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PER PAWAN SINGH, JUDICIAL MEMBER
This appeal by assessee is directed against the assessment order dated 08.10.2018 under section 143(3) r.w.s. 144C(13), passed in pursuance of direction of Dispute Resolution Panel-2, Mumbai (ld. DRP) dated 10.09.2018 for Assessment Year 2014-15. The assessee has raised the following grounds of appeal:
1. On the facts & circumstances of the case the Learned Dispute Resolution Panel (DRP) has erred in directing the Assessing Officer to treat the sum of INR 7,48,970/- under the head Income from other sources instead of business income. The appellant prays that the conclusion reached by the Assessing Officer (AO) as directed by Dispute Resolution Panel (DRP) are erroneous and shall be deleted.
Mum 2018-Shri Bikaner Highway Ltd.
On the facts & circumstances of the case, the appellant prays that the sum of INR 7,48,970/- may be reduced from the total value of capital work in progress, as the said income is in the nature of capital receipt and the same shall not be taxed under the head "Income from other sources".
On the facts & circumstances of the case, the appellant prays that the addition made by the Learned AO as directed by the Learned DRP amounting to INR 7,48,970/- under the head "Income from other sources" shall be deleted. 4. Without prejudice to ground no. 1 to 3, the appellant prays that on the facts and circumstances of the case, if interest income is taxed as income from other sources then the claim of interest expenditure amounting to INR 13,03,767/- should be allowed against the interest income and only the net interest income should be charged as per the provisions of section 56 of Income Tax Act, 1961. 5. On the facts and circumstances of the case, the appellant denies the liability for payment of interest u/s. 234B and prays that the interest levied by the Learned AO as directed by Learned DRP shall be deleted. 2. Brief facts of the case are that the assessee is a company engaged in the business of infrastructure development. The assessee was awarded a contract for development of Highway on Built Operate and Maintenance basis by Government of Rajasthan, part of NH-11, starting from Sikar to Bikaner in the state of Rajasthan. During the year under consideration, the assessee earned interest income of Rs. 7,48,948/- on fixed deposits in Banks. The assessee treated the said interest income as Business Income and reduced from the cost of work-in-progress. During the assessment the assessee was asked to explain why the interest income should not be treated as “Income from Other Sources”. The assessee filed its reply dated 15.12.2017 and contended that the assessee obtained credit 2 Mum 2018-Shri Bikaner Highway Ltd.
facilities from various banks and Institutions for setting up of infrastructure facility. The funds are exclusively meant for use of setting up of infrastructure facility. The lenders disbursed the funds at specified intervals and are required for the purpose of setting up of the project.
However, due to time difference and source and application of funds, the assessee invested in short term deposit and earned interest. On maturity, the funds were ultimately used for the purpose of project. The intention of assessee of parking the funds by way of Fixed Deposit for short period is to utilize the funds for maximizing the return. The assessee has capitalized the capital expenditure as well as revenue expenditure till time the project is set up and has treated the same as capital expenditure. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer in para-5.9 of the draft assessment order held that interest income earned by assessee is assessable as Income from Other Sources. The assessee filed the objection before the ld. DRP. However, the objection of assessee was dismissed vide direction dated 10.09.2018.
On receipt of direction from ld. DRP, the Assessing Officer passed the final assessment order accordingly. Aggrieved by the addition in the final assessment, the assessee has filed the present appeal before this Tribunal. 3. We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. 3 Mum 2018-Shri Bikaner Highway Ltd.
At the outset of hearing, the ld. AR of the assessee submits that the grounds of appeal
raised by assessee are covered by various decision of Tribunal in favour of assessee, which were passed on similar grounds of appeal in cases of assesses which are engaged in similar infrastructure development activities for Built, Operate and Maintaining the Highways in different states. The ld. AR of the assessee filed the copy of decision of Tribunal in Jorabat Shillong Expressway Ltd. Vs. ITO in for Assessment Year 2011-12 dated 12.09.2018 and in Jorabat Shillong Expressway Ltd. Vs. ITO in ITA No. 6695/Mum/2017 for Assessment Year 2012-13 dated 24.07.2019.
5. On the other hand, the ld. DR for the revenue supported the order of lower authorities. The ld. DR further submits that the assessee before the ld. DRP has taken stand that the assessee has a liability of interest and the amount was parked in a Fixed Deposit to meet out the interest liability. In support of his submission, the ld. AR of the assessee relied upon the decision of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (227 ITR 172) (SC).
6. In rejoinder submission, the ld. AR of the assessee submits that the assessee availed the credit facility from the Banks and various Institutions. There was compulsion on the assessee to park the amount of loan in an Escrow Account. The assessee cannot use the loan/credit amount for any other purpose , except for the specified purpose and thus, 4 Mum 2018-Shri Bikaner Highway Ltd. the facts of the case of assessee are entirely different from Tuticorin Alkali Chemicals & Fertilizers Ltd (supra) and covered by the decision of Tribunal.
We have heard the submission of both the parties and perused the material available on record. There is no dispute that assessee earned interest on deposit in Bank. Further, there is no dispute that the assessee is under the process of setting up of infrastructure facility of Expressway from Sikar to Bikaner. The assessee reduced the interest from its work- in-progress. We have noted that on identical grounds of appeal, the co- ordinate bench of this Tribunal in Jorabat Shillong Expressway Ltd. (supra) on similar grounds of appeal passed the following order:
5. We have considered the submission of both the parties and have gone through the orders of authorities below. We have noted that similar ground interest income was treated as “Income from Other Sources” in Assessment Year 2011-12. However, on appeal before the Tribunal, the same was allowed in favour of assessee as “Business Income”. The Tribunal while allowing the interest income as Business Income followed the decision of Jaipur Bench in Infrastructure Development Company of Rajasthan Ltd. Vs. DCIT in dated 11.08.2016, Hon’ble Delhi High Court in Indian Oil Panipat Power Consortium vs. ITO (355 ITR 255(Del.), CIT vs. Facor Power Ltd. [2016] taxman.com 178 (Del.). Therefore, considering the decision of Tribunal in assessee’s own case for Assessment Year 2011- 12 and respectfully following the same, Ground No.1 to 3 of appeal are allowed. 8. Further, we have noted that in case of Jorabat Shillong Expressway Ltd.
For Assessment Year 2010-11, which was followed in Assessment Year Mum 2018-Shri Bikaner Highway Ltd.
2012-13 (supra), the co-ordinate bench of Tribunal referred and relied upon the decision of Indian Oil Panipat Consortium Ltd. (315 ITR 255 (Delhi High Court) wherein the decision of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) was considered and distinguished. The Hon’ble Delhi High Court held that in Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) funds have been borrowed for setting up of plant and the surplus were invested in Fixed Deposit, the income earned in the form of interest was taxed as ‘Income from Other Sources’. The Hon’ble Delhi High Court also referred the decision of Hon’ble Supreme Court in Bokaro Steel Ltd. [236 ITR 315 (SC)] and held that if the income is earned by way of interest or any other manner on funds which are extricable linked to set up of the plant, such income is required to be capitalized to be set up of against the pre-operative expenses. It was held that test is whether activities are taken up for setting up of business and the funds which generated are extricable is connecting the setting up of the plant.
Thus, considering the aforesaid ratio lay down by Hon’ble Delhi High Court in Indian Oil Panipat Consortium Ltd. (supra), we find that the submissions of ld DR for the revenue has no leg to stand. Therefore, the ground no. 1 to 3 of the appeal raised by assessee are allowed in favour of assessee. Mum 2018-Shri Bikaner Highway Ltd.
Ground No.4 is raised in alternative to the ground no. 1 to 3. Since we have allowed the ground no. 1 to 3 of the appeal, hence, the discussion on ground no.4 have become academic.
Ground No.5 relates to interest under section 234B which is consequential in nature and needs no specific adjudication. 12. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 20/01/2020.