M/s Bharat Oman Refineries Limited, BINA V. The DCIT 1(2), Bhopal

MA 124/IND/2012

• Counselvise Citation: [2013] 123 COUNSELVISE.COM (IT) 9815 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: ARUN MEHROTRA
• Keywords: Business income; Source of fund; Capital receipt
• Section: 56; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 2/IND/2012 A.Y.2008-09 M/S BHARAT OMAN REFINERIES LIMITED BINA PAN AABCB7084M :: APPELLANT VS DY. COMMISSIONER OF INCOME TAX 1(2), BHOPAL :: RESPONDENT APPELLANT BY SHRI ARUN MEHROTRA RESPONDENT BY SHRI KESHAV SAXENA DATE OF HEARING 23.07.2012 DATE OF PRONOUNCEMENT 30.07.2012 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 3 RD OCTOBER, 2011 PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY, BHOPAL, ON THE GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.31,39,70,137/- TO THE TOTAL INCOME ON ACCOUNT OF INTEREST 2 EARNED ON FDRS MADE OUT OF ZERO COUPON CONVERTIBLE BONDS AND FURTHER ERRED IN NOT PLACING RELIANCE ON THE DECISI ON OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VGR FOUNDA TIONS (2008) 298 ITR 132 (MAD.) 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE , SHRI ARUN MEHROTRA, ADVANCED HIS ARGUMENTS WHICH ARE IDENTICA L TO THE GROUND RAISED. ON THE OTHER HAND, THE LEARNED CIT D R, SHRI KESHAV SAXENA, STRONGLY DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT THE INTEREST INCOME, SO EARNED, IS INCOME FROM OTHER SOURCES AND NOT THE BUSINESS INCOME. THE LD. CIT/DR ALSO PREFERRED WRITTEN SUBMISSIONS IN WHICH CERTAIN JUDI CIAL PRONOUNCEMENTS HAVE BEEN RELIED UPON. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE LEARNED ASSESSING OFFICER, DURING THE ASSE SSMENT PROCEEDINGS, NOTED THAT IN COMPUTATION OF TOT AL INCOME OF THE ASSESSEE, AN AMOUNT OF RS. 74,94,21,146/- WAS OFFERED, AND CLAIMED DEDUCTION OF RS. 31,39,70,137/-, BEING INTE REST, EARNED ON FDRS PRIOR TO COMMENCEMENT OF BUSINESS FRO M DEBENTURE LOANS. THE ASSESSING OFFICER ASKED THE JUS TIFICATION OF 3 SUCH DEDUCTION. THE ASSESSEE PLACED RELIANCE UPON THE DECISION FROM HONBLE MADRAS HIGH COURT IN THE CASE OF VGR F OUNDATIONS (SUPRA) AND CLAIMED THAT THE DEDUCTION WAS RIGHTLY CLAIMED. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE C OMPANY, IN EARLIER YEARS, ISSUED CONVERTIBLE ZERO COUPON DEBEN TURES TO BPCL WHICH WERE CONVERTIBLE INTO EQUITY SHARES WITHIN A PERIOD OF 36 YEARS. THE AMOUNT OF RS. 90 CRORES WAS RECEIVED AS DEBENTURE LOANS IN EARLIER YEARS. THE CLAIM OF THE ASSESSEE IS THAT THE INTEREST OF RS.31,39,70,137/- WAS EARNED FROM FDRS MADE FROM SUCH DEBENTURE LOANS. ON APPEAL, THE LEARNED CIT(A ) AFFIRMED THE STAND OF THE ASSESSING OFFICER AND DISCUSSED TH E DECISIONS IN CIT VS. MODI RUBBER LIMITED; 208 ITR 370 AND MANGAL CEMENTS LIMITED; 217 ITR 369 AND HELD THAT EARNING OF SUCH INTEREST IS TO BE TAXED AS INCOME FROM OTHER SOURCES. THE AGGRIEV ED ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3.1. UNDER THE FACTS MENTIONED HEREINABOVE, NOW Q UESTION ARISES WHETHER THE INTEREST INCOME EARNED FROM FDRS , MADE OUT OF ZERO COUPON CONVERTIBLE BONDS, IS BUSINESS INCOM E OR INCOME FROM OTHER SOURCES. THERE ARE SO MANY JUDICIAL PRON OUNCEMENTS ON THIS ISSUE. THE ONLY DECISION CLAIMED TO BE IN FAVOUR OF THE ASSESSEE IS VGR FOUNDATIONS (SUPRA) FROM HONBLE MA DRAS HIGH 4 COURT WHEREIN THE ASSESSEE WAS ENGAGED IN REAL ESTA TE BUSINESS, INCURRED EXPENSES PRIOR TO COMMENCEMENT OF BUSINESS AND ALSO EARNED INTEREST INCOME FROM FIXED DEPOSITS WITH THE BANK AND THE INCOME WAS SET OFF AGAINST EXPENSES. THE ASSESSING OFFICER HELD THAT INTEREST INCOME ON SHORT TERM DEPOSITS IN THE BANK, DURING PREPRODUCTION STAGE, WAS ASSESSABLE AS INCOME FROM OTHER SOURCES. THE ASSESSMENT ORDER WAS AFFIRMED BY THE L EARNED CIT(A). THE TRIBUNAL HELD THAT INTEREST ON MONIES B ORROWED FOR PRIOR PERIOD TO THE COMMENCEMENT OF BUSINESS COULD BE ALLOWED AS DEDUCTION FROM INTEREST U/S 57 OF THE ACT WHILE COMPUTING INCOME FROM OTHER SOURCES IN RESPECT OF INTEREST RE CEIVED. THIS STAND OF THE TRIBUNAL WAS AFFIRMED BY THE HONBLE M ADRAS HIGH COURT. IT IS PERTINENT TO MENTION HERE THAT EVEN TH E TRIBUNAL HELD SUCH INCOME AS INCOME FROM OTHER SOURCES (INTEREST RECEIVED FROM FIXED DEPOSITS). WHILE COMING TO THIS CONCLUSION, T HE HONBLE HIGH COURT FOLLOWED THE DECISION FROM HONBLE APEX COURT LIKE CIT VS. BOKARO STEEL LIMITED; 236 ITR 315 (SC) AND CIT VS. KARNATAKA POWER CORPORATION; 247 ITR 268 (SC) ALONG WITH OTHE R DECISIONS LIKE TUTICORIN ALKALI CHEMICALS & FERTILIZERS LIMIT ED; 227 ITR 172, KARNAL COOPERATIVE SUGAR MILLS LIMITED; 243 IT R 2 AND BONGAIGAON REFINERY & PETROCHEMICALS LIMITED; 251 I TR 329 (SC). 5 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F MADHYA PRADESH STATE INDUSTRIES CORPORATION LIMITED VS. CI T (69 ITR 824) WHEREIN THE SHARE MONIES RECEIVED BY THE COMPA NY, NOT BEING IMMEDIATELY REQUIRED, WERE DEPOSITED IN CALL DEPOSITS IN CERTAIN BANKS. THE ASSESSEE RECEIVED INTEREST ON SU CH DEPOSITS. THE ASSESSING OFFICER ASSESSED SUCH INTEREST INCOME AS INCOME FROM OTHER SOURCES WHICH WAS AFFIRMED BY AAC AND TH E TRIBUNAL. ON REFERENCE TO THE HONBLE HIGH COURT, IT WAS HELD THAT DEPOSIT OF SHARE CAPITAL IN A BANK CANNOT BE SAID TO BE AN ACT OF MONEY LENDING AND HENCE THE INTEREST INCOME WAS ASSESSABL E AS INCOME FROM OTHER SOURCES U/S 56 OF THE INCOME TAX ACT, 19 61 AND NOT AS A BUSINESS INCOME U/S 28 OF THE ACT. THE HONBL E KERALA HIGH COURT IN GTN TEXTILES LIMITED VS. DCIT (2010) 326 I TR 352 (KER) HELD THAT INTEREST FROM SHARE APPLICATION MONEY PLA CED IN DEPOSIT AND INTEREST THEREON IS INCOME FROM OTHER SOURCES. WHILE COMING TO THIS CONCLUSION, THE HONBLE HIGH COURT FOLLOWED THE DECISION IN BROOKE BOND INDIA LIMITED; 225 ITR 798 (SC) AND TUTICORIN ALKALIES CHEMICALS & FERTILIZERS LIMITED (SUPRA). IN THE CASE OF TUTICORIN ALKALIES CHEMICALS & FERTILIZERS LIMITED (SUPRA), WHEREIN INTEREST WAS EARNED FROM INVESTMENT OF BORR OWED FUNDS PRIOR TO COMMENCEMENT OF BUSINESS, SUCH INTEREST WA S HELD TO BE 6 ASSESSABLE UNDER THE INCOME TAX ACT. IT WAS HELD THAT NO DEDUCTION OR SET OFF IS PERMISSIBLE AGAINST SUCH IN TEREST. THE RELEVANT PORTION FROM THE ORDER IS REPRODUCED HEREU NDER :- INTEREST INCOME IS ALWAYS OF A REVENUE NATURE, UNLESS IT IS RECEIVED BY WAY OF DAMAGES OR COMPENSATION. IF A PERSON BORROWS MONEY FOR BUSINESS PURPOSES BUT UTILIZES THAT MONEY TO EARN INTEREST, HOWEVER TEMPORARILY, THE INTEREST SO GENERATED WILL BE HIS INCOME. THIS INCOME CAN BE UTILIZED BY THE ASSESSEE WHICHEVER WAY HE LIKES. HE MAY OR MAY NOT DISCHARGE HIS LIABILITY TO PAY INTEREST WITH THIS INCOME. MERELY BECAUSE IT WAS UTILIZED TO REPAY THE INTEREST ON THE LOAN TAKEN BY THE ASSESSEE, IT DID NOT CEASE TO BE HIS INCOME. WHEN THE QUESTION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTIONS FROM THAT RECEIPT ARE PERMISSIBLE IN LAW OR NOT, THE QUESTION HAS TO BE DECIDED ACCORDING TO THE PRINCIPLES OF LAW, AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. ACCOUNTING PRACTICE CANNOT OVERRIDE SECTION 56 OR ANY OTHER PROVISION OF THE INCOME TAX ACT . UNDER THE INCOME-TAX ACT, 1961, THE TOTAL INCOME OF A COMPANY IS CHARGEABLE TO TAX UNDER SECTION 4. THE TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SECTION 14 LAYS DOWN THAT FOR THE PURPOSE OF COMPUTATION, INCOME OF AN ASSESSEE HAS TO BE CLASSIFIED UNDER SIX HEADS, IT IS POSSIBLE FOR A COMPANY TO HAVE SIX DIFFERENT SOURCES OF INCOME, EACH ONE OF WHICH WILL BE CHARGEABLE TO INCOME- TAX. PROFITS AND GAINS OF BUSINESS OF PROFESSION IS ONLY ONE OF THE HEADS UNDER WHICH A COMPANYS INCOME IS LIABLE TO BE ASSESSED TO TAX. IF ACCOMPANY HAS NOT COMMENCED BUSINESS, THERE CANNOT BE ANY QUESTION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. THAT DOES NOT MEAN THAT UNTIL AND UNLESS THE COMPANY 7 COMMENCES ITS BUSINESS, ITS INCOME FROM ANY OTHER SOURCE WILL NOT BE TAXED. THE COMPANY MAY KEEP THE SURPLUS FUNDS IN SHORT TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTERESTS WILL BE CHARGEABLE UNDER SECTION 56. IN OTHER WORDS, IF THE CAPITAL OF A COMPANY IS FRUITFULLY UTILIZED INSTEAD OF BEING KEPT IDLE, THE INCOME THUS GENERATED WILL BE OF A REVENUE NATURE AND NOT AN ACCRETION TO CAPITAL. WHETHER THE COMPANY RAISED THE CAPITAL BY ISSUE OF SHARES OR DEBENTURES OR BY BORROWING, WILL NOT MAKE ANY DIFFERENCE TO THIS PRINCIPLE. IF BORROWED CAPITAL IS USED FOR THE PURPOSE OF EARNING INCOME, THAT INCOME WILL HAVE TO BE TAXED IN ACCORDANCE WITH LAW. INCOME IS SOMETHING WHICH FLOWS FROM THE PROPERTY. SOMETHING RECEIVED IN PLACE OF THE PROPERTY WILL BE A CAPITAL RECEIPT. THE AMOUNT OF INTEREST RECEIVED BY THE COMPANY FLOWS FROM ITS INVESTMENTS AND IS ITS INCOME AND IS CLEARLY TAXABLE EVEN THOUGH THE INTEREST AMOUNT IS EARNED BY UTILIZING BORROWED CAPITAL. IT IS TRUE THAT THE COMPANY WILL HAVE TO PAY INTEREST ON THE MONEY BORROWED BY IT. BUT THAT CANNOT BE A GROUND FOR EXEMPTION OF INTEREST EARNED BY THE COMPANY BY UTILIZING THE BORROWED FUNDS AS ITS INCOME. ANY SET-OFF OR DEDUCTION OF ANY EXPENDITURE CAN ONLY BE MADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MODI RUBBER LIMITED; 208 ITR 379 WHEREIN THE MONEY RECEIVED FRO M SHARE HOLDERS TOWARDS SHARE CAPITAL WAS DEPOSITED IN BANK S AND EARNED INTEREST FROM SUCH DEPOSITS, HELD THE SAME TO BE IN COME FROM OTHER SOURCES. WHILE COMING TO THIS CONCLUSION, THE HONBLE COURT DISTINGUISHED THE DECISION IN CHALLAPALLI SUGARS LI MITED VS. CIT; 98 ITR 167 (SC) AND FURTHER HELD THAT THE OBSERVATI ON IN CIT 8 (ADDL.) VS. INDIAN DRUGS & PHARMACEUTICALS LIMITED (1983) 141 ITR 134 (DEL), THOUGH OBITER, BUT HELD THE CORRECT LAW (SEE PAGE 393A). WHILE COMING TO THIS CONCLUSION, THE HONBL E COURT ALSO CONSIDERED FOLLOWING JUDICIAL PRONOUNCEMENTS :- A. MADHYA PRADESH STATE IND. CORPN.LTD.; 69 ITR 824 ( MP) B. TRACO CABLE COM.LTD.; 72 ITR 503 (KER.) C. SESHASAYEE PAPER & BOARDS LIMITED; 156 ITR 542 (MAD ) D. BOKARO STEEL LIMITED ; 170 ITR 545 (PAT) E. CIT VS. DERCO COOLING COILS LTD.; 198 ITR 375 (AP) F. ANDHRA PRADESH CARBIDE LTD.; 198 ITR 386 (AP) G. CIT VS. SPONG IRON INDIA LIMITED; 201 ITR 770 (AP) H. CIT VS. AJMERA IND.PVT.LTD.; 103 ITR 245 (CAL) I. CIT VS. ANDHRA FARM CHEMICAL CORPN.;1712 ITR 660(AP ) J. CIT VS. BOKARO STEEL LTD. (NO.1); 170 ITR 522 (PAT ) K. CIT VS. CAP STEEL LIMITED; 162 ITR 533 (KARN.) L. ADDL.CIT VS. MADRAS FERTILIZERS LTD.; 122 ITR 139 ( MAD) M. CIT VS. UNITED WIRE ROPES LTD.; 121 ITR 762 (BOM) AND N. NALINIKANT A. MODI VS. SAL NARAIN ROW;61 ITR 428 (S C) ANOTHER DECISION MENTIONED BY THE LD. COUNSEL FOR T HE ASSESSEE IS KARNATAKA POWER CORPORATION (247 ITR 268) (SC) WHER EIN THE ADDITION OF RS.1,30,44,518/-, BEING INTERESTS AND H IRE CHARGES 9 FROM THE CONTRACTORS, WERE HELD TO BE IN THE NATURE OF CAPITAL RECEIPT WHICH WOULD GO TO REDUCE CAPITAL COST. HOWE VER, IN THE PRESENT APPEAL, THE INTEREST RECEIPT IS FROM FIXED DEPOSITS, THEREFORE, THE FACTS ARE DIFFERENT. 3.2 IF THE ASSERTION MADE BY RESPECTIVE LEARNED COU NSEL, FACTS OF THE IMPUGNED APPEAL AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE ARE KEPT IN JUXTAPOSITION, WE FIND THAT THE ASSESSEE EARNED THE INTEREST FROM FIXED DEPOSITS AND SUCH DE POSIT OR EARNING OF INTEREST WAS PLAINLY NOT IN THE ORDINARY COURSE OF ITS BUSINESS. THE BARE FACT THAT THE ASSESSEE DEPOSITE D MONEY IN THE BANK WAS ITSELF NOT SUFFICIENT TO SHOW THAT THE DEP OSIT WAS MADE WITH A VIEW TO CARRYING OUT THE BUSINESS IN THE SEN SE OF EARNING PROFIT BY INVESTMENT, THEREFORE, SUCH INTEREST INCO ME, EARNED BY THE ASSESSEE, WAS NOT THE BUSINESS INCOME OF THE AS SESSEE BUT IS ASSESSABLE AS INCOME FROM OTHER SOURCES. OUR VIEW IS SUPPORTED BY THE DECISION FROM HONBLE KERALA HIGH COURT IN G TN TEXTILES LIMITED (SUPRA) WHEREIN DURING THE PREVIOUS YEAR, R ELEVANT TO THE ASSESSMENT 1993-94, THE ASSESSEE MADE PUBLIC ISSUE OF SHARES FOR RAISING CAPITAL. THE EXPENDITURE INCURRED FOR RAISING CAPITAL WAS CLAIMED AS DEDUCTION. THE ASSESSEE MADE SHORT T ERM DEPOSIT OF SHARE APPLICATION MONEY/SHARE ALLOTMENT MONEY AN D EARNED 10 INTEREST THEREFROM. OF THIS, A PART WAS ASSESSED A S INCOME FROM OTHER SOURCES AND BALANCE WAS ALLOWED AS DEDUCTION BECAUSE THE ASSESSING OFFICER ACCEPTED THIS AS EXPENDITURE INCU RRED IN RELATION TO SHARES ALLOTTED TO THE ASSESSEE BY THE SUBSIDIARY COMPANY. THE DISALLOWANCE TOWARDS EXPENDITURE CLAIM ED FOR RAISING SHARE CAPITAL WAS CONFIRMED BY THE TRIBUNAL . SINCE THE ASSESSEE WAS NOT ENGAGED IN FINANCING, THE INTEREST ON SHORT TERM DEPOSIT WAS RIGHTLY ASSESSED AS INCOME FROM OTHER S OURCES. WHILE COMING TO THIS CONCLUSION, THE HONBLE COURT FOLLOWED THE DECISION IN BROOKE BOND INDIA LIMITED VS. CIT; 225 ITR 798 (SC) AND