PRINCIPAL COMMISSIONER OF INCOME TAX- 2, vs. M/S. BOKARO POWER SUPPLY CO. LTD.

PDF · subscribers
ITA/451/2018HC DelhiDLHC01095007201813 April 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises from the ITAT's order. The Court's reasoning is based on the ITAT's confirmation of the CIT(A)'s deletion of the addition, which was made by relying on the High Court's own prior judgment in NTPC Power Company Ltd. Vs. Commissioner of Income Tax (ITA 1238/2011 decided on 17.7.2012). This implies the Court found the ITAT's decision to be in line with established precedent. Therefore, the appeal filed by the Principal Commissioner of Income Tax-2 was dismissed. No specific issue was left undecided.

What were the facts?

The appeal concerns the taxability of interest earned by the assessee, M/s. Bokaro Power Supply Co. Ltd., on margin money and mobilization advance. The assessee advanced funds to its service providers/contractors. The Assessing Officer (AO) treated the accrued interest as income from other sources. The assessee argued that this interest should be capitalized as it was intrinsically linked to capital expenditure for setting up a new plant. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition made by the AO. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s order, relying on a previous High Court judgment.

What were the issues?

1. Whether the interest earned by the assessee on the deployment of margin money and mobilization advance is taxable as income from other sources, or if it should be capitalized as part of the capital expenditure incurred for setting up a new plant, as per Section 56 of the Income Tax Act, 1961. Assessee's Contention: The assessee contended that the interest earned on the advances was inextricably intertwined with the capital expenditure for setting up a new plant and therefore should be capitalized. The assessee relied on the principle that income earned during the construction period of a capital asset, if directly related to the acquisition or construction, should be capitalized. Revenue's Contention: The revenue, through the AO, argued that the interest earned was income from other sources and taxable as such. The AO added this interest to the assessee's total income. The revenue's specific reliance on any particular provision or precedent is not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 56

AI-generated summary — verify with the full judgment below

$~28 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 451/2018

PRINCIPAL COMMISSIONER OF INCOME TAX- 2, ..... Appellant Through Mr.Vibhooti Malhotra, Jr.Standing Counsel and Mr.Rahul Chaudhary, Sr. Standing Counsel, Advocates.

versus

M/S. BOKARO POWER SUPPLY CO. LTD. ..... Respondent

Through Nemo.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

13.04.2018

The question of law urged in this appeal is as to the taxability of the amount earned by the assessee towards interest on deployment of margin money and mobilization advance. The assessee had advanced amounts to its service providers/contractors. The advanced money interest accrued, became the subject matter of controversy. The Assessing Officer (AO) added this interest earned as income from other sources, overruling the assessee’s contention that the amount needed to be capitalized, as such funds were inextricably intertwined with the capital expenditure which it had to incur in setting up a new plant. The CIT(A) deleted the disallowance; the

ITAT confirmed that order by relying upon the judgment of this court in NTPC Power Company Ltd. Vs. Commissioner of Income Tax (ITA 1238/2011 decided on 17.7.2012). The Court is of the opinion that as a consequence no question of law arises. The appeal is dismissed.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J APRIL 13, 2018 ndn

More judgments on Section 56

All 1,790 judgments and leading authorities on Section 56 →

Recent GST High Court judgments

Search GST case law →