M/S Tenughat Emta Coal Mines Ltd., Ranchi V. ITO,Ward-3(2), Ranchi

ITA 56/RAN/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7676 (ITAT-RANCHI)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL
• Assessee Lawyers: L N MALLICK; MANISH MA L LICK
• Keywords: Tangible material; Difference of opinion; Assessment record; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 201

Judgement Text

P A G E 1 | 13 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH , RANCHI BEFORE S/ SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA N OS .56,57 & 58 / RAN /201 5 ASSESSMENT YEA R S : 20 07 - 08 TO 2009 - 2010 M/S. TENUGHAT EMTA COAL MINES LTD., 401, RADIUM COURT, RADIUM ROAD, RANCHI VS. ITO, WARD 3(2), RANCHI PAN/GIR NO. AACCT 0777 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI MANISH MA L LICK ADV & L.N.MALLICK, CA REVENUE BY : SHRI P.K.MONDAL, ADDL. CIT( DR ) DATE OF HEARING : 2 7 / 08/ 201 9 DATE OF PRONOUNCEMENT : 30 / 10 / 201 9 O R D E R PER BENCH. TH E ABOVE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF THE COMMISSIONER OF INCOME TAX(APPEALS) - RANCHI DATED 21.1.2015 FOR THE ASSESSMENT YEAR S 2007 - 08 TO 2009 - 2010. 2. L D REPRESENTATIVE OF BOTH PARTIES HAVE AGREED THAT THE FACTS AND CIRCUMSTANCES OF THE APPEALS FOR THE ASSESSMENT YEAR 2007 - 08 TO 2009 - 2010 ARE IDENTICAL AND SIMILAR . THEREFORE, F OR THE SAKE O F CONVENIENCE AND CLARITY, FOR OUR ADJUDICATION, WE ARE TAKING UP THE APPEAL IN ITA ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 2 | 13 NO. 56 /RAN/201 5 FOR ASSESSMENT YEAR 2007 - 08 AS A LEAD CASE TO DECIDE THE CONTROVERSY. 3 . GROUND NO.1 FOR THE ASSESSMENT YEAR S 2007 - 08 TO 2009 - 2010 IS GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION. 4 . GROUND NO S .2 TO 2.2 OF APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 , THE ASSESSEE HAS RAISED LEGAL GROUND, WHICH READ AS FOLLOWS: 2. THAT THE CIT(A) FAILED TO APPRECIATE THE CONTENTION OF TH E APPELLANT IN REGARD TO WRONG ASSUMPTION OF JURISDICTION U/S.147/148 OF THE ACT BY THE AO IN ORDER TO MAKE ADDITION OF INTEREST EARNED ON FDRS AS APPELLANTS INCOME FOR THE YEAR UNDER CONSIDERATION. 2.1 THAT THE CIT(A) FAILED TO APPRECIATE THAT THE AO HAD NO REASON TO BELIEVE THAT INCOME ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE ACT AND THAT THE REOPENING WAS BAD IN LAW. 2.2 THAT THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE REASONS TO BELIEVE DID NOT EXIST AND THE AO HAD REOPENE D THE ASSESSMENT AS A CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW FOR REOPENING OF THE ASSESSMENT. 5 . APROPOS THIS GROUND, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE AO DID NOT ASSUME VALID JURISDICTION U/S.147/148 OF THE ACT FOR INITIATION OF REASSESSMENT PROCEEDINGS AND ISSUING NOTICE U/S.148 OF THE ACT. LD A.R. DREW OUR ATTENTION TOWARDS ANNEXURE - 4 I.E. REASONS RECORDED BY THE AO FOR INITIATING REASSESSMENT PROCEEDINGS VIDE DATED 14.2.2011 AND SUBMITTED THAT THERE WAS NO NEW TANGIBLE MATERIALS IN THE HANDS OF THE AO AT THE TIME OF INITIATING REASSESSMENT PROCEEDINGS AND THUS, IT IS CLEAR CASE OF CHANGE OF OPINION, WHICH WERE BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 3 | 13 LD COUNSEL VEHEMENTLY POINTED OUT THAT FROM THE REASONS, IT IS AMPLE CLEAR THAT THE AO HAD NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AS THERE IS NO REASON OR DESCRIPTION OR BASIS ON WHICH THE AO FORMED A N OPINION TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IN THE ASSESSMENT YEAR 2007 - 08. PLACING RELIANCE ON THE DECISION OF CIT V. KELVINATOR OF INDIA LTD.: 320 ITR 561(SC), LD A.R. CONTENDED THAT AS THERE WAS NO TANGIBLE MATERIALS IN THE HANDS OF THE AO FOR REOPENING THE ASSESSMENT, THE IMPUGNED ASSESSMENT AS WELL AS THE FIRST APPELLATE ORDER DESERVES TO BE QUASHED. 6 . REPLYING TO ABOVE, LD SR. DR STRONGLY OPPOSED TO THE LEGAL GROUND OF THE AS SESSEE AND SUBMITTED THAT THE ASSESSEE EARNED INTEREST INCOME FROM THE FIXED DEPOSITS FROM THE BANK AND DID NOT DISCLOSE THE SAME AS INCOME OF THE ASSESSEE. THEREFORE, THE AO HAD REASON TO BELIEVE THAT INTEREST INCOME HAS ESCAPED ASSESSMENT. 7 . ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, FIRST OF ALL, WE FIND IT APPROPRIATE TO REPRODUCE THE REASONS RECORDED BY THE AO DATED 14.2.2011 WHILE INITIATING REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT AND ISSUING NOTICE U/S.148 OF THE ACT AS UNDER: IN THIS CASE, SCRUTINY ASSESSMENT WAS DONE FOR A.Y. 2008 - 09 DURING WHICH IT WAS NOTED THAT THE ASSESSEE IS EARNING INTEREST INCOME FROM FIXED DEPOSIT AND, THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME EARNED INTEREST ON FIXED ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 4 | 13 DEPOSIT HAS ESCAPED ASSESSMENT AND, THEREFORE, NOTICE U/S.148 IS BEING ISSUED AND SERVED ON THE ASSESSEE IN THIS REGARD. 8 . FROM THE ABOVE REASONS, IT IS CLEARLY DISCERNIBLE THAT THE AO PROCEEDED TO INITIATE REASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2007 - 08 ON THE BASIS OF SCRUTINY ASSE SSMENT PROCEEDINGS DONE BY HIM FOR THE ASSESSMENT YEAR 2008 - 09 DURING WHICH IT WAS NOTED THAT THE ASSESSEE IS EARNING INTEREST INCOME FROM FIXED DEPOSITS AND THE SAME WAS NOT SHOWN AS INCOME FROM OTHER SOURCES. THEREFORE, IN OUR HUMBLE UNDERSTANDING, THER E WAS NEW MATERIAL BEFORE THE AO, WHICH WAS NOT BEFORE HIM DURING ORIGINAL ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007 - 08 AND FOUND IN THE ASSESSMENT RECORD FOR THE ASSESSMENT YEAR 2008 - 09. THEREFORE, IN OUR OPINION, IT IS NOT A CASE OF CHANGE OF OPINION. SO FAR AS REASON TO BELIEVE IS CONCERNED, WHEN THE AO HAD MADE ADDITION FOR THE ASSESSMENT YEAR 2008 - 09 PERTAINING TO INTEREST INCOME EARNED BY THE ASSESSEE FROM FIXED DEPOSITS ON THE BASIS OF FINANCIAL STATEMENT OF THE ASSESSEE FOR THE ASSESSMEN T YEAR 2008 - 09, THEN ON PERUSAL OF ASSESSMENT RECORD FOR ASSESSMENT YEAR 2007 - 08, THE AO HAD REASON TO BELIEVE THAT SIMILAR INCOME OF INTEREST EARNED BY THE ASSESSEE FROM THE FIXED DEPOSITS HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2007 - 08. IN VIEW OF AB OVE, WITHOUT EXPRESSING ANY OPINION ON THE MERITS OF THE ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 5 | 13 ADDITION, WE HAVE NO HESITATION TO HOLD THAT THE AO ASSUMED VALID JURISDICTION TO INITIATE REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT AND THUS, HE IS EMPOWERED TO ISSUE NOTICE U/S.148 OF THE ACT TO THE ASSESSEE CALLING HIS STAND ON THE RETURN OF INCOME. ACCORDINGLY, GROUND NOS.2 TO 2.2 OF THE ASSESSEE ARE DISMISSED. 9 . GROUND NOS.3 & 4 OF APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 ARE AS UNDER: 3 . THAT THE CIT(A) GROSSLY ERRED ON FACTS AND IN LAW IN SUSTAINING THE ORDER OF THE AO IN ASSESSING THE INTEREST INCOME AT RS.11,21,049/ - AS INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM OTHER SOURCES . 4. THAT THE CIT(A) GROSSLY ERRED ON FACTS AND IN LAW IN HOLDING THAT A SUM OF RS.11,21,049/ - WAS ASSESSABLE AS INCOME OF THE APPELLANT FROM OTHER SOURCES WITHOUT APPRECIATING THE DECISION CITED BY THE APPELLANT TO THE HONBLE DELHI HIGH COURT IN THE APPELLANT SISTER CONCERNS CASE. 10 . APROPOS THESE GROUNDS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN SUSTAINING THE ASSESSMENT IN ASSESSING THE INTEREST INCOME FROM FIXED DEPOSIT AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. LD A.R. SUBMITTED THAT THE AUTHORITIES BELOW HAVE MADE ADDITION WITHOUT APPRECIATING AND CONSIDERING THE DECISION OF HONBLE DELHI HIGH COURT CITED BY THE ASSESSEE IN THE CASE OF SISTER CONCERN (CIT VS PANEL COAL MINES LTD IN ITA NO.639/2008 ORDER DATED 17.9.2009). LD COUNSEL ALSO SUBMITTED THAT THE INTEREST INCOME EARNED ON FIXED DEPOSIT WAS ADJUSTED ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 6 | 13 AGAINST THE PRE - OPERATIONAL EXPENSES WHICH WERE DULY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. LD COUNSEL FOR THE ASSESSEE E XPLAINED THAT OUT OF INTEREST INCOME OF RS.11,21,049/ - EARNED BY THE ASSESSEE DURING THE RELEVANT PERIOD, SAME HAD BEEN ADJUSTED WITH THE COST OF MINES AND MINES DEVELOPMENT SHOWN UNDER THE HEAD FIXED ASSETS, THEREFORE, THERE WAS NO REASON TO BELIEVE THAT ANY INCOME HAD ESCAPED ASSESSMENT. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE IS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BOKAR O STEELS LTD., 236 ITR 315 (SC). LD COUNSEL REITERATING THE EARLIER SUBMISSION, SUBMITTED THAT IN THE CASE OF ASSESSEES SISTER CONCERN, I.E. PANEL COAL MINES LTD(SUPRA) ON SIMILAR FACTS AND CIRCUMSTANCES, HONBLE DELHI HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT T HE INTEREST INCOME HAS RIGHTLY BEEN ADJUSTED AGAINST THE COST OF PROJECT AS THE BUSINESS WAS YET CO COMMENCE. LD A.R. LASTLY POINTED OUT THAT HONBLE DELHI HIGH COURT HAS BEEN PLEASED TO DISTINGUISH THE PROPOSITION RENDERED IN THE CASE OF TUTICORIN ALKALI & FERTILIZERS LTD., 227 ITR 172, AS RELIED BY THE AO FOR MAKING ADDITION/DISALLOWANCE AND HONBLE HIGH COURT CLEARLY HELD THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. LD COUNSEL FOR THE ASSESSEE SUMMED UP HIS ARGUMENTS WIT H THE SUBMISSION THAT IN VIEW OF ANOTHER DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED VS ITO IN ITA NO.1156/2007 & 1157/2007 ORDER DATED 26.2.2009 INCLUDING THE DECISION OF HONBLE ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 7 | 13 SUPREME COURT IN THE CA SE OF TUTICORIN ALKALI & FERTILIZERS LTD (SUPRA) HELD THAT THE FUNDS INFUSED BY THE ASSESSEE BY JOINT VENTURE PARTNERS WAS INEXTRICABLE LINKED WITH THE SETTING UP OF THE PLANT AND INTEREST EARNED BY THE ASSESSEE CANNOT BE TREATED AS INCOME FROM OTHER SOURC ES. 11 . REPLYING TO ABOVE, LD D.R. DREW OUR ATTENTION TOWARDS PARAGRAPH 5.4 OF THE CIT(A) ORDER AND SUBMITTED THAT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT THE INTEREST EARNED BY THE ASSESSEE BEFORE THE COM MENCEMENT OF BUSINESS ON SHORT TERM DEPOSITS WITH BANKS, EVEN OUT OF TERM LOANS SECURED FROM FINANCIAL INSTITUTIONS, IS AN INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND WOULD NOT GO TO REDUCE INTEREST PAYABLE BY THE ASSESSEE WHICH WOULD BE CAPITALIZE AFTER COMMENCEMENT OF COMMERCIAL PRODUCTION. LD D.R. SUBMITTED THAT THE ASSESSEE HAS FAILED TO ESTABLISH THROUGH FACTS AS TO HOW SAID PROPOSITION IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THEREFORE, THE IMPUGNED ASSESSMENT AND CIT(A) O RDER MAY KINDLY BE UPHELD ON THIS ISSUE. 12 . ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY, THE ASSESSEE COMPANY HAD KEPT IN FIXED DEPOSIT OF RS.2,16,65,144/ - AND EARNED INTEREST INCOME FROM THE BANK OF RS.11,21,049/ - . IT IS A LSO NOT IN DISPUTE THAT THE ASSESSEE COMPANY, OUT OF INTEREST INCOME OF RS.11,21,049/ - , THE PRE - OPERATIONAL EXPENSES HAVE BEEN SET OFF AMOUNTING TO RS.66,244/ - AND REMAINING BALANCE AMOUNT OF ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 8 | 13 RS.10,54,805/ - HAS BEEN ADJUSTED WITH THE COST OF MINES AND MINE S DEVELOPMENT EXPENSES SHOWN UNDER THE HEAD FIXED ASSETS. THE ASSESSEE COMPANY ALSO DISCLOSED DETAILS OF PRE - OPERATIONAL EXPENSES IN THE PROFIT AND LOSS ACCOUNT WHICH INCLUDES FILING FEE, BOARD MEETING EXPENSES, PRINTING AND STATIONERY, GENERAL EXPENS ES, BANK CHARGES AND AUDIT FEES. THE MINES AND MINES DEVELOPMENT EXPENSES HAVE BEEN SHOWN IN THE FIXED ASSETS AND SAME HAS BEEN DISCLOSED IN THE BALANCE SHEET FILED BEFORE THE AUTHORITIES BELOW. IT WAS THE BONE OF CONTENTION OF THE ASSESSEE THAT THESE EX PENSES HAVE BEEN SET OFF FROM THE INTEREST INCOME FROM FIXED DEPOSITS. THEREFORE, THERE IS NO INCOME ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, THE AO WAS NOT RIGHT AND JUSTIFIED IN TAXING THE INTEREST INCOME FROM FIXED DEPOSITS AS INCOME FROM OTHER SOURCES. THE MAIN BONE OF CONTENTION OF LD D.R. IS THAT THE ASSESSING OFFICER WAS RIGHT IN APPLYING THE RATIO OF THE PROPOSITION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA), WHEREIN, IT WAS HELD T HAT INTEREST INCOME EARNED BY THE ASSESSEE FROM FIXED DEPOSIT KEEPING THE SURPLUS FUND IN THE BANK HAS TO BE ASSESSED UNDER RESIDUARY HEAD OF INCOME FROM OTHER SOURCES. FROM THE RESPECTFULLY VIGILANT READING OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED (SUPRA), WE OBSERVE THAT IDENTICAL CONTROVERSY WAS POSED TO HONBLE HIGH COURT, WHEREIN, THEIR LORDSHIPS HAS CONSIDERED THE RATIO OF RELEVANT DECISION OF HONBLE SUPREME COURT AND HIGH COURT ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 9 | 13 INCLUDI NG THE DECISIONS HONBLE SUPREME COURT IN THE CASE OF TUTICORON ALKALI CHEMICALS (SUPRA) AND BOKARO STEEL LTD (SUPRA). WE FIND IT PROFITABLE TO REPRODUCE THE FINDINGS OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED (SUPRA) IN PARA 5 TO 5.2 WHICH READ AS FOLLOWS: 5. IN OUR OPINION THE TRIBUNAL HAS MISCONSTRUED THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TUTICO R IN ALKALI CHEMICALS (SUPRA) AND THAT OF BOKARO STEEL LTD. (SUPRA). THE TEST WHICH PERMEATES THROUGH THE JUDGMENT OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IS THAT IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THE N BY VIRTUE OF THAT CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS THE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. ON THE OTHER HAND THE RATIO OF THE SUPREME COURT JUDGMENT IN BOKARO STEEL LTD. (S UPRA) 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 PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE - OPERATIV E EXPENSES. 5.1 THE TEST, THEREFORE, TO OUR MIND IS WHETHER THE ACTIVITY WHICH IS TAKEN UP FOR SETTING UP OF THE BUSINESS AND THE FUNDS WHICH ARE GARNERED ARE INEXTRICABLY CONNECTED TO THE SETTING UP OF THE PLANT. THE CLUE IS PERHAPS AVAILABLE IN SECTION 3 OF THE ACT WHICH STATES THAT FOR NEWLY SET UP BUSINESS THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS. THEREFORE, AS PER THE PROVISION OF SECTION 4 OF THE ACT WHICH IS THE CHARGING SECT ION INCOME WHICH ARISES TO AN ASSESSEE FROM THE DATE OF SETTING OF THE BUSINESS BUT PRIOR TO COMMENCEMENT IS CHARGEABLE TO TAX DEPENDING ON WHETHER IT IS OF A REVENUE NATURE OR CAPITAL RECEIPT. THE INCOME OF A NEWLY SET UP BUSINESS, POST THE DATE OF ITS SETTING UP CAN BE TAXED IF IT IS OF A REVENUE NATURE UNDER ANY OF THE HEADS PROVIDED UNDER SECTION 14 IN CHAPTER IV OF THE ACT. FOR AN INCOME TO BE CLASSIFIED AS INCOME UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION' IT WOULD HAVE TO BE AN AC TIVITY WHICH IS IN SOME MANNER OR FORM CONNECTED WITH BUSINESS. THE WORD 'BUSINESS' IS OF WIDE IMPORT WHICH WOULD ALSO INCLUDE ALL SUCH ACTIVITIES WHICH COALESCE INTO SETTING UP OF THE BUSINESS. SEE MAZACRAON DOCK LTD VS CIT & EXCESS PROFITS TAX; (1958) 3 4ITR 368 (SC), AND NARAIN SWADESHI WEAVING MILLS VS COMMISSIONER OF EXCESS PROFITS TAX; (1954) 26 ITR 765 (SC). ONCE IT IS HELD THAT THE ASSESSEE'S INCOME IS AN INCOME CONNECTED WITH BUSINESS, WHICH WOULD BE SO IN THE PRESENT CASE, IN VIEW OF THE FINDING OF FACT BY THE CIT(A) THAT THE MONIES WHICH WERE INDUCTED INTO THE JOINT ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 10 | 13 VENTURE COMPANY BY THE JOINT VENTURE PARTNERS WERE PRIMARILY INFUSED TO PUR CHASE LAND AND TO DEVELOP INFRASTRUCTURE - THEN IT CANNOT BE HELD 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 EARNED FROM THE BANK WOULD HAVE A HUE DIFFERENT THAN THAT OF BUSINESS AND BE BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IT IS WELL - SETTLED THAT AN INCOME RECEIVED BY THE ASSESSEE CAN BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' ONLY IF IT DOES NOT FAL L UNDER ANY OTHER HEAD OF INCOME AS PROVIDED IN SECTION 14 OF THE ACT. THE HEAD 'INCOME FROM OTHER SOURCES' IS A RESIDUARY HEAD OF INCOME. SEE S.G. MERCANTILE CORPORATION P. LTD VS CIT, CALCUTTA; (1972) 83 ITR 700 (SC) AND CIT VS GOVINDA CHOUDHURY & SONS .; (1993) 203 ITR 881 (SC). 5.2 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 A SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE, THE INTEREST EARNED ON FUNDS P RIMARILY BROUGHT FOR INFUSION IN THE 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 CAPITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OF F AGAINST PRE - OPERATIVE EXPENSES. IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILABLE WITH THE ASSESSEE IN THAT CASE WERE 'SURPLUS' AND, THEREFORE, THE SUPREME COURT HELD THAT THE INTEREST EARNED ON SU RPLUS FUNDS WOULD HAVE TO BE TREATED AS 'INCOME FROM OTHER SOURCES'. ON THE OTHER HAND IN BOKARO STEEL LTD (SUPRA) WHERE THE ASSESSEE HAD EARNED INTEREST ON ADVANCE PAID TO CONTRACTORS DURING PRE - COMMENCEMENT PERIOD WAS FOUND TO BE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PLANT OF THE ASSESSEE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PERMITTED TO BE SET OFF AGAINST PRE - OPERATIVE EXPENSES . 13 . IN VIEW OF ABOVE , THE CLOUDS ARE CLEAR AND WE RESPECTFULLY NOTE THAT THE HONBLE SUPREME COURT I N THE CASE OF TUTICOR I N ALKALI CHEMICALS (SUPRA) HELD 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 THE INCOME EARNED IN THE FORM OF INTER EST WILL BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THE SUBSEQUENT JUDGMENT HONBLE SUPREME COURT IN THE CASE OF BOKARO STEEL LTD (SUPRA) HELD THAT IF THE INCOME IS EARNED BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 11 | 13 WHICH ARE OTHERWI SE INEXTRICABLY LINKED TO THE SETTING UP OF THE PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE - OPERATIVE EXPENSES. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS INCURRED PRE - OPERATIONAL EXPENSES FOR SETTING UP ITS BUSINESS OF MINI NG ON VARIOUS HEADS INCLUDING MINES AND MINES DEVELOPMENT ACTIVITIES AND THE EXPENSES HAVE BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, WE HAVE NO HESITATION TO HOLD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE FIXED DEPOSITS FROM BANK, THE FUNDS WHICH OTHERWISE INEXTRICABLY LINKED TO THE SETTING UP OF MINING BUSINESS, THEN SUCH INCOME IS REQUIRED TO BE CAPITALIZED AND TO BE SET OFF AGAINST PRE - OPERATIONAL EXPENSES. THEREFORE, WE HOLD THAT THE AUTHORITIES BELOW WERE NOT CORRECT IN TREAT ING THE INTEREST INCOME ON FIXED DEPOSIT AS INCOME FROM OTHER SOURCES BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) AS THE SAME IS APPLICABLE ONLY IN A SITUATION WHEN THE ASSESSEE HAS EARNED INCOME ON FD BY KEEPING SURPLUS FUNDS WITH THE BANK. AS WE HAVE NOTED ABOVE IN THE SUBSEQUENT DECISION IN THE CASE OF BOKARO STEEL (SUPRA), THE HONBLE SUPREME COURT CLEARLY HELD THAT THE INCOME EARNED BY THE ASSESSEE BY WAY OF INTEREST OR ANY OTHER MANNER ON THE FUNDS WHICH ARE OTHERWISE INEXTRICABLY LINKED TO THE SETTING UP OF THE PLANT/BUSINESS, THEN SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE - OPERATIVE EXPENSES. THEREFORE, KEEPING IN MIND THE FACTS AND CIRCUMSTANCES OF THE RATIO OF DECI SION OF HONBLE SUPREME COURT IN THE CASE OF BOKARO STEEL LTD. ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 12 | 13 (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.11,21,049/ - AS THE INTEREST INCOME HAS BEEN ADJUSTED BY THE ASSESSEE AGAINST PRE - OPERATIONAL EXPENSES AND MINES AND MINES DEVELOPMENT EXPENSES, WHICH HAS ALREADY BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT SUBMITTED BEFORE THE AUTHORITIES BELOW. ACCORDINGLY, GROUND NO S.3 & 4 OF APPEAL ARE ALLOWED. GROUND NO.2 & 3 FOR A.Y. 2008 - 09 & 2009 - 10. 1 4 . GROUND NOS.2 & 3 OF APPEAL IN BOTH THE ASSESSMENT YEARS ARE IDENTICAL TO THE GROUND NOS.3 & 4 OF APPEAL FOR THE ASSESSMENT YEAR 2007 - 08. AS WE HAVE NOTED THAT THE DECISION TAKE N IN GROUND NO.3 & 4 FOR THE ASSESSMENT YEAR 2007 - 08 WOULD APPLY MUTATIS - MUTANDIS TO THE ASSESSMENT YEARS 2008 - 09 & 2009 - 10, HENCE, FACTS BEING IDENTICAL, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.55,31,720/ - FOR THE ASSESSMENT YEAR 2008 - 09 AND ADDITION OF RS.27,72,667/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND ALLOW THESE GROUNDS OF APPEAL OF THE ASSESSEE. 1 5 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT UNDER RULE 34(4) OF THE INCOME TAX (AP PELLATE TRIBUNAL) RULES, 1963 ON 25 / 10/2019. SD/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG ) ACOUNTANT MEMEBER JUDICIALMEMBER RANCHI ; DATED 30 / 10 /20 1 9 B.K.PARIDA, SPS ITA NOS.56,57 & 58/RAN/2015 ASSESSMENT YEARS: 2007 - 08 TO 2009 - 2010 P A G E 13 | 13 COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT S : M/S. TENUGHAT EMTA COAL MINES LTD., 401, RADIUM COURT, RADIUM ROAD, RANCHI 2. THE RESPONDENT. ITO, WARD 3(2), RANCHI 3. THE CIT(A) - RANCHI 4. PR.CIT - RANCHI 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//