORD COPY OF THE HONBLE HIGH COURTS DECISION. THE LD.DR WAS UNABLE TO CONTROVERT THI S CONTENTION OF THE ASSESSEE. 14. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE T HROUGH THE RECORD. A PERUSAL OF JUDGMENT OF THE HONBLE GUJAR AT HIGH COURT WOULD REVEAL THAT HONBLE COURT HAS MADE REFERENCE TO A L ARGE NUMBER OF DECISIONS, AND THEREAFTER ARRIVED AT A CONCLUSION T HAT HONBLE SUPREME COURT HAS NOT PUT ANY FETTER ON THE POWERS OF THE A PPELLATE AUTHORITIES IN THE CASE OF GOETEZ INDIA LTD. (SUPRA) FOR ENTERT AINING ANY NEW PLEA WHICH AFFECT TAX LIABILITY OF THE ASSESSEE. THE DI SCUSSION MADE BY HONBLE COURT READS AS UNDER: 28. LEARNED COUNSEL MR.PRANAV DESAI FOR THE DEPART MENT SUBMITTED THAT IN VIEW OF THE DECISION OF THE SUPRE ME COURT IN THE ITA NO.1663/AHD/2014 AND OTHER WITH CO 8 CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INC OME- TAX(SUPRA), THE ASSESSEE COULD NOT HAVE MAINTAINED ADDITIONAL CLAIM THAT TOO AT AN APPELLATE STAGE WITHOUT REVISI NG THE RETURN. 29. ON THE OTHER HAND LEARNED COUNSEL MR.B.S. SOPAR KAR FOR THE ASSESSEES REFERRING TO VARIOUS DECISIONS OF HIGH CO URTS AND SUPREME COURT CONTENDED THAT THE TRIBUNAL COMMITTED NO ERROR. WE WOULD REFER TO HIS CITATIONS AT AN APPROPRIATE S TAGE. 30. IN WHAT MANNER AND TO WHAT EXTENT, A GROUND, A LEGAL CONTENTION OR A FRESH CLAIM CAN BE MADE AT AN APPEL LATE STAGE ARE VEXED QUESTIONS AND HAVE OCCUPIED THE MINDS OF THE COURTS IN NUMEROUS OCCASIONS. 31. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V S. COMMISSIONER OF INCOME-TAX AND ANOTHER REPORTED IN 187 ITR 688 T HE SUPREME COURT NOTED WITH APPROVAL OBSERVATION OF THE COURT IN THE CASE OF CIT VS. KANPUR COAL SYNDICATE REPORTED IN [1964] 53 ITR 225 (SC) TO THE EFFECT THAT THE APPELLATE ASSISTANT C OMMISSIONER, THEREFORE, HAS PLENARY POWERS IN DISPOSING OF APPEA L. THE SCOPE OF HIS POWER IS COTERMINUS WITH THAT OF THE INCOME TAX OFFICER. HE CAN DO WHAT THE INCOME TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IT WAS OBSERVED THAT THERE WAS NO REASON WHY THE APPELLATE AUTHORITY CANNOT MODIFY TH E ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BE FORE THE INCOME TAX OFFICER. THE ACT DOES NOT PLACE ANY REST RICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. IT W AS OBSERVED THAT:- THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE TO THE INTERPRETATION OF S. 25 1(1) (A) OF THE ACT. THE DE CLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSIST ANT COMMISSIONER IS CO-TERMINUS WITH THAT OF THE INCOME TAX OFFICER, IF THAT HE SO, THERE APPEARS TO BE NO REAS ON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSES SMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BE FORE THE INCOME TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RESTRICTION OR L IMITATION ON THE EXERCISE OF APPELLATE POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST TH E ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTIO N BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS IF AN Y PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPELLATE AUTHORITY IS VESTED WITH AL L THE ITA NO.1663/AHD/2014 AND OTHER WITH CO 9 PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON A ND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASS ESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PAS SED BY THE INCOME TAX OFFICER. 