Dy. CIT v. Brahmaputra Cracker & Polymer Ltd.
[ITA Nos. 89 to 92, 94 to 97/Gau/2018 and ITA Nos. 101 & 200/Gau/2019] :
2020 TaxPub(DT) 4476 (Kol.-Trib.)
Interest earned on fixed deposits during pre-commencement
of project
Facts:
Assessee was a joint venture project to commission a
railway line. There was corpus/capital contributions by JV partners and certain
mobilization advances was also received from the customer. Interest on this was
claimed to be not taxable by the assessee and would offset the cost of the
project. Assessing officer sustained the additions as income from other
sources. On higher appeal the Commissioner (Appeals) accepted the offset of the
interest received on mobilization advances which was parked with interest
earning instruments while did not concur with the interest on the fixed deposit
receipts. On higher appeal --
Held in favour of the assessee that the interest during the
pre-commencement project period cannot be taxed as income from other sources.
It will reduce the capital investment. For verification of the amounts received
as to whether these were treated as capital contributions and were capitalized;
the case was remanded to the assessing officer for examination.
Applied:
Radhikapur (West) Coal and Mining Pvt. Ltd., I.T.A. Nos.
396-397CTK/2018, dated 21-10-2019;
Indian Oil Panipat Power Consortium Ltd. (2009) 315 ITR
255 (Del-HC) : 2009 TaxPub(DT) 1494 (Del-HC);
MJSJ Coal Limited v. ITO, I.T.A. Nos. 429/CTK/2016,
68/CTK/2017 & 107/CTK/2018, dated 31-8-2018 : 2018 TaxPub(DT) 5912
(Ctk-Trib);
Posco India Pvt. Ltd. v. DCIT, ITA Nos. 186 and
460/CTK/2011, 461/CTK/2011;
ACIT v. M/s. Posco India Pvt. Ltd. and vice-versa, ITA
Nos. 155 & 122/CTK/2017, C.O. Nos. 07 & 08/CTK/2017 : 2018 TaxPub(DT)
1349 (Ctk-Trib);
M/s. Kalinga Coal Mining Pvt. Ltd. v. ACIT, ITA Nos. 123
& 279/CTK/2010;
Bongaigaon Refinery and Petrochemicals Ltd. v. CIT
(2001) 251 ITR 329 (SC) : 2001 TaxPub(DT) 1536 (SC);
NTPC Sail Power Co. Pvt. Ltd. v. CIT in ITA No.
1238/2011 (Delhi-HC) : 2012 TaxPub(DT) 3140 (Del-HC);
PCIT v. M/s. NTPC Tamil Nadu Energy Co. Ltd., ITA No.
233/2018 & CM Appl. No. 7162/2018, ITA No. 234/2018 & CM Appl. No.
7163/2018;
Solarfield Energy Pvt. Ltd. v. ITO, ITA No.
5189/Mum/2016 : 2019 TaxPub(DT) 5146 (Mum-Trib);
BTW-Atlanta Transformers India Pvt. Ltd. v. ACIT, ITA
Nos. 1642 & 1643/Ahd/2018;
ITO v. CMDC ICPL Coal Ltd., ITA No. 271/RPR/2014 : 2018
TaxPub(DT) 6739 (Rai-Trib);
M/s. Saville Hospital & Research Centre Pvt. Ltd. v.
ITO, ITA No. 491/JP/2018 : 2019 TaxPub(DT) 7698 (Jp-Trib);
M/s. Haridaspur Paradip Railway Company Limited v. DCIT
in ITA No. 383/CTK/2019, Order, dated 12-10-2020;
PCIT v. M/s. Banknote Paper Mill India Pvt. Ltd. in ITA
No. 690/2017 (Kar-HC).
Dissented:
Tuticorin Alkali Chemicals v CIT (1997) 227 ITR 172 (SC)
: 1997 TaxPub(DT) 1304 (SC)
In Bokaro Steel Ltd. (1999) 236 ITR 315 (SC) : 1999
TaxPub(DT) 1094 (SC), the Supreme Court held that "if income is
earned, whether by way of Interest or in any other manner on funds which are
otherwise "inextricably linked" to the setting up of the plant, such
income is required to be capitalised to be set off against pre-operative
expenses".
Editorial Note: The
number of judgments cited and dealt in make it a one stop referencer on this
topic.