TUTICORIN ALKALIES CHEMICALS & FERTILIZERS;22 7 IT 172 (SC). EVEN OTHERWISE, THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN 69 ITR 824 IS OF BINDING NATURE, CONSEQUENTLY, W E ARE OF THE CONSIDERED OPINION THAT THE INTEREST OF RS.31,39,70 ,137/-, EARNED ON FDRS, PRIOR TO COMMENCEMENT OF BUSINESS, FROM TH E FUND OF DEBENTURE LOANS, AMOUNTING TO RS.900 CRORES, IS CLE ARLY AN INCOME FROM OTHER SOURCES AND NOT THE BUSINESS INCO ME. 3.3 THE QUESTION OF ADJUSTMENT OF INTEREST PAYABLE BY THE COMPANY AGAINST THE INTEREST EARNED BY IT DEPENDS U PON THE PROVISION OF THE ACT. THE EXPENDITURE WOULD HAVE B EEN DEDUCTIBLE AS INCURRED FOR THE PURPOSES OF BUSINESS IF THE 11 ASSESSEES BUSINESS HAD COMMENCED. HOWEVER, THAT I S NOT THE CASE HERE. SO FAR AS THE SCOPE OF THE PROVISION OF SECTION 56 OF THE ACT IS CONCERNED, THIS PROVISION APPLIES IF NON E OF THE OTHER HANDS IS APPLICABLE AS WAS HELD IN S.G. MERCANTILE CORPORATION PRIVATE LIMITED V. CIT; 83 ITR 700 (SC) AND BIHAR S TATE COOPRATIVE BANK LIMITED; 31 ITR 11 4 . THE HONBLE APEX COURT IN CIT VS. GOVINDA CHOUDHARY & SONS; 203 ITR 881 HELD THAT IT IS WELL SETTLED THAT INTEREST CAN BE ASSESSED UNDER TH E HEAD INCOME FROM OTHER SOURCES ONLY IF IT CANNOT BE BROUGHT WI THIN ONE OF THE OTHER SPECIFIED HEADS OF CHARGE. UNDER THE AFOREMEN TIONED FACTS, THE ASSESSEE COMPANY CANNOT CLAIM ANY RELIEF EITHER U/S 70 OR SECTION 71 SINCE ITS BUSINESS HAD NOT STARTED AND T HERE COULD NOT BE ANY COMPUTATION OF BUSINESS INCOME OR LOSS INCUR RED BY THE ASSESSEE FOR THE PURPOSES OF SETTING UP ITS BUSINES S CANNOT BE ALLOWED AS DEDUCTION NOR CAN IT BE ADJUSTED AGAINST ANY OTHER INCOME. AS DISCUSSED ABOVE, THE ASSESSEE MADE FDRS OF THE FUNDS, THEREFORE, MAKING SUCH FDRS WAS NOT AT ALL R ELATED TO THE CONSTRUCTION ACTIVITY OR ANY OTHER CAPITAL INSTALLA TION, THEREFORE, EARNING OF INTEREST ON FDRS, BEFORE COMMENCEMENT OF BUSINESS, IS INCOME FROM OTHER SOURCES. SO FAR AS THE DECISIO N IN THE CASE OF KARNAL COOPERATIVE SUGAR MILLS LIMITED (243 ITR 2) (SC) IS 12 CONCERNED, IT IS DISTINGUISHABLE ON FACTS BECAUSE I N THAT CASE, THE ASSESSEE DEPOSITED MONEY TO OPEN A LETTER OF CREDIT FOR PURCHASE OF MACHINERY REQUIRED FOR SETTING UP ITS PLANT IN T ERMS OF THE AGREEMENT WITH THE SUPPLIER. IT WAS ON THIS MONEY, SO DEPOSITED, THE INTEREST WAS EARNED, THEREFORE, THIS IS NOT A C ASE WHERE ANY SURPLUS SHARE CAPITAL MONEY OR LOAN AMOUNT WHICH WA S LYING IDLE WAS DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNIN G INTEREST. THE DEPOSIT OF MONEY IN THAT CASE WAS DIRECTLY LINK ED WITH THE PURCHASE OF PLANT AND MACHINERY, HENCE, INCOME SO E ARNED FROM SUCH DEPOSITS WAS INCIDENTAL TO THE ACQUISITION OF ASSET FOR SETTING UP OF PLANT AND MACHINERY, THEREFORE, THE H ONBLE SUPREME COURT HELD THE SAME TO BE CAPITAL RECEIPT W HICH WOULD GO TO REDUCE THE COST OF ASSET. THE HONBLE APEX C OURT AFFIRMED THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH C OURT IN THE SAME CASE (233 ITR 531) (P&H). SO FAR AS THE CONTE NTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LD. FIRST APP ELLATE AUTHORITY ERRED IN NOT PLACING RELIANCE UPON THE LATEST DECIS ION OF HONBLE HIGH COURT IN VGR FOUNDATION (298 ITR 132) (MAD) IS CONCERNED, WE HAVE GONE THROUGH THE SAME AND FIND THAT WHILE C OMING TO THAT CONCLUSION, THE HONBLE HIGHCOURT RELIED UPON THE DECISION IN THE CASE OF CIT VS. BOKARO STEEL LIMITED; 236 IT R 315 WHEREIN 13 THE FACTS WERE THAT THE GOVERNMENT COMPANY WAS SET UP TO PRODUCE STEEL. THERE WAS INTEREST ON ADVANCES TO C ONTRACTORS AND RENT FROM QUARTERED LET OUT TO EMPLOYEES OF THE CON TRACTOR. THE AMOUNTS WERE DIRECTLY CONNECTED TO AND INCIDENTAL T O CONSTRUCTION OF PLANT BY THE ASSESSEE, THEREFORE, T HE AMOUNTS WERE HELD TO BE CAPITAL RECEIPT AND NOT INCOME FROM ANY INDEPENDENT SOURCE. THIS DECISION OF THE HONBLE M ADRAS HIGH COURT IS OF 14 TH JUNE, 2007 WHEREAS THE HONBLE KERALA HIGH COURT IN A LATTER DECISION ON 17 TH DECEMBER, 2009 IN GTN TEXTILES LIMITED (2009) 326 ITR 352 WHEREIN THE ASSESSEE WAS NOT ENGAGED IN FINANCIAL BUSINESS, THEREFORE, THE INTER EST ON SHORT DEPOSITS WAS HELD AS INCOME FROM OTHER SOURCES. I T IS ALSO NOTED THAT WHILE COMING TO THIS CONCLUSION, THE HONBLE H IGH COURT ALSO FOLLOWED THE DECISION IN THE CASE OF BROOKE BOND I NDIA; 225 ITR 798 (SC), TUTICORIN ALKALIES & FERTILIZERS LIMITED ; 227 ITR 172 (SC), THEREFORE, EVEN OTHERWISE WE ARE SUPPOSED THE LATTER DECISION. AS MENTIONED EARLIER, THE DECISION FROM H ONBLE JURISDICTIONAL HIGH COURT (69 ITR 824) IS OF BINDIN G NATURE. THE DECISIONS IN THE CASE OF CIT VS. MODI RUBBER LIMITE D; 208 ITR 379 AND CIT VS. MANGLAM CEMENT LIMITED; 217 ITR 36 9 ARE ON IDENTICAL FACT WHEREIN IT WAS HELD THAT THE INTERES T ON FDRS, ETC., 14 BEFORE COMMENCEMENT OF BUSINESS, IS TO BE TAXED AS INCOME FROM OTHER SOURCES. IN VIEW OF THE ABOVE, WE FIND NO IN FIRMITY IN THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2012. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 30 TH JULY, 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-242425