Anrak Aluminium Limited, Hyderabad, Hyderabad V. DCIT, Circle-1(1), Hyderabad, Hyderabad

ITA 994/HYD/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5277 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2013-2014
• Appeal Filed On: 09-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJALA SAHU
• Assessee Lawyers: A V RAGHURAM
• Keywords: Earning of tax free income; Proportionate interest; Revenue expenditure; Capital expenditure; Rule 8D
• Section: 14A; 115JB; 72; 153; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 994/HYD/2017 ASSESSMENT YEAR: 2013-14 M/S.ANRAK ALUMINIUM LIMITED, HYDERABAD [PAN: AAGCA2333M] VS DCIT, CIRCLE-1(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V.RAGHURAM, AR FOR REVENUE : SMT. ANJALA SAHU, DR DATE OF HEARING : 21-01-2021 DATE OF PRONOUNCEMENT : 08-02-2021 O R D E R PER BENCH : THIS ASSESSEES APPEAL FOR AY.2013-14 ARISES FROM TH E CIT(A)-1, HYDERABADS ORDER DATED 17-03-2017 PASSED IN APPEAL NO.0016 / CIT(A)-1/ HYD/ 2016-17/ 2016-17 IN VOLVING PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE FIRST AND FOREMOST ISSUE THAT ARISES FOR OUR A PT ADJUDICATION IN ASSESSEES INSTANT APPEAL IS THAT OF C ORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION INVOKING SECTION 1 4A DISALLOWANCE OF RS.3,60,23,673/- IN THE COURSE OF A SSESSMENT ITA NO. 994/HYD/2017 :- 2 -: AND UPHELD IN THE CIT(A)S ORDER. THE SAME FOLLOWED SECTION 115JB MAT ALLEGED CONSEQUENTIAL ADJUSTMENT AS WELL. 3. COMING TO THE LATTER PART OF MAT INCLUSION OF SECTION 14A READ WITH RULE 8D DISALLOWANCE, THERE IS HARDLY ANY DISPUTE THAT CASE LAW ACIT VS. VIREET INVESTMENT P. LTD., (2017 ) [165 ITD 27] (DELHI) (SB) HAS ALREADY DECIDED THE SAME IN ASSESSEES FAVOUR. THE ASSESSEE THEREFORE GETS RELIEF TO THIS LIM ITED EXTENT AT THIS STAGE. 4. WE NOW ADVERT TO THE MAIN COMPONENT OF THE IMPUGNED DISALLOWANCE. THE ASSESSING OFFICERS ASSESSMENT OR DER DT.07- 03-2016 INVOKED SECTION 14A R.W. RULE 8D(2)(II) OF TH E INCOME TAX RULES IN ARRIVING PROPORTIONATE INTEREST EXPENDITUR E DISALLOWANCE OF RS.3,37,63,307/-. CASE RECORDS AND MORE PARTICULARLY PARA 3.4 OF THE ASSESSMENT ORDER SUGGESTS THAT THE ASSESSEE WAS FOUND TO HAVE MADE INVESTMENTS OF RS.17,41,46,612/- RELATING TO ITS EXEMPT INCOME FROM DIVIDENDS TO THE TUNE OF RS.7,91,07,443/- IN THE RELEV ANT PREVIOUS YEAR. AS AGAINST THAT, WE NOTICE THAT IT HAD IN TEREST FREE FUNDS OF RS.13,02,47,08,990/- REPRESENTING SHAR E CAPITAL FOLLOWED BY RS.7,49,10,320/- OF RESERVES AND SURPLU S; RESPECTIVELY. MEANING THEREBY THAT ASSESSEES NON-IN TEREST BEARING FUNDS EXCEED MORE THAN ITS EXEMPT INCOMES INVESTMENT. WE QUOTE CIT VS. RELIANCE UTILITIES & POWER LTD. , [313 ITR 340] AND CIT VS. HDFC BANK LIMITED [366 ITR 505] (BOM) THAT THE NECESSARY PRESUMPTION THAT FLOW IN SUCH A N INSTANCE IS THAT OF UTILISATION OF NON-INTEREST BEARING F UNDS ONLY IN DERIVING EXEMPT INCOME. WE GO BY THIS PROCES S REASON ITA NO. 994/HYD/2017 :- 3 -: ALONE TO DELETE PROPORTIONATE INTEREST EXPENDITURE DISA LLOWANCE OF RS.3,37,63,307/-. 5. THIS LEAVES US WITH THE THIRD LIMB OF ADMINISTRATIVE EXPENDITURE DISALLOWANCE OF RS.22,60,366/-. LEARNE D CIT-DR FAILS TO DISPUTE THAT BOTH THE LOWER AUTHORITIES HAVE GONE BY THE ASSESSEES GROSS AMOUNT OF INVESTMENTS THAN THOSE YIELDING ITS EXEMPT INCOME ONLY. WE THEREFORE DIRECT THE ASSESSING OFFICER TO RESTRICT THE IMPUGNED DISALLOWANCE TO THE EXTENT OF ASSESSEES EXEMPT INCOME YIELDING INVESTMENTS. THE ASSESSEE GETS PART RELIEF TO THIS EXTENT. THIS FIRST SUBS TANTIVE ISSUE IS PARTLY DECIDED IN ASSESSEES FAVOUR. NECES SARY COMPUTATION TO FOLLOW AS PER LAW. 6. WE ARE NOW LEFT WITH THE SECOND ISSUE OF INTEREST INC OME ADDITION OF RS.26,45,20,127/- TREATED AS INCOME FROM OTHER SOURCES IN BOTH THE LOWER PROCEEDINGS. LD.CIT(A) DE TAILED DISCUSSION TO THIS EFFECT READS AS UNDER: 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T IS NOTICED BY THE ASSESSING OFFICER, THAT THE ASSESSEE HAS NOT YET CO MMENCED ITS BUSINESS ACTIVITIES. FURTHER THE ASSESSEE HAS RECE IVED BANK INTEREST ON FIXED DEPOSITS AMOUNTING TO RS.26,45,20,127/- WH ICH WAS REDUCED FROM INTEREST PAID TO BANKS. 5.2 THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INTER EST INCOME SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM 'OTH ER SOURCES' IN VIEW OF THE APEX COURT DECISION IN THE CASE OF TURI CORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED VS. CIT 227 ITR 0 172, IN RESPONSE, THE ASSESSEE STATED THAT THE COMPANY HAS AVAILED TE RM LOANS, WHICH WERE PENDING FOR UTILIZATION, THESE FUNDS WERE INVE STED IN MUTUAL FUNDS AND FIXED DEPOSITS. INCOME EARNED ON SUCH SHO RT TERM INVESTMENTS WAS REDUCED FROM THE CAPITALIZATION COS T. THIS TREATMENT WAS IN ACCORDANCE WITH THE ACCOUNTING STANDARD 16. THE APPELLANT TOOK RELIANCE OF THE CASE M/S. NEELACHAL ISPAT NIGA M LTD VS ASST. CIT (ITAT CUTTACK BENCH DATED 31 AUG 2004). THE ASSESSI NG OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND INTER EST RECEIVED ON ITA NO. 994/HYD/2017 :- 4 -: FIXED DEPOSITS AMOUNTING TO RS.26,45,20,127/- WAS T REATED AS INCOME FROM OTHER SOURCES. 5.3 BEFORE ME, APPELLANT SUBMITTED THAT ASSESSING O FFICER ASSESSED THE INTEREST INCOME UNDER THE HEAD' OTHER SOURCES' BY RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF TUTICO RIN ALKALIS REPORTED IN 227 ITR 172. THE APPELLANT SUBMITTED THAT THE AS SESSING OFFICER WHO IS AWARE OF THE DECISION SHOULD BE AWARE OF THE FACTS AND APPLICATION OF SUCH RATIO TO SUCH FACTS. WHAT THE A PEX COURT IN FACT HELD IS THAT WHERE THE BUSINESS OF THE ASSESSEE HAS NOT COMMENCED AND NO PROFIT AND LOSS ACCOUNT IS DRAWN, IT IS REQU IRED TO ASSESS THE INTEREST INCOME SEPARATELY UNDER THE HEAD 'OTHER SO URCES' AND NOT IN A CASE WHERE A PROFIT AND LOSS ACCOUNT IS DRAWN. IN THE APPELLANT'S CASE A PROFIT AND LOSS ACCOUNT IS DRAWN AND LOSS OF RS.47, 43,37,983/- IS CLAIMED. EVEN IF THE INTEREST INCOME IS ASSESSABLE UNDER THE HEAD 'OTHER SOURCES' ONCE THERE IS LOSS U NDER THE HEAD BUSINESS THE SAME IS PERMITTED TO BE SET OFF UNDER THE PROVISIONS OF SEC.71. 5.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AND THE FINDINGS OF THE ASSESSING OFFICER. THERE ARE CERTA IN ABERRATIONS IN THE SUBMISSION OF THE APPELLANT. 5.5 TO BEGIN, ONE HAS TO UNDERSTAND THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED VS. CIT 227 ITR 172 (SC), WHEREIN IT WAS HELD THAT: 'INTEREST EARNED SHORT TERM INVESTMENT OF FUNDS BOR ROWED FOR SETTING UP OF FACTORY DURING CONSTRUCTION OF FACTORY BEFORE COMMENCEMENT OF BUSINESS, HAS TO BE ASSESSED AS INCOME FROM OTHER S OURCES AND IT CANNOT BE CLAIMED AS NON-TAXABLE ON THE GROUND THAT IT WOULD GO TO REDUCE INTEREST ON BORROWED FUNDS. ...... .. IN THE CASE BEFORE US, THE COMPANY HAD SU RPLUS FUNDS IN ITS HANDS. IN ORDER TO EARN INCOME OUT OF THE SURPLUS F UNDS, IT INVESTED THE AMOUNT FOR THE PURPOSE OF EARNING INTEREST. THE INTEREST THUS EARNED IS CLEARLY OF REVENUE NATURE AND WILL HAVE T O BE TAXED ACCORDINGLY. THE ACCOUNTANTS MAY HAVE TAKEN SOME OT HER VIEW BUT ACCOUNTANCY PRACTICE IS NOT NECESSARILY GOOD LAW. I N B.S.C. FOOTWEAR LTD. VS. RIDGWAY (INSPECTOR OF TAXES) (1972) 83 ITR 269 (HL), THE HOUSE OF LORDS HAD NO HESITATION IN HOLDING THAT TH E ACCOUNTING PRACTICE FOR CALCULATING ITS PROFIT FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE FOR 30 YEARS COULD NOT BE T REATED AS SANCTIONED BY LAW AND WAS NOT ACCEPTABLE FOR THE PU RPOSE OF COMPUTATION OF TAXABLE INCOME. ' 5.6. IN THE CASE OF M/S.BOKARO STEEL LTD. (SUPRA), DIFFERENT ASSESSMENT YEARS WERE INVOLVED, HOWEVER ON THE ISSU E OF TREATMENT ITA NO. 994/HYD/2017 :- 5 -: OF INTEREST RECEIVED ON THE SHORT-TERM DEPOSIT, THE HON'BLE SUPREME COURT HAS HELD AS UNDER: 'DURING THESE ASSESSMENT YEARS, THE RESPONDENT ASSE SSEE HAD INVESTED THE AMOUNTS BORROWED BY IT FOR THE CONSTRU CTION WORK WHICH WERE NOT IMMEDIATELY REQUIRED, IN SHORT-TERM DEPOSI TS AND EARNED INTEREST. IT HAS BEEN HELD IN THESE PROCEEDINGS TH AT THE RECEIPT OF INTEREST AMOUNTS TO INCOME OF THE ASSESSEE FROM OTH ER SOURCES. .. IN ANY CASE, THIS QUESTION IS NOW CONCLUDED BY A DECISION OF THIS COURT IN TUTICORIN ALKALI CHEMICALS & FERTI LIZERS LTD. VS. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC). HENCE, WE ARE NOT CALLED UPON TO EXAMINE THAT ISSUE. 5.7. AS FAR AS THE FACTS OF THE PRESENT CASE ARE CO NCERNED, IT IS NOT A CASE OF THE ASSESSEE WHERE 'THE DEPOSITS' HAD ANY N EXUS WITH THE SETTING UP OF THE PLANT. IN FACT, THE SURPLUS FUND WHICH WAS KEPT WITH THE BANK ON WHICH THE ASSESSEE EARNED INTEREST. IN MY OPINION, THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT I N THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD (SUPRA ) ARE SQUARELY APPLICABLE AND INTEREST EARNED BY THE ASSESSEE EVEN DURING THE CONSTRUCTION PERIOD ON THE SHORT-TERM DEPOSIT KEPT WITH THE BANK IS ASSESSABLE AS AN INCOME WHICH THE ASSESSING OFFICER HAS DONE. 5.8. I ALSO RELY ON THE HON'BLE COURT DECISIONS IN THE FOLLOWING CASES: A) CIT VS. AUTOKAST, (2000) [248 ITR 110] (SC) : TH E QUESTION THAT WAS BEFORE THE HIGH COURT, WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INTEREST INCOME IS NOT ASSESSABLE TO TAX IN THE HANDS OF THE APPELLANT? THE HON'BLE HIGH COURT ANSWERED T HE QUESTION AGAINST THE REVENUE AND THE DEPARTMENT WAS IN APPEA L BY SPECIAL LEAVE. IN REFERENCE TO THE TUTICORIN ALKALI CHEMICA LS AND FERTILIZERS LIMITED VS. CIT 227 ITR 172 (SC), THE CIVIL APPEAL ALLOWED IN FAVOUR OF THE REVENUE. IN OTHER WORDS, THE INTEREST INCOME IS ASSESSABLE TO TAX IN THE HANDS OF THE ASSESSEE AND HELD THAT THE INTE REST WHICH OCCURRED TO THE ASSESSEE WAS ASSESSABLE UNDER THE H EAD 'INCOME FROM OTHER SOURCES' AND CANNOT BE SET OFF AGAINST P REOPERATIVE EXPENSES AS CLAIMED BY THE ASSESSEE. B) CHANDAPUR SUGAR COMPANY LIMITED VS. CIT (2004) [ 197 CTR 381] (ALLAHABAD HIGH COURT): IN THIS CASE, THE ASSESSEE CLAIMED THAT INTEREST RECEIVED SHOULD BE SET OFF AGAINST THE INT EREST PAYMENT. HENCE NO INTEREST INCOME IS ASSESSABLE IN HANDS. TH E ITO HAS REJECTED THE CLAIM AND WAS ASSESSED UNDER INCOME FR OM OTHER SOURCES. THE COURT HELD THAT INTEREST EARNED BY THE APPELLANT HAS RIGHTLY BEEN HELD TO BE THE INCOME AND TAXABLE UNDE R THE HEAD 'INCOME FROM OTHER SOURCES'. ITA NO. 994/HYD/2017 :- 6 -: C) CIT VS. COROMANDAL CEMENTS LTD (1997) [234 ITR 4 12] (SC) D) CIT VS. NEW CENTRAL JUTE MILLS CO. LTD [1979] [1 18 ITR 1005](KOLL.); IN THIS CASE THE APPELLANT EARNED INTEREST WHICH WA S DEPOSITED IN A BANK TO RECEIVE INTEREST. THE DIFFERENCE BETWEEN IN TEREST PAID AND EARNED WAS CLAIMED AS REVENUE EXPENSES. THE KOLKATA HIGH COURT, REFERRED TO THE OBSERVATION THAT IN CASE MONEY BORR OWED BY D NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUC TING AND ERECTING ITS PLANT, THE INTEREST INCURRED BEFORE THE COMMENC EMENT OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALIZED AND ADDED TO THE COST OF THE FIXED ASSETS WHICH HAVE BEEN CREATED AS A RESUL T OF SUCH EXPENDITURE. THE COURT CONCLUDED IN FAVOR OF THE RE VENUE. 'THE EXPENDITURE ASSESSEE HAS FAILED TO ESTABLISH THAT I T WAS ITS PURPOSE THAT UTILIZED AMOUNT RECEIVED ON LOAN FOR EARNING I NTEREST. IT CANNOT BE SAID THAT THE ASSESSEE HAS ESTABLISHED NEXUS BETWEE N THE DEPOSIT AND THE LOAN TAKEN. E) ADDL.CIT VS. MADRAS FERTILIZERS LTD [1980] [122 ITR 139J(MAD.) : IN' THIS CASE, THE ISSUE RAISED WAS WHETHER THE INTERES T RECEIVED WAS WHOLLY AND EXCLUSIVELY IN CONNECTION OF BUSINESS. T HE BORROWING ITSELF WAS NOT FOR THE PURPOSE OF DEPOSITING THE MONEY AND EARNING, INTEREST, ONLY FOR THE PURPOSE OF PUTTING UP THE PL ANT AND PURCHASING THE CAPITAL GOODS. HENCE, THE INTEREST PAID TO THE LOAN AMOUNT CANNOT HAVE ANY DIRECT CONNECTION WITH THE DEPOSIT OF THE AMOUNT AND WITH THE INTEREST EARNED. THE CASE ALSO REFERRED TO SMT. PADMAVATI JAYKRISHNA VS. CIT (1975) 101 ITR 153 (GUJ.) F) M/S TRACO CABLE COMPANY LIMITED VS. CIT [19691 [ 72 ITR 503](KER.) : IN THIS CASE, THE COURT HELD THAT RECE IPT OF INCOME BY INTEREST WAS ONLY INCIDENTAL OR CONSEQUENTIAL ON TH E DEPOSIT. IT CAN HARDLY BE CONTENDED, IF AN INDIVIDUAL, WHO CARRIES ON ANY BUSINESS OTHER THAN A BUSINESS OF BANKING OR DEALING IN MONE Y, DEPOSITS IN' HIS SURPLUS FUNDS IN A BANK AND RECEIVES INTEREST THERE ON, THE INTEREST THUS RECEIVED, WOULD BE INCOME FROM BUSINESS. THAT IS TO SAY INTEREST RECEIVED IN THE BANK DEPOSITS CANNOT BE SAID TO HAV E CONNECTION WITH THE BUSINESS UNLESS HE IS IN THE BUSINESS OF BANKIN G. G) M/S MADHYA PRADESH STATE INDUSTRIES CORPORATION LIMITED VS. CIT [1968] [69 ITR 824] (MP): THE COURT HELD THAT NEWLY ESTABLISHED THE CLAIM OF TREATING THE INTEREST INCOME RECEIVED AS I NCOME FROM BUSINESS, WAS OBVIOUSLY MADE FOR THE PURPOSE OF DED UCTION OF A MAJOR PORTION OF THE EXPENSES INCURRED. THE COURT H ELD IT IS NOT SUFFICIENT MERELY TO LOOK AT THE MEMORANDUM OF ASSO CIATION AND TO FIND OUT OF THE BUSINESS AT PROFITS. IT IS ALSO NEC ESSARY TO DETERMINE FURTHER WHETHER THE PARTICULAR ACT DONE BY THE COMP ANY WAS DONE IN PURSUANCE WITH THE OBJECTS ENUMERATED IN THE MEMORA NDUM OR ARTICLES OF ASSOCIATION. IN MY OPINION ON THE FACTS OF THE CASE, IT IS IMPOSSIBLE TO HOLD THE DEPOSIT OF THE SHARE, MONEY IN CERTAIN MONEY ITA NO. 994/HYD/2017 :- 7 -: WAS AN INVESTMENT MADE BY THE APPELLANT TO THE OBJE CTS SPECIFIED BY OTHER CLAUSE. THE APPELLANT WAS NOT A BANKING COMPA NY, HENCE MONEY DEPOSITED BY THE COMPANY WITH THE BUSINESS WA S NOT IN THE ORDINARY COURSE OF BUSINESS. HENCE, INCOME RECEIVED ON THE DEPOSITS CANNOT BE REGARDED AS INCOME UNDER THE HEAD INCOME' FROM PROFIT AND GAINS OF THE BUSINESS AND, THIS CLEARLY IS A INCOME FROM OTHER SOURCES U/S. 56 OF THE IT ACT, 1961. H) IN THE CASE OF CIT VS. SESHASAYEE PAPER & BOARDS LIMITED, HON'BLE MADRAS HIGH COURT HELD THAT 'THE INTEREST EARNED BY THE ASSESSEE ON INVESTMENT OF SHARE CAPITAL IN CALL DEPOSITS HAVE B EEN BEFORE PRODUCTION COMMENCED SHOULD BE ASSESSED SEPARATELY UNDER THE HEAD OTHER SOURCES'. I) CIT VS. NAGARJUNA STEEL, HON'BLE A.P. HIGH COURT HELD THAT 'INTEREST RECEIVED ON SHORT TERM DEPOSITS BY A COMPANY PRIOR TO COMMENCEMENT OF PRODUCTION COULD NOT BE TREATED AS REVENUE RECEI PT', J) CHALAPALLI SUGAR LIMITED VS. CIT [1975J [98 ITR 167J (SC) HELD THAT THE INTEREST WAS NOT ALLOWED AS REVENUE EXPENDITURE IN THE PERIOD PRIOR TO COMMENCEMENT OF THE BUSINESS OF THE ASSESS EE. K) IN THE CASE OF CENTRAL TRAVANCORE SPECIALISTS HO SPITAL LTD VS. ACIT, HON'BLE ITAT, COCHIN BENCH HELD THAT 'INTEREST EARN ED BY THE ASSESSEE EVEN DURING THE CONSTRUCTION PERIOD ON THE SHORT-TERM DEPOSIT KEPT WITH THE BANK IS ASSESSABLE AS AN INCO ME'. I) CIT VS. UNIVERSAL ELECTRO GRAPHITE LIMITED [1989 ] [197 ITR 465], WHEREIN IT RELATED TO INTEREST ON FIXED DEPOSITS AN D LET A PAYMENT OF CALL MONEY PRIOR TO SETTING UP OF BUSINESS SHOWING NO NEXUS OR RELATION WITH A CAPITAL EXPENDITURE, REDUCTION WAS REFUSED. M) INTERNATIONAL MARKETING LIMITED VS. ITO & ORS. [ 2007] [292 ITR 504] (DEL.) HELD THAT IF NO BUSINESS HAD BEEN TRANS ACTED THERE WAS NO QUESTION OF ALLOWING ANY EXPENSES IN RELATION THERE TO. 5.9. BASED ON THE ABOVE DECISIONS, I CONSIDER INTER EST INCOME OF RS.26, 45,20,127/- EARNED BY THE APPELLANT IS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. HAVING DECIDE D THAT, THE ISSUE OF SET OFF OF BUSINESS LOSSES (INTEREST PAYABLE ON LONG TERM BORROWINGS) AGAINST THE INCOME FROM 'OTHER SOURCES' (INTEREST RECEIVED ON SHORT TERM DEPOSIT DURING PRE-OPERATIVE PERIOD), AS CONTENDED BY THE APPELLANT, CANNOT BE ALLOWED U/S 72. HENCE, THE ASSESSING OFFICER IS RIGHT IN HOLDING THE INTEREST INCOME ON SHORT TERM DEPOSITS WHICH IS TO BE ASSESSED UNDER INCOME FROM OTHER SO URCES AND NOT TO BE SET OFF AGAINST INTEREST PAYABLE OR CAPITALIZ ED IN WORKS-IN- PROGRESS. ITA NO. 994/HYD/2017 :- 8 -: 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIV AL PLEADINGS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. WE FIND NO MERIT IN ASSESSEES STAND I N PRINCIPLE SINCE ITS INTEREST INCOME IS NOT RELATED TO ANY REVENUE DERIVING BUSINESS ACTIVITY. THE SAME THEREFORE DESERVES TO BE TREATED AS INCOME FROM OTHER SOURCES ONLY GOING BY THE LD.CIT( A)S DETAILED DISCUSSION EXTRACTED HEREINABOVE IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS. THE FACT ALSO REMAINS TH AT NEITHER OF THE LOWER AUTHORITIES HAS PROCEEDED ON NETTING FORMUL A GOING BY HON'BLE APEX COURTS DECISION IN ACG ASSOCI ATED CAPSULES PVT. LTD. VS. CIT (2012) [343 ITR 89] (SC). WE THEREFORE DIRECT THE ASSESSING OFFICER TO ALLOW NETTING BENEFIT QUA THE IMPUGNED ADDITION VIS--VIS THE CORRESPONDING EXPENDITURE INCURRED AT THE TAXPAYERS BEHEST IN ABOVE TERMS. 8. LEARNED COUNSEL NEXT INVITED OUR ATTENTION TO THE CIT( A)S ORDER IN PARA 5 THAT THE ASSESSEE HAD ALTHOUGH PLEADED SET-OFF OF ITS IMPUGNED INTEREST INCOME AGAINST BUSINESS LOSSES OF RS.3,12,49,041/-, THE SAME HAS NOT BEEN DEALT WITH SPECIFICALLY. 9. LD.CIT-DR, ON THE OTHER HAND, QUOTED PARA 5.9 OF TH E CIT(A)S ORDER THAT THE SAME HAD BEEN DULY CONSIDERED. IT EMANATES FROM THE CASE RECORDS THAT ALTHOUGH THE CIT(A) APPEARS TO HAVE DENIED THE ASSESSEE THE IMPUGNED INTRA HEAD SET-OFF OF THE TWO HEADS OF INCOME, IT IS NOT CLEAR AS TO UNDER WHICH CLAUSE OF SECTION 72 WAS INVOKED TO DECLINE THIS RELIEF. WE THUS ARE OF THE OPINION THAT THIS ISSUE OF SET-OFF OF INTEREST INCOME AGAINST BUSINESS LOSS DESERVES TO BE CONSIDERE D AFRESH ITA NO. 994/HYD/2017 :- 9 -: AS PER LAW. WE RESTORE THIS ISSUE BACK TO THE ASSESSIN G OFFICER THEREFORE. 10. MR.RAGHURAM LASTLY INVITED OUR ATTENTION TO THE ASSESSEES GROUND NO.5 THAT THE CIT(A) HAS ERRED IN NO T CONSIDERING THE ASSESSEES ALTERNATE PLEA SEEKING DI RECTIONS TO THE ASSESSING OFFICER TO INCREASE THE WORK IN PROGRES S UPON ADDITION OF INTEREST INCOME OF RS.26,45,20,127/-. WE D O NOT FIND ANY MERIT IN THE INSTANT GROUND PER SE. THE FACT ALSO REMAINS THAT SINCE THE ASSESSEES MAIN ISSUE HAS ALREA DY BEEN RESTORED BACK TO THE ASSESSING OFFICER, HE SHALL ALSO EXAMINE AND ENSURE THAT THERE IS NO DOUBLE DEDUCTION/ADDITION QUA THE SAME IN CONSEQUENTIAL PROCEEDINGS. NECESSARY COMPUTA TION TO FOLLOW AS PER LAW. 11. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN FORE GOING TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH FEBRUARY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.GO DARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 08-02-2021 TNMM ITA NO. 994/HYD/2017 :- 10 -: COPY TO : 1.M/S.ANRAK ALUMINIUM LIMITED, C/O.K.VASANT KUMAR, A.V.RAGHU RAM, P.VINOD & M.NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2.THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1 ), HYDERABAD. 3.CIT(APPEALS)-1, HYDERABAD. 4.PR.CIT-1, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.