32. IN CASE OF NATIONAL THERMAL POWER CO. LTD. VS.C OMMISSIONER OF INCOME-TAX REPORTED IN [1998] 229 ITR 383(S.C.) WHEN THE QUESTION OF LAW WAS RAISED FOR THE FIRST TIME BEFOR E THE TRIBUNAL THOUGH FACTS WERE ALREADY ON RECORD, THE SUPREME CO URT OBSERVED THAT THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING SUCH A QUESTION BEFORE THE TRIBUNAL FO R THE FIRST TIME SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESP ECT OF THE ITEM CONCERNED. THERE IS NO REASON TO RESTRICT THE POWER OF THE TRIBUNAL IN SUCH APPEAL ONLY TO DECIDE THE GROUNDS WHICH ARI SE FROM THE ORDER OF COMMISSIONER (APPEALS). THE TRIBUNAL SHOUL D NOT BE PREVENTED FROM CONSIDERING THE QUESTIONS OF LAW ARI SING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 33. IN CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME- TAX(SUPRA) THE SUPREME COURT DISTINGUISHED THE JUDG MENT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. COMMISS IONER OF INCOME-TAX (SUPRA) ON THE GROUND THAT THE SAME PERT AINED TO THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE ACT TO ENTERTAIN A POINT OF LAW FOR THE FIRST TIME AND COMMENTED THAT SUCH DECISION DOES NOT RELATE TO THE POWER OF THE ASSESSING OFFIC ER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVI SED RETURN. IN THE PROCESS THE SUPREME COURT RECOGNIZED THAT A NEW CLAIM COULD NOT BE ENTERTAINED BY THE ASSESSING OFFICER WITHOUT THE ASSESSEE REVISING THE RETURN. WHILE DOING SO IT WAS CLARIFIE D THAT:- 4...HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN TH IS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TR IBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961. THER E SHALL BE NO ORDER AS TO COSTS. 34. IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. J AI PARABOLIC SPRINGS LTD. REPORTED IN [2008] 306 ITR 42 (DELHI), THE DELHI HIGH COURT HELD THAT THERE IS NO PROHIBITION ON THE POWE RS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH AC CORDING TO THE TRIBUNAL AROSE IN THE MATTER AND FOR JUST DECISION OF THE CASE. ITA NO.1663/AHD/2014 AND OTHER WITH CO 10 35. IN CASE OF COMMISSIONER OF INCOME-TAX VS. PRUTH VI BROKERS AND SHAREHOLDERS P.LTD. REPORTED IN [2012] 349 ITR 336(BOM) THE BOMBAY HIGH COURT CONSIDERED THE ISSUE AT CONSIDERA BLE LENGTH AND HELD THAT COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE THE JURISDICTION TO CONSIDER THE ADDITIONAL CL AIM AND NOT MERELY ADDITIONAL LEGAL SUBMISSIONS. THE APPELLATE AUTHORITIES HAVE DISCRETION TO PERMIT SUCH ADDITIONAL CLAIMS. S UCH CLAIMS NEED NOT BE THOSE WHICH BECAME AVAILABLE ON ACCOUNT OF C HANGE OF CIRCUMSTANCES OF LAW BUT WHICH WERE EVEN AVAILABLE WHEN THE RETURN WAS FILED. 