Jaypee Powergrid Limited Vs ITO (ITAT Delhi)
It is clear upon a perusal of the facts as found by the authorities below that the funds in the form of share capital were infused for the specific purpose of acquiring land and the development of infrastructure. Therefore, the interest earned on funds primarily brought for infusion in the business could not have been classified as income from other sources. Since the income was earned in a period prior to commencement of business, it was in the nature of capital receipt and hence was required to be set off against the pre-operative expenses.” That, the ratio of the above finding of the Hon’ble Delhi High Court would be squarely applicable to the facts of the assessee’s case, because admittedly in the case under appeal before us the share capital as well as loans were raised for the specific purpose of setting up of the power generation plants. The business of the assessee has not been commenced and therefore, as per above decision, the interest received in the period prior to commencement of business was in the nature of capital receipt and hence was required to be set off against the pre-operative expenses.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-5, Delhi, Dated 14.12.2015, for the A.Y. 2011-2012, challenging the Orders of the authorities below in assessing a sum of Rs.1,53,70,579/- being interest income from FDRs during pre-operative period as income from other sources.
2. We have heard the Learned Representatives of both the parties through video conferencing and perused the Orders of the authorities below.
3. Briefly the facts of the case are that return declaring NIL income was filed on 30.09.2011. The assessee company was incorporated on 05.10.2006. The source of the funds in the hands of assessee as per balance-sheet as on 31.03.2011 are share capital of Rs.250 crores and secured loans of Rs.576.94 crores. During the course of assessment proceedings, it was explained that company has been granted licence for construction of maintenance of certain transmission lines and evacuation of power from Karcham-Wangtoo HEP located in the State of Himachal Pradesh to Abdullapur sub-station located in the State of Haryana. It was explained that the project is under implementation and profit and loss account has been drawn for the year under consideration. All the expenses incurred during the year have been shown in the balance-sheet as Incidental Expenses During Construction [IEDC]. Examination of the IEDC statement revealed that the assessee company had earned an amount of Rs.1,53,70,579/- as “Interest on short term deposits with Banks”. The said amount was deducted from the expenditure mentioned in the said statement. Thus, the interest received on the FDRs has been reduced from the pre-operative expenditure which are pending allocation. After reduction of this amount, IEDC expenditure was shown at Rs.239,45,85,724/-. Thus, the interest income earned during the year, instead of being shown separately, has been used towards abatement of capital cost. The A.O. issued show cause notice as to why the impugned amount earned by deploying of surplus funds may not be assessed under the Head “Income from other sources”. The explanation of assessee is reproduced in the assessment order. The A.O, however, did not accept the contention of assessee and considered the impugned interest income from FDRs as income from other sources. The A.O. also made reference to the Order of the Ld. CIT(A) for the A.Y. 2009-2010 in which similar addition have been made. The Ld. CIT(A) dismissed the appeal of assessee.
4. Learned Counsel for the Assessee submitted that in A.Y. 2009-2010 on identical facts the appeal of assessee has been allowed by ITAT, Delhi-D Bench, New Delhi in ITA.No.5489/Del./2013 for the A.Y. 2009-2010 vide Order Dated 24.07.2018. The Order is reproduced as under :
ITA No. 5489/De1/2013
Assessment year 2009-10
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘D’ NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON’BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 5489/De1/2013
Assessment Year: 2009-10
