ITO, New Delhi V. M/s. NTPC Tamilnadu Energy Co. Ltd., New Delhi

ITA 4558/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4743 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P GUPTA
• Assessee Lawyers: SAURABH AGARWAL; AJAY KUMAR AGARWAL
• Keywords: Capital receipt
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM ITA NO. 4558/DEL/2014 : ASSTT. YEAR : 2011 - 12 ITA NO. 4559/DEL/2014 : ASSTT. YEAR : 2012 - 13 INCOME TAX OFFICER, WARD - 13(1), NEW DELHI VS NTPC TAMIL NADU ENERGY CO. LTD., THE PRINCIPAL OFFICER, CORE - 7, SCOPE COMPLEX, 7, INDUSTRIAL AREA, LODHI ROAD, NEW DELHI - 110003 (APPELLANT) (RESPONDENT) PAN NO. A A BCN9916C ASSESSEE BY : SH. AJAY KUMAR AGAR WAL, CA & SH. SAURABH AGARWAL, CA REVENUE BY : SH. S. P. GUPTA , SR. DR DATE OF HEARING : 11.09 .201 7 DATE OF PRONOUNCEMENT : 13 . 0 9 .201 7 ORDER PER N. K. SAINI, AM: THESE TWO APPEAL S BY THE DEPARTME NT ARE DIR ECTED AGAINST THE SEPARATE ORDER S EACH DATED 28.05.2014 OF LD. CIT(A) - XVI, NEW DELHI . 2 . SINCE THE ISSUES INVOLVED ARE COMMON AND THE APPEALS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BR EVITY. ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 2 3. FIRST WE WILL DEAL WITH THE APPEAL IN ITA NO. 4558/DEL/2014 FOR THE ASSESSMENT YEAR 2011 - 12. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE I NTEREST INCOME AMOUNTING TO RS.2,59,43,153/ - BY NOT APPRECIATING THE PROVISION LAID DOWN IN SECTION 5 OF THE INCOME TAX ACT WHEREIN IT HAS BEEN CLEARLY MENTIONED THAT THE TOTAL INCOME OF A PERSON INCLUDES ALL THE INCOME EARNED/RECEIVED OR DEEMED TO BE EARN ED/RECEIVED BY THE PERSON IN THE PREVIOUS YEAR. 2. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ABOVE MENTIONED INTEREST INCOME BY HOLDING THAT INTEREST INCOME FROM CONTRACTORS ADVANCES ARE INEXT RICABLY LINKED WITH THE SETTING UP BY IGNORING THE FACT THAT THE ADVANCES GIVEN BY THE COMPANY WERE NOT IN THE REGULAR COURSE OF BUSINESS NOR WERE IT IS THE BUSINESS OF THE COMPANY TO MAKE ADVANCES AND EARN INTEREST. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 4 . FROM THE AFORESAID GROUNDS, IT IS NOTICED THAT ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO THE DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF IN TEREST EARNED ON THE CONTRACTORS ADVANCES BY THE ASSESSEE DURING THE CONSTRUCTION PERIOD. ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 3 5 . THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SATED THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEE S FAVOUR VIDE ORDER DATED 15.02.2016 IN ITA NO. 6016/DE L/2013 FOR THE ASSESSMENT YEAR 2010 - 11 IN ASSESSEE S OWN CASE (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 6 . IN HIS RIVAL SUBMISSIONS THE LD. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE DEPART MENTAL APPEAL FOR THE ASSESSMENT YEAR 2010 - 11 IN ITA NO. 6016/DEL/2013 WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 5 & 6 OF THE ORDER DATED 15.02.2016 WHICH READ AS UNDER: 5. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD, CASE LAWS CITED BY LD. COUNSEL FOR ASSESSEE, ASSESSMENT ORDER AND THE ORDER OF THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS ELABORATELY DISCUSSED TH E ISSUE AND GAVE HIS FINDING VIDE PARA NO. 4.1 TO 4.9 AT ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 4 PAGE NO. 8 TO 13 OF THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDING OF THE LD. CIT(A) IS REPRODUCED BELOW : 4.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE FINDINGS OF THE AO AS WELL AS THE SUBMISSIONS OF THE A/R OF THE APPELLANT. BOTH THE GROUNDS OF APPEAL ARE DIRECTED AGAINST ADDITIONS OF RS. 175,74,129/ - COMPRISING OF THE INTEREST INCOME RECEIVED FROM THE BANK(S) AMOUNTING TO RS. 1,02,740 / - AND INTEREST RECEIVED FR OM CONTRACTORS ADVANCES AMOUNTING TO RS. 174,71,389 / - . IN THE P&L ACCOUNT THE APPELLANT HAS SHOWN UNDER THE HEAD OTHER INCOME, AMOUNT OF RS. 1,02,740/ - AS INTEREST INCOME EARNED ON SHORT TERM DEPOSITS PARKED WITH BANKS AND AN AMOUNT OF RS. 174,71,389/ - AS INTEREST EARNED ON INTEREST BEARING ADVANCE GIVEN TO CONTRACTORS, TOTAL RS. 1,75,74,129/ - WHICH WAS ADJUSTED AGAINST EXPENDITURE DURING CONSTRUCTION ACCOUNT IN SCHEDULE - 15 AND THE NET EXPENDITURE DURING CONSTRUCTION WAS CAPITALIZED UNDER THE CAPITAL WORK IN PROGRESS IN SCHEDULE - 4 OF THE BALANCE SHEET. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS NOT OFFERED ABOVE INCOMES FOR TAX. AO OBSERVED THAT THE FACTS OF CASE ARE SIMILAR TO THE CASE OF TUTICORIN ALKALI CHEMICAL & FERTILIZERS LTD. V . CIT (SUPRA). THEREFORE, THE AO TREATED THE ABOVE RECEIPT OF RS. 175.74 LAKH AS CHARGEABLE TO TAX U/S 56 OF THE ACT AS 'INCOME FROM OTHER SOURCES' FOLLOWING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. TUTICORIN ALKALI AND CHEMICALS & FERTIL IZERS LTD. (1997) 227 ITR 172. ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 5 4.2 THEREFORE, THE ISSUE TO BE DECIDED IN THIS APPEAL IS WHETHER THE ABOVE RECEIPTS ARE CAPITAL RECEIPT AS CLAIMED BY THE APPELLANT OR INCOME FROM OTHER SOURCES U/S 56 OF THE ACT AS HELD BY THE AO. THE WHOLE EMPHASIS OF APE X COURT DECISION IN THE TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA) WAS THAT FUNDS WERE FOUND TO BE SURPLUS. THE COMPANY WAS READY TO COMMENCE TRIAL PRODUCTION AND THE SURPLUS FUNDS WERE DEPOSITED IN BANK TO EARN INTEREST. 4.3 IN THE INSTANT CA SE THERE IS NO DISPUTE THAT PROJECT WAS UNDER CONSTRUCTION DURING THE PREVIOUS YEAR RELEVANT TO AY 2010 - 11 AND THE BUSINESS HAD NOT COMMENCED. THE APPELLANT COMPANY WAS INCORPORATED ON 23 - 05 - 2003 AS A JOINT VENTURE COMPANY BETWEEN NTPC LTD. AND TAMIL NADU ELECTRICITY BOARD FOR THE PURPOSE OF CONSTRUCTION OF POWER PLANT FOR GENERATION OF ELECTRICITY. THE TOTAL PROJECT WAS MEANT TO PRODUCE 1500 MW OF ELECTRICITY THROUGH 3 UNITS @ 500 MW BY EACH UNIT. THE SAID POWER PLANT WAS LOCATED AT VELLUR AT THE OUTSKIRT OF CHENNAI, TAMIL NADU. THE CONSTRUCTION OF THE POWER GENERATING UNIT WAS STARTED ON 28 - 03 - 2007. AS PER LETTER OF CEO, COMMERCIAL OPERATION IS DECLARED IN RESPECT OF UNIT - I W.E.F. 29/11/2012, UNIT - II W.E.F. 25/08/13 AND UNIT 3 IS YET TO BE COMMISSIONED . BY END OF FINANCIAL YEAR 31 - 03 - 2010 THE ASSESSEE COMPANY HAD RAISED SHARE HOLDERS FUND OF RS. 905.5 CRORES AND HAD BORROWED FUNDS IN THE FORM OF SECURED LOAN OF RS. 1808.27 CRORES. THESE FUNDS WERE ESSENTIALLY UTILIZED DURING THE INITIAL PERIOD OF CONSTR UCTION FROM A.Y. 2004 - 05 TO A.Y. 2010 - 11 FOR CONDUCTING SURVEY, INVESTIGATION & PRELIMINARY EXPENSES, FOR PURCHASING LAND, FOR INFRASTRUCTURE ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 6 DEVELOPMENT WORK AND FOR DISBURSEMENT AS ADVANCE TO THE CONTRACTORS ENGAGED FOR CONSTRUCTION OF POWER PLANT ETC. 4.4 FURTHER, THERE IS NO FINDING GIVEN BY THE AO THAT ADVANCES WERE MADE BY THE APPELLANT OUT OF SURPLUS FUND. FROM THE BALANCE SHEET IT IS OBSERVED THAT AS AGAINST THE ABOVE FUNDS OF RS. 2713.77 CRORES (WITHOUT CONSIDERING AMOUNTS DUE TO SUNDRY CREDITORS ), SUMS AGGREGATING TO RS. 2998.02 CRORES WERE USED FOR ACQUIRING / CONSTRUCTION OF FIXED ASSETS. AGAINST THE LIABILITIES AND PROVISIONS AGGREGATING TO RS. 293.45 CRORES, BANK AND CASH BALANCES WAS RS. 4.74 CRORES ONLY. FURTHER, THE DEBIT BALANCE OF PROFIT AND LOSS ACCOUNT AS APPEARING IN THE BALANCE SHEET AS ON 31.03.2010 WAS RS.1.13 CRORES. FROM THE ABOVE IT IS EVIDENT THAT INVESTMENT IN FIXED ASSETS IS MORE THAN THE FUNDS AVAILABLE AND FIXED ASSET IS PARTLY FUNDED BY CURRENT LIABILITIES. THE LIABILITY TO WARDS SUNDRY CREDITORS (RS.86.78 CRORES) ARE FAR MORE THAN THE FUNDS LYING IN BANK (RS.4.74 CRORES). THEREFORE, IT IS CLEAR THAT ADVANCES WERE NOT GIVEN OUT OF SURPLUS FUNDS AVAILABLE WITH THE COMPANY. SIMPLY BECAUSE MONEY IS LYING IN BANK MEANT FOR CONSTR UCTION OF THE PLANT, IT CANNOT BE TREATED AS THE SURPLUS MONEY. THE SURPLUS MONEY CAN ARISE ONLY AFTER MEETING ALL THE OBLIGATIONS RELATING TO THE CONSTRUCTION OF THE POWER PLANT AND IF THE MONEY IS FOUND TO BE SURPLUS AFTER THE COMPLETION OF CONSTRUCTION OF THE UNIT. IN THE INSTANT CASE THE WORK OF CONSTRUCTION OF THE POWER PLANT WAS UNDER PROGRESS. THEREFORE, FUNDS CANNOT BE SAID TO BE AT SURPLUS. ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 7 4.5 SOME OF SUCH FUNDS WHICH WERE LYING UNUTILIZED WERE TEMPORALLY PARKED BY THE APPELLANT IN BANK TO EARN INTEREST. THE PURPOSE OF BANK DEPOSITS YIELDING INTEREST WAS EVIDENTLY TO MAINTAIN LIQUIDITY OF FUNDS AND TO REDUCE THE COST OF CONSTRUCTION OF THE POWER PLANT. THEREFORE, INTEREST EARNED ON SUCH UNUTILIZED FUNDS TEMPORALLY PARKED WITH BANKS TO MAINTAIN LI QUIDITY AND TO REDUCE COST, IS INEXTRICABLY LINKED WITH THE SETTING UP OF THE PROJECT. SIMILARLY, THE INTEREST INCOMES EARNED ON ADVANCE TO CONTRACTORS ENGAGED FOR CONSTRUCTION OF POWER PLANT IS ALSO INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWER PLA NT. THESE INCOMES HAVE ALSO GONE ON TO REDUCE THE EXPENSES FOR SETTING UP OF THE PLANT AS EVIDENT FROM SCHEDULE 15 OF ANNUAL REPORT SHOWING DETAILS OF EXPENSES DURING CONSTRUCTION. HON'BLE SUPREME COURT ON IDENTICAL ISSUE IN CIT V. BOKARO STEEL LTD. 102 TA XMAN 94 (SC) AFTER CONSIDERING THE DECISION IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SUPRA) HELD THAT INTEREST FROM ADVANCE TO CONTRACTORS, RENT CHARGED ON CONTRACTOR, HIRE CHARGES FROM CONTRACTORS ARE INEXTRICABLY LINKED TO THE SETT ING UP OF THE PROJECT AND AS SUCH CAPITAL RECEIPTS. IN THAT SAID DECISION HON'BLE APEX COURT HELD: - '5. WE WILL TAKE THE FIRST THREE HEADS UNDER WHICH THE ASSESSEE HAS RECEIVED CERTAIN AMOUNTS. THESE ARE THE RENT CHARGED BY THE ASSESSEE TO ITS CONTRACTORS FOR HOUSING WORKERS AND STAFF EMPLOYED BY THE CONTRACTOR FOR THE CONSTRUCTION WORK OF THE ASSESSEE INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSESSEE. SECONDLY, HIRE CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN TO THE CONTRACTORS BY THE A SSESSEE FOR USE IN THE ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 8 CONSTRUCTION WORK OF THE ASSESSEE, AND THIRDLY, INTEREST FROM ADVANCES MADE TO THE CONTRACTORS BY THE ASSESSEE FOR THE PURPOSE OF FACILITATING THE WORK OF CONSTRUCTION. THE ACTIVITIES OF THE ASSESSEE IN CONNECTION WITH ALL THESE THRE E RECEIPTS ARE DIRECTLY CONNECTED WITH OR ARE INCIDENTAL TO THE WORK OF CONSTRUCTION OF ITS PLANT UNDERTAKEN BY THE ASSESSEE. BROADLY SPEAKING, THESE PERTAIN TO THE ARRANGEMENTS MADE BY THE ASSESSEE WITH ITS CONTRACTORS PERTAINING TO THE WORK OF CONSTRUCTI ON. TO FACILITATE THE WORK OF THE CONTRACTOR, THE ASSESSEE PERMITTED THE CONTRACTOR TO USE THE PREMISES OF THE ASSESSEE FOR HOUSING ITS STAFF AND WORKERS ENGAGED IN THE CONSTRUCTION ACTIVITY OF THE ASSESSEE'S PLANT. THIS WAS CLEARLY TO FACILITATE THE WORK OF CONSTRUCTION. HAD THIS FACILITY NOT BEEN PROVIDED BY THE ASSESSEE, THE CONTRACTORS WOULD HAVE HAD TO MAKE THEIR OWN ARRANGEMENTS AND THIS WOULD HAVE BEEN REFLECTED IN THE CHARGES OF THE CONTRACTORS FOR THE CONSTRUCTION WORK. INSTEAD, THE ASSESSEE HAS PR OVIDED THESE FACILITIES. THE SAME IS TRUE OF THE HIRE CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN BY THE ASSESSEE TO THE CONTRACTORS FOR THE ASSESSEE'S CONSTRUCTION WORK. THE RECEIPTS IN THIS CONNECTION ALSO GO TO COMPENSATE THE ASSESSEE FOR THE WEAR A ND TEAR OF THE MACHINERY. THE ADVANCES WHICH THE ASSESSEE MADE TO THE 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 FINANCIAL HITCHE S AS TO HELP THE CONTRACTORS. THE ARRANGEMENTS WHICH WERE MADE BETWEEN THE ASSESSEE - COMPANY AND THE CONTRACTORS PERTAINING TO THESE THREE RECEIPTS ARE ARRANGEMENTS WHICH ARE INTRINSICALLY CONNECTED WITH THE CONSTRUCTION OF ITS STEEL PLANT. THE RECEIPTS HAV E ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 9 BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CONTRACTORS AND HAVE GONE TO REDUCE THE COST OF CONSTRUCTION. THEY HAVE, THEREFORE, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AND NOT INCOME OF THE ASSESSEE FROM ANY INDEPENDENT SOURCE. 7. HOWEVER, WHILE INTE REST EARNED BY INVESTING BORROWED CAPITAL IN SHORT - TERM DEPOSITS IS AN INDEPENDENT SOURCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVITIES OF THE ASSESSEE, THE SAME CANNOT BE SAID IN THE PRESENT CASE WHERE THE UTILIZATION OF VARIOUS ASSETS OF THE COMPANY AND THE PAYMENTS RECEIVED FOR SUCH UTILIZATION ARE DIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP THE STEEL PLANT OF THE ASSESSEE. THESE RECEIPTS ARE INEXTRICABLY LINKED WITH THE SETTING UP OF THE CAPITAL STRUCTURE OF THE ASS ESSEE - COMPANY. THEY MUST, THEREFORE, BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION.' 4.6 HON'BLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. 1TO (2009) 315 ITR 255 (DEL.) HELD THAT WHERE INTEREST ON MONEY R ECEIVED AS SHARE CAPITAL IS TEMPORARILY PLACED IN FIXED DEPOSIT AWAITING ACQUISITION OF LAND, A CLAIM THAT SUCH INTEREST IS A CAPITAL RECEIPT ENTITLED TO BE SET OFF AGAINST PRE - OPERATIVE EXPENSES, IS ADMISSIBLE, AS THE FUNDS RECEIVED BY THE ASSESSEE COMPAN Y BY THE JOINT VENTURE PARTNERS ARE 'INEXTRICABLY LINKED' WITH THE SETTING UP OF THE PLANT AND SUCH INTEREST EARNED CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. THE HON'BLE DELHI HIGH COURT APPLIED THE RATIO OF HON'BLE SUPREME COURT IN BOKARO STEEL LTD. (SUPRA) WHILE ARRIVING AT THE ABOVE DECISION. HON'BLE HIGH COURT ALSO DISTINGUISHED THE FACTS BEFORE THEM FROM ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 10 THE FACTS WHICH WERE BEFORE THE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V CIT. THE DISTINCTION DRAWN BY DELHI HIGH COURT, WAS THAT THAT THERE WAS A FINDING OF FACT RECORDED IN THE CASE BEFORE THE APEX COURT THAT WHATEVER MONEY WAS DEPOSITED IN THE BANK WAS ESSENTIALLY FOUND TO BE THE SURPLUS FUNDS IN THE HANDS OF THAT COMPANY AND THE VERY PURPOSE OF MAKING FIXED D EPOSITS WAS TO EARN INTEREST ON SUCH SURPLUS MONEY. APEX COURT UNDER THOSE PECULIAR CIRCUMSTANCES, HAD HELD IN TUTICORIN ALKALI CHEMICALS THAT INTEREST INCOME ARISING ON SURPLUS FUNDS, WAS CHARGEABLE TO TAX AS INCOME FROM OTHER SOURCES. 4.7 IN IDENTICAL I SSUE IN THE CASE OF NTPC SAIL POWER COMPANY (P) LTD. VS. CIT IN ITA NO. 1238, HON'BLE DELHI HIGH COURT IN ITS DECISION ON 17/07/2012 HELD THAT: - 'IT IS NO DOUBT CORRECT THAT THE PROVISO TO SECTION 36 (1) (III) OF THE INCOME TAX ACT ENACTS THAT ANY AMOUNT OF THE INTEREST PAID TOWARDS ('IN RESPECT OF) CAPITAL BORROWED FOR ACQUISITION OF AN ASSET OR FOR EXTENSION OF EXISTING BUSINESS REGARDLESS OF ITS CAPITALIZATION IN THE BOOKS OR OTHERWISE, 'FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BO RROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE' WOULD NOT QUALIFY AS DEDUCTION. HOWEVER, IN ALL THESE CASES, WHEN THE INTEREST WAS RECEIVED BY THE ASSESSEE TOWARDS INTEREST PAID FOR FIXED DEPOSITS WHEN THE BORROW ED FUNDS COULD NOT BE IMMEDIATELY PUT TO USE FOR THE PURPOSE FOR WHICH THEY WERE TAKEN, THIS COURT, AND INDEED THE SUPREME COURT HELD THAT IF THE RECEIPT IS 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PROJECT, IT WOULD BE CAPITAL RECEIPT NOT LIABLE TO T AX BUT ULTIMATELY BE USED TO REDUCE THE COST OF THE PROJECT, BY THE SAME LOGIC, IN THIS CASE TOO. THE FUNDS INVESTED BY THE ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 11 ASSESSEE COMPANY AND THE INTEREST EARNED WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWER PLANT.' 4.8 THEREFORE, DECISION S OF HON'BLE SUPREME COURT IN THE CASE OF BOKARO STEEL LTD. (SUPRA), HON'BLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) AND NTPC SAIL POWER COMPANY (P) LTD. (SUPRA) ARE SQUARELY APPLICABLE IN THE INSTANT CASE. IDENTICAL ISSUE WAS RAISED IN APPEAL FOR AY 2008 - 09 WHICH WAS DECIDED BY ME IN FAVOUR OF THE APPELLANT IN A. NO. 102/2010 - 12 VIDE DECISION DT. 17/12/2012 FOLLOWING THE ABOVE DECISIONS OF SUPREME COURT AND DELHI HIGH COURT AS UNDER: '8.1.5 SINCE THE WORK OF CONSTRUCTION OF TH E POWER PLANT HAS JUST STARTED AND FUNDS WERE ESSENTIALLY UTILIZED FOR CONDUCTING SURVEY, INVESTIGATION & PRELIMINARY EXPENSES, FOR LAND PURCHASE, FOR INFRASTRUCTURE DEVELOPMENT WORK AND FOR DISBURSEMENT AS ADVANCE TO THE CONTRACTORS ENGAGED FOR CONSTRUCTI ON OF POWER PLANT ETC., THEREFORE, FUNDS CANNOT BE SAID TO BE AT SURPLUS. MOREOVER, THE LIABILITY TOWARDS SUNDRY CREDITORS (RS.23.52 CRORES) ARE FAR MORE THAN THE FUNDS LYING IN BANK (RS.3.34 CRORES). INTEREST INCOME IS ALSO INEXTRICABLY LINKED WITH THE SE TTING UP OF THE POWER PLANT BECAUSE INTEREST INCOME HAVE GONE ON TO REDUCE THE INCIDENTAL EXPENSES FOR SETTING UP OF THE PLANT AS EVIDENT FROM SCHEDULE 12 OF BALANCE SHEET SHOWING DETAILS OF INCIDENTAL EXPENSES DURING CONSTRUCTION. IN VIEW OF THE ABOVE, AS THE INTEREST ON STDR ARE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PROJECT AND THE FACT THAT NO SURPLUS FUNDS ARE ALSO AVAILABLE WITH THE APPELLANT COMPANY, THEREFORE, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST THE PRE OPERATIVE EXPENSES. AS SUCH THE A.O. IS NOT JUSTIFIED IN ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 12 ADDING THE SUM OF RS.36,06,774/ - AS INCOME FOR OTHER SOURCE U/S 56.'' 4.9 IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITIONS IN THE INSTANT AY 2010 - 11 SINCE THE WORK OF CONSTRUCTION OF THE POWER PLANT WAS UNDER PROGRESS, INTEREST INCOMES ARE ALSO INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWER PLANT AND SUCH INCOMES HAVE GONE ON TO REDUCE THE EXPENSES FOR SETTING UP OF THE PLANT AND AS THERE WAS NO SURPLUS FUNDS AVAILABLE WITH THE APPELLANT COMPANY, THEREFO RE, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST THE PRE OPERATIVE EXPENSES. AS SUCH THE A.O. IS NOT JUSTIFIED IN ADDING THE SUM OF RS. 1,75,74,129/ - AS INCOME FROM OTHER SOURCE U/S 56. THE APPEAL IS ALLOWED IN GROUND NOS. I & 2 OF APPEA L. 6. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND THE PRECEDENTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. HENCE, WE UPHOLD THE SAME. ACCORDINGLY, THE APPEAL OF THE R EVENUE IS DISMISSED. 8. AGAINST THE AFORESAID ORDER DATED 15.02. 2016 , THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE HON BLE JURISDICTIONAL HIGH COURT IN ITA NO. 541/2016 WHEREIN VIDE ORDER DATED 20.09.2016, THE ORDER OF THIS BENCH OF THE TRIBUNAL WAS AFF IRMED. 9. SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE ASSESSMENT YEAR 2010 - 11 IN ITA NO. 6016/DEL/2013 IN ASSESSEE S OWN CASE . SO, ITA NOS. 4558 & 4559 /DEL /201 4 NTPC TAMIL NADU ENERGY CO. LTD. 13 RESPECTFULLY FOLLOWING THE ORDER DATED 15.02.2016 PASSED BY THIS BENCH OF TH E ITAT , NEW DELHI, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE IMPUGNED ADDITION MADE BY THE AO. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 10 . IN ITA NO. 4559/DEL/2014, THE FACT ARE IDENTICAL AS WERE INVOLVED IN ITA NO. 4558/DEL/2014 FOR THE ASSESSMENT YEAR 2011 - 12 WHICH WE HAVE ALREADY DI SPOSED OFF IN THE FORMER PART OF THIS ORDER. THEREFORE, THE FINDINGS GIVEN THEREIN FOR THE ASSESSMENT YEAR 2011 - 12 SHALL APPLY MUTATIS MUTANDIS FOR THE ASSESSMEN T YEAR 2012 - 13. 11 . IN THE RESULT, APPEAL S OF THE DEPARTMENT ARE DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 13 /0 9 /2017 ) SD/ - SD/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 13 /09 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR