ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-SHIMLA, SHIMLA vs. H P POWER TRANSMISSION CORPORATION LTD., SHIMLA

आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 415/CHD/2025 �नधा�रण वष� / Assessment Year: 2016-17 H.P. Power Transmission Corp.Ltd., The DCIT/ACIT, HIMFED Bhawan, Vs Circle, Shimla. Near Old MLA Quarters, Shimla. �थायी लेखा सं./PAN NO: AACCH1548M अपीलाथ�/Appellant ��यथ�/Respondent & आयकर अपील सं./ ITA No. 436/CHD/2025 �नधा�रण वष� / Assessment Year: 2016-17 The ACIT, H.P. Power Transmission Corp.Ltd., Circle, Shimla. Vs HIMFED Bhawan, Near Old MLA Quarters, Summerhill, Sangti,Shimla. �थायी लेखा सं./PAN NO: AACCH1548M अपीलाथ�/Appellant ��यथ�/Respondent Assessee by : Shri Vishal Mohan, Sr. Advocate with Shri Abhinav Bijwaria, Advocate Revenue by : Shri Manav Bansal, CIT DR Date of Hearing : 26.02.2026 Date of Pronouncement : 20.04.2026 HYBRID HEARING O R D E R PER RAJ PAL YADAV, VP

The assessee and the Revenue are in cross appeals against the order of ld. Commissioner of Income Tax (Appeals)

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[in short ‘the CIT (A)’] dated 28.01.2025 passed for assessment year 2016-17.

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assessment year 2016-17 electronically on 16.10.2016 declaring total income at Rs.17,77,850/-. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) was issued and served upon the assessee. The assessee has earned interest income on bank deposits of Rs.9,41,09,250/-. The ld. AO, after putting reliance upon the judgement of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd., Madras vs Commissioner of Income Tax, Madras 227 ITR 172 has made the addition of such interest income.

4.1 As far as the second component is concerned, it was contended that this issue is covered in favour of the assessee by the decision of the ITAT passed in assessment year 2014- 15 and 2015-16. The ld.CIT (Appeals) while following the

ITA No.415 &436/CHD/2025 A.Y.2016-17 4 order of the ITAT has allowed the appeal of the assessee partly and held that interest earned on ADB Loans amounting to Rs.349.70 lacs is not taxable as it is not revenue in nature whereas interest income earned on surplus funds deposited with the Bank amounting to Rs.591.38 lacs has been taxed. In other words, assessment order to this extent has been upheld.

ITA No .789/Chd/2019 (A .Y .2014 -15 ):

ITA No.415 &436/CHD/2025 A.Y.2016-17 5 that too without allowing the set off of the interest paid on borrowed funds from the same. Fact of the matter is that the interest accrued was to be set off against the capital work in progress and did not tantamount to be the income of the appellant.” 10. Drawing our attention to the facts of the case from the assessment order, the Ld.Counsel for the assessee pointed out that the assessee company namely, HP. Power Transmission Corporation Limited (HPPTCL), an undertaking of Government of Himachal Pradesh was established on 27th August, 2008 with a view to strengthen the Transmission Network in Himachal Pradesh and to facilitate evacuation of Power from upcoming Generating Plants. The jobs entrusted to Corporation by HP. Government inter-alia included execution of all New Works - both Transmission Lines and Substations of 66kv and above Voltage Ratings, Formulation, Updation, Execution of Transmission Master Plan of HP for Strengthening of Transmission Network and Evacuation of Power. Besides, coordinating the transmission related issues with CTU, CEA/OP (GOI), HP Government and HPSEBL. HPPTCL was also responsible for planning and co-ordination of transmission related issues with IPPs, CPSUs, State PSUs, HPPCL and other State/Central Government Agencies. The assessee company was yet to start commercial operation. The statement showing incidental expenditure during construction (pending allotment) had been prepared. However, profit & loss account for earning of other income had been prepared. As per the details of "Other income", the assessee company had earned interest on bank deposit of Rs.11,64,79,756/- during the period relevant to the assessment year. The interest was earned on surplus funds available with the assessee company, however, the same was not offered for taxation. The said fact was confronted to the assessee during assessment proceedings who filed detailed reply. The AO rejected the same pointing out that identical arguments and submissions had been rejected by the ITAT in the case of the assessee itself in the appeal for assessment year 2010-11 and that the issue was squarely covered by the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (1997) 227 ITR 172 (SC). Accordingly, the interest of Rs.11,64,79,756/- was assessed to tax in the hands of the assessee as ‘income from other sources”. 11. The matter was carried in appeal before the Ld.CIT(A) who upheld the order of the AO stating that no distinguishing facts had been pointed out by the assessee from the preceding years wherein the issue had been decided against the assessee