36. THE DELHI HIGH COURT ONCE AGAIN IN RECENT JUDGM ENT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. SAM GLOBAL S ECURITIES LTD. REPORTED IN [2014] 360 ITR 682 (DELHI) OBSERVE D THAT THE COURTS HAVE TAKEN A PRAGMATIC VIEW AND NOT A TECHNI CAL ONE AS TO WHAT IS REQUIRED TO BE DETERMINED IN TAXABLE INCOME . IN THAT SENSE ASSESSMENT PROCEEDINGS ARE NOT ADVERSARIAL IN NATURE. WITH THESE OBSERVATIONS COURT CONFIRMED THE VIEW OF THE TRIBUNAL REVERSING THE DECISION OF THE ASSESSING OFFICER REJ ECTING THE CLAIM OF THE ASSESSEE ON THE GROUND THAT NO REVISED RETUR N WAS FILED. 37. IN CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT- I VS. CELLULOSE PRODUCTS OF INDIA LTD. REPORTED IN [1985] 151 ITR 499, FULL BENCH OF THIS COURT HELD THAT MERELY BECAUSE A GROUND HAS NOT BEEN RAISED THOUGH IT COULD HAVE BEEN RAISED IN SUP PORT OF THE RELIEF SOUGHT IN THE APPEAL, IT CANNOT BE SAID THAT SUCH GROUND CANNOT BE RAISED BEFORE THE TRIBUNAL. SUCH GROUND C AN BE RAISED PROVIDED IT FALLS WITHIN THE CONTOURS OF THE SUBJEC T MATTER OF THE APPEAL. 38. IT THUS BECOMES CLEAR THAT THE DECISION OF THE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA) IS CONFINED TO THE POWERS OF THE ASSESSING OFFICER AND ACCEPTING A CLAIM WITHOUT REVISED RETURN. THIS IS W HAT SUPREME COURT OBSERVED IN THE SAID JUDGMENT WHILE DISTINGUI SHING THE JUDGMENT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA) AND THAT IS HOW VARIOUS HIGH COURTS HAVE VIEWED THE DICTUM OF THE DECISION IN TH E CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA). WHEN IT COMES TO THE POWER OF APPELLATE COMMISSIONE R OR THE TRIBUNAL, THE COURTS HAVE RECOGNIZED THEIR JURISDIC TION TO ENTERTAIN A NEW GROUND OR A LEGAL CONTENTION. A GROUND WOULD HAVE A REFERENCE TO AN ARGUMENT TOUCHING A QUESTION OF FAC T OR A QUESTION OF LAW OR MIXED QUESTION OF LAW OR FACTS. A LEGAL CONTENTION WOULD ORDINARILY BE A PURE QUESTION OF L AW WITHOUT ITA NO.1663/AHD/2014 AND OTHER WITH CO 11 RAISING ANY DISPUTE ABOUT THE FACTS. NOT ONLY SUCH ADDITIONAL GROUND OR CONTENTION, THE COURTS HAVE ALSO, AS NOTE D ABOVE, RECOGNIZED THE POWERS OF THE APPELLATE COMMISSIONER AND THE TRIBUNAL TO ENTERTAIN A NEW CLAIM FOR THE FIRST TIM E THOUGH NOT MADE BEFORE THE ASSESSING OFFICER. INCOME TAX PROCE EDINGS ARE NOT STRICTLY SPEAKING ADVERSARIAL IN NATURE AND THE INTENTION OF THE REVENUE WOULD BE TO TAX REAL INCOME. 39. THIS IS PRIMARILY ON THE PREMISE THAT IF A CLAI M THOUGH AVAILABLE IN LAW IS NOT MADE EITHER INADVERTENTLY O R ON ACCOUNT OF ERRONEOUS BELIEF OF COMPLEX LEGAL POSITION, SUCH CL AIM CANNOT BE SHUT OUT FOR ALL TIMES TO COME, MERELY BECAUSE IT I S RAISED FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITY WITHOUT R ESORTING TO REVISING THE RETURN BEFORE THE ASSESSING OFFICER. 15. THUS, AS FAR AS THIS OBJECTION IS CONCERNED AT THE END OF THE REVENUE IN ITS APPEAL, IT IS NOT TENABLE AND THEREF ORE THIS GROUND OF APPEAL IS REJECTED. 16. NEXT QUESTION RELATES TO QUANTIFICATION OF INTE REST INCOME AVAILABLE WITH THE ASSESSEE FOR SET OFF AGAINST PRE-OPERATIVE EXPENDITURE IN POWER PROJECT IMPLEMENTATION. WE FIND THAT THE LD.CIT(A) HAS NOT INDEPENDENTLY EXAMINED ANY ISSUE IN THIS ORDER, RAT HER FOLLOWED ORDER OF HIS PREDECESSOR IN THE ASSESSMENT YEAR 2008-09. TH E ITAT DID NOT APPROVE THE ORDER OF THE LD.CIT(A) IN THE ASSESSMEN T YEAR 2008-09 AND RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE ASSESSMENT YEAR 2008-09, WE ARE OF THE VIEW THAT INTEREST INCOME OF RS.8,17,60,319/- IS AVAILABLE WITH THE ASSESSEE FOR SET OFF AGAINST PRE -OPERATIVE EXPENDITURE WHICH IS TITLED AS PROJECT DEVELOPMENT EXPENDITURE . DISCUSSION MADE BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2008-09 ON T HIS ISSUE READS AS UNDER: 18. WE FIND THAT BOTH THE PARTIES HAVE RELIED UPON THE DECISIONS OF THE HON'BLE APEX COURT AND IN ADDITION , THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE DE LHI HIGH COURT. THEREFORE, IT WOULD BE APPROPRIATE TO FIRST REFER TO THOSE ITA NO.1663/AHD/2014 AND OTHER WITH CO 12 DECISIONS. IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA), THE HON'BLE APEX COURT HELD AS UNDER: - '...THAT THE COMPANY HAD SURPLUS FUNDS IN ITS HANDS . IN ORDER TO EARN INCOME OUT OF THE SURPLUS FUNDS, IT H AD INVESTED THE AMOUNT FOR THE PURPOSE OF EARNING INTE REST. THE INTEREST THUS EARNED WAS CLEARLY OF REVENUE NAT URE AND WOULD HAVE TO BE TAXED ACCORDINGLY. THE ACCOUNT ANTS MIGHT HAVE TAKEN SOME OTHER VIEW BUT ACCOUNTANCY PRACTICE WAS NOT NECESSARILY GOOD LAW. THIS WAS NOT A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. TH E ASSESSEE WAS ENTIRELY AT LIBERTY TO DEAL WITH THE I NTEREST AMOUNT AS IT LIKED. THE APPLICATION OF THE INCOME FO R PAYMENT OF INTEREST WOULD NOT AFFECT ITS TAXABILITY IN ANY WAY. THE COMPANY COULD NOT CLAIM ANY RELIEF UNDER SECTION70 OR SECTION 71 SINCE ITS BUSINESS HAD NOT STARTED AND THERE COULD NOT BE ANY COMPUTATION OF BUSINESS INCOME OR LOSS INCURRED BY THE ASSESSEE IN THE RELE VANT ACCOUNTING YEARS. IN SUCH A SITUATION, THE EXPENDIT URE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF SETTING UP ITS BUSINESS COULD NOT BE ALLOWED AS DEDUCTION, NOR COU LD IT BE ADJUSTED AGAINST ANY OTHER INCOME UNDER ANY OTHE R HEAD. SIMILARLY ANY INCOME FROM A NON-BUSINESS SOUR CE COULD NOT BE SET OFF AGAINST THE LIABILITY TO PAY I NTEREST ON FUNDS BORROWED FOR THE PURPOSE OF PURCHASE OF PLANT AND MACHINERY EVEN BEFORE COMMENCEMENT OF THE BUSINESS OF THE ASSESSEE.' 