ACIT, New Delhi V. M/s. Porbandar Solar Power Ltd., New Delhi

ITA 6539/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7224 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 3
• Next Hearing Date: 22-08-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: SANJEEV KAPOOR
• Keywords: Depreciation; Capital receipt
• Section: 143(3); 56; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 6539/DEL/2015 ASSESSMENT YEAR: 2012-13 ACIT, CIRCLE 20(1), VS. M/S PORBANDAR SOLAR POWE R LTD. NEW DELHI 616A (6 TH FLOOR) DEVIKA TOWER NEHRU PLACE, NEW DELHI 19 (PAN: AAFCM9611B) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. FR MEENA, SR. DR ASSESSEE BY : SHRI SANJEEV KAPOOR, CA DATE OF HEARING : 22-08-2016 DATE OF ORDER : 30-08-2016 ORDER PER H.S. SIDHU, J.M. THE DEPARTMENT HAS FILED THE APPEAL AGAINST THE IM PUGNED ORDER DATED 02.9.2015 OF LD. CIT(A)-7, NEW DELHI PERTAINI NG TO ASSESSMENT YEAR 2012-13. THE GROUNDS RAISED IN THE REVENUES APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 35,43,471/- WITHOUT APPRECIATING THE FACT THAT THE APEX COURT IN THE CASE OF CIT VS. AUTOCAST LTD. (20 01) 348 ITR 110 (SC) HAS HELD THAT SHORT TERM INVESTMEN T OF MONEY WAS INCOME FROM OTHER SOURCES. 2. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND / OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE HAD FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 27.9.2012. THE RET URN WAS PROCESSED ITA NO.6539/DEL/2015 2 U/S. 143(1) OF THE I.T. ACT, 1961. THE CASE WAS SEL ECTED FOR SCRUTINY THROUGH CASS AND ACCORDINGLY, THE NOTICE U/S. 143(2 ) WAS ISSUED TO THE ASSESSEE ON 8.8.2013 AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAME, ASSESSEES AR ATTENDED THE HEARING FROM TIME TO TIME AND FILED THE REQUISITE DETAILS/ DOCUMENTS. AFTER PERUSING THE R ECORDS FILED BY THE ASSESSEE, AO COMPLETED THE ASSESSMENT U/S. 143(3) O F THE I.T. ACT, 1961 VIDE HIS ORDER DATED 24.2.2015 AND HELD THE INTERES T INCOME OF RS. 35,43,471/- AS TAXABLE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, A SSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUG NED ORDER DATED 02.9.2015 HAS DELETED THE ADDITION IN DISPUTE AND ALLOWED THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STA TED THAT ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND APPEAL OF THE REVEN UE MAY BE ALLOWED. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, THE SAME MAY BE UPHELD AND ACCORDINGLY, THE APPEAL OF THE REVENUE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). I FIN D THAT LD. FIRST ITA NO.6539/DEL/2015 3 APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED THE I SSUE IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND A DJUDICATED THE ISSUE AS UNDER VIDE PAGES 7 TO 11 OF THE IMPUGNED ORDER. THE SAID RELEVANT PARAS ARE REPRODUCED AS UNDER:- 3.