M/s HP Power Corporation Ltd., Shimla V. ACIT, Shimla

ITA 169/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77137 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV SOOD SMT JYOTI KUMARI
• Keywords: Business income; Diversion of income; Source of fund; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.169 /CHD/2013 ASSESSMENT YEAR : 2009-10 & ITA NO.488 /CHD/2012 ASSESSMENT YEAR : 2008-09 M/S HP POWER CORPORATION LTD., VS. THE D.C.I.T ., HIMFED BHAWAN, BELOW OLD MLA QTRS., SHIMLA. BYE PASS ROAD, TUTI KANDI, SHIMLA. PAN: AABCH8615G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV SOOD RESPONDENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 01.05.2014 DATE OF PRONOUNCEMENT : 30.06.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), SHIMLA DATED 0 5.11.2012 AND 28.02.2012 RESPECTIVELY AGAINST THE ORDER PASSED UN DER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN BOTH THE APPEALS THE ASSESSEE HAS RAISED FOLL OWING CONCISE GROUNDS OF APPEAL WHICH READ AS UNDER: 1. THAT THE LD A.O. HAS ERRED IN FACT AND LAW AND HAS MISCONSTRUED THE PROVISIONS OF THE INCOME TAX ACT AND THE BASIC TENETS OF ACCOUNTI NG BY TREATING INTEREST EARNED DURING CONSTRUCTION PERIOD AS INCOME FROM OTHER SOU RCES WITHOUT GOING INTO THE NATURE OF THE FUNDS WHICH WERE INVESTED, AND DISREG ARDING THE RATIO OF THE CASES DECIDED AFTER TUTICORIN ALKALIES & CHEMICAL LTD 227 ITR 172 WHICH IS DISTINGUISHABLE AND HAS OUTLIVED ITS LIFE. 2 2. THE ASSESSEE CRAVES TO DELETE, ADD, AND AMEND A NY GROUND OF APPEAL WITH THE PERMISSION OF THE HON'BLE BENCH. 3. THE ONLY ISSUE RAISED IN BOTH THE APPEALS BEFORE US IS IN RELATION TO THE TREATMENT OF INTEREST ON FDRS DURING THE CONSTR UCTION PERIOD. 4. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE O N IDENTICAL ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE FACTS AND ISSUE RAISED IN BOTH THE APPEALS ARE IDENTICAL, HOWEVER, REFERENCE IS MA DE TO THE FACTS IN ITA NO.488/CHD/2012 TO ADJUDICATE THE ISSUE. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CORPORATION WAS A GOVERNMENT COMPANY SET UP ON 5.12.2006 AS A JOINT V ENTURE BETWEEN GOVERNMENT OF HIMACHAL PRADESH AND H.P.STATE ELECTR ICITY BOARD. DURING THE YEAR UNDER CONSIDERATION NO COMMERCIAL P RODUCTION HAD BEEN UNDERTAKEN. HOWEVER, THE ASSESSEE HAD SET OFF SUM OF RS.1,59,44,653/- ON ACCOUNT OF INTEREST EARNED ON FDRS UNDER THE HEA D STATEMENT OF INCIDENTAL EXPENSES. THE ASSESSEE WAS SHOW CAUSE D TO EXPLAIN AS TO WHY THE SAID INTEREST SHOULD NOT BE ADDED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN REPLY IT WAS SUBMI TTED BY THE ASSESSEE THAT THE SAID INCOME COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AS IT WAS A CAPITAL RECEIPT, WHICH NEEDS TO BE SET OFF AGAINST THE INTEREST PAID AND OTHER INCIDENTAL EXPENSES INCURRED DURING PRE-OPERATIVE STAGE. IT WAS FURTHER POINTED OUT THAT THE NATURE OF THE F UNDS WAS EARMARKED AND WAS MEANT ONLY FOR SETTING UP OF POWER PROJECTS AND WAS DIRECTLY IN INEXTRICABLY LINKED TO THE CAPITAL EXPENDITURE. T HE ASSESSING OFFICER VIDE PARA 5 DEALT WITH THE RATIOS LAID DOWN IN VARI OUS JUDGMENTS RELIED UPON BY THE ASSESSEE AND HELD THAT IN THE PRESENT C ASE IT WAS AN ADMITTED FACT THAT THE BUSINESS OF THE ASSESSEE HAD YET TO C OMMENCE. FURTHER THE ASSESSEE HAD NOT MADE ANY INVESTMENT IN THE ASSETS TOWARDS SETTING UP OF 3 POWER PLANT DURING THE RELEVANT YEAR AND THE INCIDE NTAL EXPENDITURE INCURRED DURING THE YEAR WAS ALMOST ENTIRELY IN THE NATURE OF ADMINISTRATIVE EXPENSES. THE ASSESSING OFFICER TH US HELD THAT S INCE THE PROCESS OF SETTING UP OF THE PLANT HAD NOT AT ALL C OMMENCED DURING THE RELEVANT YEAR, THERE CAN BE NO QUESTION IN THE PRES ENT CASE OF THE INTEREST INCOME BEING INEXTRICABLY LINKED WITH TH E SETTING UP OF THE PLANT. HENCE, THE FACTS OF THE PRESENT CASE ARE E NTIRELY DIFFERENT FROM THE FACTS THAT WERE PLACED BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM NEW DEL HI CITED BY THE ASSESSEE . THE ASSESSING OFFICER IN VIEW THEREOF OBSERVED THAT SINCE THE BUSINESS HAS NOT COMMENCED AND SINCE THE SETTIN G UP OF THE PLANT HAS ALSO NOT COMMENCED, THE INTEREST INCOME EARNED CANN OT BE ASSESSED AS PROFITS AND GAINS OF BUSINESS AND HENCE CANNOT BE S ET OFF AGAINST THE PREOPERATIVE EXPENSES, WHICH DO NOT INCLUDE ANY EXP ENDITURE ON SETTING UP OF THE PLANT. ON THE OTHER HAND, ON THE FACTS OF THE PRESENT CASE IT IS THE JUDGMENT OF THE HON'BLE SUPREME COURT IN TUTICO RIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA) THAT IS SQUARE LY APPLICABLE . IN VIEW THEREOF, SUM OF RS.1.59 CRORES WAS TREATED AS INCOME OF THE ASSESSEE IN ASSESSMENT YEAR 2008-09. 6. SIMILARLY IN ASSESSMENT YEAR 2009-10 THE ASSESSE E HAD EARNED INTEREST ON FDRS TOTALING RS.27.75 CRORES. THE EX PLANATION OF THE ASSESSEE WAS THAT IT HAD RECEIVED MONEY FROM DELHI JAL BOARD TO IMPLEMENT RENUKA DAM PROJECT AS PER THE AGREEMENT E NTERED INTO BETWEEN THE PARTIES. THE FUNDS IN THE PROJECT WERE PROVIDED BY THE CENTRAL GOVERNMENT AND PAYMENT WAS MADE BY DELHI JA L BOARD OF RS.210.42 CRORES TO THE ASSESSEE IN PURSUANCE OF TH E AGREEMENT. THE ASSESSING OFFICER OBSERVED THAT NO RESTRICTIONS AND CONDITIONS HAD BEEN IMPOSED ON THE ASSESSEE FOR UTILIZATION OF MONEY RE CEIVED FROM DELH JAL 4 BOARD AS WELL AS THE INTEREST THAT HAD ACCRUED THER EUPON. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE SUPRE ME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT [227 IT R 172 (SC)]. THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME WAS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. 