19. IN THE CASE OF BOKARO STEEL LTD. (SUPRA), THE HO N'BLE APEX COURT, AFTER CONSIDERING THE DECISION OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA), HELD AS UNDER :- '..., DISMISSING THE APPEAL, THAT THE FIRST THREE H EADS OF INCOME WERE (I) THE RENT CHARGED BY THE ASSESSEE TO ITS CONTRACTORS FOR HOUSING WORKERS AND STAFF EMPLOYED B Y THE CONTRACTOR FOR THE CONSTRUCTION WORK OF THE ASSE SSEE INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSESSEE, (II) HIRE ITA NO. 2755/AHD/2011 ADANI POWER LTD VS. ACIT AYS 2008-09CHARGES FOR PLANT AND MACHINE RY WHICH WAS GIVEN TO THE CONTRACTORS BY THE ASSESSEE FOR USE IN THE CONSTRUCTION WORK OF THE ASSESSEE, AND (I II) INTEREST FROM ADVANCES MADE TO THE CONTRACTORS BY T HE ASSESSEE FOR THE PURPOSE OF FACILITATING THE WORK OF CONSTRUCTION. THE ACTIVITIES OF THE ASSESSEE IN CON NECTION ITA NO.1663/AHD/2014 AND OTHER WITH CO 13 WITH ALL THESE THREE RECEIPTS WERE DIRECTLY CONNECT ED WITH OR INCIDENTAL TO THE WORK OF CONSTRUCTION OF ITS PL ANT UNDERTAKEN BY THE ASSESSEE. THE ADVANCES WHICH THE ASSESSEE MADE TO THE CONTRACTORS TO FACILITATE THE CONSTRUCTION ACTIVITY OF PUTTING TOGETHER A VERY LA RGE PROJECT WAS AS MUCH TO ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED WITHOUT ANY FINANCIAL HITCH A S TO HELP THE CONTRACTORS. THE ARRANGEMENTS WHICH WERE M ADE BETWEEN THE ASSESSEE-COMPANY AND THE CONTRACTORS PERTAINING TO THESE THREE RECEIPTS WERE ARRANGEMENT S WHICH WERE INTRINSICALLY CONNECTED WITH THE CONSTRU CTION OF ITS STEEL PLANT. THE RECEIPTS HAD BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CONTRACTORS AND HAD GONE TO REDUCE THE COST OF CONSTRUCTION. THEY HAD, THEREFOR E, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AND NOT INCOM E OF THE ASSESSEE FROM ANY INDEPENDENT SOURCE.' 20. IN THE CASE OF KARNAL CO-OPERATIVE SUGAR MILLS LTD. (SUPRA), THEIR LORDSHIPS OF HON'BLE APEX COURT, AFTER APPLYI NG THE DECISION OF BOKARO STEEL LTD. (SUPRA), HELD AS UNDER :- 'HELD, THAT, IN THE PRESENT CASE, THE ASSESSEE HAD DEPOSITED MONEY TO OPEN A LETTER OF CREDIT FOR THE PURCHASE OF THE MACHINERY REQUIRED FOR SETTING UP I TS PLANT IN TERMS OF THE ASSESSEE'S AGREEMENT WITH THE SUPPLIER. IT WAS ON THE MONEY SO DEPOSITED THAT SOM E INTEREST HAD BEEN EARNED. THIS WAS, THEREFORE, NOT A CASE WHERE ANY SURPLUS SHARE CAPITAL MONEY WHICH WAS LYI NG IDLE HAD BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE DEPOSIT OF MONEY IN THE PRESE NT CASE WAS DIRECTLY LINKED WITH THE PURCHASE OF PLANT AND MACHINERY. HENCE, ANY INCOME EARNED ON SUCH DEPOSIT WAS INCIDENTAL TO THE ACQUISITION OF ASSETS FOR THE SETTING UP OF THE PLANT AND MACHINERY. THE INTEREST WAS A C APITAL RECEIPT, WHICH WOULD GO TO REDUCE THE COST OF ASSET . ' 21. IN THE CASE OF KARNATAKA POWER CORPORATION (SUP RA), THEIR LORDSHIPS OF HON'BLE APEX COURT, FOLLOWING THE DECI SION OF BOKARO STEEL LTD. (SUPRA), HELD AS UNDER:- '...ALSO, (I) THAT THE TRIBUNAL WAS RIGHT IN LAW IN UPHOLDING THE ORDER OF THE COMMISSIONER (APPEALS) WHO DELETED THE ADDITION OF RS.1,30,44,518/- BEING INTEREST RECEIPT S AND HERE CHARGES FROM CONTRACTORS BY HOLDING THAT THE S AME ITA NO.1663/AHD/2014 AND OTHER WITH CO 14 WERE IN THE NATURE OF CAPITAL RECEIPTS WHICH WOULD GO TO REDUCE CAPITAL COST.' 22. IN THE CASE OF BONGAIGAON REFINERY & PETROCHEMI CALS LTD. (SUPRA), THE HON'BLE APEX COURT, AFTER CONSIDERING THE DECISION OF BOKARO STEEL LTD. (SUPRA), HELD AS UNDER:- ' REVERSING THE DECISION OF THE HIGH COURT IN RELAT ION TO THESE ITEMS OF INCOME, THAT THESE ITEMS OF RECEIPTS WERE NOT TAXABLE INCOME BUT WERE TO BE ADJUSTED AGAINST THE PROJECT COST FOR THE BUSINESS OF OIL REFINERY AND P ETRO- CHEMICALS.' 23. THAT THE HON'BLE DELHI HIGH COURT IN THE CASE O F INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA), AFTER CONSID ERING THE DECISIONS IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA) AND BOKARO STEEL LTD. (SUPRA) AT LENGTH , HELD AT PAGES 258, 259 AND 260 OF REPORT, I.E., 315 ITR 255 , AS UNDER:- 5. IN OUR OPINION THE TRIBUNAL HAS MISCONSTRUED THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS [1997] 227 ITR 172 AND THA T OF BOKARO STEEL LTD. [1999] 236 ITR 315. THE TEST WHICH PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS [1997] 227 ITR 172 IS THAT IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THEN BY VIRTUE OF THAT CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS TH E INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXAB LE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. ON THE OTHER HAND THE RATIO OF THE SUPREME COURT JUDGMENT IN BOKARO STEEL LTD. [1999] 236 ITR 315 TO OUR MIND IS THAT IF INCOME IS EARNED, WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH ARE OTHERWISE 'INEXTRIC ABLY LINKED' TO THE SETTING UP OF THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PR E- OPERATIVE EXPENSES. 5.1 THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE ACTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUS INESS AND THE FUNDS WHICH ARE GARNERED ARE INEXTRICABLY CONNECTED TO THE SETTING UP OF THE PLANT. THE CLUE IS PERHAPS AVAILABLE IN S. 3 OF THE ACT WHICH STATES THAT FOR ITA NO.1663/AHD/2014 AND OTHER WITH CO 15 NEWLY SET UP BUSINESS THE PREVIOUS YEAR SHALL BE TH E PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE ITA NO. 2755/AHD/2011 ADANI POWER LTD VS. ACIT AYS 2008- 09 BUSINESS. THEREFORE, AS PER THE PROVISION OF S. 4 OF THE ACT WHICH IS THE CHARGING SECTION INCOME WHICH ARISE S TO AN ASSESSEE FROM THE DATE OF SETTING OF THE BUSINES S BUT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDIN G ON WHETHER IT IS OF A REVENUE NATURE OR CAPITAL REC EIPT. THE INCOME OF A NEWLY SET UP BUSINESS, POST THE DAT E OF ITS SETTING UP CAN BE TAXED IF IT IS OF A REVENUE N ATURE UNDER ANY OF THE HEADS PROVIDED UNDER S. 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFIED AS INC OME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IT WOULD HAVE TO BE AN ACTIVITY WHICH I S IN SOME MANNER OR FORM CONNECTED WITH BUSINESS. THE WO RD 'BUSINESS' IS OF WIDE IMPORT WHICH WOULD ALSO INCLU DE ALL SUCH ACTIVITIES WHICH COALESCE INTO SETTING UP OF T HE BUSINESS. SEE MAZAGAON DOCK LTD. VS. CIT/CEPT (1958) 34 ITR 368 (SC) AND NARAIN SWADESHI WEAVING MILLS VS. CEPT (1954) 26 ITR 765 (SC). ONCE IT IS HELD THAT T HE ASSESSEE'S INCOME IS AN INCOME CONNECTED WITH BUSIN ESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF T HE FINDING OF FACT BY THE CIT(A) THAT THE MONIES WHICH WERE INDUCTED INTO THE JOINT VENTURE COMPANY BY THE JOIN T VENTURE PARTNERS WERE PRIMARILY INFUSED TO PURCHASE LAND AND TO DEVELOP INFRASTRUCTURE THEN IT CANNOT BE HEL D THAT THE INCOME DERIVED BY PARKING THE FUNDS TEMPORARILY WITH TOKYO MITSUBISHI BANK, WILL RESULT IN THE CHARACTER OF THE FUNDS BEING CHANGED, IN AS MUCH AS THE INTEREST EAR NED FROM THE BANK WOULD HAVE A HUE DIFFERENT THAN THAT O F BUSINESS AND BE BROUGHT TO TAX UNDER THE HEAD 'INCO ME FROM OTHER SOURCES'. IT IS WELL-SETTLED THAT AN INC OME RECEIVED BY THE ASSESSEE CAN BE TAXED UNDER THE HEA D 'INCOME FROM OTHER SOURCES' ONLY IF IT DOES NOT FAL L UNDER ANY OTHER HEAD OF INCOME AS PROVIDED IN S. 14 OF THE ACT. THE HEAD 'INCOME FROM OTHER SOURCES' IS A RESIDUARY HEAD OF INCOME. SEE S.G. MERCANTILE CORPORATION (P) LTD. VS. CIT 1972 CTR (SC) 8 : (1972) 83 ITR 700 ( SC) AND CIT VS. GOVINDA CHOUDHURY & SONS (1994) 116 CTR (SC) 61 : (1993) 203 ITR 881 (SC). 5.2 IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUN D BY THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHA RE ITA NO.1663/AHD/2014 AND OTHER WITH CO 16 CAPITAL WERE INFUSED FOR A SPECIFIC PURPOSE OF ACQU IRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFO RE, THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINESS COULD NOT HAVE BEEN CLASSI FIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EAR NED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS IT WA S IN THE NATURE OF CAPITAL RECEIPT AND HENCE WAS REQUIRE D TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. IN THE CASE OF TUTICORIN ALKALI CHEMICALS [1997] 227 ITR 172 IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILABLE W ITH THE ASSESSEE IN THAT CASE WERE 'SURPLUS' AND, THEREFORE , THE SUPREME COURT HELD THAT THE INTEREST EARNED ON SURP LUS FUNDS WOULD HAVE TO BE TREATED AS 'INCOME FROM OTHE R SOURCES'. ON THE OTHER HAND IN BOKARO STEEL LTD. [19 99] 236 ITR 315 (SC) WHERE THE ASSESSEE HAD EARNED INTE REST ON ADVANCE PAID TO CONTRACTORS DURING PRE- COMMENCEMENT PERIOD WAS FOUND TO BE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PLANT OF THE ASSESS EE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PERMITTED TO BE SET OFF AGAINST PRE-OPERATIVE EXPEN SES. (UNDERLINED OURS TO SUPPLY EMPHASIS) 24. FROM THE ABOVE, IT IS EVIDENT THAT THE HON'BLE DELHI HIGH COURT HAS CONSIDERED AND INTERPRETED THE DECISIONS OF HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA) AS WELL AS BOKARO STEEL LTD. (SUPRA). T HE CONCLUSION OF THE DELHI HIGH COURT IS IN FACT THE L AW WHICH EMERGES AS PER THE DECISION OF HON'BLE APEX COURT. THEREFORE, IN OUR OPINION, THE CIT(A) WAS NOT JUSTIFIED IN IGN ORING THE DECISION OF HON'BLE DELHI HIGH COURT BY SIMPLY MENT IONING THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE APE X COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA). AFTER CONSIDERING THESE TWO DECISIONS OF THE HON'BLE APEX COURT AND ALSO SOME OTHER DECISIONS OF THE HON'BLE APEX C OURT, THEIR LORDSHIPS OF THE DELHI HIGH COURT ARRIVED AT THE CO NCLUSION 'IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUND BY THE A UTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL W ERE INFUSED FOR THE SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, THE INTEREST EARNED O N FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINESS COUL D NOT HAVE BEEN CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUS INESS, IT WAS IN THE NATURE OF CAPITAL RECEIPT AND HENCE WAS REQUIRED TO ITA NO.1663/AHD/2014 AND OTHER WITH CO 17 BE SET OFF AGAINST THE PRE-OPERATIVE EXPENSES.' THA T, THE RATIO OF THE ABOVE FINDING OF THE HON'BLE DELHI HIGH COUR T WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE, BECAUSE ADMITTEDLY IN THE CASE UNDER APPEAL BEFORE US THE S HARE CAPITAL AS WELL AS LOANS WERE RAISED FOR THE SPECIFIC PURPO SE OF SETTING UP OF THE POWER GENERATION PLANTS. THE BUSINESS OF THE ASSESSEE HAS NOT BEEN COMMENCED AND THEREFORE, AS P ER ABOVE DECISION, THE INTEREST RECEIVED IN THE PERIOD PRIOR TO COMMENCEMENT OF BUSINESS WAS IN THE NATURE OF CAPIT AL RECEIPT AND HENCE WAS REQUIRED TO BE SET OFF AGAINST THE PR E-OPERATIVE EXPENSES. THE ASSESSEE HAS ALREADY SET OFF THE INTE REST INCOME AGAINST THE PRE-OPERATIVE EXPENSES WHICH IS TITLED AS 'PROJECT DEVELOPMENT EXPENDITURE'. IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT THE INTEREST INCOME OF RS.1,35,87,158/ - AS WELL AS RS.7,91,51,306/- WAS A CAPITAL RECEIPT NOT CHARGEAB LE TO TAX DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, GR OUND NOS. 2 AND 4 OF THE ASSESSEE'S APPEAL ARE ALLOWED. 17. THERE IS NO DISPARITY ON FACTS. THE LD.CIT(A) HAS SIMPLY FOLLOWED THE ORDER OF THE LD.CIT(A) IN THE ASSESSMENT YEAR 2 008-09. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE ASSESSMENT YEAR 2008-09, WE REJECT THE GROUND OF APPEAL TAKEN BY TH E REVENUE AND ALLOW THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. 18. SO FAR AS CO IS CONCERNED, IT IS IN SUPPORT OF THE ORDER OF THE LD.CIT(A) ON THE ISSUE AGITATED BY THE REVENUE IN I TS APPEAL. 19. SUB-SECTION 4 OF SECTION 253 AUTHORISES THE RES PONDENT TO FILE CROSS-OBJECTION ON RECEIPT OF NOTICE IN APPEAL. TH E CO IS REQUIRED TO BE FILED WITHIN 30 DAYS OF RECEIPT OF NOTICE AND IT IS TO BE VERIFIED IN THE MANNER AKIN TO AN APPEAL, BUT, THE CO IS TO BE FILE D AGAINST ANY PART OF THE ORDER IMPUGNED IN THE APPEAL. IN THE CO FILED BY THE ASSESSEE, IT HAS NOWHERE DEMONSTRATED ITS GRIEVANCES AGAINST ANY PART OF THE ORDER OF THE CIT(A), AS SUCH, THE CO IS NOT MAINTAINABLE IN THE PRESENT FORM, HENCE, REJECTED. ITA NO.1663/AHD/2014 AND OTHER WITH CO 18 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED, AND APPEAL OF THE ASSESSEE IS ALLOWED, WHEREAS, CROSS OBJECTION O F THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28 TH JUNE, 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER