ITO, WARD- 13(1), NEW DELHI vs. NABINAGAR POWER GENERATING CO. PVT. LTD, NEW DELHI

ORDER PER H.S. SIDHU, JM

This appeal is filed by the Revenue against the Order dated 5.6.2017 passed by the Ld. CIT(A)-6, New Delhi relating to assessment year 2014-15 on the following grounds:- i. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 58,11,065/- and Rs. 20,06,174/- on account of interest received from bank and on advances to contractors respectively during the year by not appreciating the fact that provisions laid down in section 5 of the Income Tax Act, (the Act) wherein it has been clearly mentioned that the total income of a person includes all the income earned / received or deemed to be earned / received by the person in the previous year? ii. Whether on the facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 2,44,466/- on account of miscellaneous income by sale of scrap even when the receipt was squarely covered under provision to section 5 of the Act r.w.s. 56(1) & (2) of the Act which says that the ‘total income’ includes all the income earned / received or deemed to be earned / received by the persons in the previous year? iii. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 58,11,065/- and Rs. 20,06,174/- on account of interest received from bank and on advances to contractors respectively by ignoring the findings of the AO recorded in the assessment order that the assessee invested surplus funds which were not immediately required by it in FDRs and earned interest on it which clearly falls in the definition of ‘income from other sources’ as per sub section (1) and (2) to section 56 of the Act? iv. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of its earlier years’ decision in the assessee’s own case despite the fact that principle of resjudicata is not applicable to income tax proceedings as each assessment year is a separate year? v. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.

Act, 1961 dated 14.9.2015 was issued and served upon the assessee company. Thereafter, notices u/s. 142(1) alongwith with questionnaire was issued and duly served upon the assessee company. In response to the same, assessee attended the proceedings from time to time and filed the requisite details. The assessee is a Joint Venture Company incorporated on 9.9.2008. The Joint Venture Company of the company are NTPC Limited and Bihar State Electricity Board. The Joint Venture was 3 incorporated with the main objective of construction of Power Plant of the capacity to produce 3,960 MW (660 MW*6 units) of electricity at Shivanpur, Dist. Aurangabad, Bihar. On perusal of the Note No. 14 – ‘Other Income’ of the Statement of Profit and Loss account, it was observed that the assessee company has shown receipt of Rs. 20,06,174/- on account of interest from contractors, Rs. 58,11,065/- on account of interest income from Indian Banks, and Rs. 2,44,466/- on account of Misc. Income. The assessee has reduced the entire receipts on account of interest from the total expenditure during construction period under Note No. 18 of the Statement of Profit and Loss account and the net amount has been transferred to the Capital Work-in-progress vide Note No. 9 of the Balance Sheet. The AO vide his query note dated 15.1.2016 has called upon to furnish the complete details of other income as shown in the Statement of the Profit and loss account and the assessee was also asked to show cause as to why the interest received from contractors and interest received from banks, miscellaneous income and net gain in foreign currency transaction should be not added in the total income of the assessee as income under the head Other Sources.

The assessee company submitted its reply vide dated 29.8.2016 and the contention of the assessee company, that interest is in respect of Interest on FDRs and Income on advances given to contractors earned in a period which is prior to commencement of business and therefore be treated as capital receipt and reduced from the total capital expenditure was not correct. Thereafter, the AO observed that assessee company has invested the surplus funds, which were not immediately required by it, in FDRs and also has given advances to the contractors. The deposits and the advances given by the company were not in the regular course of business, nor was it the business of the company to make deposits and advances and earn interest. the interest income cannot be said to be attributable to the activities of the company. The interest had accrued on the funds, which were not immediately required by the assessee company for its business purposes and which were invested in FDRs and on the advances given to contractors. the interest earned on FDRs and advances were not earned out of business regularly carried out by the Assessee company. Therefore, the AO treated the interest income of Rs. 20,06,174/- on account of interest from contractors Rs. 58,11,065/- on account of interest income from Indian Banks and Rs. 2,44,466/- on account of Misc. income as the income under the head ‘income from other sources’. Accordingly, the AO assessed the income of the assessee at Rs. 80,61,705/- u/s.143(3) of the Act dated 31.8.2016. Against the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 05.6.2017 has partly allowed the appeal of the assessee. Aggrieved with the impugned order, Revenue is in appeal before the Tribunal.