7. IN THE APPEAL RELATING TO ASSESSMENT YEAR 2008-0 9 THE LEARNED A.R. FOR THE ASSESSEE STRESSED THAT THE FUNDS WHICH WERE INEXTRICABLY LINKED TO THE SHARE CAPITAL WERE TO BE DEPLOYED TOWARDS SETTI NG UP OF POWER PROJECTS AND THE INTEREST THEREON MUST BE HELD TO B E CAPITAL RECEIPT. THE CIT (APPEALS) NOTED THAT THERE WAS NO ACTIVITY UNDERTAKEN DURING THE YEAR TOWARDS THE SETTING UP OF ANY OF THE POWER PL ANTS. BY VIRTUE OF BEING A JOINT VENTURE COMPANY, THE GOVERNMENT OF HI MACHAL PRADESH CONTRIBUTED AN AMOUNT OF RS.79,71,00,000/- DURING T HE YEAR UNDER CONSIDERATION TOWARDS ITS EQUITY SHARE. ANOTHER AMOUNT OF RS.RS.12,36,82,000/- WAS RECEIVED BY THE APPELLANT COMPANY FROM DELHI JAL BOARD. THUS THE TOTAL FUNDS RECEIVED DURING THE YEAR AMOUNTED TO RS. 92,07,82, 000/-. THE COMPANY ALSO HAD AN OPEN ING BALANCE OF RS.40 LACS AS ON 01.04.2007. THUS THE TOTAL FUNDS AVAIL ABLE WITH THE APPELLANT COMPANY WERE TO THE TUNE OF RS. 92,47,82, 000/- OU T OF WHICH AN AMOUNT OF RS.42,74,14,562/- WAS INVESTED IN THE FORM OF FI XED DEPOSITS WITH THE BANK. THE APPELLANT WAS STILL LEFT WITH THE BALAN CE OF RS.49,73,67,438/- AN INTEREST OF RS.1,59,44,653/- WAS EARNED BY THE APPELLANT ON ACCOUNT OF THE INVESTMENT IN FIXED DEPOSITS . THE CIT (APPEALS) WHILE DECIDING THE ISSUE UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSI DERED WITH REFERENCE TO THE FACTS OF THE CASE AND THE CASE LAW S RELIED UPON. IT IS NOTED THAT THE APPELLANT COMPANY WAS SE T UP AS A JOINT VENTURE BETWEEN THE GOVERNMENT OF HIMACHAL PR ADESH AND H.P. STATE ELECTRICITY BOARD TO CARRY OUT THE W ORKS OF 5 VARIOUS HYDRO ELECTRICAL PROJECTS. TWO OTHER COMPAN IES, NAMELY KINNAR KAILASH POWER CORPORATION LTD. AND M/ S. PABBER VALLEY POWER CORP. LTD. WERE MERGED WITH THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON AND ALL THE ASSETS AND LIABILITIES OF THOSE COMPANIES W ERE TAKEN OVER AT BOOK VALUE. THERE WAS NO ACTIVITY UNDERTAKEN DURING THE YEAR TOWARDS THE SETTING UP OF ANY OF THE POWER PLANTS. BY VIRTUE OF BEING A JOINT VENTURE COMPANY, THE GOV ERNMENT OF HIMACHAL PRADESH CONTRIBUTED AN AMOUNT OF RS.79,71,00,000/- DURING THE YEAR UNDER CONSIDE RATION TOWARDS ITS EQUITY SHARE. ANOTHER AMOUNT OF RS.RS.12,36,82,000/- WAS RECEIVED BY THE APPELLANT COMPANY FROM DELHI JAL BOARD. THUS THE TOTAL FUNDS RECEI VED DURING THE YEAR AMOUNTED TO RS. 92,07,82, 000/-. THE COM PANY ALSO HAD AN OPENING BALANCE OF RS.40 LACS AS ON 01.04.20 07. THUS THE TOTAL FUNDS AVAILABLE WITH THE APPELLANT C OMPANY WERE TO THE TUNE OF RS. 92,47,82, 000/- OUT OF WHI CH AN AMOUNT OF RS.42,74,14,562/- WAS INVESTED IN THE FOR M OF FIXED DEPOSITS WITH THE BANK. THE APPELLANT WAS STILL LEFT WITH THE BALANCE OF RS.49,73,67,438/- AN INTEREST OF RS.1,5 9,44,653/- WAS EARNED BY THE APPELLANT ON ACCOUNT OF THE INVES TMENT IN FIXED DEPOSITS. 8. BEFORE THE CIT (APPEALS) IN ASSESSMENT YEAR 2009 -10 THE PLEA OF THE ASSESSEE WAS AS UNDER: 4.3 THE APPELLANT HAS FURTHER ARGUED THAT THE INTE REST EARNED ON THE BANK DEPOSITS INVESTED FROM THE FUNDS RECEIVED FROM THE STATE GOVT. IS TO BE CONSIDERED AS ADDITIONAL EQUITY OF THE GOVERNMENT, AND AS SUCH TH E INTEREST INCOME BELONGS TO THE STATE GOVERNMENT AND NOT TO THE APPELLANT. IN SU PPORT OF THE SAID ARGUMENT, THE APPELLANT HAS SUBMITTED A COPY OF THE MINUTES OF TH E 15 TH MEETING OF THE BOARD OF DIRECTORS OF THE APPELLANT CORPORATION HELD ON 20.0 2.2009 AT SHIM/A AND POINTED OUT THAT ITEM NO. 02 OF THE SUPPLEMENTARY/ADDITIONAL AG ENDA ITEM DEALT WITH THE ISSUE OF INTEREST EARNED/ACCRUED ON THE AMOUNTS RECEIVED FRO M THE STATE GOVT. AS EQUITY. IT WAS EMPHASIZED THAT IT WAS DECIDED IN THE SAID BOARD ME ETING THAT THE INTEREST EARNED IS TO BE CONVERTED INTO EQUITY FROM H.P. GOVERNMENT. 9. THE CIT (APPEALS) PERUSED THE MINUTES OF MEETING OF THE BOARD OF DIRECTORS WHICH ARE REPRODUCED UNDER PARA 4.4 AT PA GES 6 AND 7 OF THE APPELLATE ORDER AND COMPILED THE FACTS OF THE CASE AS UNDER: 4.5 FROM THE PERUSAL OF THE ABOVE, THE FOLLOWING FACTS BECOME IMMEDIATELY EVIDENT: - (I)THE BOARD OF DIRECTORS OF THE APPELLANT CORPORAT ION WAS FULLY SEIZED OF THE MATTER REGARDING THE TAXABLE NATURE OF THE INTEREST INCOME EARNED/ACCRUED ON THE BANK DEPOSITS INVESTED FROM T HE SURPLUS FUNDS AVAILABLE WITH THE APPELLANT CORPORATION. (II)SPECIAL DELIBERATIONS WERE HELD TO FIND OUT A W AY TO AVOID TAXATION ON THE SAID INCOME. 6 (III) SINCE THE DIRECTORS AS WELL AS THE TAX CONSUL TANT BELIEVED THAT THE INTEREST INCOME ON BANK DEPOSITS ATTRACTED INCOME TAX, IT WA S DECIDED TO PAY THE DUE ADVANCE TAX OF RS.230.71 LACS TO ESCAPE ANY ADDITIO NAL TAX DEMAND AND PENALTY. (IV) IT WAS PURELY AN IN-HOUSE DECISION OF THE BOAR D OF DIRECTORS THAT REFUND SHOULD BE CLAIMED 'WHILE FILING THE INCOME TAX RETURN BY TAKING THE P LEA THAT THE INTEREST EARNED IS TO BE CONVERTED INTO EQUITY FOR THE MONEY COMING FROM H.P. GOVERNMENT AND IS NOT AN INCOME OF HPPCL ARID THE I NTEREST ON MONEY FROM DELHI GOVERNMENT HAS TO BE SPENT ON THE WORK ITSELF .' THUS IT WAS NOT THE DECISION TAKEN BY THE H.P. GOVERNMENT THAT THE INTE REST EARNED BY THE HPPCL ON BANK DEPOSITS SHALL BE CONVERTED INTO EQUITY AND CREDITED TO THE ACCOUNT OF THE HP. GOVERNMENT, BUT IT WAS A CLEVER STRATEGY D EVISED BY THE APPELLANT ITSELF TO DO THE WINDOW DRESSING OF ITS A CCOUNTS ONLY WITH A VIEW TO ESCAPING THE TAX LIABILITY. THUS THE INTENTION OF T HE BOARD OF DIRECTORS OF THE APPELLANT COMPANY IS ABSOLUTELY CLEAR FROM THE MINU TES OF THE MEETING ABOVE. SUCH A DECISION UNILATERALLY TAKEN BY THE APPELLANT CORPORATION THUS HAS NO SANCTITY, AND IS INDICATIVE ONLY OF THE DESPERATE A TTEMPT OF THE APPELLANT CORPORATION TO SOMEHOW DEVISE A METHOD TO AVOID THE PAYMENT OF DUE TAX ON ITS INTEREST INCOME. 4.6 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT'S ARGUMENT THAT THE INTEREST INCOME, IN VIEW OF THE RESOLUTION ABOVE, BELONGS TO THE STATE GOVT. AND NOT TO THE APPELLANT CORPORATION IS DEVOID OF ANY MERIT ON ANO THER COUNT. GOING BY THIS PLEA OF THE APPELLANT, THE INCIDENCE OF TAX ON THE GIVEN INTEREST INCOME SHOULD BE SHITTED TO THE H.P. STATE GOVT. BECAUSE THE APPELLA NT HAS A/SO ADMITTED THAT THE GIVEN INCOME BELONGS TO THE STATE GOVT. AND SHALL B E ADDED TOWARDS THE EQUITY OF THE STATE GOVERNMENT. BUT THE APPELLANT HAS FAILED TO SHOW THAT IT HAD INVESTED THE FUNDS IN THE NAME OF THE STATE GOVT. OR THAT IT WAS DULY AUTHORIZED BY THE STATE GOVT. TO INVEST THE SURPLUS FUNDS OF THE STATE GOVT . IN THE FORM OF BANK DEPOSITS, OR THAT IT HAD DULY INFORMED THE STATE GOVT. ABOUT THE INTEREST INCOME EARNED THEREON, AND THAT THE ACCOUNTING OF THE SAID INTEREST INCOME WAS MADE BY HE STATE GOVT. ANYWHERE IN ITS ACCOUNTS. IT CERTAINLY CANNOT BE T HE APPELLANTS CASE THAT IT WOULD EARN INCOME FROM THE BANK DEPOSITS BY UTILIZING THE FUNDS RECEIVED FROM THE STATE GOVT. AND THEN PASS ON HE BURDEN OF TAXATION THEREO N TO THE STATE GOVT. ONLY ON PAPERS AND THAT NEITHER OF THE TWO PARTIES WOULD AC TUALLY MAKE THE DUE PAYMENT OF THE INCOME TAX. THUS THE SAID PLEA OF THE APPELLA NT IS ONLY A BALD PLEA WHICH DOES NOT HELP ITS CASE IN ANY MANNER. 10. THE CIT (APPEALS) THEREAFTER DEALT WITH THE CAS E LAWS RELIED UPON BY THE ASSESSEE IN PARAS 4.7 TO 4.9 AND HELD THAT T HE FACTS OF THE PRESENT CASE HAD TO BE EXAMINED IN THE LIGHT OF THE DECISIO N OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTI LIZERS LTD. VS. CIT (SUPRA). THE CIT (APPEALS) FURTHER HELD THAT THE TOTAL INCOME OF THE APPELLANT COMPANY IS CHARGEABLE TO TAX U/S 4 OF THE I.T. ACT. SINCE THE APPELLANT COMPANY HAD NOT COMMENCED ANY BUSINESS, T HERE WAS NO QUESTION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. BUT THE CAPITAL OF THE COMPANY WAS FRUITFULLY UTILIZED BY T HE APPELLANT INSTEAD OF KEEPING IT IDLE. THEREFORE THE INCOME GENERATED I N THE FORM OF INTEREST 7 IS DISTINCTLY OF A REVENUE NATURE. THE AMOUNT OF I NTEREST RECEIVED BY THE APPELLANT COMPANY HAS FLOWN FROM ITS INVESTMENT AND IS, THEREFORE, IN THE NATURE OF INCOME. IT IS IMMATERIAL IF THE SAID IN TEREST HAS BEEN EARNED BY DEPOSITING THE FUNDS RECEIVED FROM THE STATE GOV T. OR DELHI JAL BOARD. THIS CERTAINLY CANNOT BE A GROUND FOR EXEMPTION OF INTEREST EARNED BY THE APPELLANT FROM TAXATION . THE CIT (APPEALS) THUS UPHELD THE ORDER OF THE ASSESSING OFFICER. 11. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT THE ASSESSEE WAS ENGAGED IN THE OPERATION OF POWER PROJECTS IN HIMAC HAL PRADESH. THERE WAS AN AGREEMENT BETWEEN DIFFERENT STATES AND CERTA IN FUNDS WERE ALLOCATED TO THE ASSESSEE WHICH HAD TO BE UTILIZED FOR SPECIFIC PURPOSE AND IN CASE WERE NOT SO UTILIZED, THE SAME WERE TO BE RETURNED TO THE RESPECTIVE AUTHORITIES. IT WAS FURTHER POINTED OU T BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE ASSESSEE HAD RECEIVED INT EREST ON FDRS, DEPLOYED OUT OF SHARE CAPITAL AND THERE WAS EVERY L IKELIHOOD THAT THE INTEREST RECEIVED THEREON HAD TO BE PAID TO THE SAI D AUTHORITIES FROM WHOM THE MONEY WAS ALLOCATED TO THE ASSESSEE. ACC ORDING TO THE LEARNED A.R. FOR THE ASSESSEE THE SAME WAS CONTINGE NT LIABILITY AND THE SAME HAD NOT CRYSTALLIZED DURING THE YEAR AND THE S AME WAS NOT TAXABLE DURING THE YEAR UNDER CONSIDERATION. FURTHER RELI ANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. ITO [315 ITR 255 (DLI)]. IT WAS FAIRLY ADMITTED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THERE WAS NO AGREEMENT BETWEEN THE PARTIES WHO HAD ADVANCED THE SAID FUNDS TO THE ASSESSEE AND FURTHER THERE WERE NO PROVISION OF ANY INTEREST LIABILITY. 12. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW AND ALSO PLACED RELIANCE ON T HE CASE OF WHISTLING WOODS INTERNATIONAL LTD. VS. ITO (2011) 135 TTJ (MU MBAI) 28. 8 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY NAMELY, HIMACHAL PRADESH POWER CORPORATION LIMITED (HPPCL) WAS INCOR PORATED IN DECEMBER 2006 UNDER THE COMPANIES ACT 1956. ITS O BJECTIVES WERE TO PLAN, PROMOTE AND ORGANIZE THE DEVELOPMENT OF ALL A SPECTS OF HYDROELECTRIC POWER ON BEHALF OF HIMACHAL PRADESH S TATE GOVERNMENT (GOHP) AND HIMACHAL PRADESH STATE ELECTRICITY BOARD (HPSEB) IN THE STATE OF HIMACHAL PRADESH. THE GOHP AND HPSEB HAV E A 60:40 EQUITY PARTICIPATION IN THE ASSESSEE COMPANY. 14. ON 31.7.2007 I.E. DURING HE ASSESSMENT YEAR 200 8-09, TWO OTHER COMPANIES I.E. M/S KINNAR KAILASH POWER CORPORATION LTD. AND M/S PABBER VALLEY POWER CORPORATION LTD., WERE MERGED W ITH THE ASSESSEE AND ALL THE ASSETS AND LIABILITIES OF THOSE COMPAN IES WERE TAKEN OVER AT BOOK VALUES BY THE ASSESSEE. THE ASSESSING OFFICE R ON PERUSAL OF THE BALANCE SHEET AS ON 31.3.2008 NOTED THAT THERE WERE NO FIXED ASSETS WITH THE ASSESSEE AS ON 1.4.2007 AND THE ENTIRE ASS ETS EXCEPT FOR SOME OFFICE EQUIPMENTS WERE RECEIVED ON MERGER FROM HE A MALGAMATING COMPANIES. THE ASSESSEE HAD NOT MADE ANY INVESTME NT IN ASSETS TO SET UP POWER PLANT DURING THE SAID YEAR. THE INCIDENTA L EXPENDITURE INCURRED DURING THE YEAR WERE IN THE NATURE OF ADMINISTRATIV E EXPENSES, APART FROM SOME NOMINAL EXPENSES ON SURVEY AND INVESTIGATION A ND CONSULTANCY FEE. THE PROCESS OF SETTING UP OF POWER PLANT HAD NOT CO MMENCED DURING THE RELEVANT YEAR. THE ASSESSING OFFICER FURTHER NOTE D THAT THE BANK DEPOSITS WERE MADE NOT ONLY FROM THE SHARE CAPITAL BUT ALSO FROM THE FUNDS OF THE AMALGAMATING COMPANIES, WHICH IN TURN WERE TRANSFERRED TO THE ASSESSEE ON MERGER. THE ASSESSEE DURING THE A SSESSMENT YEAR 2008- 09 IN ADDITION TO THE SHARE CAPITAL HAD RECEIVED AD DITIONAL FUNDS OF RS.12.37 CRORES FROM DELHI JAL BOARD WHICH WERE SHO WN UNDER THE HEAD 9 CAPITAL RESERVE IN THE BALANCE SHEET. THE ISSUE W HICH ARISES BEFORE US IN THIS REGARD WAS WHETHER THE INTEREST EARNED ON F DRS IN SUCH CIRCUMSTANCES COULD BE SAID TO BE INEXTRICABLY LINK ED TO THE PROFITS AND GAINS OF THE BUSINESS AND WHETHER THE INTEREST INCO ME COULD BE SET OFF AGAINST THE PRE-OPERATIVE EXPENSES, WHICH DO NOT IN CLUDE ANY EXPENDITURE ON SETTING UP OF THE PLANT. 15. IN ASSESSMENT YEAR 2009-10 THE ASSESSEE IN THE ANNUAL REPORT HAD DECLARED THAT THOUGH IT WAS IMPLEMENTING NUMBER OF PROJECTS IN THE STATE OF HIMACHAL PRADESH BUT NONE OF THE SAID PROJECTS H AD COMMENCED. AT PAGE 14 OF THE ANNUAL REPORT FOR THE FINANCIAL YEAR 2008-09 IT WAS DECLARED THAT SAWKR KUDDH HYDROELECTRIC PROJECT WOU LD COMMENCE GENERATION OF ELECTRICITY AT THE END OF THE YEAR 20 12. AT PAGE 33 OF THE ANNUAL REPORT THE AUDITORS HAD ALSO OBSERVED THAT T HE PROFIT & LOSS ACCOUNT HAD NOT BEEN PREPARED AS THE COMPANY HAD NO T STARTED THE COMMERCIAL OPERATION. HOWEVER, STATEMENT SHOWING I NCIDENTAL EXPENDITURE DURING THE CONSTRUCTION PERIOD WAS PREP ARED. DURING THE ASSESSMENT YEAR 2009-10 THE EXPLANATION OF THE ASSE SSEE BEFORE THE ASSESSING OFFICER IS REPRODUCED AT PAGE 3 OF THE AS SESSMENT ORDER IN WHICH THE ASSESSEE HAD EXPLAINED THAT ON THE ONE HA ND THE STATE GOVERNMENT OF HIMACHAL PRADESH HAD CONTRIBUTED FUND S TO THE ASSESSEE AS SHARE CAPITAL FOR USE IN CONSTRUCTION OF SEVERAL POWER GENERATION PROJECTS AND SINCE THE CONSTRUCTION OF THE PROJECTS HAD GOT DELAYED ON ACCOUNT OF CERTAIN REASONS, THE FUNDS WERE UTILIZED FOR MAKING SHORT TERM DEPOSITS WITH THE BANK FOR EARNING SOME INTEREST. THE SAID INTEREST EARNED WOULD IN TURN REDUCE THE COST OF THE PROJECT S. THEREFORE, THE SAME CONSTITUTES CAPITAL RECEIPT. FURTHER IT WAS EXPLAINED BY THE ASSESSEE TO THE ASSESSING OFFICER THAT IN ADDITION THE ASSESSEE WAS ALSO CONSTRUCTING RENUKA DAM PROJECT ON BEHALF OF THE CE NTRAL GOVERNMENT 10 ON NO PROFIT AND NO LOSS BASIS. THE SAID PROJECT WAS DECLARED AS A NATIONAL PROJECT AND THE ENTIRE FUNDS REQUIRED FOR THE CONSTRUCTION OF THE SAID PROJECT WERE PROVIDED BY THE DELHI JAL BOARD O N BEHALF OF CENTRAL GOVERNMENT. THE SAID FUNDS WERE UTILIZED FOR MAKI NG FDRS AGAINST WHICH INTEREST INCOME WAS EARNED. THE ASSESSEE DU RING THE ASSESSMENT YEAR 2009-10 HAD RECEIVED INTEREST INCOME OF RS.27. 64 CRORES WHICH WAS SET OFF AGAINST THE INCIDENTAL EXPENSES. 16. THE ANALYSIS OF THE ABOVE SAID FACTS REFLECTS T HAT THE ASSESSEE COMPANY WAS IN THE PROCESS OF SETTING UP OF POWER P ROJECTS IN THE STATE OF HIMACHAL PRADESH FOR WHICH THE FUNDS WERE ALLOCA TED BY THE STATE GOVERNMENT AS SHARE CAPITAL AND FURTHER FUNDS WERE RECEIVED FROM DELHI JAL BOARD FOR THE CONSTRUCTION OF RENUKA DAM PROJEC T ON BEHALF OF CENTRAL GOVERNMENT. SINCE BOTH THE PROJECTS HAD N OT COMMENCED, THE FUNDS LYING WITH THE ASSESSEE WERE PARKED IN SHORT TERM DEPOSITS IN THE BANK AND INTEREST EARNED THEREUPON. THE TAXABILIT Y OF SUCH INTEREST IN THE HANDS OF THE ASSESSEE IS THE QUESTION RAISED IN THE PRESENT APPEAL. THE TAXABILITY OF A PARTICULAR RECEIPT OR INCOME IS TO BE DETERMINED IN ACCORDANCE WITH THE NATURE AND CHARACTER OF THE REC EIPT/INCOME. THERE IS NO MERIT IN THE PLEA OF THE ASSESSEE THAT SINCE THE INCOME EARNED IS TO BE UTILIZED IN A PARTICULAR MANNER, THE SAME PARTAK ES THE CHARACTER OF A CAPITAL RECEIPT. THE RECEIPT IS WHETHER CAPITAL O R REVENUE IN NATURE, IS TO BE DETERMINED IN LINE WITH THE PROVISIONS OF INC OME TAX ACT AND ALSO KEEPING IN MIND THE NATURE AND CHARACTER OF THE SAI D RECEIPT/INCOME. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT THE IN TEREST EARNED ON THE BANK DEPOSITS WAS TO BE CONSIDERED AS ADDITIONAL EQ UITY OF THE COMPANY AND THE SAID INTEREST BELONGS TO THE STATE GOVERNME NT AND NOT TO THE ASSESSEE. THE ASSESSEE IN SUPPORT THEREOF PLACED RELIANCE ON THE MINUTES OF 15 TH MEETING OF THE BOARD OF DIRECTORS OF THE ASSESSEE HELD 11 ON 20.2.2009 AT SHIMLA AND REFERRED TO ITEM NO.2 OF THE SUPPLEMENTARY/ADDITIONAL AGENDA ITEMS DEALT WITH TH E ISSUE OF INTEREST EARNED/ACCRUED ON THE AMOUNTS RECEIVED FROM HE STAT E GOVERNMENT AS CAPITAL. AS PER THE ASSESSEE IT WAS DECIDED IN TH E SAID BOARD MEETING THAT THE INTEREST EARNED WAS TO BE CONVERTED INTO E QUITY FROM THE HIMACHAL PRADESH GOVERNMENT. THE CIT (APPEALS) UN DER PARA 4.4 AT PAGES 6 AND 7 HAS REPRODUCED THE ITEM NO.2 OF THE SUPPLEMENTARY/ADDITIONAL AGENDA ITEMS RECORDED IN T HE SAID MINUTES WHEREIN THE ISSUE OF INTEREST EARNED/ACCRUED ON THE AMOUNTS RECEIVED FROM THE STATE GOVERNMENT AS EQUITY AND AMOUNTS REC EIVED FROM HE GOVERNMENT OF DELHI ON ACCOUNT OF CONSTRUCTION OF R ENUKA DAM PROJECT, WHICH IN TURN HAVE BEEN UTILIZED FOR MAKING SHORT T ERM DEPOSITS WITH THE BANK, WAS TAKEN UP AND AFTER DISCUSSION WITH THE TA X CONSULTANT, THE MANAGING DIRECTOR INFORMED IN THE MEETING THAT THE ADVANCE TAX IS TO BE PAID ON SUCH INTEREST. THE CIT (APPEALS) HAS REPR ODUCED THE RELEVANT PORTION OF THE MINUTES OF MEETING AND THE SAME ARE NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. THE ASSESSEE HAS FILED C OPY OF THE SAID MEETING AT PAGES 72 TO 84 OF THE PAPER BOOK WITH THE RELEVA NT ITEM NO.2 AT PAGES 83 AND 84 OF THE PAPER BOOK. IN THE SAID MEETING TWO DECISIONS WERE TAKEN BY THE MEMBERS OF THE ASSESSEE BOARD, THAT TH E ADVANCE TAX DUE ON THE SAID INTEREST EARNED BY THE ASSESSEE IS TO BE P AID AND FURTHER THE AMOUNT IS TO BE CLAIMED AS REFUND WHILE FILING THE INCOME TAX RETURN BY TAKING THE PLEA THAT THE INTEREST EARNED IS TO BE C ONVERTED INTO EQUITY FOR THE MONEY COMING FROM HIMACHAL PRADESH GOVERNMENT A ND IS NOT THE INCOME OF THE ASSESSEE AND THE INTEREST ON MONEY FR OM DELHI GOVERNMENT HAS TO BE SPENT ON THE WORK ITSELF. 17. THE ASSESSEE HAD FURTHER PLACED ON RECORD THE S ANCTION ORDERS OF ALLOCATION OF FUNDS BY THE HIMACHAL PRADESH GOVERNM ENT AND ALSO THE 12 DELHI JAL BOARD AT PAGES 85 TO 96 OF THE PAPER BOOK . THE PERUSAL OF THE DIFFERENT SANCTION ORDERS REFLECTS THE MONEY TO HAV E BEEN ACCORDED TO THE ASSESSEE AGAINST EQUITY SHARES OF STATE GOVERNMENT OR FOR UTILIZATION FOR THE SPECIFIC PROJECTS. IT IS ALSO MENTIONED IN TH E SAID SANCTION ORDERS AS TO WHERE THE MONEY CANNOT BE UTILIZED IN THE YEAR O F GRANT, THEN THE SAME COULD BE RE-APPROPRIATED FOR PROVIDING EQUITY TO HY DRO POWER PROJECTS. WHILE RELEASING THE FUNDS THE SANCTION ORDERS TALKS OF ITS UTILIZATION FOR A SPECIFIC PURPOSE AND RECOGNIZES THAT THE SAME MAY N OT BE UTILIZED FOR THE SAID PURPOSE DURING THE YEAR OF ITS GRANT AND MAY B E REALLOCATED IN THE SUCCEEDING YEAR. HOWEVER, THE SAID GRANT ORDERS A RE SILENT ABOUT THE UTILIZATION OF THOSE FUNDS BY THE ASSESSEE DURING T HE INTERVENING PERIOD I.E. FROM THE DATE OF ALLOTMENT TO ITS UTILIZATION. THE ASSESSEE DURING BOTH THE YEARS UNDER APPEAL HAD ADMITTEDLY NOT COM MENCED ITS ACTIVITIES AND THE MONEY WHICH IT HAD RECEIVED FROM THE H.P. S TATE GOVERNMENT AND FROM DELHI JAL BOARD ON BEHALF OF GOVERNMENT OF DELHI WAS UTILIZED FOR MAKING SHORT TERM DEPOSITS IN BANK ON WHICH INT EREST WAS EARNED. 18. DURING THE COURSE OF HEARING, THE LEARNED A.R. FOR THE ASSESSEE WAS ASKED TO PRODUCE ANY AGREEMENT OR ANY LETTER TO THE EFFECT THAT THE INTEREST EARNED ON SUCH DEPOSITS IS TO BE REVERTED BACK OR PARTAKE THE CHARACTER OF FUNDS ALLOCATED TO THE ASSESSEE BY WAY OF ANY AGREEMENT OR ANY SANCTION LETTER. THE LEARNED A.R. FOR THE ASS ESSEE THOUGH SOUGHT ADJOURNMENT ON THIS BEHALF BUT HE WAS UNABLE TO FIL E ANY EVIDENCE TO JUSTIFY ITS CLAIM THAT THE SAID INTEREST EARNED ON FDRS IS NOT THE PROPERTY OF THE ASSESSEE BUT IS THE PROPERTY OF THE PRINCIPA LS WHO HAD ALLOCATED THE SAID FUNDS TO THE ASSESSEE. IN THE ABSENCE OF THE SAME AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE PLEA RAISED BY THE ASSESSEE. THE INTEREST INCOME EARNE D BY THE ASSESSEE DURING THE CAPTIONED ASSESSMENT YEARS IS INCLUDIBLE AS INCOME OF THE 13 ASSESSEE AND IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. MERELY BECAUSE THE SAID INTEREST INCOME IN FUTURE WOULD BE UTILIZED FOR CARRYING ON THE BUSINESS OF T HE ASSESSEE OR APPLIED TO THE PROJECTS UNDERTAKEN BY THE ASSESSEE, DOES NO T MAKE THE SAID INTEREST INCOME AS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AS THE UTILIZATION OF THE INCOME OR THE RECEIPT DOES NOT D ETERMINE THE NATURE OF THE RECEIPTS. THE INTEREST INCOME RECEIVED BY THE ASSESSEE DURING THE PRE-OPERATION PERIOD IS ASSESSABLE AS INCOME FROM O THER SOURCES IN THE HANDS OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOW N BY THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTI LIZERS LTD. VS. CIT (SUPRA). THE HON'BLE SUPREME COURT (SUPRA) HELD AS UNDER: IF A PERSON BORROWS MONEY FOR BUSINESS PURPOSE BUT UTILIZES THAT MONEY TO EARN INTEREST, HOWEVER TEMPORARILY, T HE INTEREST SO GENERATED WILL BE HIS INCOME. THIS INCOME CAN BE U TILIZED BY THE ASSESSEE WHICHEVER MAY HE LIKES. HE MAY OR MAY NOT DISCHARGE HIS LIABILITY TO PAY INTEREST WITH THIS INCOME. MERELY BECAUSE IT WAS UTILIZED TO REPAY THE INTEREST ON THE LOAN TAKEN BY THE ASSESSEE, IT DID NOT CEASE TO BE HIS INCOME. THE INTEREST EARNE D BY THE ASSESSEE COULD HAVE BEEN USED FOR MANY OTHER PURPOSES. IF T HE ASSESSEE PURCHASED A HOUSE OR DISTRIBUTED DIVIDEND OR PAID S ALARY TO ITS EMPLOYEES WITH THE MONEY RECEIVED AS INTEREST WILL THE INTEREST AMOUNT BE TREATED AS NOT HIS INCOME? THIS IS NOT A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. THE ASSES SEE WAS ENTIRELY AT LIBERTY TO DEAL WITH THE INTEREST AMOUNT AS HE L IKED. THE APPLICATION OF THE INCOME FOR PAYMENT OF IT COULD N OT AFFECT ITS TAXABILITY IN ANY WAY. 19. THE PLEA OF THE LEARNED A.R. FOR THE ASSESSEE B EFORE US WAS THAT THE SAID DECISION OF THE HON'BLE SUPREME COURT IN TUTIC ORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (SUPRA) HAD BE EN REVERSED BY THE HON'BLE SUPREME COURT IN CIT VS. BOKARO STEEL LTD. [236 ITR 315 (SC). IN THE FACTS OF THE SAID CASE THE ASSESSEE COMPANY HAD ADVANCED MONEY TO CONTACTORS, WHO WERE TO ERECT IRON AND STEEL PLA NT FOR THE ASSESSEE. ON THESE ADVANCES TO THE CONTRACTORS, THE ASSESSEE WAS PAID SOME INTEREST. THE COMPANY WAS ALSO RECEIVING HIRE CHA RGE ON THE PLANT AND MACHINERY LET OUT TO THE CONTRACTORS AND HOUSING QU ARTERS LEASED TO THE 14 EMPLOYEES. THE HON'BLE SUPREME COURT HELD THAT TH E RATIO OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., SUPRA, WAS N OT APPLICABLE TO SUCH FACTS. THE RELEVANT EXTRACT FROM THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF BOKARO STEEL LTD., SUPRA, IS A S UNDER: HOWEVER, WHILE INTEREST EARNED BY INVESTING BORROW ED CAPITAL IN SHORT-TERM DEPOSITS IS AN INDEPENDENT SO URCE OF INCOME AND NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVITIES OF THE ASSESSEE, THE SAME CANNOT BE SAID IN THE PRESENT CASE WHERE THE UTILIZATION OF VARIOUS ASSETS OF THE COMPANY AND HE PAYMENTS RECEIVED FOR SUCH UTILIZATION ARE DIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP OF THE STEEL PLANT OF THE AS SESSEE. THESE RECEIPTS ARE INEXTRICABLY LINKED WITH THE SETTING U P OF THE CAPITAL STRUCTURE OF THE ASSESSEE COMPANY. THEY MUST, THER EFORE, BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION. 20. THE LEARNED A.R. FOR THE ASSESSEE HAS FURTHER P LACED RELIANCE ON DECISION OF THE HON'BLE DELHI HIGH COURT IN INDIAN OIL PANIPAT CONSORTIUM LTD. VS. ITO [(2009) 315 ITR 255 (DEL)], IN THE FACTS OF WHICH THE FUNDS IN THE FORM OF SHARE CAPITAL WERE I NFUSED FOR A SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF IN FRASTRUCTURE. THE HON'BLE DELHI HIGH COURT HELD THAT SINCE INTEREST EARNED BY INDIAN OIL PANIPAT CONSORTIUM LTD. WAS INEXTRICABLY LINKED WIT H SETTING UP OF THE PLANT OF THE ASSESSEE, IT CONSTITUTED A CAPITAL REC EIPT IN THE HANDS OF THE ASSESSEE . 21. THE CIT (APPEALS) HAD ALSO MADE A REFERENCE TO ANOTHER DECISION OF THE HON'BLE DELHI HIGH COURT IN INTERNATIONAL M ARKETING LTD. VS. ITO [(2007) 292 ITR 504 (DEL)] WHEREIN IT WAS HELD THAT INTEREST EARNED IN PRE-OPERATIVE STAGE OF THE BUSINESS TO BE TAXABLE I N THE HANDS OF THE ASSESSEE . 22. THE CIT (APPEALS) VIDE PARA 11 HAD HELD THAT TH E FACT SITUATION IN THAT CASE WAS VERY SIMILAR TO THE CASE BEFORE HON'B LE DELHI HIGH COURT IN INTERNATIONAL MARKETING LTD. VS. ITO (SUPRA) AND WH ERE SURPLUS FUNDS 15 WERE PARKED WITH DIFFERENT COMPANIES AND THE HON'BL E HIGH COURT APPLIED THE RATIO LAID DOWN IN TUTICORIN ALKALI CHE MICALS & FERTILIZERS LTD. VS. CIT (SUPRA) TO BRING THE INTEREST TO TAX. 23. IN ORDER TO DECIDE THE ISSUE AND TO APPLY THE R ATIO LAID DOWN BY THE HON'BLE SUPREME COURT OR OTHER VARIOUS HIGH COURTS, THE FIRST PARAMETER TO BE APPLIED IS THE FACTS OF THE CASE. WE FIND T HAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS BEFORE THE HO N'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT (SUPRA) AND APPLYING THE RATIO LAID DOWN BY THE HON'BLE APEX CO URT WE HOLD THAT THE INTEREST EARNED BY THE ASSESSEE BY PARKING ITS FUND S IN SHORT TERM DEPOSITS WITH THE BANK IS ASSESSABLE AS INCOME FROM OTHER SOURCES. WE FIND NO MERIT IN THE RELIANCE PLACED UPON THE DECIS ION OF THE HON'BLE DELHI HIGH COURT BY THE LEARNED A.R. FOR THE ASSESS EE IN INDIAN OIL PANIPAL CONSORTIUM LTD. VS. ITO (SUPRA) AS THE FACT S OF THE SAID CASE WERE AT VARIANCE. WE ALSO FIND NO MERIT IN THE PL EA OF THE ASSESSEE THAT THE INTEREST EARNED BY THE ASSESSEE IS TO BE INFUSE D AS SHARE CAPITAL AND/OR TO BE RETURNED TO THE PRINCIPALS WHO HAD HAD ADVANCED THE LOANS TO THE ASSESSEE AS THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH ITS CLAIM. MERELY BECAUSE THE MONEY IN FUTURE WOULD BE UTILIZED FOR CAPITAL EXPENDITURE DOES NOT MAKE THE RECEIPTS AS CAPITAL RECEIPTS IN THE HANDS OF THE ASSESSEE. 24. THE MUMBAI BENCH OF THE TRIBUNAL IN WHISTLING W OODS INTERNATIONAL LTD. VS. ITO (SUPRA) HAD CONSIDERED S IMILAR ISSUE AND ALSO ADJUDICATED THE SUBMISSIONS MADE THEREIN THAT THE P RINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CH EMICALS & FERTILIZERS LTD. VS. CIT (SUPRA) HAD BEEN DILUTED B Y THE HON'BLE SUPREME COURT WHILE DECIDING THE CASE IN CIT VS. BOKARO STE EL LTD. (SUPRA) AND OTHER CASES. THE RELEVANT PARAS ARE AS UNDER: 16 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS DECISIONS CITED BY THE PARTIES. I N THE CASE OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [SUPRA] THE H ON'BLE SUPREME COURT OBSERVED AS UNDER: THE ASSESSEE WAS A COMPANY INCORPORATED ON 3RD DEC ., 1971 FOR THE PURPOSE OF, INTER ALIA, MANUFACTURING HEAVY CHEMICALS SUCH AS AMMONI UM CHLORIDE AND SODA ASH. THE TRIAL PRODUCTION OF THE FACTORIES OF THE COMPANY CO MMENCED ON 30TH JUNE, 1982. FOR THE PURPOSE OF SETTING UP OF THE FACTORIES, THE COMPAN Y HAD TAKEN TERM LOANS FROM VARIOUS BANKS AND FINANCIAL INSTITUTIONS. THAT PART OF THE BORROWED FUNDS WHICH WAS NOT IMMEDIATELY REQUIRED BY THE COMPANY WAS KEPT INVEST ED IN SHORT-TERM DEPOSITS WITH BANKS. SUCH INVESTMENTS WERE SPECIFICALLY PERMITTED BY THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY. THE COMPANY HAD ALSO DE POSITED CERTAIN SUMS WITH THE TAMIL NADU ELECTRICITY BOARD. IT HAD ALSO GIVEN INT EREST-BEARING LOANS TO ITS EMPLOYEES TO PURCHASE VEHICLES. UPTO THE ASST. YR. 1980- 81, INTERESTS EARNED BY THE COMPANY FROM THE VARIOUS LOANS GIVEN BY THE COMPANY AND ALSO FRO M THE BANK DEPOSITS WERE SHOWN AS INCOME AND WAS TAXED ACCORDINGLY. FOR THE ACCOUNTIN G YEAR ENDING ON 30 TH JUNE, 1981, (ASST. YR. 1982-83), THE ASSESSEE RECEIVED A TOTAL AMOUNT OF INTEREST OF RS. 2,92,440. IN ITS RETURN OF INCOME FILED ON 22ND JUNE, 1982, THE COMPANY DISCLOSED THE SAID SUM OF RS. 2,92,440 AS 'INCOME FROM OTHER SOURCES'. IT ALSO DI SCLOSED BUSINESS LOSS OF RS. 3,21,802. AFTER SETTING OFF THE INTEREST INCOME AG AINST BUSINESS LOSS, THE COMPANY CLAIMED THE BENEFIT OF CARRY FORWARD OF NET LOSS OF RS.29,360. THE COMPANY LATER ON REALISED ITS MISTAKE AND ON 26TH DEC., 1984, IT FIL ED A REVISED RETURN SHOWING BUSINESS LOSS OF RS. 3,21,802. IT CLAIMED THAT ACCORDING TO THE ACCEPTED ACCOUNTING PRACTICE, INTEREST AND FINANCE CHARGES ALONG WITH OTHER PRE-P RODUCTION EXPENSES WILL HAVE TO BE CAPITALISED, AND THAT, THEREFORE, THE INTEREST INCO ME OF RS.2,92,440 SHOULD GO TO REDUCE THE PRE-PRODUCTION EXPENSES (INCLUDING INTEREST AND FINANCE CHARGES), WHICH WOULD ULTIMATELY BE CAPITALISED. IN THIS CONNECTION, THE COMPANY HIGHLIGHTED THE FACT THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASST. YR. 1982-83, IT HAD INCURRED A SUM OF RS. 1,13,06,068 AS AND BY WAY OF INTEREST AND FINANCE C HARGES, WHICH HAD TO BE CAPITALISED ALONG WITH OTHER PRE-PRODUCTION EXPENSES. IN OTHER WORDS, ACCORDING TO THE ASSESSEE, THE INTEREST INCOME OF RS.2,92,440 WAS NOT EXIGIBLE TO TAX. THE ITO REJECTED THE ASSESSEES CLAIM THAT THE INTEREST INCOME WAS NOT E XIGIBLE TO TAX. THE VIEW OF THE ITO WAS UPHELD BY THE CIT(A). THE COMPANY S FURTHER A PPEAL TO THE TRIBUNAL WAS DISMISSED. WE ARE ALSO CONCERNED IN THIS CASE WITH THE ASST. YR. 1983-84. DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS.1,08,336. THE ASSESSEE THIS ASSESSMENT YEAR, THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS. 1,08,336. THE ASSESSEE FILED ITS RETURN IN WHICH IT CLAIMED THAT THE INTEREST INCOME OF 1,08,336 SHOULD GO TO 13 REDUCE THE PRE- PRODUCTION EXPENSES INCLUDING THE INTEREST AND FINANCE CHARGES WHICH WO ULD ULTIMATELY BE CAPITALISED. THE INCOME-TAX OFFICER REJECTED THE ASSESSEES CLAIM TH AT THE INTEREST INCOME WAS NOT EXIGIBLE TO TAX. THE VIEW OF THE ITO WAS UPHELD BY THE CIT[A] . THE COMPANYS FURTHER APPEAL TO THE INCOME TAX APPELLATE TRIBUNAL WAS DIS MISSED. IN VIEW OF THE CONFLICT OF DECISIONS BETWEEN THE MADRAS AND ANDHRA PRADESH HIG H COURTS., THE TRIBUNAL REFERRED THE QUESTION REGARDING TAXABILITY OF INCOME, DIRECT LY TO THE SUPREME COURT. ON THE ABOVE FACTS, IT WAS HELD AS UNDER: THE COMPANY HAD SURPLUS FUNDS IN ITS HANDS. IN ORDE R TO EARN INCOME OUT THE SURPLUS FUNDS, IT INVESTED THE AMOUNT FOR THE PURPOSE OF EA RNING INTEREST. THE INTEREST THUS EARNED IS CLEARLY OF REVENUE NATURE AND WILL HAVE T O BE TAXED ACCORDINGLY. THE ACCOUNTANTS MAY HAVE TAKEN SOME OTHER VIEW BUT ACCO UNTANCY PRACTICE IS NOT NECESSARILY GOOD LAW. THIS CASE NOT A CASE OF DIVER SION OF INCOME BY OVERRIDING TITLE. THE ASSESSEE WAS AT LIBERTY TO DEAL WITH THE INTERE ST AMOUNT AS IT LIKED. THE APPLICATION OF THE INCOME FOR PAYMENT OF INTEREST WOULD NOT AFF ECT ITS TAXABILITY IN ANY WAY. THE COMPANY COULD NOT CLAIM ANY RELIEF. UNDER SECTION 7 0 OR SECTION 71 SINCE ITS BUSINESS HAD NOT STARTED AND THERE COULD NOT BE ANY COMPUTAT ION OF BUSINESS INCOME OR LOSS 17 INCURRED BY THE ASSESSEE IN THE RELEVANT ACCOUNTING YEARS. IN SUCH A SITUATION, THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOS E OF SETTING UP ITS BUSINESS COULD NOT BE ALLOWED AS DEDUCTION, NOR COULD IT BE ADJUSTED A GAINST ANY OTHER INCOME UNDER ANY OTHER HEAD. SIMILARLY ANY INCOME FROM A NON-BUSINES S SOURCE COULD NOT BE SET OFF AGAINST THE LIABILITY TO PAY INTEREST ON FUNDS BORR OWED FOR THE PURPOSE OF PURCHASE OF PLANT AND MACHINERY EVEN BEFORE COMMENCEMENT OF THE BUSINESS OF THE ASSESSEE. IN THE DETAILED DISCUSSION WHILE ADJUDICATION THIS MATTER, THE HON'BLE SUPREME COURT HAD ALSO OBSERVED AT PAGE 179 AS UNDER: THE BASIC PROPOSITION THAT HAS TO BE BORNE IN MIND IN THIS CASE IS THAT IT IS POSSIBLE FOR A COMPANY TO HAVE SIX DIFFERENT SOURCES OF INCOME, EACH ONE OF WHICH WILL BE CHARGEABLE TO INCOME TAX. PROFITS AND GAINS OF BUSI NESS OR PROFESSION IS ONLY ONE OF THE HEADS UNDER WHICH THE COMPANYS INCOME IS LIABLE TO BE ASSESSED TO TAX. IF A COMPANY HAS NOT COMMENCED BUSINESS, THERE CANNOT BE ANY QUE STION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. THAT DOES NOT MEAN THAT UNTI L AND UNLESS THE COMPANY COMMENCES ITS BUSINESS, ITS INCOME FROM ANY OTHER S OURCE WILL NOT BE TAXED. IF THE COMPANY, EVEN BEFORE IT COMMENCES BUSINESS, INVESTS THE SURPLUS FUND IN ITS HAND 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, IF A COMPANY PURCHASES A RENTED HOUSE AND GETS RENT, SUCH RENT W ILL BE ASSESSABLE TO TAX UNDER S. 22 AS INCOME FROM HOUSE PROPERTY. LIKEWISE, A COMPANY MAY HAVE INCOME FROM OTHER SOURCES. IT MAY BUY SHARES AND GET DIVIDENDS. SUCH DIVIDENDS WILL BE TAXABLE UNDER S. 56 OF THE ACT. THE COMPANY MAY ALSO, AS IN THIS CASE, KEEP THE SURPLUS FUND IN SHORT-TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTERESTS WILL BE CHARGEABLE UNDER S. 56 OF THE ACT. THUS, IT IS CLEAR FROM THE ABOVE DISCUSSION THAT IF WHENEVER AN ASSESSEE IS IN THE PROCESS OF SETTING UP OF THE BUSINESS, IF ANY, INCOME ARISE S UNDER ANY OF THE HEADS EXCEPT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS, THEN SUCH I NCOME HAS TO CHARGED TO TAX UNDER THAT PARTICULAR HEAD. 13. THE LD. COUNSEL OF THE ASSESSEE HAD VEHEMENTLY ARGUED THAT THIS PRINCIPLE WAS DILUTED BY HON'BLE SUPREME COURT WHILE DECIDING THE ISSUE IN THE CASE OF BOKARO STEEL LTD. [SUPRA], KARNAL CO-OPERATIVE SUGAR MILL LTD. [ SUPRA] AND CIT VS. KARNATAKA POWER CORPORATION [SUPRA]. BUT HAVING READ THESE JU DGMENTS VERY CAREFULLY, WE FIND THAT THE LD. DR IS RIGHT THAT IN THESE LATER THREE DECISIONS WERE RENDERED BECAUSE OF DISTINGUISHABLE FACTS. IN THE CASE OF BOKARO STEEL LTD. [SUPRA], THE ISSUE WAS WHETHER RENT RECEIVED FROM CONTRACTORS AGAINST HOUSES GIVEN FOR STAFF OF CONTRACTORS, MACHINE HIRE CHARGES RECEIVED FROM MACHINES GIVEN BY THE AS SESSEE COMPANY AND INTEREST RECEIVED 15 FROM CONTRACTORS ON ADVANCES MADE BY TH E ASSESSEE COMPANY TO SUCH CONTRACTORS, WAS ASSESSABLE TO TAX. THE HON'BLE SUP REME COURT OBSERVED THAT THESE RECEIPTS BASICALLY PERTAIN TO ARRANGEMENTS MADE BY THE ASSESSEE WITH CONTRACTORS PERTAINING TO THE WORK OF CONSTRUCTION. TO SMOOTHLY EXECUTE THE WORK, SOME FACILITIES WERE EXTENDED BY THE ASSESSEE COMPANY TO THE CONTRA CTORS TO FACILITATE THE WORK OF CONSTRUCTION AND THUS THESE RECEIPTS HAVE BEEN CORR ECTLY ADJUSTED BY THE ASSESSEE COMPANY AGAINST THE CHARGES PAYABLE TO CONTRACTORS. IT WAS ALSO OBSERVED THAT HAD THE ASSESSEE NOT MADE THESE ARRANGEMENTS AND HAD THE CO NTRACTORS MADE THESE ARRANGEMENTS, CHARGES TO THE COMPANY WOULD HAVE BEE N MORE. IT IS SIGNIFICANT TO NOTE THAT IN THIS CASE ITSELF ONE MORE ISSUE WAS THERE, I.E. INTEREST RECEIVED FROM INVESTMENTS MADE OUT OF BORROWED FUNDS WHICH WERE NOT IMMEDIATE LY REQUIRED. THIS INTEREST WAS HELD TO BE TAXABLE BY FOLLOWING THE DECISION OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [SUPRA]. IN FACT, WE ARE REPRODUCING THE PARA GIVEN AT PAGE-321 OF THE REPORT- DURING THESE ASSESSMENT YEARS, THE RESPONDENT ASSE SSEE HAD INVESTED THE AMOUNTS BORROWED BY IT FOR THE CONSTRUCTION WORK WHICH WERE NOT IMMEDIATELY REQUIRED, IN SHORT- TERM DEPOSITS AND EARNED INTEREST. IT HAS BEEN HELD IN THESE PROCEEDINGS THAT THE RECEIPT 18 OF INTEREST AMOUNTS TO INCOME OF THE ASSESSEE FROM OTHER SOURCES. THE ASSESSEE HAS NOT FILED ANY APPEAL FROM THIS FINDING WHICH IS GIVEN A GAINST IT. IN ANY CASE, THIS QUESTION IS NOW CONCLUDED BY A DECISION OF THIS COURT IN OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [1997] 227 ITR 172. HENCE , WE ARE NOT CALLED UPTO TO EXAMINE THAT ISSUE. 14. THUS, IT IS CLEAR THAT AS FAR AS INTEREST RECEI VED FROM SHORT TERM DEPOSITS WHICH WERE NOT IMMEDIATELY REQUIRED, WERE HELD TO BE TAXABLE F OLLOWING THE DECISION OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [SUPRA]. ONLY THOSE SUMS WHICH WERE RECEIVED FROM CONTRACTORS, WHICH WE CAN SAY WE RE INEXTRICABLY CONNECTED WITH THE CONSTRUCTION ACTIVITIES, WERE HELD TO BE NOT TAXABL E, RATHER THAN THEY WERE HELD TO BE REDUCED FROM THE TOTAL CAPITAL EXPENDITURE. 15. IN THE CASE OF KARNAL CO-OPERATIVE SUGAR MILL L TD. [SUPRA], INTEREST WAS RECEIVED ON THE MONEY DEPOSITED TO OPEN A LETTER OF CREDIT FOR PURCHASE OF MACHINERY WHICH IS AGAIN DIRECTLY CONNECTED WITH THE PURCHASE OF MACHINE AND THAT IS WHY THE RATIO OF BOKARO STEEL LTD. [236 ITR 315] WAS MADE APPLICABLE. IN TH E CASE OF CIT VS. KARNATAKA POWER CORPORATION [SUPRA], THE FIRST QUESTION REFERRED BE FORE THE HON'BLE COURT WAS AS UNDER- '(1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN UPHOLDING THE ORDER OF THE CIT(A) WHO DELETE D THE ADDITION OF RS. 1,30,44,518 BEING INTEREST RECEIPTS AND HIRE CHARGES FROM CONTR ACTORS BY HOLDING THAT THE SAME ARE IN THE NATURE OF CAPITAL RECEIPTS WHICH WOULD GO TO REDUCE CAPITAL COST ? FROM THE QUESTION ITSELF IT IS CLEAR THAT IN THIS C ASE THE ISSUE WAS REGARDING INTEREST RECEIPTS AND HIRE CHARGES FROM THE CONTRACTS AND TH AT IS WHY THE PRINCIPLE LAID DOWN IN BOKARO STEEL LTD. [SUPRA] WAS FOLLOWED. 16. WE FURTHER FIND THAT HON'BLE SUPREME COURT HAS AGAIN FOLLOWED THE DECISION OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [SUPRA] IN THE CASE OF CIT VS. COROMANDAL CEMENTS LTD. [234 ITR 412]. IN THIS CAS E THE HEAD NOTE READS AS UNDER: AGAINST THE JUDGMENT OF THE ANDHRA PRADESH HIGH CO URT REFUSING TO CALL FOR A REFERENCE OF THE QUESTION WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT INTEREST EARNED ON SHORT-TERM BANK DEPOSITS DURING THE PRE-PRODUCTI ON STAGE COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AND SHOULD GO TOWARDS THE PROJECT COST, THE REVENUE FILED AN APPEAL TO THE SUPREME COURT. THE SUPREME COURT, FOL LOWING ITS OWN JUDGMENT IN OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [1997] 227 ITR 172, ALLOWED THE APPEAL OF THE REVENUE AND SET ASIDE THE JUDGMENT OF THE HIGH COURT. THUS, IT IS CLEAR THAT WHENEVER INTEREST IS RECEIVE D DURING PREPRODUCTION STAGE FROM SHORT TERM DEPOSITS, SAME HAS TO BE TAXED AS INCOME FROM OTHER SOURCES. THIS DECISION HAS BEEN AGAIN FOLLOWED BY THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. AUTOKAST LTD. [248 ITR 110]. THE HEAD NOTE OF THIS DECISIONS READS AS UNDER- FROM THE DECISION OF THE KERALA HIGH COURT (SEE [1 998) 229 ITR 789) HOLDING THAT WHERE THE ASSESSEE KEPT THE MONEY BORROWED FROM THE INDUSTRIAL DEVELOPMENT BANK OF INDIA FOR PURCHASE OF PLANT AND MACHINERY IN SHORT- TERM DEPOSITS IN BANKS AND USED IT IN BILL DISCOUNTING UNTIL PAYMENT FOR THE PLANT AND MA CHINERY, THE INTEREST EARNED ON THE DEPOSITS WAS NOT TAXABLE IN THE HANDS OF THE ASSESS EE AS INCOME FROM OTHER SOURCES BUT WOULD GO TO REDUCE THE ACTUAL COST OF THE PLANT AND MACHINERY. THE DEPARTMENT TOOK AN APPEAL TO THE SUPREME COURT, THE SUPREME COURT REVE RSED THE DECISION OF THE HIGH COURT HOLDING THAT THE INTEREST WAS TAXABLE IN THE HANDS OF THE ASSESSEE. THIS JUDGMENT HAS BEEN RENDERED ON NOVEMBER 21, 200 0 I.E., MUCH AFTER THE DECISION OF BOKARO STEEL LTD. [SUPRA] WHICH WAS RENDERED ON SEP TEMBER 3, 1999 AND THE DECISION IN THE CASE OF CIT VS. KARNATAKA POWER CORPORATION [SU PRA] WHICH WAS RENDERED ON JULY 19 27, 2000. THUS, IT IS CLEAR THAT THE PRINCIPLES LAI D DOWN IN OF M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTDS CASE [SUPRA] WERE NEV ER DILUTED AND THE DECISIONS OF BOKARO STEEL LTD. [SUPRA] AND KARNAL CO-OPERATIVE S UGAR MILL LTD. [SUPRA] AND CIT VS. KARNATAKA POWER CORPORATION [SUPRA], OPERATES IN DI FFERENT FIELD. AS FAR AS THE DECISION OF TRIBUNAL IN THE CASE OF SHAPOORJI PALLO NJI POWER CO. LTD. VS. ITO [SUPRA] IS CONCERNED, THE TRIBUNAL MADE THE DISTINCTION FROM O F M/S TUTICORIN ALKALI CHEMICALS & FERTILISERS LTDS PRINCIPLE [SUPRA], BECAUSE MONEY WAS DEPOSITED AS SECURITY DEPOSIT WITH THE ELECTRICITY BOARD WHICH WAS PART OF THE CO NDITION OF THE CONTRACT WHICH THE ASSESSEE COMPANY WAS TO EXECUTE BY WAY OF CONSTRUCT ION OF POWER PLANT FOR THE GOVERNMENT OF MADHYA PRADESH BUT THAT CONTRACT COUL D NOT BE EXECUTED. THEREFORE, THIS DECISION IS CLEARLY DISTINGUISHABLE, PARTICULARLY I N THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT. 17. AS FAR AS THE SECOND LIMB OF THE ARGUMENT IS CO NCERNED, TO WHICH THE LD. COUNSEL OF THE ASSESSEE HAS REFERRED TO THE DECISION OF THE HO N'BLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED VS. ITO [SUPRA], IT WAS OBSERVED BY THE HON'BLE DELHI COURT AT PLACITUM AS UNDER: 4. IT IS IMPORTANT TO NOTE THAT THE TRIBUNAL WITHO UT HOLDING THAT THE FINDING OF FACT OF THE COMMISSIONER OF INCOME-TAX (APPEALS), THAT THE INTEREST EARNED WAS INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWER PLANT REVE RSED THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS)BY MAKING A BALD OBSERVATION THAT THE 'DEPOSIT OF SHARE CAPITAL HAS NO OR VERY REMOTE CONNECTION WITH SETTING UP OF PLANT AND MACHINERY'. THE TRIBUNAL FURTHER OBSERVED THAT IT WAS AN INDEPENDENT INCOME EARNED IN A SIMILAR FASHION AS WAS THE CASE IN TUTICORIN ALKALI CHEMICALS [1997] 227 I TR 172 (SC). FROM THE ABOVE, IT IS CLEAR THAT THERE WAS ALREADY A FINDING BY THE FIRST APPELLATE AUTHORITY THAT INTEREST EARNED WAS INEXTRICABLY LIN KED WITH THE SETTING UP OF THE POWER PLANT. WHEREAS IN THE CASE BEFORE US, THERE IS NO S UCH FINDING AND THE FUNDS RAISED THROUGH SHARE CAPITAL WHICH WERE NOT REQUIRED FOR T HE CONSTRUCTION OF THE TRAINING INSTITUTE HAS BEEN PLACED WITH BANKS AND OTHER COMP ANIES AS SHORT TERM DEPOSITS. 18. AS FAR AS THE DECISION IN THE CASE OF CIT VS. A SPENTECH INDIA (P) LTD. [SUPRA] IS CONCERNED, AGAIN THE FACTS ARE QUITE DISTINGUISHABL E. IN THAT CASE THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.2.53 CRORES AGAINST THE M EAGER INCOME OF RS.4,93,343/-. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOFTWARE DE VELOPMENT AND THE EXPENDITURE WAS MAINLY INCURRED ON ACCOUNT OF EMPLOYEES SALARY AMO UNTING TO RS.1.72 CRORES, TRAVELLING COST OF RS.30.61 LAKHS AND OTHER ADMINIS TRATIVE EXPENSES OF RS.39.65 LAKHS. THUS, IT IS CLEAR THAT ASSESSEE HAD ALREADY STARTED GENERATING INCOME BECAUSE RECEIPTS WERE ALSO SHOWN AT RS.4,93,343/- AND THE OTHER EXPE NSES WERE CLAIMED AS REVENUE EXPENDITURE AND WERE NOT CLAIMED AS REDUCTION FROM CAPITAL EXPENDITURE AS HAS BEEN DONE IN THE CASE BEFORE US. 19. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT BOT H THE DECISIONS OF HON'BLE DELHI HIGH COURT ARE NOT APPLICABLE TO THE FACTS OF THE ASSESS EES CASE BEFORE US. THUS, IT IS CLEAR THAT IN THE CASE BEFORE US, ASSESSEE WAS STILL CONS TRUCTING THE BUILDING FOR THE INSTITUTE WHICH WAS TO ESTABLISH FOR TRAINING OF PEOPLES. DUR ING THIS PHASE, ASSESSEE HAS RAISED A SHARE CAPITAL AND FUNDS RAISED FROM SUCH SHARE CAPI TAL HAVE BEEN INVESTED IN FIXED DEPOSIT RECEIPTS OF THE BANKS AS WELL AS DEPOSITS W ITH VARIOUS COMPANIES AND ASSESSEE HAS EARNED INTEREST ON THE SAME. THE SAME HAS TO BE TAXED AS INCOME FROM OTHER SOUR CES IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S TUTICO RIN ALKALI CHEMICALS & FERTILISERS LTD. V/S. CIT [SUPRA], WHICH WE HAVE DISCUSSED IN D ETAIL. 20 25. WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT (APPEALS) RELATING TO ASSESSMENT YEAR 2009-10 AND RELIANCE PLACED ON V ARIOUS CASE LAWS AND UPHOLDING BOTH THE ORDERS OF THE CIT (APPEALS) WE D ISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN BOTH THE APPEAL S. 26. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH JUNE, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH