Hotel Queen Road Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5827/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52909 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Capital asset; Depreciation; Capital receipt; Onus to prove; Capital expenditure
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.5827/DEL/2010 ASSESSMENT YEAR : 2006-07 HOTEL QUEEN ROAD PVT. LTD., 19, ASHOKA ROAD, NEW DELHI 110 001. PAN : AABCH1600H VS. ITO, WARD 12 (4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE REVENUE BY : SHRI SALIL MISHRA, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 4 TH NOVEMBER, 2010 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED (I) IN CONFIRMING ADDITION OF RS.50,00,000/- ON ACC OUNT OF SHARE APPLICATION MONEY RECEIVED DURING THE YEAR I.E., RS.2 5,00,000/- EACH THROUGH ACCOUNT PAYEE CHEQUES FROM M/S ORCHID LEAFIN PVT. LTD. AND M/S UNIT COMMERCIAL PVT. LTD. AND THE APPELLANT COMPANY HAS WHILE PROVED THE IDENTITY OF THE APPLICANTS BY FURNISHING THEIR COMPLETE NAMES, ADDRESSES AND PAN AND DATABASE PRINTOUT FROM RO C WEBSITE, TO SHOW THAT APPLICANT COMPANIES ARE EXISTENT AND ACTIVE. (II) IN CONFIRMING ADDITION OF RS.9,75,668/-, ON ACC OUNT OF INTEREST EARNED ON BANK DEPOSITS MADE BY THE APPELLANT COMPANY (OUT OF SHARE CAPITAL, SHARE APPLICATION MONEY, SECURED & UNSECURED LOANS MEANT FOR UPGRADATION AND RENOVATION OF HOTEL PROJECT) AS MARGIN MONEY FOR OBTAINING BANK GUARANTEES/LETTER OF CREDITS FOR IMPORT OF CAPITAL GOODS, ITA NO.5827/DEL/2010 2 FOR THE PURPOSE OF RENOVATION AND UPGRADATION OF HOTEL INDRAPRASTHA (A UNIT OF APPELLANT) AND WHICH WAS CREDITED TO THE CAPITAL EXPENDITURE INCURRED BY THE COMPANY FOR SUBSTANTIAL RENOVATION/UPGR ADATION OF THE HOTEL UNIT. THE ABOVE ACTIONS BEING MISCONCEIVED, ERRONEOUS AND ILLEGAL MUST BE QUASHED WITH DIRECTIONS FOR APPROPRIATE RELIEF. 2. THAT THE APPELLANT CRAVES LEAVE TO RESERVE ITSELF TO ADD, DELETE, AMEND AND FORGO ANY GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. THE ASSESSEE IS A COMPANY INCORPORATED ON 23 RD AUGUST, 2001 AND WAS ENGAGED IN THE BUSINESS OF PROVIDING HOTEL SERVI CES UNDER DIS- INVESTMENT SCHEME OF GOVERNMENT OF INDIA. THE ORIGINA L NAME OF THE HOTEL WAS ASHOKA YATRI NIWAS AND LATER ON THE NAME WAS CHANGED TO INDRAPRASTHA AND BOTH WERE UNDER THE OWNERSHIP OF IT DC. BY THE SCHEME OF DEMERGER THE SAID HOTEL WAS DEMERGED INTO HO TELS QUEEN ROAD, I.E., THE ASSESSEE COMPANY W.E.F. 31 ST MARCH, 2011 WITH ALL ITS ASSETS AND LIABILITIES. THE RETURN OF INCOME WAS FILED ON 27 TH NOVEMBER, 2006 DECLARING THE INCOME AT NIL. IN THE COMPUTATI ON THE FIGURE WAS TAKEN AT A LOSS OF ` 2,89,19,475/- WHEREAS IN THE COMP UTATION OF INCOME FILED ALONG WITH THE RETURN ON 27 TH NOVEMBER, 2006, THE LOSS FIGURE WAS TAKEN AT ` 3,18,99,300/-. THE ASSESSMENT WAS COMPLETED U/S 143 (3) ON 26 TH DECEMBER, 2008 AT A LOSS OF ` 1,75,33,101/- AGAINST THE AUDITED LOSS OF ` 2,89,19,475/-. THE TWO AMOUNTS WERE ADDED TO THE INCOME OF THE ASSESSEE. FIRST, ` 50,00,000/- ON ACC OUNT OF UNEXPLAINED SHARE APPLICATION MONEY AND SECOND, ON AC COUNT OF INCOME FROM OTHER SOURCES ` 9,75,668/- AND THE ASSESSMENT RESULTED IN NIL DEMAND. 3. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION RECE IVED SHARE APPLICATION MONEY OF ` 4,78,00,000/- WHICH INCLUDED ` 25 LAC EACH RECEIVED BY THE ASSESSEE FROM M/S ORCHID LEAFIN PVT. LTD . (OLPL) AND M/S UNIT COMMERCIAL PVT. LTD. (UCPL). THE ASSESSEE WAS R EQUIRED TO ITA NO.5827/DEL/2010 3 EXPLAIN THE GENUINENESS OF SUCH TRANSACTION AND IN THE ABSENCE OF SATISFACTORY EXPLANATION, THE SAME WAS ADDED TO THE INC OME OF THE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS BEF ORE THE CIT (A) IT WAS SUBMITTED THAT THE ASSESSEE COMPANY DECIDED FO R RENOVATION AND UPGRADATION OF THE HOTEL AND THE OPERATION WAS SU SPENDED W.E.F. 30 TH JUNE, 2003 AND RENOVATED HOTEL STARTED RE-OPERATION FROM OCTOBER, 2008. FOR THE PURPOSE OF RENOVATION, THE ASSESSEE TOOK TERM LOAN OF ` 45 CRORE FROM INDIAN OVERSEAS BANK DURING THE ASSESSMENT YEAR 2004- 05. UNSECURED LOANS WERE RAISED TO THE EXTENT OF ` 16 CRORE AND SHARE APPLICATION MONEY WAS RAISED AT A SUM OF ` 4.78 CRORE. THERE WAS A CHANGE OF MANAGEMENT ON 15 TH JANUARY, 2009 AND IT WAS SUBMITTED THAT WHATEVER DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER WAS NOT AVAILABLE WITH THE CHANGED MANAGEMENT AND THAT IS WHY CERTIFIED COPIES OF THE DOCUMENTS WERE OBTAINED FROM THE CONCER NED ASSESSING OFFICER. IT WAS SUBMITTED THAT SHARE APPLICATION MONE Y WAS RECEIVED THROUGH BANK ACCOUNT. OLPL HAD ISSUED CHEQUE THROUGH PUNJAB NATIONAL BANK, TILAK NAGAR BRANCH, NEW DELHI AND IT WAS CLEARED ON 1 ST JUNE, 2005 AND CREDITED TO THE CD ACCOUNT BEARING N O.310614258 WITH AMERICAN EXPRESS BANK, CP BRANCH. SIMILARLY, THE CHE QUE OF UCPL WAS ISSUED THROUGH OBC, NEW DELHI BRANCH AND THE SAME WAS A GAIN CREDITED IN THE SAME ACCOUNT OF THE APPELLANT ON 1 ST JUNE, 2005. IT WAS SUBMITTED THAT THESE DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 8 TH SEPTEMBER, 2008, BUT THE ASSESSING OFFICER DID NOT MAKE ANY REFERENCE TO THE SAID LETTER IN THE ASSESSMENT ORDER PASSED BY HIM WHICH IS DATED 26 TH DECEMBER, 2008. IT WAS SUBMITTED THAT PAN OF BOTH THE COMPANIES WERE SUBMITTED BEFORE THE ASSESSING OFFICER ALONG WITH THE LETTER DATED 8 TH SEPTEMBER, 2008. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD MADE REFERENCE VIDE LETTER DATED 22 ND APRIL, 2009 TO THE CONCERNED ASSESSING OFFICER HAVING JURISDICTION OVER UCPL I.E., DCIT, CIRCLE 12 AND OLP L I.E., ITO 13 (4) AND COPIES OF THESE LETTERS WERE SUBMITTED. IT WAS FURTHER SUBMITTED THAT ITA NO.5827/DEL/2010 4 THE ASSESSEE HAS OBTAINED PRINT OUT OF COMPANY MASTER DET AILS AS DOWNLOADED FROM ROC WEBSITE WHICH WAS ALSO FILED WITH THE ASSESSING OFFICER ALONG WITH THE SAID LETTER. IN THIS VIEW OF THE SITUATION, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS TO CONTEND THAT ADDITION OF ` 50 LAC WAS NOT WARRANTED: I) CIT V. DWARKADISH INVESTMENT P. LTD. (2010) 194 TA XMAN 43 (DEL) II) CIT VS. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 1 95. 4. ON THESE SUBMISSIONS, LEARNED CIT (A) HAS HELD THAT TH E ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO FILE CONFIRMATIONS FROM BOTH THE PARTIES ALONG WITH THE COPY OF ITR, BANK STATEMENTS, B ALANCE SHEET, ETC. BY WHICH THE GENUINENESS OF TRANSACTION AND CREDI T WORTHINESS OF THE PARTIES COULD BE ESTABLISHED AND THE ASSESSEE HAS FAILE D TO PROVE IDENTIFICATION AS WELL AS THE GENUINENESS OF THE TRANSAC TION AND CREDIT WORTHINESS OF INVESTING COMPANIES AS NO EVIDENCE AS REQUI RED BY THE A.O HAS BEEN FURNISHED BY THE ASSESSEE. THE ONLY PLEA TA KEN BY THE ASSESSEE WAS THAT HE WAS HAVING A STRAINED RELATIONSHIP WIT H THE AFOREMENTIONED SHARE APPLICANTS AND THIS REASON IS NOT SUFFICIENT TO ACCEPT THE CLAIM OF THE ASSESSEE. HE, THEREFORE, HAS UP HELD THE ADDITION BY REFERRING TO VARIOUS JUDICIAL PRONOUNCEM ENTS AND HAS HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH ANY OF TH E THREE INGREDIENTS OF PROVING THE SHARE APPLICATION MONEY AN D, IN THIS MANNER, THE ADDITION OF ` 50 LAC HAS BEEN SUSTAINED. 5. AFTER NARRATING THE FACTS, IT WAS VEHEMENTLY PLEAD ED BY THE LEARNED AR THAT THE ASSESSEE WAS HAVING STRAINED RELATION SHIP WITH THE AFOREMENTIONED TWO SHARE APPLICANTS. HE SUBMITTED THA T LETTER DATED 18 TH DECEMBER, 2008 WHICH WAS FILED BEFORE THE ASSESSING OFF ICER IS SUBMITTED AT PAGES 28 TO 30 OF THE PAPER BOOK. HE SUB MITTED THAT THE ITA NO.5827/DEL/2010 5 ASSESSEE HAD RECEIVED AGGREGATE AMOUNT OF ` 4.78 CRORE FROM THREE PARTIES AS SHARE APPLICATION MONEY WHICH HAS BEEN DESCRI BED IN THE FOLLOWING TABLE:- S.NO. PARTICULARS AMOUNT (RS.) PAN 1. ORCHID LEAFIN (P) LTD. B-4/160A, KESHAV PURAM, DELHI 35. 25,00,000/- AAACO0205 C 2. PROGRESSIVE PORTFOLIO (P) LTD., 144, SANGAM APARTMENTS, POCKET-24, SECTOR 24, ROHINI, DELHI 85. 4,28,00,000/- AACCP6626L ITO WARD 14 (4). 3. UNIT COMMERCIAL (P) LTD. 4353/4C, ANSARI ROAD, DARYA GANJ, NEW DELHI. 25,00,000/- AAACU1500E 6. IT WAS SUBMITTED THAT THE TWO COMPANIES MENTIONED A T SL. NO.1 AND 3 HAVE STRAINED RELATIONSHIP WITH THE ASSESSEE AS SHARE APPLICATION MONEY WAS RECEIVED FROM THEM IN FINANCIAL YEAR 2005- 06. THE SHARES COULD NOT BE ALLOTTED TO THEM TILL DATE DUE TO THE DISPUTE AMONG THE SHAREHOLDERS. THOSE COMPANIES WERE ASKING FOR REFUND OF MONEY WHICH COULD NOT BE REFUNDED BY THE ASSESSEE COMPANY DUE TO FINANCIAL CRISIS AND, THEREFORE, THOSE COMPANIES ARE NOT COOPERAT ING AND PROVIDING ANY INFORMATION AND, ON THE REQUEST OF THE ASSESSEE COMPANY IT HAS BEEN STATED THAT THEY HAVE BEEN ADVISE D NOT TO SUBMIT ANY INFORMATION UNLESS DIRECTLY CALLED FOR FROM THE A SSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT BOTH THESE PARTIES ARE INCOR PORATED BODIES AND ARE REGISTERED WITH ROC HAVING INDEPENDENT IDENT ITY WHERE ALL THE DETAILS INCLUDING THEIR ANNUAL ACCOUNTS, LIST OF SHAREH OLDERS AND DIRECTORS, REGISTERED OFFICE ADDRESS, ETC. ARE AVAILABL E. PRINT OUTS SHOWING DETAILS OF THE SAID COMPANIES TAKEN FROM THE WE BSITE OF ROC ARE ENCLOSED. IN CASE ANY INFORMATION IS DESIRED THE SAME MAY BE PROCURED DIRECTLY FROM THE ROC OR THE SHARE APPLICAN T COMPANIES AT THE COST OF THE ASSESSEE AS THE SAID APPLICANTS ARE NOT GIV ING ANY CONFIRMATION TO THE ASSESSEE. THEREAFTER, REFERENCE WA S MADE TO THE JUDICIAL PRONOUNCEMENTS TO SAY THAT ONCE IDENTITY IS P ROVED , THE ITA NO.5827/DEL/2010 6 ASSESSEE HAS DISCHARGED THE ONUS TO PROVE THE GENUINENESS OF THE SHARE APPLICATION MONEY. HE FURTHER INVITED OUR AT TENTION TOWARDS THE COPY OBTAINED FROM ROC RECORD WHICH ARE FILED AT PA GES 31-32 RESPECTIVELY IN RESPECT OF OLPL AND UCPL WHICH SHOWS TH AT BOTH THE COMPANIES ARE EXISTING ON THE RECORD OF ROC AND THEY ARE HAVING SUBSTANTIAL AUTHORIZED PAID UP CAPITAL. THEIR RECOR D SHOW THAT THEY HAVE FILED BALANCE SHEET UPTO 31 ST MARCH, 2007 AND 31 ST MARCH, 2008 RESPECTIVELY. THEIR ADDRESSES HAVE ALSO BEEN GIVEN. H E FURTHER INVITED OUR ATTENTION TO COPY OF PAY-IN SLIP OF THE CHEQUES W HICH WERE RECEIVED FROM THOSE PARTIES AND DEPOSITED IN THE BANK ACCOUNT O F THE ASSESSEE WHICH IS PLACED AT PAGE 33 OF THE PAPER BOOK. HE FUR THER DREW OUR ATTENTION TOWARDS COPY OF BANK ACCOUNT OF THE ASSESSEE W HEREIN THE AFORESAID AMOUNT SHOWING THE SAME CHEQUE NOS. WERE DEPO SITED IN THE BANK ACCOUNT WHICH IS ACCOUNT NO.310614258 IN TH E AMERICAN EXPRESS BANK. HE ALSO INVITED OUR ATTENTION TO THE LE DGER ACCOUNT OF THE AFOREMENTIONED TWO PARTIES IN THE BOOKS OF THE ASSE SSEE, COPIES OF WHICH ARE PLACED AT PAGES 36-37 OF THE PAPER BOOK. THEN, MAKING REFERENCE TO THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA), HE SUBMITTED TH AT IN A CASE WHERE IDENTITY OF SHARE APPLICANTS HAVE BEEN PROVED, NO ADD ITION CAN BE MADE IN THE HANDS OF THE RECIPIENT AND EVEN IF THE SH ARE APPLICANTS ARE BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE ASSESSING OF FICER, THAT DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR I NDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH THE LAW. HE FURTHER SUBMI TTED THAT THE ASSESSING OFFICER HAS ALSO ISSUED LETTER TO BOTH THE AFOREM ENTIONED PARTIES SEEKING INFORMATION FROM THE CONCERNED ASSESSING OFFICER REGARDING THE SHARE APPLICATION MONEY AND COPY OF SUC H LETTERS ARE FILED AT PAGES 52 AND 53 OF THE PAPER BOOK. HE PLEA DED THAT THUS, THE ASSESSEE HAS DISCHARGED ITS ONUS AS THE PERMANENT ACCOUNT NO . AND THE CONCERNED ASSESSING OFFICER WHERE THEY WERE ASSESSED WE RE INFORMED TO THE ASSESSING OFFICER AND WAS IN THE KNOWLED GE OF ITA NO.5827/DEL/2010 7 ASSESSING OFFICER. THEREFORE, HE PLEADED THAT THE AFOR EMENTIONED AMOUNT OF ` 50 LAC COULD NOT BE TREATED AS UNEXPLAIN ED INCOME OF THE ASSESSEE AS THE ONUS WAS DISCHARGED BY THE ASSESSEE. 7. ON THE OTHER HAND, RELYING UPON THE ASSESSMENT ORDER AND THE ORDER PASSED BY THE CIT (A), IT IS THE CASE OF THE LEAR NED DR THAT THE ASSESSEE HAVING NOT SUBMITTED THE CONFIRMATION FROM BOTH THESE PARTIES AND OTHER PARTICULARS ASKED FOR BY THE ASSESSING O FFICER, EVEN THE INITIAL BURDEN WAS NOT DISCHARGED BY THE ASSESSEE. H E SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CRED IT WORTHINESS AND GENUINENESS OF THE TRANSACTION, THEREFORE, LEARNED CIT (A) HAS RIGHTLY UPHELD THE ADDITION AND HIS ORDER SHOULD BE U PHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS THE CONTENTION OF THE LEARNED AR THAT BY PLACING THE AFOREMENTIONED EVIDENCE ON RECO RD, THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS AND THEREAFTER IT WAS T HE OBLIGATION OF THE REVENUE TO BRING ON RECORD THE MATERIAL ON THE BASIS OF WHICH IT CAN BE SAID THAT THE AFOREMENTIONED AMOUNT OF ` 50 LAC W AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. TO EXAMINE SUCH CONTE NTION ONE HAS TO PROPERLY APPRECIATE THE EVIDENCE ON THE B ASIS OF WHICH THIS CONTENTION HAS BEEN RAISED. 9. THE DETAILS OF SHARE APPLICATION MONEY WERE FIRST F ILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 8 TH DECEMBER, 2008. AFTER MENTIONING SUCH DETAILS, THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT THE TWO COMPANIES HAVE STRAINED RE LATIONSHIP WITH THE ASSESSEE AS THE SHARE APPLICATION MONEY WAS RECEI VED FROM THEM IN FINANCIAL YEAR 2005-06. THE SHARE COULD NOT BE ALLOTTED TO THEM TILL DATE DUE TO DISPUTE AMONG SHAREHOLDERS. THO SE COMPANIES WERE ASKING FOR REFUND OF MONEY WHICH COULD NOT BE R EFUNDED BY THE ITA NO.5827/DEL/2010 8 ASSESSEE COMPANY DUE TO FINANCIAL CRISIS AND, THEREFORE, THESE COMPANIES ARE NOT COOPERATING IN PROVIDING ANY INFOR MATION. 10. AFTER STATING SO, IT WAS SUBMITTED BY THE ASSESSEE THAT THOSE PARTIES ARE INCORPORATE BODIES AND REGISTERED WITH THE ROC HAVING INDEPENDENT IDENTITY WHERE ALL THE DETAILS INCLUDING THEIR ANNUAL ACCOUNTS, LIST OF SHAREHOLDERS AND DIRECTORS, REGISTERED OFFICE ADDRESSES, ETC. ARE AVAILABLE AND REFERENCE WAS MADE TO THE PRINT OUTS OBTAINED BY THE ASSESSEE FROM THE WEBSITE OF THE ROC AND IT WAS STATED THAT THE INFORMATION SHOULD BE PROCURED DIRECT LY FROM ROC AT THE COST OF THE ASSESSEE. IN ADDITION TO THE SAID LETTER AND THE COPIES SO OBTAINED FROM WEBSITE OF ROC, THE OTHER EVIDENCE I S IN THE SHAPE OF COPY OF PAY-IN SLIP THROUGH WHICH IT IS CLAIMED THAT CHEQUES OBTAINED FROM THOSE PARTIES WERE DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. ALONG WITH THE SAID LETTER, THE COPY OF BANK ACCOUNT OF THE ASSESSEE WHERE SUCH DEPOSIT WAS MADE WERE FURNISHED AND THE COPI ES OF ACCOUNT OF THE SAID PARTIES FROM THE ASSESSEES BOOKS OF AC COUNT WERE ALSO SUBMITTED. 11. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER H AD ASKED THE ASSESSEE TO FILE CONFIRMATIONS, COPY OF ITR AND COPY OF BANK STATEMENT AND COPY OF THEIR BALANCE SHEET. IT MAY ALSO BE NOTE D THAT THE ASSESSEE EVEN DID NOT FURNISH THE CONFIRMATION ALLEGING THAT THE ASSESSEE HAS A STRAINED RELATIONSHIP WITH THOSE TWO PARTIES. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SU GGEST THAT DUE TO NON-ALLOTMENT OF SHARE AND DUE TO NON-REFUND OF ALLEGED SHARE APPLICATION MONEY, THERE WERE STRAINED RELATION BETW EEN THE ASSESSEE AND THOSE TWO PARTIES. NO CORRESPONDENCE WHATSOEVER HA S BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SUPPORT THE FACT TH AT THOSE PARTIES HAD EVER DEMANDED THE SO CALLED SHARE APPLICAT ION MONEY FROM THE ASSESSEE. SIMILARLY, THE ASSESSEE EVEN DID NOT SUBMIT T HE COPIES ITA NO.5827/DEL/2010 9 OF THE APPLICATIONS THROUGH WHICH SUCH SHARE APPLICATI ON MONEY IS STATED TO BE RECEIVED BY THE ASSESSEE WHICH IN ABSENCE OF CONFIRMATION IS ABSOLUTELY NECESSARY TO ASCERTAIN THE NATURE OF THE R ECEIPT BY THE ASSESSEE THAT WHETHER IT IS TRULY IN THE NATURE OF SHARE APPLICATION MONEY. IN ABSENCE OF CONFIRMATION AND COPY OF APPLI CATION SUBMITTED FOR ALLOTMENT OF SHARE, THE NATURE OF MONEY RECEIVED BY THE ASSESSEE CANNOT BE HELD TO BE MONEY RECEIVED AS SHARE APPLICAT ION MONEY. 12. THEREFORE, ACCORDING TO THE MATERIAL AVAILABLE ON RECORD, IT CANNOT BE SAID THAT THE AMOUNT CLAIMED TO HAVE BEEN RECEIVED AS SHARE APPLICATION MONEY WAS IN FACT SHARE APPLICATION MONEY. IF IT IS SO, THEN, THE SAID AMOUNT OF ` 50 LAC WILL BE IN THE NATURE OF A SIMPLE LOAN OR ANY OTHER RECEIPT WHICH HAS BEEN CREDITED IN THE BOOKS OF THE ASSESSEE. THEREFORE, THE RELEVANT CREDIT HAS TO BE EXAMI NED ONLY IN THE CATEGORY OF ORDINARY LOAN/CREDIT FOUND IN THE BOOKS OF THE ASSESSEE FOR WHICH THE ASSESSEE IS UNDER AN OBLIGATION TO EXPLAIN THE SAME AS PER PROVISIONS OF SECTION 68 OF THE IT ACT, 1961. 13. IF THE MATTER IS EXAMINED IN THE LIGHT OF THE AF OREMENTIONED DISCUSSION, THEN, THE ASSESSEE CAN BE SAID TO HAVE DISCHARGE D THE INITIAL ONUS ONLY IF IT HAS FURNISHED PRIMA FACIE MATE RIAL TO PROVE THE THREE INGREDIENTS OF PROVING CASH CREDIT, NAMELY, (I) IDENTITY OF CREDITOR; (II) CAPACITY OF THE CREDITOR; AND (III) GENUINENESS OF THE TRANSACTION. 14. SO AS IT RELATES TO THE IDENTITY OF THE CREDITOR, EVEN THOUGH IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE SAID AMOUNT HAS BEE N RECEIVED FROM THOSE TWO COMPANIES, BUT IN THE ABSENCE OF COPY O F CHEQUES, COPY OF SHARE APPLICATION MONEY RECEIVED FROM THOSE P ARTIES AND COPY ITA NO.5827/DEL/2010 10 OF BANK ACCOUNTS OF THOSE PARTIES, IT CANNOT BE SAID WI TH CERTAINTY THAT THE SAID AMOUNT ACTUALLY WAS TENDERED BY THOSE PARTIES ONLY. THOUGH THESE PARTIES ARE PRIVATE LIMITED COMPANIES AND HAVE E XISTENCE ON THE RECORD OF ROC, BUT, IN OUR HUMBLE OPINION, IDENTITY OF THE CREDITOR HAS TO BE SEEN VIS-A-VIS THE DEPOSIT MADE BY THE CREDITOR. IN THE PRESENT CASE THERE IS COMPLETE ABSENCE OF LINKAGE OF THE AMOUN T CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND AMOUNT HAVING BE EN PAID BY THOSE CREDITORS AND, THEREFORE, IT CANNOT BE SAID THAT THE IDENTITY HAS BEEN ESTABLISHED VIS-A-VIS THE DEPOSITS RECEIVED BY THE ASSESSEE FROM THOSE COMPANIES. HOWEVER, TECHNICALLY IT CAN BE SAID THAT IF THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE FROM THOSE PARTI ES, THEN, THEIR IDENTITY CANNOT BE DOUBTED AS THEY ARE INCORP ORATED BODIES AND THEY EXIST ON THE RECORD OF ROC. 15. NOW, COMING TO THE CAPACITY OF THE CREDITORS, NO DOCUMENT OTHER THAN THE RECORD OBTAINED FROM THE WEBSITE OF ROC HAS BEEN FILED. IN THE ABSENCE OF BALANCE SHEET, COPY OF INCOME TAX RETU RN, ETC., IT CANNOT BE SAID THAT THOSE COMPANIES HAD THE CAPACITY TO ADVAN CE THE MONEY OF ` 25 LAC EACH. SO, THERE IS NO MATERIAL ON RECOR D TO SUPPORT THE CONTENTION THAT THOSE ENTITIES WERE HAVING CAPACITY T O ADVANCE THE MONEY. THOUGH IT IS THE CASE OF THE LEARNED AR THAT ACCORDING TO THE STATUS OBTAINED BY THE ASSESSEE FROM ROC WEBSITE, THEY HAV E THE CAPACITY TO ADVANCE THE MONEY, BUT THE CAPACITY OF THE PERSON HAS TO BE SEEN VIS-A-VIS THE AMOUNT GIVEN BY THE CREDITOR AT A PARTICULAR TIME; WHETHER THE SAME WAS AVAILABLE WITH HIM AND COULD BE ADVANCED AT THAT POINT OF TIME. THEREFORE, IT CANNOT BE SAID TH AT THE ASSESSEE HAS PLACED ON RECORD PRIMA FACIE MATERIAL TO PROVE THE CAPACITY OF THE CREDITOR. 16. SO AS IT RELATES TO THE GENUINENESS OF THE TRANSACTI ON, THERE IS COMPLETE ABSENCE OF ANY SUCH MATERIAL WHICH CAN PROVE THE ITA NO.5827/DEL/2010 11 GENUINENESS OF THE TRANSACTION. FIRSTLY, IT HAS NOT BEE N SUPPORTED BY ANY MATERIAL THAT THE SAID AMOUNT WAS ACTUALLY SHARE A PPLICATION MONEY. SECONDLY, THERE IS NO MATERIAL PLACED ON REC ORD TO SHOW THAT THE SAID AMOUNT HAD COME OUT OF THE BANK ACCOUNT OF THE PARTY, WHO HAS PROVIDED SUCH MONEY TO THE ASSESSEE . THIRDLY, THERE IS NO MATERIAL ON RECORD TO SHOW THAT IN FACT THE SAID AMOU NT WAS GIVEN BY THE SAID PARTY TO THE ASSESSEE AS EVEN THE COPY OF SHARE A PPLICATION MONEY HAS NOT BEEN FILED. FOURTHLY, THE ASSESSEE HAS SUBM ITTED BEFORE US ONE ADDITIONAL PAPER BOOK CONTAINING PAGES FROM 115 TO 145 OF THE PAPER BOOK IN WHICH THE AFOREMENTIONED AMOUN T OF ` 25 LAC EACH IN THE HANDS OF ORCHID LEAFIN PVT. LTD. AND UNIT COM MERCIAL PVT. LTD. HAS BEEN WRITTEN BACK BEING UNCLAIMED IN THE FINANCI AL YEAR 2009-10 I.E., FOR ASSESSMENT YEAR 2010-11. COPY OF ACCOUNT OF BOTH THESE PARTIES ARE FILED AT PAGES 144-145 OF THE PAPER BOOK. THE DETAILS OF AMOUNT WRITTEN BACK AS UNCLAIMED BALANCES IS FILED AT PAGE 143 WHEREIN AN AGGREGATE SUM OF ` 2,85,56,756.92 HAS BEEN WRITTEN BACK BY THE ASSESSEE IN RESPECT OF VARIOUS ITEMS WHICH INCLUDED THE AFORESAID AMOUNT OF ` 50 LAC. 17. WE MAY ALSO MENTION HERE THAT THE FACT THAT AFOR EMENTIONED AMOUNT OF RS.50 LAC, CLAIMED TO BE RECEIVED BY THE ASSESSEE ON ACCOUNT OF SHARE APPLICATION MONEY, WAS WRITTEN BACK IN THE ACCOUNT AND CREDITED TO PROFIT & LOSS ACCOUNT WAS NOT MENTIONE D BY THE LD. AR DURING THE COURSE OF HEARING OF THE PRESENT APPEAL. THE SAID AMOUNT WAS WRITTEN BACK BY THE ASSESSEE IN ITS ACCOUNT ON 21.11. 09 AND THE DATE OF ORDER OF CIT (A) IS 4.11.10. THE APPEAL WAS HEARD BY CIT (A) IN NOVEMBER, 2010. THIS FACT EVEN HAS NOT BEEN SHOWN TO BE PLACED BEFORE THE CIT (A) AND ALSO DOES NOT CONTAIN IN THE I MPUGNED ORDER. IN ANY CASE, ACCORDING TO SECTION 68, THE CREDIT HAS TO BE EXAMINED IN THE YEAR OF CREDITS. THEREFORE, FROM THE AFOREMENTIONE D ACCOUNT, IT IS CLEAR THAT THE SHARES WERE NEVER ALLOTTED BY THE ASSESSEE TO THOSE ITA NO.5827/DEL/2010 12 PARTIES AND THE SAID AMOUNT WAS NEVER RETURNED TO THOSE PARTIES AND WRITTEN BACK BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT BEIN G UNCLAIMED AND ADDED TO THE PROFITS & LOSS ACCOUNT. THEREFORE, T HERE IS COMPLETE ABSENCE OF PRIMA FACIE MATERIAL PLACED ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE ASSESSEE HAS DISCHARGED INITIAL BU RDEN LAID UPON IT. THE BURDEN WILL SHIFT UPON THE REVENUE ONLY IF THE ASSESSEE WILL DISCHARGE THE INITIAL ONUS LAID UPON IT AND THAT CAN BE EITHER CONFIRMATION FROM THOSE PARTIES OR BY FURNISHING THE C OPY OF THE APPLICATION VIDE WHICH AFOREMENTIONED DEPOSIT WAS STAT ED TO BE RECEIVED AS SHARE APPLICATION MONEY. 18. THE INITIAL BURDEN CANNOT BE SAID TO BE DISCHARGE D BY SIMPLY PLACING ON RECORD THE INFORMATION OF CREDITOR WHICH IS OBTAINED FROM ROC WEBSITE. THE SAID INFORMATION ONLY STATE THE EXIST ENCE OF THE CREDITOR, BUT, AS ALREADY POINTED OUT, UNLESS THE ASSESSEE PRIMA FACIE ESTABLISH THAT THE SAID CREDIT HAS EMANATED FROM THE CR EDITOR, THE INFORMATION OBTAINED FROM THE WEBSITE CANNOT BE CORR ELATED TO THE CREDIT. THE FIRST AND FOREMOST THING REQUIRED TO BE ESTABLISHED PRIMA FACIE CASE IS THE ADMISSION OR ACT ON THE PART OF THE C REDITOR THAT HE HAD ADVANCED THE AMOUNT TO THE ASSESSEE AND THE SAID AMO UNT REPRESENTED SHARE APPLICATION MONEY. IN FACT, IN THE PRESENT CASE, THE AMOUNT ULTIMATELY HAS BEEN CREDITED BY THE ASSESSEE IN I TS PROFIT & LOSS ACCOUNT AND NEITHER IT HAS BEEN RETURNED BACK TO THOSE PARTIES NOR ANY SHARE IS ALLOTTED THEM. IT IS DIFFICULT TO CO MPREHEND THAT A PERSON WILL DEPOSIT RS.25 LAC TO GET SOME SHARES AND FOR THE LONG TIME NEITHER SHARES ARE ALLOTTED NOR MONEY IS REFUNDED AND THE SAID PERSON WILL NOT TRY TO GET EITHER SHARE OR REFUND OF MONEY. NO DOCUMENT WHATSOEVER HAS BEEN FILED TO SHOW THAT ANY SUCH EXERCISE WAS UNDERTAKEN BY THE CREDITORS. SO, THE CONTENTION THA T THE ASSESSEE HAS STRAINED RELATIONSHIP WITH CREDITORS IS WHOLLY UNSUPPORT ED AND CANNOT BE ACCEPTED. ITA NO.5827/DEL/2010 13 19. KEEPING IN VIEW THE AFOREMENTIONED DISCUSSION AND GOING THROUGH THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER OF CIT (A) VIDE WHICH THE IMPUGNED ADDITION HAS BEEN UPHELD. GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 20. APROPOS GROUND NO.2, IT IS THE CASE OF THE ASSESSEE TH AT DURING THE YEAR UNDER CONSIDERATION THE HOTEL OPERATION WAS STOPPED AND RENOVATION WAS GOING ON FOR RESTART OF THE HOTEL. FO R THE PURPOSE OF RENOVATION THE ASSESSEE HAD ARRANGED THE MONEY IN THE SHAPE OF LOANS FROM BANKS, SHARE APPLICATION MONEY, ETC. AND TH E SAID MONEY WAS DIRECTLY RELATING TO RENOVATION OF THE PROJECT. THEREFORE, THE AMOUNT BORROWED BY THE ASSESSEE WAS FOR CAPITAL ASSET AND IT WAS TO BE CAPITALISED. IN THE PROCESS THE ASSESSEE IN ORDER TO O BTAIN LETTER OF CREDITS FOR WHICH THE SECURITY WAS TO BE GIVEN AND, IN THIS MANNER, FDRS WERE OBTAINED ON WHICH THE ASSESSEE HAS EARNED INTER EST OF RS.9,75,668/- WHICH WAS SET OFF AGAINST THE PROJECT COST AND IT CANNOT BE CONSIDERED TO BE INCOME FROM OTHER SOURCES AND, FOR THIS PURPOSE, RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. ITO (2009) 315 ITR 255 (DEL). 21. IN THE ASSESSMENT ORDER, IT HAS BEEN MENTIONED BY TH E ASSESSING OFFICER THAT THE ASSESSEE WAS REQUIRED TO FURNISH REASONS F OR ADJUSTING THE REVENUE INCOME AGAINST CAPITAL NATURE EXPENSES AND THE ASSESSEE COULD NOT FURNISH ANY JUSTIFICATION FOR DOING SO AND, IN THIS MANNER, HE HAS ASSESSED THE SAID INCOME UNDER THE HEAD INCOME FROM O THER SOURCES. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE CIT (A) WERE AS UNDER:- 3.1 THE LD. AR STATED AS BELOW:- THE FACT IS THAT THE APPELLANT HAS TAKEN FUND AS SECURED LOAN, UNSECURED LOAN, BYWAY OF SHARE APPLICATION IS EVIDENT FROM ITA NO.5827/DEL/2010 14 THE RECORD ITSELF. FURTHER THE APPELLANT HAS TO GIVE LC & BGS FOR IMPORTING OF CAPITAL GOODS (WHICH IS BEING RECEIVED C ONTINUOUSLY INCLUDING THE YEAR UNDER APPEAL). THE APPELLANT HAS TO GIVE THE BANK MARGIN FOR OBTAINING LC & BG WHICH WAS GIVEN IN THE FORM OF FDR ON WHICH THE INTEREST INCOME EARNED. THE APPEL LANT IS REDUCING THE SAME FROM THE CAPITAL EXPENDITURE AND THE D ECISION OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. V ITO (200 9) 315 ITR 255(DEL) WOULD SPEAK FOR ITSELF. IN THIS DECISION THE JURISDICTIONAL HIGH COURT HAS DISTINGUISHED THE DECISION OF TUTICORIN ALKALI CHEMICAL AND FERTILIZER LTD V. CIT (1997) 227 ITR 172 (SC) AND CIT V BOKARO STEEL LTD. (1999) 236 ITR 315 (SC). 22. LD. CIT (A) HAS NOT ACCEPTED SUCH SUBMISSIONS OF THE ASSESSEE AND HAS UPHELD THE ADDITION MADE BY THE AO BY APPLYI NG THE RATIO LAID DOWN IN TUTICORIN ALKALI CHEMICAL AND FERTILIZER LT D. VS. CIT (SUPRA). 23. AFTER NARRATING THE FACTS AND RELYING UPON THE SU BMISSIONS MADE BEFORE THE AO AND CIT (A), IT WAS VEHEMENTLY PLEADED BY LD. AR THAT CONSIDERING THE RATIO LAID DOWN BY HONBLE DELHI HIG H COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) L D. CIT (A) HAS WRONGLY UPHELD THE ADDITION AND THE ADDITION DESERVE S TO BE DELETED. 24. ON THE OTHER HAND, RELYING UPON THE ORDER OF TH E AO AND CIT (A) IT WAS PLEADED BY LD. DR THAT THE ADDITION HAS RIGHTLY B EEN UPHELD AND THIS GROUND OF THE ASSESSEE SHOULD BE DISMISSED. 25. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE HAVE TO APPRECIAT E THE FACTS OF THE PRESENT CASE. THE ASSESSEE IN THE PRESENT CASE WAS RUNNING A HOTEL WHICH WAS TEMPORARILY CLOSED FOR THE RENOVATION. HOW EVER, THE ASSESSEE HAS BEEN SHOWING PROFIT AND LOSS, WHATEVER IT MAY BE, UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND THE SAM E HAS ALSO BEING ASSESSED. FOR THE YEAR UNDER CONSIDERATION THE ASSE SSEE HAS CLAIMED LOSS AS PER PROFIT & LOSS ACCOUNT AT RS.2,89,19,4 75/- AND AFTER ADDING DEPRECIATION AND LOSS ON SALE OF ASSET, THE LOSS HA S COME DOWN TO RS.2,35,08,769/-. FROM THAT FIGURE THE ASSESSEE HAS C LAIMED ITA NO.5827/DEL/2010 15 EXPENDITURE WHICH WERE DISALLOWED IN ASSESSMENT YEAR 200 5-06 AND ARE CLAIMED AS ALLOWABLE FOR THE YEAR UNDER CONSIDERA TION WHICH IS A SUM OF RS.83,90,534/- AND, IN THIS MANNER, THE LOSS HAS B EEN COMPUTED AT RS.3,80,99,303/-. THUS, IT IS NOT A CASE WHERE NEW BUSINESS IS BEING SET UP. NOW, ON THESE FACTS, THE CASE OF THE ASSESSEE HAS T O BE EXAMINED IN THE LIGHT OF THE DECISION RELIED UPON BY LD. AR. IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA), THE ASSESSEE WAS INCORPORATED ON OCTOBER 6, 1999 IN PURSUANCE OF A JO INT VENTURE ENTERED INTO BETWEEN INDIAN OIL CORPORATION AND MAR UBENI CORPORATION, JAPAN. THE JOINT VENTURE WAS CONCEIVED TO SET UP A P OWER PROJECT AT PANIPAT IN THE STATE OF HARYANA AND IT WAS EXPECTED THAT THE PROJECT WOULD BE SET UP BY THE END OF THE FINANCIAL YEAR 200 0-01. IN ORDER TO EFFECTUATE THE PURPOSE FOR WHICH THE JOINT VENTURE W AS CONCEIVED, SHARE CAPITAL WAS CONTRIBUTED BY INDIAN OIL CORPORATI ON AND MARUBENI CORPORATION OF JAPAN WHICH INCLUDED RS.20 CRORE BY W AY OF ADDITIONAL SHARE CAPITAL. IT WAS THE STAND TAKEN BY THE ASSESSEE BEF ORE AO THAT THESE FUNDS WERE REQUIRED PRIMARILY FOR THE PURCHASE O F LAND AND DEVELOPMENT OF INFRASTRUCTURE. HOWEVER, DUE TO THE LEGAL ENTANGLEMENT WITH RESPECT TO TITLE OF LAND, WHICH HA RYANA GOVERNMENT WAS TO ACQUIRE FOR THE ASSESSEE, IN THE INTERREGNUM, THE FUNDS ACQUIRED BY WAY OF SHARE CAPITAL WERE PUT IN A FIXED DEPOSIT W ITH THE TOKYO MITSUBISHI BANK BY THE ASSESSEE ON WHICH THE INTEREST OF RS.1,65,75,906/- WAS EARNED FOR ASSESSMENT YEAR 2001-02. THE AO APPLIED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SUPRA) AND ALSO CIT VS. AUTOKAST LTD. (2001) 248 ITR 110 AND TREATED