ITA No.415 &436/CHD/2025 A.Y.2016-17 6 by the ITAT. The relevant findings of the Ld.CIT(A) at para 5.2 to 5.2.2 of the order are as under: 5.2 The issue is regarding the taxability of interest income received on the funds parked with various banks or otherwise as mentioned above. The issue under consideration is not a new issue. This is a decided issue against the assesses by CIT(A) in its own cases for the A.Y.2010-11 & 2011-12 in appeal No. IT/74/2013- 14/Sml dated 27/06/2014 and Appeal No.lT/375/13-14/Sml dated 05.11.2014. The order of the CIT(A) dated 05.11.2014 for A.Y. 2011-12 has been confirmed by the jurisdictional ITAT in ITA No. 68/Chd/2015 vide order dated 04.08.2015. The appeal has been decided against the assessee by the ITAT by relying on its own order in ITA No. 488/Chd/2012 and 169/Chd/2013 for the A.Y. 2008-09 & 2009-10. 5.2.1 However, during the year the appellant has tried to distinguish on facts by arguing that the funds from ADB were specifically advanced for specific purposes and the interest accrued on the FDRs made from the said accounts and funds and the interest paid on the same are clearly inter linked and need to be set off. The appellant has relied on the judgment of the jurisdictional ITAT in the case of H.P. Power Corporation ITA No.842/Chd/2014 dated 06.05.2015. The appellant in the year under consideration has however relied on the order of this office in the case of M/s. H.P. Power Corporation ltd. which has been decided by following the order of the jurisdictional ITAT in ITA No. 842/Chd/2014 dated 06.05.2015. However, the appellant has failed to explain as to how the facts of the case under consideration are different from the facts of the case for A.Y. 2013-14 wherein the appeal of tine assessee has been dismissed vide order dated !T/395/15-16/Shimla dated 28.10.2016. The said order has been upheld by the Jurisdictional ITAT in ITA No. 1443/Chd/2016 dated 18.04.2017 wherein the appellant argued on similar lines as reproduced supra which were dismissed. It is also not out of place to mentioned that the long term loans from ADB as seen from Schedule 4 of the balance sheet in A.Y. 2013-14 is shown at Rs.6136.06 lacs and at Rs.11056.06 in A.Y. 2014-15. Thus, what is seen is that the loans from ADB were raised by the appellant in the preceding year also. Moreover, the appellant vide order sheet dated 22.03.2019 also expressed the inability to bifurcate

ITA No.415 &436/CHD/2025 A.Y.2016-17 7 the use of funds and interest paid w.r.t. equity and REC loans. Accordingly, it is held that the facts in the year under consideration are identical to the facts for A.Y. 2013-14. The assessee has brought nothing on record to show how the facts or the legal position during the year under consideration is anyway different from the preceding years. The issue is squarely covered by the decisions of this office duly confirmed by ITAT in the preceding years as detailed supra. 5.2.2 Therefore, it is held that there is no infirmity in the order of the A.O. and the order of the A.O. in making the addition of Rs.11,64,79,756/- on account of 'income from other sources' needs no interference and the same is confirmed. In the result, order of the A.O. upheld and the appeal of the assessee is dismissed.” 12. Before us the Ld.Counsel for the assessee though fairly admitted that the findings of the authorities below was correct that this issue had been adjudicated in the preceding years also against the assessee by the ITAT, but at the same time he pointed out that certain facts distinguished the case of the assessee from the preceding years and in view of those ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 9 of 21 facts the issue stood squarely covered by the order of the ITAT in the case of M/s H.P. Power Corporation Ltd. in ITA No.842/Chd/2014 for assessment year 2010-11 which had adjudicated in favour of the assessee. He first drew our attention to the order of the ITAT in the case of M/s H.P. Power Corporation Ltd.(supra) placed before us at paper book page no.42-47 and drew our attention to the specific findings of the ITAT at para 8 of the order as under: 8. After considering the rival submissions carefully we find that during this year assessee has borrowed certain funds as mentioned in the submissions before AO from PFC and ADB. The Assessee had earlier taken the money from Delhi Jal Board on which no interest was required to be paid. It was held in the earlier year in assessee’s own case that interest on such investment of these funds would be taxable. In view of the decision of Hon’ble Supreme Court in case of Tuticorin Alkali Chemicals And Fertilizers Ltd. Vs. CIT 227 ITR 172. However, the interest earned on temporary investment made out of the borrowed funds can not be taxed because these funds

ITA No.415 &436/CHD/2025 A.Y.2016-17 8 have been specifically borrowed for the purpose of project but project was delayed and therefore funds were parked in temporary investment in the form of FDR. Same view was taken in the case of M/s Beas Valley Power, Corporation Ltd. Vs. The ACIT in ITA No. 857/Chd/2012 it was observed at page 12 & 13 as under: 12. On the other hand, ld. DR relied upon orders of the authorities below. 12(i) On consideration of the above facts and material on record, we do not find any justification to sustain the findings of the authorities below. It is not in dispute that assessee corporation is a government company promoted by H.P. State Electricity Board Ltd. The assessee has admittedly not started commercial operation in the year under consideration and was still in the preoperative stage. The assessee claimed that it has no surplus funds but the finding of the authorities below was that assessee earned interest on surplus funds. The accounts of the assessee placed on record clearly support the submission of the assessee that there were no surplus funds available with the assessee. The assessee also claimed that its funds were temporarily employed for short term deposits for efficiently and effectively use of its funds so as to reduce the total cost of the project. The ld. CIT(Appeals) also partly agreed with the submission of the assessee that part funds were invested for setting up of the plant & machinery. The assessee's counsel has referred to the accounts of the assessee at page 15 of the Paper Book to show that assessee received lesser interest of Rs. 625.97 lacs and paid interest on loan at Rs. 3652.44 lacs in the year under consideration would show that assessee has to pay more interest as against the small interest received by assessee. Therefore, if any adjustment is made against interest paid, still there is a liability of the assessee to pay interest on the loans. The assessee also explained that for effective funds management, the temporary surplus funds were kept in short term bank deposits and thereafter, interest was earned and so was also used for construction of the project and for paying interest to the power finance company which have not been adversely commented upon by the authorities below. Therefore, the reliance of the Assessing Officer on the decision in the case of

ITA No.415 &436/CHD/2025 A.Y.2016-17 9 Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT (supra) was totally misplaced. The Hon'ble Supreme Court in the case of CIT Vs Bokaro Steel Ltd. held as under : Held, dismissing the appeal, that the first three heads of income were (i) the rent charged by the assessee to its contractors for housing workers and staff employed by the contractor for the construction work of the assessee including certain amenities granted to the staff by the assessee, (ii) hire charges for plant and machinery which was given to the contractors by the assessee for use in the construction work of the assessee, and (ii) interest from advances made to the contractors by the assessee for the purpose of facilitating the work of construction. The activities of the assessee in connection with all these three receipts were directly connected with or incidental to the work of construction of its plant undertaken by the assessee. The advances which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these three receipts were arrangements which were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee any independent source. 12(ii) The Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. V ITO 315 ITR 255 (Delhi) held as under : The assessee- company was incorporated in pursuance of a joint venture entered into between Indian Oil Corporation and M of Japan to set up a power project. In order to effectuate the purpose for which the joint venture was conceived, share capital was contributed by these two corporations which included Rs. 20 crores by way of additional share capital. The Assessing Officer treated the interest earned on monies received as share capital by the

ITA No.415 &436/CHD/2025 A.Y.2016-17 10 assessee temporarily placed in a fixed deposit awaiting acquisition of land which had run into legal entanglements on account of title as "Income from other sources". The Commissioner (Appeals) accepted the stand of the assessee that the interest was in the nature of a capital receipt which was liable to be set off against preoperative expenses. The Tribunal reversed this order. On appeal : Held, allowing the appeals, 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 in the business could not be 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 a capital receipt and was required to be set off against preoperative expenses. 13. Considering the facts of the case in the light of the above decisions, it is clear that the funds with the assessee, even if temporarily used for savings/short term deposits, but the earning of the interest were directly connected with work of construction of the project employed by the assessee. Therefore, the earning of interest could not be treated as income from other sources, since the income was earned in the period prior to commencement of the business and it was the nature of capital receipt and was required to be set off against preoperative expenses. We, therefore, set aside the orders of authorities below and delete the addition of Rs. 83,06,897/-. However the details of these funds are not available on record therefore, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to examine bifurcation of funds borrowed by the assessee and funds owned by the assessee. Interest earned on account of funds borrowed should not be subjected to tax and only interest on balance surplus funds should be subjected to tax.” 13. Referring to the same he pointed out that in the facts of the said case the assessee had borrowed funds from ADB (Asian Development Bank) specifically for the purpose of the project but since the project was delayed the funds were parked in temporary investment in the form of FDR. In this factual background the ITAT, following its decision in the case of M/s

ITA No.415 &436/CHD/2025 A.Y.2016-17 11 Beas Valley Power Corporation Ltd. Vs. ACIT in ITA No.857/Chd/2012, had held that the interest of such specifically borrowed funds be not subjected to tax. The Ld.Counsel for the assessee thereafter stated that in the impugned case also the assessee had borrowed project specific funds from ADB and on account of certain delays in execution of the project the funds could not be utilized and were, therefore, parked in FDRs earning interest thereon. The aforesaid facts were pointed out to us from the Annual Report of the assessee, placed before us as Annexure-A to the Paper Book. Our attention was drawn to page 17 of the Annual Report and it was pointed out therefrom that the assessee had taken loan from ADB amounting to Rs.11,056 lacs in the impugned year which stood reflected in the schedule of Long term borrowings (Schedule No.4 of the Annual Report). Further drew our attention to the copy of loan agreement entered into by the assessee with ADB placed before us at PB page No.2-29. Ld.Counsel specifically drew our attention to clause 5 of Schedule 3 of the agreement dealing with Allocation and Withdrawal of Loan proceeds ,which read as under : Imprest Accounts and Statement of Expenditures 5. Except as ADB may otherwise agree, the Borrower may establish, and cause to be established, immediately after the Effective Date, (i) a first generation imprest account at the Reserve Bank of India, and (ii) a second generation imprest account for HPPTCL at a commercial bank acceptable to ADB (collectively, imprest accounts). The imprest accounts shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook, and detailed arrangements agreed upon between the Borrower and ADB. The imprest accounts shall only be used for the purposes of the Project. The currency of the first generation imprest sccount shall be the Dollar, and the currency of the second generation imprest accounts deposited into the imprest accounts shall be the Rupee. The aggregate amount to be expenditure to be deposited into the imprest accounts shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest accounts for the first 6 months of Project implementation, or (ii) the equivalent of 10% of the Loan amount.” 14. Referring to the same he pointed out that the loan disbursed could not have been used by the assessee for any purpose other than that for which it was granted being funding of four Transmission projects as mentioned in the agreement as under :(P.B 3)

ITA No.415 &436/CHD/2025 A.Y.2016-17 12 Whereas the Government of India is taking a loan of 350 million U S Dollar from Asian Development Bank in various branches under Himachal Pradesh Clean Energy Transmission Investment Programme for execution of various Transmission projects covered in Power, System Master Plan for Himachal Pradesh. Out of the above loan of 350 Million U S Dollar, Tranche-1 loan of 113 Million U S Dollar shall fund following four number Transmission Projects : i) 22/66/220 kV, '(22/66 kV, 2x10 MVA +66/220 kV, 31.5 MVA) GIS sub station at Bhoktoo in Distt. Kinnaur with LILO of one circuit of 220 kV Kashang-Bhaba D/C line. ii) ii) 220 kV (Twin MOOSE) D/C line from Hatkoti to planned 220/400 kV sub station at Pragati Nagar in Distt. Shimia. ; iii) iii) 220/400 kV, 315 MVA GIS Sub station at Pragati Nagar in Distt. Shimla with LILO of both circuits of 400 kV Jhakri- Abdullapur D/C line of PGCIL. iv) iv) 66/220/400 kV GIS sub station ( 65/220 kV, 2x80/100 MVA+220/400 kV, 2x315 MVA) at Wangtoo in Distt. Kinnaur with LILO of both circuits 1 of 220 kV Kashang- Bhaba and 400 kV Wangtoo- Abdullapur D/C Lines. AND WHEREAS future Tranches shall fund Transmission Projects in Distt. Kullu, Distt Kangra & Distt. Mandi (Reas Basin), Distt. Chamba (Ravi Basin), Distt Kinnaur (Satluj Basin) and Distt. Shimla (Yamuna Basin). AND WHEREAS the Government of India will further transfer this loan granted by Asian Development Bank to the Government of Himachal Pradesh, which interalia shall transfer the same to H.P. Power Transmission Corporation Limited (Second Party) which is designated; implementing agency for these Transmission Projects. 15. Thereafter he took us to page No.21 of the Annual Report, Schedule-11 being the schedule of Income and pointed out that on account of the investments made out of the said funds interest of Rs.246.96 lacs had been earned by the assessee. He also pointed out that in the preceding year the amount of interest earned was a meager amount of Rs.3.34 lacs and was, therefore, immaterial for the decision rendered in the case of the assessee against it by the ITAT in the preceding year. He

ITA No.415 &436/CHD/2025 A.Y.2016-17 13 contended that in view of the identity of facts of the assessee in the impugned year with that in the case of M/s H.P. Power Corporation Ltd.(supra) and the facts being distinguishable with that in the case of the assessee for the preceding year, the decision in the case of M/s H.P. Power Corporation Ltd.(supra) was squarely applicable and the interest earned, therefore, was not liable to be taxed in the hands of the assessee. 16. The Ld. DR, on the other hand, vehemently contested the claim of the Ld.Counsel for the assessee pointing out that as per the admission of the Ld.Counsel for the assessee itself the ADB loan was very much there with the assessee in the preceding year also amounting to Rs.6,136 lacs as reflected in the schedule of Long term borrowings of the Schedule-4 of the Annual Report and even though meager,the fact remained that interest was earned by the assessee in the preceding year also. She, therefore, stated that there were no distinguishing facts from the preceding year and the issue had been rightly held to be covered by the order of the ITAT in the case of the assessee for the preceding year. 17. We have heard the contentions of both the parties and have also gone through the orders of the authorities below and documents referred to before us. The issue to be adjudicated is regarding the treatment of interest received on FDRs/Deposits made out of funds during the period pertaining to the pre- commencement of business of the assessee, which has been held to be taxable as being revenue in nature by the Revenue Authorities, while the assessee claims the same to be capital in nature. 18. The contention of the Ld. Counsel for the assessee is that though admittedly identical issue stands decided against the assessee in the preceding years but the facts are distinguishable and the facts are ,on the contrary, identical to that in the case of M/s H.P. Power Corporation Ltd.(supra) where the issue was decided in favour of the assessee. 19. We have gone through the aforementioned orders of the ITAT.In the order passed by the ITAT in the case of the assessee (in ITA No.1443/Chd/2016 dated 18.04.2017) we find that the fact noted in the same at para 4 of the order is that the interest was earned by the assessee on surplus funds available with it. On the basis of these facts, which were found to be identical with that in the preceding year wherein the ITAT had held the said income to be taxable following the decision of the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra), the issue was decided against the assessee. The ITAT noted that no

ITA No.415 &436/CHD/2025 A.Y.2016-17 14 distinguishing facts were found in the preceding year and, therefore, treated the issue as covered by the order of the ITAT in the preceding year in the case of the assessee. 20. In the order passed by the ITAT in the case of HP Power Corporation in ITA No.842/Chd/2014 dated 06.05.2016,we find that it was noted in the order at para 6 that the assessee had been found to have borrowed certain amount from Asian Development Bank (ADB) for specific project and on account of delay in the project they had been parked in temporary investments in FDRs. The interest earned thereon was held by the ITAT to be not taxable following the view taken by the ITAT in the case of M/s Beas Valley Power Corporation Ltd. (supra) wherein the decision of the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) was found not applicable and the decision of the CIT Vs. Bokaro Steel Ltd. on identical issue was followed. We find that in the said case also the assessee had submitted that in the earlier years the issue had been decided by the ITAT against the assessee but it was noted in the order that the facts during the year were partly different with funds having been borrowed for specific purpose and parked in FDRs as temporary investments on account of delay in the project. The relevant findings to this effect by the ITAT are at paras 6 to 8 of its order which stands reproduced above in earlier part of our order. Thus the distinction in facts in the aforestated two orders is that while in the case of the assessee in earlier years the interest was found to be earned on surplus funds and hence held taxable, in the case of HP Power corporation (supra) the interest was earned on specific purpose funds deposited in FDR’s on account of delay in execution of projects and therefore held not taxable . 21. In the present case the Ld.Counsel for the assessee has drawn our attention to the facts pointing out that the loans had been taken from ADB by the assessee also amounting to Rs.11,056 lacs on which interest income of Rs.246.96 lacs had been earned and that these loans were to be utilized for specific projects and on account of delay in the project in the project the same had been parked in temporary funds. The aforesaid facts,clearly, are identical to that in the case of M/s H.P. Power Corporation Ltd.(supra). 22. Moreover ,the facts in the present case have been demonstrated before us to be distinguishable from that in the preceding year in the case of the assessee where only surplus funds were found to be available with the assessee. No doubt in the preceding year also interest was earned on ADB funds(specific purpose funds) deposited in FDR’s , but the same was a meager amount of Rs.3.34 lacs as against interest earned on other funds

ITA No.415 &436/CHD/2025 A.Y.2016-17 15 of Rs. 1206.78 lacs ,which facts are recorded in the annual accounts of the assessee . While in impugned year the amount of interest earned on ADB funds is Rs.246.96 lacs while that earned on other deposits is Rs.918.30 lacs. The facts relating to the issue before us ,being interest earned on deposits, are therefore clearly distinguishable from the preceding year wherein there was hardly any income earned from specific purpose loan funds deposited in FDR’s(ADB loans) and primarily interest income was earned from other surplus funds, While in the impugned year a substantial portion of interest income is found to have been earned from deposits made from specific purpose loan funds(ADB loans). 23. The argument of the Ld.DR that ADB Loan was being availed by the assessee in both the years establishes identity of facts,we find, is not correct. Since the issue before us relates to interest income earned , the relevant fact is the nature and composition of interest income earned ,i.e on surplus funds and specific purpose funds, which has been clearly distinguished from the preceding year, and not the factum of loan. 24. We therefore agree with the Ld.Counsel for the assessee that the issue stands squarely covered by the decision of the ITAT in the case of HP Power Corporation (supra), where identically the facts were found to be different from the preceding year on account of identical ADB loan taken for specific project parked temporary in FDRs on account of delay in the project and the ITAT holding the case to be distinguishable from the preceding year had ruled in favour of the assessee following the decision of the ITAT in the case of M/s Beas Valley Power Corporation Ltd. (supra). 25. In view of the same, we hold that the interest received to the extent of ADB loan parked in investments in FDRs is not revenue in nature and not liable to be taxed under the head “income from other sources”. 26. In the result, the appeals of the assessee are allowed in above terms. Order pronounced on 24th June, 2021.

Sd/- Sd/- (R.L.NEGI) (ANNAPURNA GUPTA) Judicial Member Accountant Member

ITA No.415 &436/CHD/2025 A.Y.2016-17 16 7. There is no disparity on facts. Identical issue has been considered by the Tribunal in these two years. The ld. counsel for the assessee while buttressing his case took us through copy of the Balance Sheet available on page No. 2 to 18, the Audit Report available on page Nos. 19 to 30. He has demonstrated as to how interest income has been earned by the assessee on ADB loans as well as on surplus funds. We are satisfied that issue is squarely covered by the earlier years’ judgement of the ITAT and these issues must have been pending before the Hon'ble High Court. Accordingly, we do not find any merit in the grounds of appeal raised by both the appellants in their respective appeals. Accordingly, the solitary issue raised by the Revenue is rejected and the appeal of the Revenue is dismissed.

9.1 The brief facts of the case are that assessee has claimed Prior Period Expenses which include;

ITA No.415 &436/CHD/2025 A.Y.2016-17 17 a) Expenses paid to HPSEB Rs.3062 lacs b) Depreciation for A.Y. 2014-15 Rs.158.47 lacs

In response, the assessee vide reply dated 15.10.2018 has submitted that

"Regarding not adding back the Prior Period Expenses of Rs. 189.09 lakh, it is submitted that after providing for depreciation amounting to Rs. 7,58,33,779/- as per income tax act and adding back the prior period expenses. Assessee has taxable income of Rs. 1,96,814 only whereas income tax amounting to Rs. 64,10,688/- has been paid on book profit of Rs. 3,14,42,127/- under MAT provisions. As such there is no tax effect of not adding back prior period expenses of Rs. 189.09 lakh" The assessee's reply has been considered. However, the same is found to be untenable. The profit for the year under consideration has to be determined by taking into account incomes & expenses of the year under consideration. The prior period income and expenses are required to be ignored to compute the profit for the year under consideration. Further, just because the tax has been paid under provision of MAT doesn't mean that the correct profits for the year under consideration are not quired to be computed. In view of the above, the prior period expense claimed by the assessee counting to Rs. 1,89,09,099/- are hereby disallowed and added to the total income computed by the assessee.

ITA No.415 &436/CHD/2025 A.Y.2016-17 18

10.1 A perusal of the above finding would reveal that this correspondence was not brought to the notice of the AO. Though this letter is stated to be of 16.10.2016, it was available with the assessee before the assessment order. Similarly, ld.CIT (Appeals) took cognizance of this fact and did not agree with the submissions of the assessee on the ground that it ought to have been brought to the notice of the AO.

ITA No.415 &436/CHD/2025 A.Y.2016-17 19 GROUND NO. 3

Order pronounced on 20.04.2026.

Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�/ CIT 3. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 4. गाड� फाईल/ Guard File 5.

सहायक पंजीकार/ Assistant Registrar