M/s Jaypee Powergrid Ltd., New Delhi V. ITO, New Delhi

ITA 239/DEL/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8515 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINOD GARG
• Keywords: Business income; Diversion of income; Capital receipt; CHAPTER IV

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 239/DEL/2016 : ASSTT. YEAR : 2010-11 M/S JAYPEE POWERGRID LTD., 63, JA HOUSE, BASANT LOK, VASANT VIHAR, NEW DELHI-110057 VS INCOME TAX OFFICER, WARD-4(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCJ8054F ASSESSEE BY : SH. VINOD GARG, ADV. REVENUE BY : MS. APOORVA BHARDWAJ, SR. DR DATE OF HEAR ING: 0 5 . 01 .20 2 1 DATE OF PRONOUNCEMENT: 05 .01 .20 2 1 ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A)-VIII, NEW DELHI DATED 31.0 7.2014. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: THAT THE LD. ASSESSING OFFICER (LD. AO) HAS ERRED ON FACTS AND IN LAW IN ASSESSING A SUM OF RS. 57,40,935/- BEING INTEREST INCOME FROM FDRS DURING PREOPERATIVE PERIOD AS INCOME FROM OTHER SOURCES. THE LD. AO HAS ERRED IN NOT TREATING THE SAME AS CAPITAL RECEIPT TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. THE LD. CIT(A) HAS ERRED IN SUSTAINING TH E VIEW OF THE LD. AO. 2. THAT THE LD. AO HAS ERRED ON FACTS AND IN LAW I N ASSESSING INCOME ON FDRS OF RS. 57,40,935/- AT ITS GROSS AMOUNT AS INCOME FROM OTHER SOURCES RATHER THAN IN NETTING OF THE SAME AGAINST SUBSTANTIALLY ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 2 HIGHER INTEREST PAID WHICH IS Y LINKED WITH THE SAI D INTEREST EARNED DURING PRE-OPERATIVE PERIOD RELATED TO THE SOLE PROJECT BEING IMPLEMENTED. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE VIEW OF THE LD. AO. 3. THAT THE TREATMENT OF THE SAID INTEREST FROM FDRS AS INCOME FROM OTHER SOURCES RATHER THAN IN ASSESSING THE SAME AS CAPITAL RECEIPT TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES IS CONTRARY TO BINDI NG ACCOUNTING STANDARDS. AS SUCH TOO, THE ADDITION AS MADE AND AS SUSTAINED BY LD. CIT(A) IS LIABLE TO BE DELETED. 4. THAT THE FDRS ARE INTRINSICALLY LINKED TO THE ESSENTIAL FUNDS FOR THE SOLE OBJECT OF SETTING UP T HE PROJECT INVOLVED IN ACCORDANCE ALSO WITH THE BINDIN G PROVISIONS OF RELATED AGREEMENTS. AS SUCH TOO, THE INTEREST PAID AND EARNED HAVE NEXUS AND IT IS ONLY THE NET INTEREST WHICH WOULD HAVE BEEN CAPABLE OF BEING CONSIDERED FOR ADJUSTMENT, IF ANY. THERE IS NO POSI TIVE NET INTEREST AND AS SUCH TOO THERE IS NO INCOME CAPABLE TO BEING ASSESSED AS INTEREST INCOME. 5. THAT THE ASSESSMENT OF THE SAID INCOME FROM INTEREST ON FDRS DURING PRE-OPERATIVE PERIOD AS INCOME FROM OTHER SOURCES IS CONTRARY TO THE FACTS AND LAW AND IS BASED ON IGNORING OR NOT APPRECIATIN G THE SUBMISSIONS AND CASE LAWS IN APPELLANTS FAVOUR . THE ADDITION AS MADE AND AS SUSTAINED BY LD. CIT(A) IS LIABLE TO BE DELETED IN TOTO. 6. THAT THE ASSESSMENT AS MADE AND THE ORDER OF THE LD. CIT(A) ARE AGAINST LAW AND FACTS OF THE CASE INVOLVED. 3. THE SOLE ISSUE PERTAINING TO INTEREST INCOME ON FDRS, THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STA TED THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEES OWN CASE IN ITA NO. 5489/DEL/2013 VIDE ORDER DATED 24.07.2018 FOR THE A SSESSMENT YEAR 2009-10. ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 3 4. THE LD. SR. DR ALTHOUGH SUPPORTED THE ORDER OF T HE LD. CIT (A) BUT COULD NOT CONTROVERT THE AFORESAID CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE. 5. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 6. WE FIND THAT THE ISSUE STANDS COVERED IN THE CAS E OF THE ASSESSEE IN ITA NO. 5489/DEL/2013 VIDE ORDER DATED 24.07.2018 FOR THE ASSESSMENT YEAR 2009-10, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 8 WHICH READ AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT A SIMILA R ISSUE HAD COME UP BEFORE ITAT AHMEDABAD BENCH IN THE CASE OF ADANI POWER LTD. VS. ACIT IN ITA NO. 2755/AHD/2011. IN IT S ORDER DATED 27.7.2015, THE COORDINATE BENCH OF THE ITAT A NALYSED THE RATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TUTICORIN CHEMICALS AND FERTILIZERS LTD AS WELL AS THAT IN THE CASE OF BOKARO STEEL LTD. (SUPRA) AND THE JU DGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) ALONG WITH A PLETHORA OF OTHER RELATED JUDGMENTS ON IDENTICAL SET OF FACTS. THE RE LEVANT OBSERVATIONS AND ADJUDICATION ARE CONTAINED IN PARA 18, 19, 20, 21, 22, 23 AND 24 OF THE ABOVE SAID ORDER OF TH E ITAT AHMEDABAD BENCH IN THE CASE OF ADANI POWER LTD. VS. ACIT (SUPRA). THE SAME IS BEING REPRODUCED HEREUNDER FOR A READY REFERENCE:- 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 DECISIONS. IN THE CASE OF TUTICORIN ALKALI CH EMICALS & FERTILIZERS LTD. (SUPRA), THE HON'BLE APEX COURT HE LD AS UNDER:- '...THAT THE COMPANY HAD SURPLUS FUNDS IN ITS HAND S. IN ORDER TO EARN INCOME OUT OF THE SURPLUS FUNDS, IT H AD INVESTED THE AMOUNT FOR THE PURPOSE OF EARNING INTE REST. ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 4 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. THE ASS ESSEE WAS ENTIRELY AT LIBERTY TO DEAL WITH THE INTEREST A MOUNT AS IT LIKED. THE APPLICATION OF THE INCOME FOR PAYMENT OF INTEREST WOULD NOT AFFECT ITS TAXABILITY IN ANY WAY . THE COMPANY COULD NOT CLAIM ANY RELIEF UNDER SECTION 70 OR SECTION 71 SINCE ITS BUSINESS HAD NOT STARTED AND T HERE COULD NOT BE ANY COMPUTATION OF BUSINESS INCOME OR LOSS INCURRED BY THE ASSESSEE IN THE RELEVANT ACCOUNTING YEARS. IN SUCH A SITUATION, THE EXPENDITURE INCURRED BY TH E ASSESSEE FOR THE PURPOSE OF SETTING UP ITS BUSINESS COULD NOT BE ALLOWED AS DEDUCTION, NOR COULD IT BE ADJUST ED AGAINST ANY OTHER INCOME UNDER ANY OTHER HEAD. SIMI LARLY ANY INCOME FROM A NON-BUSINESS SOURCE COULD NOT BE SET OFF AGAINST THE LIABILITY TO PAY INTEREST 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 H ON'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 BY THE CONTRACTOR FOR THE CONSTRUCTION WORK OF THE ASSESSE E INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSESSEE, (II) HIRE CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN TO THE CONTRACTORS BY THE ASSESSEE FOR US E IN THE CONSTRUCTION WORK OF THE ASSESSEE, AND (III) INTERE ST FROM ADVANCES MADE TO THE CONTRACTORS BY THE ASSESSEE FO R THE PURPOSE OF FACILITATING THE WORK OF CONSTRUCTION. T HE ACTIVITIES OF THE ASSESSEE IN CONNECTION WITH ALL T HESE THREE RECEIPTS WERE DIRECTLY CONNECTED WITH OR INCIDENTAL TO THE WORK OF CONSTRUCTION OF ITS PLANT UNDERTAKEN BY THE ASSESSEE. THE ADVANCES WHICH THE ASSESSEE MADE TO T HE CONTRACTORS TO FACILITATE THE CONSTRUCTION ACTIVITY OF PUTTING TOGETHER A VERY LARGE PROJECT WAS AS MUCH TO ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED WITHOUT ANY F INANCIAL HITCH AS TO HELP THE CONTRACTORS. THE ARRANGEMENTS WHICH WERE MADE BETWEEN THE ASSESSEE-COMPANY AND THE ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 5 CONTRACTORS PERTAINING TO THESE THREE RECEIPTS WERE ARRANGEMENTS WHICH WERE INTRINSICALLY CONNECTED WIT H THE CONSTRUCTION OF ITS STEEL PLANT. THE RECEIPTS HAD B EEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CONTRAC TORS AND HAD GONE TO REDUCE THE COST OF CONSTRUCTION. THEY H AD, THEREFORE, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AN D NOT INCOME 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, AFT ER APPLYING 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 O F THE MACHINERY REQUIRED FOR SETTING UP ITS PLANT IN TERM S OF THE ASSESSEE'S AGREEMENT WITH THE SUPPLIER. IT WAS ON T HE MONEY SO DEPOSITED THAT SOME INTEREST HAD BEEN EARN ED. THIS WAS, THEREFORE, NOT A CASE WHERE ANY SURPLUS S HARE CAPITAL MONEY WHICH WAS LYING IDLE HAD BEEN DEPOSIT ED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE D EPOSIT OF MONEY IN THE PRESENT CASE WAS DIRECTLY LINKED WITH THE PURCHASE OF PLANT AND MACHINERY. HENCE, ANY INCOME EARNED ON SUCH DEPOSIT WAS INCIDENTAL TO THE ACQUIS ITION OF ASSETS FOR THE SETTING UP OF THE PLANT AND MACHINER Y. THE INTEREST WAS A CAPITAL RECEIPT, WHICH WOULD GO TO R EDUCE 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 HIRE CHARGES FROM CONTRACTORS BY HOLDING THAT THE S AME 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 RELATI ON TO THESE ITEMS OF INCOME, THAT THESE ITEMS OF RECEIPTS WERE ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 6 NOT TAXABLE INCOME BUT WERE TO BE ADJUSTED AGAINST THE PROJECT COST FOR THE BUSINESS OF OIL REFINERY AND PETROCHEMICALS.' 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 LENGT H, 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 TU TICORIN ALKALI CHEMICALS [1997] 227 ITR 172 AND THAT OF BOK ARO STEEL LTD. [1999] 236 ITR 315. THE TEST WHICH PERME ATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICO RIN ALKALI CHEMICALS [1997] 227 ITR 172 IS THAT IF FUND S HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THEN BY VIRTUE OF THAT CIRCUMSTANCE T HEY ARE INVESTED IN FIXED DEPOSITS THE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDER THE HEAD 'INCOME FRO M OTHER SOURCES'. ON THE OTHER HAND THE RATIO OF THE SUPREM E 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 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PLAN T, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. 5.1 THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE ACTIVITY 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 AVAILA BLE IN S. 3 OF THE ACT WHICH STATES THAT FOR NEWLY SET UP BUSIN ESS THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH TH E DATE OF SETTING UP OF THE BUSINESS. THEREFORE, AS PER THE P ROVISION OF S. 4 OF THE ACT WHICH IS THE CHARGING SECTION IN COME WHICH ARISES TO AN ASSESSEE FROM THE DATE OF SETTIN G OF THE BUSINESS BUT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDING ON WHETHER IT IS OF A REVENUE NATURE OR C APITAL RECEIPT. THE INCOME OF A NEWLY SET UP BUSINESS, POS T THE DATE OF ITS SETTING UP CAN BE TAXED IF IT IS OF A R EVENUE NATURE UNDER ANY OF THE HEADS PROVIDED UNDER S. 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFI ED AS ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 7 INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINES S OR PROFESSION' IT WOULD HAVE TO BE AN ACTIVITY WHICH I S IN SOME MANNER OR FORM CONNECTED WITH BUSINESS. THE WORD '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 THE AS SESSEE'S INCOME IS AN INCOME CONNECTED WITH BUSINESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF THE FINDING O F FACT BY THE CIT(A) THAT THE MONIES 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 INCO ME DERIVED BY PARKING THE FUNDS TEMPORARILY WITH TOKYO MITSUBISHI BANK, WILL RESULT IN THE CHARACTER OF TH E FUNDS BEING CHANGED, IN AS MUCH AS THE INTEREST EARNED FR OM THE BANK WOULD HAVE A HUE DIFFERENT THAN THAT OF BUSINE SS AND BE BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IT IS WELL-SETTLED THAT AN INCOME RECEIVE D BY THE ASSESSEE CAN BE TAXED UNDER THE HEAD 'INCOME FROM O THER SOURCES' ONLY IF IT DOES NOT FALL UNDER ANY OTHER H EAD OF INCOME AS PROVIDED IN S. 14 OF THE ACT. THE HEAD 'I NCOME FROM OTHER SOURCES' IS A RESIDUARY HEAD OF INCOME. SEE S.G. MERCANTILE CORPORATION (P) LTD. VS. CIT1972 CTR (SC ) 8 : (1972) 83 ITR 700 (SC) AND CIT VS. GOVINDA CHOUDHUR Y & SONS (1994) 116 CTR (SC) 61 : (1993) 203 ITR 881 (S C). 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 CAPITAL WERE INFUSED FOR A SPECIFIC PURPOSE OF ACQUIRING LA ND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, THE I NTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN T HE BUSINESS COULD NOT HAVE BEEN CLASSIFIED AS INCOME F ROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PER IOD PRIOR TO COMMENCEMENT OF BUSINESS IT WAS IN THE NAT URE OF CAPITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OF F AGAINST PRE-OPERATIVE EXPENSES. IN THE CASE OF TUTICORIN AL KALI CHEMICALS [1997] 227 ITR 172 IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILABLE WITH THE ASSES SEE IN THAT CASE WERE 'SURPLUS' AND, THEREFORE, THE SUPREM E COURT HELD THAT THE INTEREST EARNED ON SURPLUS FUNDS WOUL D HAVE TO BE TREATED AS 'INCOME FROM OTHER SOURCES'. ON TH E OTHER HAND IN BOKARO STEEL LTD. [1999] 236 ITR 315 (SC) W HERE ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 8 THE ASSESSEE HAD EARNED INTEREST ON ADVANCE PAID TO CONTRACTORS DURING PRE-COMMENCEMENT PERIOD WAS FOUN D TO BE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE P LANT OF THE ASSESSEE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PERMITTED TO BE SET OFF AGAINST PREOPERATIVE EX PENSES. 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 CHEMICAL S & FERTILIZERS LTD. (SUPRA) AS WELL AS BOKARO STEEL LT D. (SUPRA). THE CONCLUSION OF THE DELHI HIGH COURT IS IN FACT T HE LAW WHICH EMERGES AS PER THE DECISION OF HON'BLE APEX COURT. THEREFORE, IN OUR OPINION, THE CIT (A) WAS NOT JUSTIFIED IN IG NORING 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 & FERTILIZER S LTD. (SUPRA). AFTER CONSIDERING THESE TWO DECISIONS OF THE HON'BL E APEX COURT AND ALSO SOME OTHER DECISIONS OF THE HON'BLE APEX COURT, THEIR LORDSHIPS OF THE DELHI HIGH COURT ARRI VED AT THE CONCLUSION 'IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUND BY THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR THE SPECIFIC PURPOSE OF AC QUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, T HE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN T HE BUSINESS COULD NOT HAVE BEEN CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS, IT WAS IN THE NATURE OF C APITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OFF AGAINS T THE PRE- OPERATIVE EXPENSES.' THAT, THE RATIO OF THE ABOVE F INDING OF THE HON'BLE DELHI HIGH COURT WOULD BE SQUARELY APPLICAB LE TO THE FACTS OF THE ASSESSEE'S CASE, BECAUSE ADMITTEDLY IN THE CASE UNDER APPEAL BEFORE US THE SHARE CAPITAL AS WELL AS LOANS WERE RAISED FOR THE SPECIFIC PURPOSE OF SETTING UP OF TH E POWER GENERATION PLANTS. THE BUSINESS OF THE ASSESSEE HAS NOT BEEN COMMENCED AND THEREFORE, AS PER ABOVE DECISION, THE INTEREST RECEIVED IN THE PERIOD PRIOR TO COMMENCEMENT OF BUS INESS WAS IN THE NATURE OF CAPITAL RECEIPT AND HENCE WAS REQU IRED TO BE SET OFF AGAINST THE PRE-OPERATIVE EXPENSES. THE ASS ESSEE HAS ALREADY SET OFF THE INTEREST INCOME AGAINST THE PRE OPERATIVE EXPENSES WHICH IS TITLED AS 'PROJECT DEVELOPMENT EX PENDITURE'. IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT THE IN TEREST INCOME OF RS.1,35,87,158/- AS WELL AS RS.7,91,51,30 6/- WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX DURING THE YE AR UNDER ITA NO. 239/DEL/2016 JAYPEE POWERGRID LTD. 9 CONSIDERATION. ACCORDINGLY, GROUND NOS. 2 AND 4 OF THE ASSESSEE'S APPEAL ARE ALLOWED. 8.1 THE LD. SR. DR COULD NOT POINT OUT ANY OTHER JU DGMENT IN FAVOUR OF THE REVENUE OTHER THAN THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF TUTICORIN CHEMICALS AND F ERTILIZERS LTD (SUPRA) WHICH HAS BEEN DULY CONSIDERED AND DIST INGUISHED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDI AN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) AND WHICH COV ERS THE CASE OF THE ASSESSEE IN ITS FAVOUR. THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS ALSO TAKEN A VIEW IN FAVOUR OF THE ASSESSEE ON IDENTICAL FACTS AND THE SAME HAS BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS OF THIS ORDER. THEREFORE, IN V IEW OF THE ORDER OF THE COORDINATE BENCH AND RESPECTFULLY APPL YING THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (S UPRA), WE HOLD THAT SINCE THE BUSINESS OF THE ASSESSEE HAD NO T COMMENCED, THE INTEREST RECEIVED IN THE PERIOD PRIO R TO THE COMMENCEMENT OF BUSINESS WAS IN THE NATURE OF ITA N O. 5489/DEL/2013 ASSESSMENT YEAR 2009-10 16 CAPITAL RE CEIPT AND WAS REQUIRED TO BE SET OFF AGAINST THE PREOPERA TIVE EXPENSES. THEREFORE, THE IMPUGNED INTEREST INCOME I S A CAPITAL RECEIPT NOT CHARGEABLE TO TAX DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/01/2021. SD/- SD/- (H. S. SIDHU) (DR. B . R. R. KUMAR) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 05/01/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR