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Income Tax Appellate Tribunal, DELHI BENCH ‘H’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal filed by the Revenue is directed against the order of the ld. CIT (Appeals)-22, New Delhi pertaining to AY 2014-15.
The grounds of appeal taken by the Revenue read as under :- “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.18,20,50,747/- made by Assessing Officer on the issue of Interest earned during the period of setting up of Industry as capable of being set off against the EDC (Expense During Construction) without appreciating the fact that the issue is pending before Supreme Court and matter has not reached finality?”
3. At the outset, it is noted that the issue involved is squarely covered in favour of assessee by the decision of ITAT as well as Hon’ble Delhi High Court in AY 2013-14 in assessee’s own case. AO had made the disallowance following his earlier year order, which now stands covered in favour of assessee.
4. We may gainfully refer to the order of ld. CIT (A) in this regard as under :-
“6.2 Ground No.2: Regarding set off' of interest before start of commercial operations/ sales : I have carefully examined the finding of the AO, submission of the Ld. AR and the case law relied upon by the AO as well as the Ld. AR. The appellant has set-off the bank interest earned of Rs1820.51 lakhs by it on the surplus funds prior to the start of commercial operations / sales against the EDC (Expenses During Construction -including interest). The appellant had also made submissions in this regard before the AO during the assessment proceedings - which were similar to the submissions made before me herein above 6.2.1 The AO taxed it as income from other sources on the basis of decision of Hon'ble Apex Court in the case of Tuticorin Alkalies & Chemicals Ltd (1997) 227 ITR 172. The AO made addition following the orders of AO on this issue, of the previous year. 6.3 In appeal the Ld. AR has submitted a copy of the ITAT order dated 7-02- 2018 in Del/2017 for AY 2013-14 by Bench G in its own case where in this very issue regarding the interest earned during the period of setting up of industry as capable of being set off against EDC expenses in favour of the appellant. It was also informed by the Ld. AR during discussions that the Department further referred the matter to High Court of Delhi -and that the High Court was pleased to dismiss the Departmental appeal by upholding the order of ITAT. Respectfully following the decision of the ITAT, the addition of interest earned of Rs.1820.51 lakhs is hereby deleted. Accordingly, this ground of appeal is allowed.”
5. Against the above order, Revenue has filed the present appeal alleging that the issue is pending before Hon’ble Supreme Court. We do not find this any reason not to follow Hon’ble Delhi High Court order dated in ITA 882/2018 in assessee’s own case. The same reads as under:-
3 ITA No.4833/Del./2019 “2. The issue raised relate to capitalisation of interest received from the bank fixed deposits and set-off of this interest from the pre-operative expenses.
The finding recorded by the Tribunal are that the fixed deposits were procured from surplus funds, being share capital and the borrowings. Further and importantly, the fixed deposit receipts had been used and utilized for obtaining bank guarantees given to 3rd parties and the government agencies for the purpose of capital job etc. for setting-up and construction of the factory, i.e. the project.
It is an accepted and admitted position that the respondent/assessee had not commenced and was not engaged in any business activity as the business of manufacture and production of styrene butadiene rubber had not started. This factum is admitted and accepted in the assessment order.
In the aforesaid factual background, the issue raised by the appellant/Revenue is covered by the ratio in CIT v. Bokaro Steel ltd. [1999] 236 ITR 315 (SC) and decision of this High Court in PCIT-VI vs. M/s. NTPC Tamil Nadu Energy Co. Ltd. decided on 23.2.2018. Decision of the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT [1997] 227 ITR 172 (SC) would not be applicable, as the business of the respondent/assessee had not commenced, which is admitted and accepted by the appellant/Revenue.
Accordingly, no substantial question of law arises and the appeal is dismissed in limine, with no order as to costs.”
6. Upon hearing both the sides and perusing the records, we find that the issue is duly covered in favour of the assessee. Hence, we uphold the order of ld. CIT (A).
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 22nd day of June, 2022.