“3.3.1 The facts of the case and the submissions of the AR have been carefully considered. It is observed that the ground of appeal relates to the receipt of Rs. 20,06,174/- on account of interest from contractor’s advances, Rs.

58,11,065/- on account of interest income from banks and Rs. 2,44,466/- on account of Misc. income from sale of scrap etc. It is submitted that the company is a Private

Limited Company which was incorporated on 9.9.2008 as a joint venture company between NTPC Ltd. and Bihar State

Electricity Board, with an equal percentage of shareholdings with the main objective of construction of power plant(s) for generating electricity. The joint venture was incorporated with an authorized capital of Rs. 2000 Crore. It had started in the financial year 2009-10, the preliminary work like survey and investigations etc i.e. before undertaking the construction of the power generating plant of the capacity to produce

3960 MW (660 MWx6 units) of electricity at Shivanpur, Distt- Aurangabad, Bihar. The total estimated cost of the project is Rs.

12,600 crore. The main work of construction of the said power plant was started in the year 2011-12, which is now expected to be completed in the financial year 2018-19

(Stage-1). The funds for the entire power plant had been planned to be financed by way of 30% as equity contributions from the shareholders and the balance 70% by raising debt funds.

I find that going by the facts and the nature of receipts, the judgment in the case of Facor Power Limited and Indian Oil

Panipat Power Consortium (Both Hon'ble

High Court of Delhi), squarely applies to present case. In the case of Facor Power

Limited, Hon'ble Delhi High Court held that "where assessee engaged in generating electric power, kept margin money in form of fixed deposits for procurement of various capital goods for setting up of power project, interest earned on said deposits would be in nature of capital receipt not liable to tax". In the case of Indian Oil

Panipat Power Consortium, Hon'ble High Court of Delhi relied on the Hon'ble Supreme Court judgment in CIT vs. Bokaro

Steel Limited that if income is earned, whether by way of interest or in any other manner on funds which are otherwise

"inextricably linked" to the setting up of plant, such income is required to be capitalized to be set off against pre- operative expenses. The Hon'ble Delhi High

Court had also distinguished the facts before them from those which were before the apex court in the case of Tuticorin Alkali

Chemicals and Fetilizers Ltd. Vs CIT. The AO failed to establish that these were surplus funds parked in the bank to earn interest.

Going by the facts of the case and various decisions cited above, the interest receipts are treated as capital in nature and the additions deserve to be deleted.”

Besides, it is observed that the similar addition of interest income from bank, interest on contractor's advances and misc. income on account of sale of scrap etc. in A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2013-

14 was also deleted by CslT(A) in the appellant's own case. Therefore, the addition of Rs. 80,61,705/- is hereby deleted. These grounds of appeal are therefore allowed.”

5.1 After perusing the aforesaid finding and after going through the decision dated 13.9.2017 of the ITAT, ‘E’ Bench, New Delhi in assessee’s own case passed in (AYrs.) 2011-12 & 2012-13, which has also been upheld by the Hon’ble Delhi High Court in ITA No.553/2018, CM Appl. 19070/2018 and ITA No. 555/2018, CM Appl.

19072/2018 vide order dated 9.5.2018, we are of the considered view that there is no illegality or infirmity in the finding of the Ld. CIT(A) on the issues in dispute, hence, therefore, we uphold the action of the Ld. CIT(A) on the issues in dispute and reject the grounds raised by the Revenue.

Order pronounced on 09-01-2019.