M/s. Rail Vikas Nigam Ltd., New Delhi V. DCIT, New Delhi

ITA 6165/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69154 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 23-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VEENA JOSHI
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Capital asset; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) SHRI B.C. MEENA, ACCOUNTANT MEMBER AND BEFORE SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.6165/DEL/2012 (ASSESSMENT YEAR : 2009-10) M/S. RAIL VIKAS NIGAM LIMITED, VS. DCIT, CIRCLE 15 (1), AUGUST KRANTI BHAWAN, NEW DELHI. B 1, BHIKAJI CAMA PLACE, NEW DELHI 110 066. (PAN NO.AACCR5652A) (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE AND SHRI SOMIL AGARWAL, CA REVENUE BY : MRS. VEENA JOSHI, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-XVIII, NEW DELHI DATED 07.09.2012. 2. THE ASSESSEE IS A LIMITED COMPANY WHOLLY OWNED B Y MINISTRY OF RAILWAYS, GOVERNMENT OF INDIA, INCORPORATED ON 24.0 2.2003. THE MAIN OBJECTS OF THE COMPANY IS TO ENTER INTO AND CARRY O N BUSINESS RELATING TO PROJECT DEVELOPMENT, PROJECT FINANCING, IF REQUIRED , AND PROJECT EXECUTION OF RAIL INFRASTRUCTURE PROJECT FOR AND ON BEHALF OF MI NISTRY OF RAILWAYS. DURING THE YEAR, THE ASSESSEE HAS EXECUTED SEVERAL RAILWAY INFRASTRUCTURE PROJECTS. THE ITA NO.6165/DEL/2012 2 ASSESSEE COMPANY RAISES A LOAN FROM INDIAN RAILWAY FINANCE CORPORATION (IRFC) AND ALSO RECEIVED PROJECT ADVANCE CAPITAL FR OM MINISTRY OF RAILWAYS. DURING THE YEAR, THE ASSESSEE HAS RAISED RS.3,910 C RORES AS A LOAN FROM IRFC. THE ASSESSEE COMPANY ALSO PAID MONEY AS MOBILIZATIO N ADVANCE TO VARIOUS CONTRACTORS AS PER THE TERMS OF THE CONTRACT. THE I NTEREST ON THESE MOBILIZATION ADVANCES IS PASSED ON AS CREDIT TO THE EXPENDITURE INCURRED ON THE PROJECT. CONSEQUENTLY, THIS INTEREST IS REDUCED FROM PROJECT COST. THIS PRACTICE IS BEING FOLLOWED SINCE THE COMMENCEMENT OF THE BUSINESS. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ALSO TREATED THIS I NTEREST INCOME ACCORDINGLY. HOWEVER, THE ASSESSING OFFICER REDUCED THE CLAIM OF ASSESSEE U/S 80IA BY RS.6,37,45,667/- BY HOLDING AS UNDER :- THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED . IT IS CLEAR THAT INTEREST INCOME HAS NOT BEEN DERIVED FRO M THE INDUSTRIAL ACTIVITIES OF THE ASSESSEE. IT IS A WELL SETTLED LAW OF THE LAND AS DECIDED BY THE HON'BLE APEX COURT IN TH E CASE OF LIBERTY INDIA LTD. VS. CIT AND PANDIAN CHEMICALS LT D. V/S CIT, SO THE SAME CANNOT BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING AND THEREFORE NOT ELIGIBLE U/S 801A. AC CORDINGLY, INTEREST INCOME OF RS.6,37,45,667/- IS BEING ASSESS ED TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. SINCE T HE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND HAS CONCEALED TRUE PARTICULARS OF INCOME, PENALTY PROCE EDINGS U/S 271(1)(C) OF THE ACT HAVE SEPARATELY BEEN INITIATED . THE CIT (A) HAS CONFIRMED THE ADDITION BY HOLDING A S UNDER :- THUS, THE TERM PROFIT DERIVED BY AN INDUSTRIAL UND ERTAKING FROM BUSINESS HAS A LIMITED CONNOTATION AND IT IS MUCH N ARROWER IN ITS FIELD OF OPERATION AND INCOME OTHER THAN THAT DERIV ED FROM BUSINESS DOES NOT FALL WITHIN ITS PURVIEW. CONSIDER ING THE ABOVE ITA NO.6165/DEL/2012 3 FACTS AND JUDICIAL PRONOUNCEMENTS, THE DISALLOWANCE OF RS.6,37,45,667/- FOR DEDUCTION U/S 80IA IS CONFIRME D. 4.3 THE ALTERNATIVE CLAIM OF THE APPELLANT IS WHETH ER THE INTEREST EARNED ON MOBILIZATION ADVANCE IS A CAPITA L RECEIPT. IN THE DETERMINATION OF THE QUESTION WHETHER A RECEIPT IS CAPITAL OR REVENUE, IT IS NOT POSSIBLE TO LAY DOWN ANY SINGLE TEST AS INFALLIBLE OR ANY SINGLE CRITERION AS DECISIVE. THE QUESTION HAS TO ULTIMATELY DEPEND ON THE FACTS OF THE PARTICULAR CA SE, AND THE AUTHORITIES BEARING ON THE QUESTION ARE VALUABLE ON LY AS INDICATING THE MATTERS THAT HAVE TO BE TAKEN INTO A CCOUNT IN REACHING A DECISION. THE QUESTION ALSO INVOLVES A C ONCLUSION OF LAW TO BE DRAWN FROM THOSE FACTS-CIT V RAI BAHADUR JARIAM VALJI [1959] 35 ITR 148 (SC). HOWEVER, IT WOULD BE WORTHWHILE TO GAIN AN UNDERSTANDING OF SOME OF THE IMPORTANT T ESTS WHICH ARE USUALLY APPLIED IN DISTINGUISHING BETWEEN CAPIT AL RECEIPTS AND INCOME RECEIPTS. THERE ARE CERTAIN TESTS LAID D OWN FOR DIFFERENTIATING CAPITAL RECEIPTS AND REVENUE RECEIP TS IN THE ABOVE CASE : 1. A RECEIPT BY WAY OF PRICE OR COMPENSATION ON DISPOSAL OF CIRCULATING CAPITAL OR STOCK-IN-TRADE I S A REVENUE RECEIPT. A RECEIPT ON THE DISPOSAL OF A CAP ITAL ASSET REFERABLE TO FIXED CAPITAL IS A CAPITAL RECEIPT. WH ETHER AN ASSET IS A CAPITAL ASSET OR A TRADING ASSET MUST BE DETERMINED ON THE FACTS OF EACH. ORDINARILY, FIXED CAPITAL IS RETAINED IN BUSINESS IN ORDER TO EARN PROFITS, E.G., PLANT, MACHINERY AND BUILDIN G ETC. CIRCULATING CAPITAL CIRCULATES IN THE BUSINESS AND IT IS OUT OF THIS CIRCULATION (E.G., CAPITAL INVESTED IN STOC K-IN-TRADE) THAT THE PROFIT IS EARNED. COMPENSATION RECEIVED FOR THE IMMOBILISATION, STERILISATION OR DESTRUCTION OF A CAPITAL ASSET IS A CAPITAL RECEIPT WHILE COMPENSATION FOR INJURIOUS AFFECTATIO N OF A TRADING ASSET IS A REVENUE RECEIPT. 2. RECEIPT IN SUBSTITUTION OF A SOURCE OF INCOME IS OF CAPITAL NATURE WHILE THE AMOUNT THAT SUBSTITUTES IN COME ITSELF SHALL BE THE INCOME CHARGEABLE TO TAX. FOR E XAMPLE, COMPENSATION FOR LOSS OF AN AGENCY IS A CAPITAL REC EIPT ITA NO.6165/DEL/2012 4 (THOUGH TAXABLE) WHEREAS THE AMOUNT RECEIVED FOR BR EACH OF BUSINESS CONTRACT SHALL BE A REVENUE RECEIPT. 3. IN THE CASE OF AN ISOLATED TRANSACTION OF PURCHA SE AND SALE OF PROPERTY THE MOTIVE OF THE SELLER IS A DECIDING FACTOR IN DETERMINING THE NATURE OF A RECEIPT. SALE PROCEEDS, OF SECURITIES (WHERE THEY ARE HELD AS INVESTMENTS) WILL BE CAPITAL RECEIPT, BUT ON THE OT HER HAND, WHERE THESE SECURITIES ARE HELD AS STOCK-IN-TRADE, THE RECEIPTS WILL BE OF REVENUE NATURE. 4. WHEN A SUM IS RECEIVED FOR THE SURRENDER OF CERT AIN RIGHTS UNDER AN AGREEMENT, IT IS A CAPITAL RECEIPT BECAUSE A CAPITAL ASSET (NAMELY, THE RIGHTS) IS GIVEN UP. BUT WHERE THE SUM RECEIVED IS IN THE NATURE OF COMPENSATION F OR LOSS OF FUTURE PROFITS, IT IS A REVENUE RECEIPT. FOR EXA MPLE, A PENSION RECEIVED BY AN EMPLOYEE FROM HIS FORMER EMPLOYER IS A REVENUE RECEIPT BEING COMPENSATION FO R PAST SERVICES, BUT A LUMP-SUM RECEIVED IN COMMUTATION OF A PENSION IS A CAPITAL RECEIPT BECAUSE OF ITS BEING COMPENSATION FOR THE SURRENDER OF A RIGHT I.E., THE RIGHT TO PENSION. COMMUTATION OF PENSION IS, HOWEVER, TAXED AS ORDINARY INCOME OUTSIDE SPECIFIED LIMIT. SINCE IN THE CASE OF THE APPELLANT, THE INTEREST HA S BEEN EARNED ON ADVANCE GIVEN BY THE APPELLANT TO THE VARIOUS CONTR ACTORS. THE ADVANCE GIVEN BY THE APPELLANT IS CAPITAL IN NATURE BUT THE INCOME OR INTEREST EARNED ON THE ADVANCE IS CERTAIN LY REVENUE IN CHARACTER. IT CANNOT BE SAID TO BE PART OF FIXED CA PITAL, BUT IN FACT IS A RECEIPT EARNED ON THE CAPITAL ASSET, IT IS, TH EREFORE, ONLY REVENUE IN NATURE. THE ALTERNATIVE CLAIM OF THE APP ELLANT THAT THE INTEREST IS CAPITAL RECEIPT AFTER CONSIDERING ALL T HE FACTS OF THE CASE, IS, THEREFORE, NOT ACCEPTED. THE CLAIM OF THE APPELLANT IS, THUS, DISMISSED. {5} GROUNDS OF APPEAL NO.4 IS DIRECTED AGAINST NOT GIVING CREDIT OF PRE-PAID TAXES. IN THIS CONNECTION THE AS SESSING OFFICE IS DIRECTED ALLOW CREDIT TO ANY PRE-PAID TAXES AFTE R VERIFICATION OF FACTS. ITA NO.6165/DEL/2012 5 NOW, THE ASSESSEE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE INTEREST RECEIVED ON MOBILIZATION ADVANCE IS NOT IN COME OF THE ASSESSEE COMPANY AND LD. CIT(A) HAS ERRED IN HOLDING THE ACTION OF LD. AO IN TAXING THE RECEIPT AS INCOME DESPITE THE FACT THAT THE SAME HAS BEEN CRED ITED TO THE COST OF PROJECT BEING EXECUTED FOR AND ON BE HALF OF MINISTRY OF RAILWAYS. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE IMPUGNED AMOUNT IS NOT TAXABLE AS INCOME IN THE HAN DS OF THE ASSESSEE COMPANY MORE SO AS THERE IS DIVERSI ON OF RECEIPT BY OVERRIDING TITLE AT THE SOURCE ITSELF AS THE AMOUNT HAS BEEN RECEIVED ON BEHALF OF RAILWAY BOARD , GOVERNMENT OF INDIA. 3. WITHOUT PREJUDICE TO THE ABOVE, ACTION OF LD. CI T(A) IN CONFIRMING THE ACTION OF LD. AO IN NOT TREATING THE INTEREST EARNED ON MOBILIZATION ADVANCE OF RS.6,37,45,667/- AS CAPITAL RECEIPT IS CONTRARY TO LAW AND FACTS. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.6,37,45,667/- BEING INTEREST ON MOBILIZATION ADV ANCE AND HAS ERRED IN TREATING THE SAME AS INCOME AND HA S FURTHER ERRED IN NOT ALLOWING THE DEDUCTION U/S 80I A OF THE ACT ON THIS AMOUNT AND THE SAME AMOUNT HAS BEEN WRONGLY TREATED AS INCOME FROM OTHER SOURCES. 5. THAT IN ANY CASE AND ANY VIEW OF THE MATTER, ACT ION OF LD. CIT(A) IN NOT REVERSING THE ACTION OF LD. AO IN MAKING THE IMPUGNED ADDITION AND FRAMING THE IMPUGNED ASSESSMENT ORDER WHICH IS CONTRARY TO LAW AND FACTS, VOID AB INITIO, BEYOND JURISDICTION, AND WIT HOUT GIVING ADEQUATE OPPORTUNITY OF HEARING, BY RECORDIN G INCORRECT FACTS AND FINDINGS AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. ITA NO.6165/DEL/2012 6 6. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODI FY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MIS-UNDERSTOOD THE TREATMENT GIVEN BY THE ASSESSEE TO THIS INTEREST EARNED TO THE MOBILIZATION ADVANCES. HE DREW OUR ATTENTION TO THE COMPUTATION OF INCOME AND PLEADED THAT THE ASSESSEE HAS NEVER INCLUDED THIS AMOUNT IN THE PROFIT WORKED OUT FOR CLAIMING THE DE DUCTION U/S 80IA. LD. AR SUBMITTED THAT THESE ADVANCES WERE GIVEN TO THE CON TRACTORS FOR CONSTRUCTING THE PROJECT AND NOT TO EARN THE INTEREST. THESE INT EREST INCOME WERE INCIDENTAL AND HAS DIRECT PROXIMATE INEXTRICABLE LINK TO THE S ETTING UP OF THE PROJECT. THEREFORE, SUCH INCOME REDUCES THE COST OF PROJECT. HE FURTHER PLEADED THAT THE ENTIRE INTEREST ON MOBILIZATION ADVANCE IS TRAN SFERRED TO MINISTRY OF RAILWAYS AS PER THE DIRECTION OF MINISTRY OF RAILWA YS AS THE ENTIRE FUND OF THE PROJECTS HAVE BEEN DONE BY THE MINISTRY OF RAILWAYS . EVEN THE INTEREST PAYABLE TO IRFC WAS ALSO BORNE BY MINISTRY OF RAILW AYS. IN VIEW OF THIS, THE INTEREST OF MOBILIZATION ADVANCE WAS NOT SHOWN AS I NCOME BUT REDUCED FROM THE PROJECT COST. THE LD. AR FURTHER SUBMITTED THAT THE ENTIRE INTEREST ON MOBILIZATION ADVANCES IS DIVERTED TO THE MINISTRY O F RAILWAYS AT THE THRESHOLD ITSELF. THE INTEREST EARNED ON THESE MOBILIZATION A DVANCES WERE DIVERTED TO THE COST OF PROJECT OF RAILWAYS BY OVERRIDING TITLE AT THE SOURCE ITSELF AS THE ITA NO.6165/DEL/2012 7 AMOUNT WAS RECEIVED ON BEHALF OF RAILWAY BOARD, GOV ERNMENT OF INDIA. THEREFORE, SUCH INCOME NEVER BECAME THE INCOME OF T HE ASSESSEE. IT WAS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. FOR THIS PROP OSITION, THE LD. AR RELIED ON THE FOLLOWING DECISIONS :- (I) CIT VS. SITALDAS TIRATHDAS (1961) 41 ITR 367 (SC); (II) MOTILAL CHHADAMI LAL JAIN VS. CIT 190 ITR 1 (SC); (III) CIT VS. AMBUR CO-OP SUGAR MILLS LTD. (2004) 269 I TR 398 (SC); AND (IV) CIT VS. NEW HORIZON SUGAR MILLS P LTD. (2004) 269 ITR 397 (SC) ULTIMATELY, LD. AR ALSO SUBMITTED THAT IF SUCH INTE REST INCOME ON MOBILIZATION ADVANCES IS TREATED AS INTEREST INCOME OF THE ASSESSEE THEN THE INTEREST PAID ON THE SOURCE OF THE AMOUNT FOR EARNI NG SUCH INTEREST DESERVED TO BE ALLOWED U/S 57 OF THE ACT. LD. AR FURTHER SUBMIT TED THAT THE ASSESSEE WAS FOLLOWING THIS METHOD OF ACCOUNTING SINCE THE INCEP TION OF THE COMPANY BUT SUCH DISALLOWANCE WAS NEVER MADE IN THE PRIOR AND S UBSEQUENT YEARS. LD. AR ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. BOKARO STEEL LIMITED REPORTED IN 236 ITR 315 WHEREI N THE HON'BLE APEX COURT HAS HELD AS UNDER :- THE ACTIVITIES OF THE ASSESSEE IN CONNECTION WITH ALL THREE RECEIPTS VIZ. RENT CHARGED BY THE ASSESSEE TO ITS C ONTRACTORS FOR HOUSING WORKERS AND STAFF EMPLOYED BY THE CONTRACTO R FOR THE CONSTRUCTION WORK OF THE ASSESSEE INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSESSEE; SECONDLY, HIR E CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN TO THE CONTRACT ORS BY THE ASSESSEE FOR USE IN THE CONSTRUCTION WORK OF THE AS SESSEE AND THIRDLY, INTEREST FROM ADVANCES MADE TO THE CONTRAC TORS BY THE ITA NO.6165/DEL/2012 8 ASSESSEE FOR THE PURPOSE OF FACILITATING THE WORK O F CONSTRUCTION ARE DIRECTLY CONNECTED WITH OR ARE INCIDENTAL TO TH E WORK OF CONSTRUCTION OF ITS PLANT UNDERTAKEN BY THE ASSESSE E. BROADLY SPEAKING, THESE PERTAIN TO THE ARRANGEMENTS MADE BY THE ASSESSEE WITH ITS CONTRACTORS PERTAINING TO THE WORK OF CONS TRUCTION. 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 ACTIV ITY OF THE ASSESSEE'S PLANT. THIS WAS CLEARLY TO FACILITATE TH E WORK OF CONSTRUCTION. HAD THIS FACILITY NOT BEEN PROVIDED B Y THE ASSESSEE, THE CONTRACTORS WOULD HAVE HAD TO MAKE THEIR OWN AR RANGEMENTS AND THIS WOULD HAVE BEEN REFLECTED IN THE CHARGES O F THE CONTRACTORS FOR THE CONSTRUCTION WORK. INSTEAD, THE ASSESSEE HAS PROVIDED THESE FACILITIES. THE SAME IS TRUE OF THE HIRE CHARGES FOR PLANT AND MACHINERY WHICH WAS GIVEN BY THE ASSESSEE TO THE CONTRACTOR FOR THE ASSESSEE'S CONSTRUCTION WORK. TH E RECEIPTS IN THIS CONNECTION ALSO GO TO COMPENSATE THE ASSESSEE FOR THE WEAR AND TEAR ON THE MACHINERY ADVANCES WHICH THE ASSESS EE MADE TO THE CONTRACTOR TO FACILITATE THE CONSTRUCTION ACTIV ITY OF PUTTING TOGETHER A VERY LARGE PROJECT WAS AS MUCH TO ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED WITHOUT ANY FINANCIAL HITCHES AS TO HELP THE CONTRACTORS. THE ARRANGEMENTS WHICH WERE M ADE BETWEEN THE ASSESSEE-COMPANY AND THE CONTRACTORS PE RTAINING TO THESE THREE RECEIPTS ARE ARRANGEMENTS WHICH ARE INT RINSICALLY CONNECTED WITH THE CONSTRUCTION OF ITS STEEL PLANT. THE RECEIPTS HAVE BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO T HE CONTRACTORS AND HAVE GONE TO REDUCE THE COST OF CONSTRUCTION. T HEY HAVE, THEREFORE, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AN D NOT INCOME OF THE ASSESSEE FROM ANY INDEPENDENT SOURCE. THE SAME REASONING WOULD APPLY TO ROYALTY RECEIVED BY THE ASSESSEE-COM PANY FOR STONE, ETC. EXCAVATED FROM THE ASSESSEE-COMPANY'S L AND. THE LAND HAD BEEN ALLOWED TO BE UTILISED BY THE CONTRAC TORS FOR THE PURPOSE OF EXCAVATING STONES TO BE USED IN THE CONS TRUCTION WORK OF ASSESSEE'S STEEL PLANT. THE COST OF THE PLANT TO THE EXTENT OF SUCH ROYALTY RECEIVED, IS REDUCED FOR THE ASSESSEE. IT IS, THEREFORE, RIGHTLY TAKEN AS A CAPITAL RECEIPT.-BOKARO STEEL LT D. VS. CIT (1988) 67 CTR (PAT) 281 : (1988) 170 ITR 545 (PAT) : TC 38R.1012 AND CTT VS. BOKARO STEEL LTD. (1988) 67 CT R (PAT) 138 : (1988) 170 ITR 522 (PAT) : TC 38R.1011 AFFIRM ED; CHALLAPALLI SUGARS LTD. VS. CTT 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC) : TC 17R.834 APPLIED; ADDL. CTT VS. INDIAN DRUGS & PHARMACEUTICALS LTD. (1983) 141 ITR 134 (DE L) : TC ITA NO.6165/DEL/2012 9 13R.668 APPROVED; TUTICORIN ALKALI CHEMICALS & FERT ILISERS LTD. VS. CTT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 17 2 (SC) DISTINGUISHED. LD. AR ALSO SUBMITTED THAT THE ISSUE IS COVERED BY THIS DECISION OF HON'BLE SUPREME COURT WHEREIN THE INTEREST EARNED ON THE MO BILIZATION ADVANCES HAS HELD TO BE A CAPITAL RECEIPT AND TO BE ADJUSTED AGA INST THE COST OF THE PROJECT. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HA VE ALSO PERUSED THE COMPUTATION OF INCOME WHEREIN THE LD. AR WAS SUCCES SFUL IN DEMONSTRATING THAT THIS INTEREST EARNED OF RS.6,37,45,667/- IS NO T FORMING PART OF THE INCOME ON WHICH THE DEDUCTION U/S 80IA HAS BEEN CLAIMED. T HEREFORE, WE DO NOT FIND ANY MERIT IN THE ORDER OF AUTHORITIES BELOW WITH RE GARD TO REDUCTION IN 80IA CLAIM. IT WAS ALSO MADE CLEAR DURING THE HEARING TH AT THIS AMOUNT IS REDUCED FROM THE COST OF THE PROJECT AND AS PER THE CONTRAC T, THIS AMOUNT TO BE GIVEN CREDIT AS MISC. RECEIPTS IN THE PROJECT ACCOUNT. TH ERE IS DIVERSION OF THIS INTEREST BY OVERRIDING TITLE WITH THE CONTRACT COND ITIONS. THE RELEVANT PARA OF THE LETTER FROM THE MINISTRY OF RAILWAYS, GOVERNMEN T OF INDIA TO THE MANAGING DIRECTOR OF RAIL VIKAS NIGAM LIMITED REGAR DING TREATMENT OF INTEREST CHARGED ON THE MOBILIZATION ADVANCES IS AS UNDER :- AS PER RULE AND PRACTICE FOLLOWED ON INDIAN RAILW AYS, INTEREST CHARGED ON MOBILIZATION ADVANCE GIVEN TO C ONTRACTORS IS ITA NO.6165/DEL/2012 10 CREDITED TO THE COST OF THE PROJECT. RAIL VIKAS NIG AM LTD. (RVNL) WAS SET UP AS A PUBLIC SECTOR UNDERTAKING IN THE YEAR 2004 UNDER MINISTRY OF RAILWAYS FOR EXECUTION OF RA ILWAY PROJECTS SPECIFICALLY TRANSFERRED TO IT. PROJECTS U NDERTAKEN BY RVNL WOULD BE TRANSFERRED TO MINISTRY OF RAILWAYS O N THEIR COMPLETION. AS SUCH, ASSETS CREATED BY RVNL FOR RAI LWAYS ARE/ WOULD BE THE ASSETS OF RAILWAYS AND HENCE ANY ANCIL LARY INCOME GENERATED DURING EXECUTION OF PROJECTS VIZ. INTERES T ON MOBILIZATION ADVANCE EXTENDED TO CONTRACTORS, SALE OF TENDER DOCUMENTS, PENALTIES IMPOSED TO CONTRACTORS ETC SHO ULD BE CREDITED TO CONCERNED PROJECT (MINISTRY OF RAILWAYS ) UNDER 'MISCELLANEOUS RECEIPTS'. IN VIEW OF THESE FACTS, THE RECEIPTS WERE NOT TAXAB LE IN THE HANDS OF ASSESSEE FURTHER LD. AR ALSO RELIED ON THE DECISION OF HON'B LE SUPREME COURT IN THE CASE OF CIT VS. BOKARO STEEL LIMITED, CITED SUPRA, WHEREIN THE INTEREST EARNED ON THE ADVANCES MADE TO THE CONTRACTOR TO FACILITAT E THE CONSTRUCTION ACTIVITY OF PUTTING TOGETHER A VERY LARGE PROJECT WERE HELD TO BE CAPITAL IN NATURE. AS THESE ADVANCES ARE TO ENSURE THAT THE WORK OF THE C ONTRACTORS PROCEEDED WITHOUT ANY FINANCIAL HITCHES SO AS TO HELP THE CON TRACTORS. SUCH ARRANGEMENTS MADE ARE INEXTRICABLY CONNECTED WITH THE CONSTRUCTI ON OF THE PROJECT AND SUCH RECEIPTS ADJUSTED AGAINST THE CHARGES PAYABLE TO TH E CONTRACTOR REDUCE THE COST OF CONSTRUCTION. AS PER THE ARRANGEMENT OF THE ASSE SSEE WITH RAILWAYS, , INTEREST CHARGED ON MOBILIZATION ADVANCES IS TO BE CREDITED TO THE CONCERNED ITA NO.6165/DEL/2012 11 PRODUCT UNDER THE MISC. RECEIPTS WHICH ULTIMATELY R EDUCES THE COST OF THE PROJECT AND THE PROJECT IS THE ASSET OF THE MINISTR Y OF RAILWAYS. KEEPING THESE FACTS IN VIEW, WE HOLD THAT CIT (A) WAS NOT JUSTIFI ED IN SUSTAINING SUCH ADDITION TO THE INCOME OF THE ASSESSEE. THEREFORE, WE ALLOW THE RELIEF TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 2 ND DAY OF AUGUST, 2013. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 2 ND DAY OF AUGUST, 2013/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.