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE AR OF THE APPELLANT AND THE ORDER PASSED BY THE AO. THE AO HAS BROUGHT TO TAX OF INTEREST INCOME OF RS.35,43,471/- EARNED BY THE APPELLANT ON THE FIXED DEPOSITS OF RS.7,5O,OO,OOO/- DEPOSITED AS MARGIN MONEY FOR ISSUE OF PERFORMANCE SECURITY FOR FULFILL MENT OF OBLIGATION UNDER POWER PURCHASE AGREEMENT WITH GUJARAT URJA VIKAS NIGAM LTD. IT IS THE CASE OF THE AO THAT THE SAID FDRS HAD BEEN MADE OUT SURPLUS FUND AVAILABLE TO THE APPELLANT AND EVEN IF THE FDRS MAY BE INEXTRICABLY WITH THE BUSINESS OF THE APPELLANT THE INTEREST INCOME ARISING FROM IT IS TAXABLE AS PER T HE PROVISIONS OF THE ACT. THE APPELLANT HAS CONTENDED THAT MONEY IS BORROWED BY A NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE THE COMMENCEMENT OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALIZE D AND ADDED TO THE COST OF THE FIXED ASSETS CREATED A S A RESULT OF SUCH EXPENDITURE. AS A NECESSARY COROLLAR Y IF THE ASSESSEE RECEIVES ANY AMOUNTS WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP ITS ITA NO.6539/DEL/2015 4 PLANT AND MACHINERY, SUCH RECEIPTS WILL GO TO REDUC E THE COST OF ITS ASSETS. THESE ARE RECEIPTS OF A CAPITAL NATURE AND CANNOT BE TAXED AS INCOME. THE AO HAS RELIED ON THE RATIO OF TUTICORIN ALKALI CHEMICALS AND FERTILI ZERS LTD. VS. CIT (1997) 227 ITR 172. THE AO HAS HELD TH AT SHORT TERM DEPOSITS HAS BEEN MADE BY THE APPELLANT OUT OF SURPLUS FUNDS WHICH WERE NOT IMMEDIATELY REQUIRE D AND THEREFORE PARKED IN FDRS. IT IS HOWEVER NOTED T HAT IN THE PREVIOUS YEAR, THE AUDITED FINANCIALS REFLEC T THAT THE APPELLANT HAD 'CURRENT LIABILITIES OF RS.13,23,82,781/- AND A CORRESPONDING 'CASH AND BAN K BALANCE' OF RS.36,92,417/-. FURTHER, DURING THE PER IOD UNDER CONSIDERATION, THE APPELLANT HAS RAISED LONG TERM BORROWINGS IN FORM OF TERM LOANS PORBANDAR SOLAR PO WER LTD.LA. Y. 2012-13 FROM BANKS AMOUNTING TO RS.75,93,61,471/- AND HAS OUTSTANDING CURRENT LIABILITIES OF RS.97,12,39,602/- AS ON 31.03.2012. IT CANNOT BE CONCLUSIVELY SAID THAT THERE WAS AVAILABI LITY OF SURPLUS FUND FOR THE PURPOSE OF INVESTMENT INTO FDR S FOR EARNING INTEREST. IN THE CASE OF TUTICORIN ALKA LI CHEMICALS AND. FERTILIZERS LTD. VS. CIT (SUPRA), TH E COMPANY INVESTED FOR THE PURPOSE OF EARNING INTERES T. IN THE CASE OF THE APPELLANT HOWEVER THE AMOUNT WAS INVESTED IN FDRS AS MARGIN MONEY FOR ISSUE OF BANK GUARANTEE TO BE FURNISHED TO GUJARAT URJA VIKAS LT D. AS ITA NO.6539/DEL/2015 5 PERFORMANCE SECURITY. THIS WAS PREREQUISITE THAT TH E APPELLANT WAS OBLIGED TO PROVIDE UNDER THE POWER PURCHASE AGREEMENT WITH GUJARAT, URJA VIKAS NIGAM LTD. THE INTEREST EARNED ON THE FDRS WAS CLEARLY INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF PLANT AND MACHINERY BY THE APPELLANT COMPANY. FURNISHING OF THE PERFORMANCE GUARANTEE AND THE EXECUTION OF THE PROJECT BY THE APPELLANT COMPANY W ERE INEXTRICABLY LINKED EVENTS. IN THE CASE OF COMMISSI ONER OF INCOME-TAX V. KARNAL CO-OPERATIVE SUGAR MILLS LT D., [2000] 243 ITR 2 11 (SC) THE ASSESSEE HAD DEPOSITED MONEY TO OPEN A LETTER OF CREDIT FOR THE PURCHASE O F THE MACHINERY REQUIRED FOR SETTING UP ITS PLANT IN TERM S OF THE ASSESSEE'S AGREEMENT WITH THE SUPPLIER. IT WAS ON THE MONEY SO DEPOSITED THAT SOME INTEREST HAD BEEN EARNED. IN THAT FACTUAL BACKDROP, THE APEX COURT R ULED AS UNDER: 'THIS IS, THEREFORE, NOT A CASE WHERE ANY SURPLUS SHARE CAPITAL MONEY WHICH IS LYING IDLE HAS BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE DEPOSIT OF MONEY IN THE PRESENT CASE IS DIRECTLY LINKED WITH THE PURCHASE OF PLANT AND MACHINERY. HENCE, ANY INCOME EARNED ON SUCH DEPOSIT IS INCIDENTAL TO THE ACQUISITION OF ASSETS FOR THE SETTING UP OF THE PLANT AND MACHINERY. IN ITA NO.6539/DEL/2015 6 THIS VIEW OF THE MATTER THE RATIO LAID DOWN BY THIS COURT IN TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED V. CIT [1997] 227 ITR 172, WILL NOT BE ATTRACTED. THE MORE APPROPRIATE DECISION IN THE FACTUAL SITUATION IN THE PRESENT CASE IS IN CIT V. BOKARO STEEL LTD. [1999J 236 ITR 315 (SC). 3.4. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V S. BOKARO STEEL LTD. (1999) 236 ITR 315 (SC) HAD DECID ED THE ISSUE WHICH HAS BEEN RELIED UPON BY THE AR. THE HEAD NOTE OF THE JUDGEMENT IS REPRODUCED AS UNDER: 'IN CASE MONEY IS BORROWED BY A A NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE TH E COMMENCEMENT OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALIZED AND ADDED TO THE COST OF THE FIX ED ASSETS CREATED AS A RESULT OF SUCH EXPENDITURE. BY THE SAME REASONING OF THE ASSESSEE RECEIVES ANY AMOUNT S WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF S ETTING UP ITS PLANT AND MACHINERY, SUCH RECEIPT WILL GO T O REDUCE THE COST OF ITS ASSETS. THESE ARE RECEIPTS O F A CAPITAL NATURE AND CANNOT BE TAXED AS INCOME. 3.5 THE APEX COURT HAD RULED AS UNDER: WE WILL TAKE THE FIRST THREE HEADS UNDER WHICH THE ASSESSEE HAS RECEIVED CERTAIN AMOUNTS. THESE ARE, T HE RENT CHARGED BY THE ASSESSEE TO ITS CONTRACTORS FOR ITA NO.6539/DEL/2015 7 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 ASSES SEE. SECONDLY, HIRE CHARGES FOR PLANT AND MACHINERY WHIC H WAS GIVEN TO THE CONTRACTORS BY THE ASSESSEE FOR US E IN THE CONSTRUCTION, WORK OF THE ASSESSEE, AND THIRDLY , INTEREST FROM ADVANCES MADE TO THE CONTRACTORS BY T HE ASSESSEE FOR THE PURPOSE OF FACILITATING THE WORK O F CONSTRUCTION. THE ACTIVITIES OF THE ASSESSEE IN CONNECTION WITH ALL THESE THREE RECEIPTS ARE DIRECT LY CONNECTED WITH OR ARE INCIDENT TO THE 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 PERTAININ G TO THE WORK OF CONSTRUCTION. TO FACILITATE THE WORK F OR THE CONTRACTORS, THE ASSESSEE PERMITTED THE CONTRACTOR S TO USE THE PREMISES OF THE ASSESSEE FOR HOUSING ITS ST AFF AND WORKERS ENGAGED IN THE CONSTRUCTION ACTIVITY OF THE ASSESSEE'S PLANT. THIS WAS CLEARLY TO FACILITATE TH E WORK OF CONSTRUCTION. HAD THIS FACILITY NOT BEEN PROVIDE D BY THE ASSESSEE, THE CONTRACTORS WOULD HAVE HAD TO MAK E THEIR OWN ARRANGEMENTS AND THIS WOULD HA E BEEN REFLECTED IN THE CHARGES OF THE CONTRACTORS FOR TH E CONSTRUCTION WORK. INSTEAD, THE A1SESSEE HAS PROVID ED THESE FACILITIES. THE SAME IS TRUE OF THE HIRE CHAR GES FOR ITA NO.6539/DEL/2015 8 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 COMPENSA TE THE ASSESSEE FOR THE WEAR AND TEAR ON 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 T O ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED WITHOUT ANY FINANCIAL HITCH AS TO HELP THE CONTRACT ORS. 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 IT S STEEL PLANT. THE RECEIPTS HAVE BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CONTRACTORS AND HAVE GONE TO REDUCE THE COST OF CONSTRUCTION. THEY HAVE, THEREFO RE, BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AND NOT INCOM E OF THE ASSESSEE FROM ANY INDEPENDENT SOURCE. IN THE CASE OF ADDL. CIT V. INDIAN DRUGS AND PHARMACEUTICALS LTD. [1983] 141 ITR 134, THE DELHI HIGH COURT CONSIDERED A CASE WHERE THE WORK OF CONSTRUCTION OF THE FACTORY OF THE ASSESSEE WAS IN PROGRESS AND PRODUCTION HAD NOT COMMENCED. RECEIPTS FROM SALE OF TENDER FORMS AND SUPPLY OF WATER AND ELECTRICITY TO, THE CONTRACTORS ENGAGED IN CONSTRUC TION AS ITA NO.6539/DEL/2015 9 ALSO RECEIPTS ON ACCOUNT OF SALE OF STONES, BOULDER S, GRASS AND TREES WERE HELD TO BE RECEIPTS NOT FROM INDEPENDENT SOURCES BUT WERE CONSIDERED AS INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF BUSINESS. THESE WERE DIRECTLY RELATED TO THE, CAPIT AL STRUCTURE OF BUSINESS AND WERE HELD TO BE CAPITAL I N NATURE. WE AGREE WITH THIS VIEW TAKEN BY THE DELHI HIGH COURT. THE APPELLANT, HOWEVER, RELIED UPON THE DECISION OF THIS COURT IN TUTLCORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V. CIT [19971 227 ITR 172. THAT CASE DEALT WITH THE QUESTION WHETHER INVESTMENT OF BORROWED FUNDS PRIOR TO COMMENCEMENT OF BUSINESS, RESULTING IN EARNING OF INTEREST BY THE ASSESSEE WOULD AMOUNT TO THE ASSESS EE EARNING ,MY INCOME. THIS COURT HELD THAT IF A PERSON HARROWS MONEY FAR BUSINESS PURPOSES, BUT UTILISES THAT MONEY TO EARN INTEREST SO GENERATED WILL BE HIS INCOME. THIS INC OME CAN BE UTILIZED BY THE ASSESSEE WHICHEVER WAY HE L IKES. MERELY BECAUSE HE UTILIZED TO REPAY THE INTEREST ON THE LOAN TAKEN, WILL NOT MAKE THE INTEREST INCOME AS A CAPITAL RECEIPT. THE DEPARTMENT RELIED UPON THE OBSERVATIONS MADE IN THAT JUDGMENT (AT PAGE 179) TO THE EFFECT THAT IF THE COMPANY, EVEN BEFORE IT COMMENCES BUSINESS, INVESTS THE SURPLUS FUNDS IN IT S ITA NO.6539/DEL/2015 10 HANDS FOR PURCHASE OF LAND OR HOUSE PROPERTY AND LA TER SELLS IT AT PROFIT, THE GAIN MADE BY THE COMPANY WI LL BE ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS'. SIMILARL Y, IF A COMPANY PURCHASES A RENTED HOUSE .AND GETS RENT, SU CH RENT WILL BE ASSESSABLE TO TAX UNDER SECTION 22 AS INCOME FROM HOUSE PROPERTY. LIKEWISE, A COMPANY MAY HAVE INCOME FROM OTHER SOURCES. THE COMPANY MAY ALSO, AS IN THAT CASE, KEEP THE SURPLUS FUNDS IN SH ORT- TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTER EST WILL BE CHARGEABLE UNDER SECTION 56 OF THE-INCOME T AX- ACT. THIS COURT ALSO EMPHASIZED THE FACT THAT THE COMPANY WAS NOT BOUND TO UTILIZE THE INTEREST SO EA RNED TO ADJUST IT AGAINST THE INTEREST PAID ON BORROWED CAPITA. THE COMPANY WAS FREE TO USE THIS INCOME IN ANY MANNER IT LIKED. HOWEVER, WHILE INTEREST EARNED BY INVESTING BORROWED CAPITAL IN SHORT-TERM DEPOSITS I S AN INDEPENDENT SOURCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVITIES OF T HE ASSESSEE, THE SAME CANNOT BE SAID IN THE PRESENT CA SE WHERE THE UTILIZATION OF VARIOUS ASSETS OF THE COMP ANY, AND THE PAYMENTS RECEIVED FOR SUCH UTILIZATION ARE INDIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP T HE STEEL PLANT OF THE ASSESSEE. THESE RECEIPTS ARE INEXTRIC ABLY LINKED WITH THE SETTING UP OF THE CAPITAL STRUCTURE OF THE ASSESSEE-COMPANY. THEY MUST, THEREFORE,. BE VIEWED AS ITA NO.6539/DEL/2015 11 CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTR UCTION. IN THE CASE OF CHALLAPALLI SUGARS LTD. V. CIT [1975 J 98 ITR 167, THIS COURT EXAMINED THE QUESTION WHETHER INTEREST PAID BEFORE THE COMMENCEMENT OF PRODUCTION BY A COMPANY ON AMOUNTS BORROWED FOR THE ACQUISITIO N AND INSTALLATION OF PLANT AND MACHINERY WOULD FORM A PART OF THE ACTUAL COST OF THE ASSET TO THE ASSESSE E WITHIN THE MEANING OF THAT EXPRESSION IN SECTION 10 (5) OF THE INDIAN INCOME-TAX ACT, 1922, AND WHETHER THE ASSESSEE WILL BE ENTITLED TO DEPRECIATION ALLOWANC ES AND DEVELOPMENT REBATE WITH REFERENCE TO SUCH INTEREST ALSO. THE COURT HELD THAT THE ACCEPTED ACCOUNTANCY RULE FOR DETERMINING THE COST OF FIXED ASSETS IS TO INCL UDE ALL EXPENDITURE NECESSARY TO BRING SUCH ASSETS INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION. IN CASE MONEY IS BORROWED BY A NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE THE COMMENCEMENT OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALIZE D AND ADDED TO THE COST OF THE FIXED ASSETS CREATED A S A RESULT OF SEEN EXPENDITURE. BY THE SAME REASONING I F THE ASSESSEE RECEIVES ANY AMOUNTS WHICH ARE INEXTRICABL Y LINKED WITH THE PROCESS OF SETTING UP ITS PLANT AND MACHINERY; SUCH RECEIPTS WILL GO TO REDUCE THE COST OF ITA NO.6539/DEL/2015 12 ITS ASSETS. THESE ARE RECEIPTS OF A CAPITAL NATURE AND CANNOT BE TAXED AS INCOME. THE SAME REASONING WOULD APPLY TO ROYALTY RECEIVED BY THE ASSESSEE-COMPANY FOR STONES, ETC., EXCAVATED FR OM THE ASSESSEE-COMPANY'S LAND. THE LAND HAD BEEN ALLOWED TO BE UTILIZED BY THE CONTRACTORS FOR THE P URPOSE OF EXCAVATING STONES TO BE USED IN THE CONSTRUCTION WORK OF THE ASSESSEE'S STEEL PLANT. THE COST OF THE PLANT TO THE EXTENT OF SUCH ROYALTY RECEIVED IS REDUCED F OR THE ASSESSEE. IT IS, THEREFORE, RIGHTLY TAKEN AS A CAPI TAL RECEIPT'. 3.6 IN MY VIEW THE CASE OF THE APPELLANT IS COVERED BY THE RATIO OF THE JUDGMENTS REFERRED ABOVE. THE DEPOSIT MADE BY THE APPELLANT IN FDR AS MARGIN MONEY FOR ISSUE OF PERFORMANCE SECURITY WAS NOT A CASE OF PARKING IDLE OR SURPLUS FUNDS BUT A CRITICAL PRECONDITION TO MEET ITS OBL IGATION UNDER THE POWER PURCHASE AGREEMENT WITH GUJARAT URJA VIKA S NIGAM LTD. THE EARNING OF INTEREST ON THE SAID FDR WAS THEREFORE ONLY INCIDENTAL AND NOT THE CARDINAL MOTIVE OF THE TRANSACTION. INTEREST INCOME OF RS. 35,43,471/- BEING INEXTRICAB LY LINKED WITH THE ACTIVITY OF THE SETTING UP OF THE BUSINESS OF THE APPELLANT IS TREATED AS CAPITAL RECEIPT. THE TREATM ENT OF INTEREST INCOME OF RS. 35,43,471/- AS INCOME FROM THE OTHER SOURCES AS HELD BY THE AO IS NOT SUSTAINABLE AND IS THEREFORE, DELETED. ITA NO.6539/DEL/2015 13 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD.CIT( A), AS AFORESAID, I FIND THAT LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DELETED THE ADDITION IN DISPUTE BY RESPECTFULLY FOLLOW THE ORDER OF THE HONBLE SUPREME COURT OF IN DIA IN THE CASES OF CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD. (200 0) 243 ITR 2 (SC) AND CIT VS. BOKARO STEEL LTD. (1999) 236 ITR 3 15 (SC). KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES AS E XPLAINED AND RESPECTFULLY FOLLOW THE PRECEDENTS OF THE HONBLE SUPREME COURT AS CITED IN THE LD. CIT(A)S IMPUGNED ORDER, AS AF ORESAID, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), HENCE, I UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/08/2016. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 30/8/2016 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR