International Coal Ventures Private Limited Vs ITO (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal, Delhi, arose from the order of the Commissioner of Income-tax (Appeals), who had directed that the entire interest earned by the assessee be taxed under the head “Income from other sources.” The assessee, a public sector undertaking incorporated as a special purpose vehicle by five government entities, was formed to acquire coal mines and assets outside India. During the relevant assessment year 2012–13, the assessee received ₹157 crore as call money from one promoter and ₹3 crore from others. Out of this, ₹156 crore was placed in fixed deposits while the company was engaged in preparatory activities such as feasibility studies and project reports, incurring expenditure of over ₹4.48 crore.
The fixed deposits generated interest income of ₹11.45 crore. Simultaneously, the assessee paid ₹11.14 crore as interest to the contributing promoter upon demand. After adjusting expenses and interest, the net expenditure was capitalized as “capital work-in-progress” (CWIP), and the assessee filed its return declaring nil income. During assessment, the Assessing Officer allowed netting of interest income and expenditure, taxing only the net amount of ₹31.18 lakh. However, the Commissioner (Appeals) reversed this approach and directed that the entire interest earned be taxed as income from other sources without allowing set-off.