THE SAME AS INCOM E FROM OTHER SOURCES. IT WAS FOUND BY THE CIT (A) THAT THE FUNDS WE RE PLACED IN FIXED DEPOSITS, SO THAT LIQUIDITY WAS ENSURED AND MONEY WOULD REMAIN AVAILABLE WHEN REQUIRED FOR THE PURCHASE OF LAND AND FOR INFRASTRUCTURE DEVELOPMENT, THEREFORE, INTEREST EARNED WAS INEXTRICA BLY LINKED WITH THE SETTING UP OF THE POWER PLANT AND THE ADDITION W AS DELETED ITA NO.5827/DEL/2010 16 FOLLOWING THE RATIO OF THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF BOKARO STEEL LTD (1999) 236 ITR 315 (SC). THE TRIBUNAL REVERSED THE DECISION OF CIT (A) AND IT WAS HELD BY HONBLE DE LHI HIGH COURT THAT THE TRIBUNAL HAS MISCONSTRUED THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND F ERTILIZERS (SUPRA) AND ACCORDING TO THE RATIO OF THAT DECISION IF FUNDS HAVE BEEN BORROWED FOR SETTING UP OF A PLANT AND IF THE FUNDS ARE SURPLU S AND THEN, BY VIRTUE OF THAT CIRCUMSTANCE, THEY ARE INVESTED IN FIX ED DEPOSITS THE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABL E UNDER THE HEAD INCOME FROM OTHER SOURCES WHEREAS IN THE CASE OF BOKA RO STEEL LTD. (SUPRA) THE RATIO IS THAT IF THE INCOME IS EARNED WHET HER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH ARE OT HERWISE INEXTRICABLY LINKED TO THE SETTING UP OF PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALISED TO BE SET OFF AGAINST PRE-OPERATIVE EXP ENSES AND AFTER ANALYSING THE FACTS OF THE CASE THEIR LORDSHIPS FOUND TH AT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR THE SPECIFI C PURPOSE OF ACQUIRING LAND AND FOR DEVELOPMENT OF INFRASTRUCTURE . THEREFORE, THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSIO N IN THE BUSINESS COULD NOT BE CLASSIFIED AS INCOME FROM OTHER SOURCES. S INCE THE INCOME AS EARNED IN A PERIOD PRIOR TO COMMENCEMENT O F BUSINESS, IT WOULD BE IN THE NATURE OF CAPITAL RECEIPT AND, HENC E, WAS REQUIRED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. ANOTHER REA SON FOR HOLDING THE ISSUE IN FAVOUR OF THE ASSESSEE WAS SECTION 208 OF COM PANIES ACT, 1956, ACCORDING TO WHICH A COMPANY CAN PAY INTEREST ON SHARE CAPITAL WHICH IS ISSUED FOR A SPECIFIC PURPOSE TO DEFRAY EXPENSES FOR CONSTRUCTION OF ANY WORK AND WHICH CANNOT BE MADE PR OFITABLE FOR A LONG PERIOD SUBJECT TO CERTAIN RESTRICTIONS CONTAINED IN SUB-SECTIONS (2) TO (7) OF SECTION 208 AND, IN THIS MANNER, IT WAS HEL D IN THAT CASE THAT INTEREST WAS REQUIRED TO BE SET OFF AGAINST PRE-OPERATI VE EXPENSES. ITA NO.5827/DEL/2010 17 26. IN OUR CONSIDERED OPINION, THE FACTS OF THE CASE O F INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) DO NOT MATCH WI TH THE FACTS OF THE PRESENT CASE OF THE ASSESSEE. ACCORDING TO FACTS OF PRESENT CASE, IT IS NOT A CASE OF SET UP OF BUSINESS, BUT IT IS A CASE O F TEMPORARY LULL IN THE BUSINESS WHERE RENOVATION WAS BEING EFFECTED FOR TH E RESTART OF THE HOTEL. SECONDLY, IT HAS NOT BEEN SHOWN AT ALL THAT T HE AMOUNT WHICH HAS BEEN INVESTED IN FDRS WAS ACTUALLY RELATING TO THE AMOUNT BORROWED FOR SETTING UP OF CAPITAL ASSETS. ACCORDING T O THE RATIO OF AFOREMENTIONED DECISION, THERE SHOULD BE A DIRECT LIN K BETWEEN THE AMOUNTS BORROWED FOR PURCHASE OF CAPITAL ASSET AND DEVE LOPMENT OF INFRASTRUCTURE BEFORE COMMENCEMENT OF BUSINESS AND THE AMOUNT INVESTED IN FDRS. THIS LINK IS ABSENT IN THE PRESENT CASE AS NO DOCUMENT WHATSOEVER HAS BEEN BROUGHT ON RECORD TO SHOW THAT WHATEVER WAS INVESTED IN FDR WAS ACTUALLY OUT OF THE A MOUNT RECEIVED BY THE ASSESSEE FOR ACQUIRING CAPITAL ASSET OR FOR DEVELO PMENT OF INFRASTRUCTURE. THEREFORE, THE RATIO OF THE AFOREME NTIONED DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN T HE ABSENCE OF SUCH LINK, THE AMOUNT HAS TO BE ASSESSED SEPARATELY AS INCOME F ROM OTHER SOURCES AND WE ARE OF THE CONSIDERED OPINION THAT LD. CIT (A) HAS RIGHTLY HELD THAT THE AO WAS RIGHT IN ASSESSING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. WE DECLINE TO INTERF ERE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.20 11. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 30.09.2011. DK ITA NO.5827/DEL/2010 18 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES