BKP MINING CORPORATION LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD-1(3), HYDERABAD

Brief facts of the case are that the assessee-company, which is engaged in the business of development of housing projects and also setting up of Solar Energy Projects, filed its return of income for the assessment year 2013-14 declaring its income at Rs. 12,55,310/- under the normal provisions and an amount of Rs. 12,55,309/- under MAT provisions. The case was selected for scrutiny under CASS and accordingly notices were issued. The assessee furnished required details.

On perusal of the same, the A.O. observed that the assessee- company is a company established and promoted with an intention to harness Electricity Energy by using Solar Power besides other objects and that in this process, it mobilised funds by way of share capital from shareholders to the extent of Rs. 10,44,10,000/-. He observed that the assessee-company applied for tender for production of Solar Energy but, since it was time consuming process, the assessee deposited the mobilized share capital with banking institutions and earned interest to the extent of Rs. 23,57,172/-. The assessee-company claimed set-off of interest income against the expenditure incurred by it during the accounting year relevant to the A.Y. 2013-14 and the balance of Rs. 12,55,309/- was offered for tax. The assessee relied upon the decisions of the ITAT in the case of Indian Oil Panipat Power Consortiam Ltd and Adani Power Limited in support of its claim and also submitted that the

Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O and therefore, the assessee is in second appeal before us.

Learned Counsel for the Assessee reiterated the submissions made before the lower authorities and also placed reliance upon the decision of the Coordinate Bench of the Tribunal at Ahmedabad in the case of Adani Power Limited vs. ACIT (ITA No.2755/Ahd/2011, dated 27/07/2015).

Learned Departmental Representative, on the other hand, relied upon the orders of the Authorities below.

Having regard to the rival contentions and the material on record, we find that the assessee’s arguments that the judgment of the Hon’ble Supreme Court in the case of M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd (supra) is on the treatment to be given to the interest earned from Fixed Deposits and not as to whether pre-operative expenditure can be allowed from such income is not acceptable. As per the judgment of the Hon’ble Supreme Court, the interest income has to be treated as ‘income from other sources’. Admittedly, the pre-operative expenditure claimed by the assessee is to be capitalised. In the case of Adani Power Ltd (supra), the interest therein was earned from Margin Money kept in the banks and therefore, the Tribunal had directed that the interest earned therefrom is relatable to the business of the assessee and therefore, it is ‘business income’, whereas in the case before us, it is idle funds which are kept with the banks and therefore, the interest earned thereon cannot be treated as business income of the assessee.

In the result, appeal filed by the assessee is dismissed.