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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI C. M. GARGDr. B. R. R. KUMAR
ORDER PER Dr. B. R. R. KUMAR, AM: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-8, New Delhi dated 01.11.2019.
Following grounds have been raised by the Revenue in this appeal:
“1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made by AO on account of income from Other Sources amounting to Rs. 64,72,19,392/- relying on the case of Hon'ble High Court judgment in the case of Indian Oil Panipat Power Consortium Limited Vs. ITO 181 Taxman 248, whereas the facts of the case relied upon by the CIT(A) are different. IN the case of Indian Oil Panipat Power Consortium Limited the business had not even commenced and the company was formed only for the purpose of setting up of refinery in Joint Venture. But in the case of assessee company the business activity has started long ago in the year 2004-05 itself as the business of the assessee company has started from the moment it had acquired the land for the construction activity. The Hon'ble Apex Court laid down the law in the case of M/s Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT (1997) 227ITR 172 (SC) and held that interest earned during pre commencement period by placing surplus funds in the bank account is taxable as income under the head income from other sources. A similar legal issue has been appealed against for A.Y 2014-15."
The assessee is a private limited company engaged in business of development of real estate for the purposes of commercial, industrial and residential use. The AO added interest earned of Rs.57.88 Cr. to the returned income. Relying on the judgment of the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT, 227 ITR 172 (SC). The ld. CIT(A) deleted the addition relying on the judgement of Hon’ble Supreme Court in the case of Bokaro Steels Ltd. 236 ITR 315. The ld. CIT(A) deleted the addition relying on the order of the Tribunal in assessee’s own case for the A.Y. 2013-14/2015-16. The relevant part of the order of the ld. CIT(A) is as under:
“4.5 I have discussed the facts of the case of the captioned year with the Ld. AR of the Appellant and find that the facts of the case in hand are identical to the aforesaid case before the Hon'ble ITAT for AY 2013-14. I also find merits in the submission of the Appellant that it had utilized the funds not immediately required but relating to the project in the fixed deposit. Thus, the interest income is inextricably linked to the cost of the ongoing project and should ultimately reduce the capital WIP. I accordingly direct the AO to treat the interest income as capital in nature and reduce the capital WIP with the amount of interest income capitalised.
4.6 In light of the above, Ground No. 4 raised by the Appellant in relation to the netting off the interest income against the project cost is allowed. Therefore, the other grounds i.e. Ground No. 2 and Ground No. 3 are dismissed. It is seen that AO has treated Rs. 64,72,19,392/- as income from other sources that includes other income of Rs. 11,545/- and Rs.64,72,07,847/- from interest income. In view of the Hon'ble ITAT order for AY 2013-14 on identical issue, the AO is directed to reduce the Capital WIP by an amount of interest income amounting to Rs.64,72,07,847/-.”
For the sake of ready reference, the relevant part of the order of the ITAT for the A.Y. 2013-14 which was referred in the order for the A.Y. 2015-16 in is reproduced as under:
“7. As regards, Ground No. 2 to Ground No. 5 relating to corporate tax additions. The Ld. AR submitted that the Assessing Officer had made similar additions in AY 2013-14, wherein the Assessing Officer had capitalized the interest expenses and treated the entire interest income as income from other sources. The assessee preferred appeal before the Tribunal in AY 2013-14 which was disposed of vide order dated 26.07.2019 in favour of the assessee on this issue. The Tribunal held that the Assessing Officer should treat the interest income as capital in nature and reduce the same from the cost of the ongoing project. The Tribunal directed the Assessing Officer to treat the interest income as capital in nature and netting the same against the project cost/capital working progress. The Ld. AR further submitted that in AY 2014-15 the CIT(Appeal) followed the order of the Tribunal and deleted similar additions made by the Assessing Officer. The Ld. AR submitted that the present assessment year i.e. AY 2013-14 is continued year and the factual aspect remains the same.”
Hence, in the absence of any change in the factual matrix and the legal proposition, the appeal of the revenue is liable to be dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 13.09.2023.