Hp Power Transmission Corporation ... vs Assessee

M/s HP Power Transmission Corporation Ltd., Vs. The A.C.I.T., Shimla. Circle 1, Shimla

PAN: AABCH1548M

(Appellant) (Respondent)

Appellant by : Shri Vishal Mohan & Aman Singh Respondent by : Shri Manjit Singh

Date of hearing : 08.06.2015 Date of Pronouncement :

PER T.R. SOOD, AM :

The appeal filed by the assessee is directed against the order dated

27.6.2014 of CIT(A), Shimla.

2. In this appeal the assessee has raised the following ground:-

1. That in the facts and circumstances of the case the Ld. CIT(A) Shimla is not justified in upholding the addition of Rs. 1,28,80,767/- in respect of interest on short term deposits treating the same as income from other sources.

The said addition is not sustainable in the eyes of law.

3. After hearing both the parties we find that during assessment

proceedings the Assessing Officer noticed that Assessee Company was

incorporated as an Undertaking of Government of Himachal Pradesh in 2

April 2008 to strengthen transmission network of facilitation of

evacuation of power from generating plants. Since the company had not

started commission operation, no profit and loss account was prepared.

From this, Assessing Officer observed that assessee has commenced the

business operations. He further noted that Auditor in the Audit report

has given following noted in para (E)(ii)

Para Assessing Officer page 2/3

4. On the basis of above observations, a show cause notice was issued

to the assessee that why interest income from surplus funds should not

be taxed in view of the decision of Hon'ble Supreme Court in the case of

Tuticorin Alkali Chemicals & Fertilizers V C IT, 227 ITR 172. In response it

was i t w a s m a i n l y s t a t e d t h a t f u n d s h a v e b e e n r e c e i v e d b y t h e a s s e s s e e

Corporation from Government of Himachal Pradesh against the proposed

purchases of transmissions as well as contribution. Since there were

certain problems in obtaining NOC from various authorities the funds

available with the assessee company could not be utilized and parked in

the bank deposits. Therefore, it cannot be said that assessee had surplus

funds and in this regard reliance was placed on the decision of Hon'ble

Delhi High Court in the case of Indian Oil Panipat Consortium Power

ltd, New Delhi before cons Ltd v ITO 315 ITR 255.

5. The Assessing Officer considered these submissions in detail and

also referred to the decision of Hon'ble Supreme court in the case of

Tuticorin Alkali Chemicals & Fertilizers V C IT ( s u p r a ) a n d u l t i m a t e l y h e l d

that interest income was taxable.

3 6. On appeal, the action of the Assessing Officer was confirmed by

Ld. CIT(A).

7. Both the parties were heard in details. After considering the rival

submissions we find that identical issue came up for consideration in

assessee's own case for assessment years 2008-09 and 2009-10 in ITA

No. 488/Chd/2012 and 169/Chd/2013. In those cases the issue was

decided against the assessee vide paras 13 to 25, which are as under:-

"13. We have heard the rival contentions and perused the record. The brief facts of the case are that the assessee company namely, Himachal Pradesh Power Corporation Limited (HPPCL) was incorporated in December 2006 under the Companies Act 1956. Its objectives were to plan, promote and organize the development of all aspects of hydroelectric power on behalf of Himachal Pradesh State Government (GOHP) and Himachal Pradesh State Electricity Board (HPSEB) in the State of Himachal Pradesh. The GOHP and HPSEB have a 60:40 equity participation in the assessee company.

14. On 31.7.2007 i.e. during he assessment year 2008-09, two other companies i.e. M/s Kinnar Kailash Power Corporation Ltd. and M/s Pabber Valley Power Corporation Ltd., were merged with the assessee and all the assets and liabilities of those companies were taken over at book values by the assessee. The Assessing Officer on perusal of the Balance Sheet as on 31.3.2008 noted that there were no fixed assets with the assessee as on 1.4.2007 and the entire assets except for some office equipments were received on merger from he amalgamating companies. The assessee had not made any investment in assets to set up power plant during the said year. The incidental expenditure incurred during the year were in the nature of administrative expenses, apart from some nominal expenses on survey and investigation and consultancy fee. The process of setting up of power plant had not commenced during the relevant year. The Assessing Officer further noted that the bank deposits were made not only from the share capital but also from the funds of the amalgamating companies, which in turn were transferred to the assessee on merger. The assessee during the assessment year 2008-09 in addition to the share capital had received additional funds of Rs.12.37 crores from Delhi Jal Board which were shown under the head capital reserve in the Balance Sheet. The issue which arises before us in this regard was whether the interest earned on FDRs in such circumstances could be said to be inextricably linked to the profits and gains of the business and whether the interest income could be set off against the pre-operative expenses, which do not include any expenditure on setting up of the plant.

15. In assessment year 2009-10 the assessee in the Annual Report had declared that though it was implementing number of projects 4

in the State of Himachal Pradesh but none of the said projects had commenced. At page 14 of the Annual Report for the financial year 2008-09 it was declared that Sawkr Kuddh Hydroelectric Project would commence generation of electricity at the end of the year 2012. At page 33 of the Annual Report the auditors had also observed that the Profit & Loss Account had not been prepared as the company had not started the commercial operation. However, statement showing incidental expenditure during the construction period was prepared. During the assessment year 2009-10 the explanation of the assessee before the Assessing Officer is reproduced at page 3 of the assessment order in which the assessee had explained that on the one hand the State Government of Himachal Pradesh had contributed funds to the assessee as share capital for use in construction of several power generation projects and since the construction of the projects had got delayed on account of certain reasons, the funds were utilized for making short term deposits with the bank for earning some interest. The said interest earned would in turn reduce the cost of the projects. Therefore, the same constitutes capital receipt. Further it was explained by the assessee to the Assessing Officer that in addition the assessee was also constructing Renuka Dam Project on behalf of the Central Government on no profit and no loss basis. The said project was declared as a national project and the entire funds required for the construction of the said project were provided by the Delhi Jal Board on behalf of Central Government. The said funds were utilized for making FDRs against which interest income was earned. The assessee during the assessment year 2009-10 had received interest income of Rs.27.64 crores which was set off against the incidental expenses.

16. The analysis of the above said facts reflects that the assessee company was in the process of setting up of power projects in the State of Himachal Pradesh for which the funds were allocated by the State Government as share capital and further funds were received from Delhi Jal Board for the construction of Renuka Dam Project on behalf of Central Government. Since both the projects had not commenced, the funds lying with the assessee were parked in short term deposits in the bank and interest earned thereupon. The taxability of such interest in the hands of the assessee is the question raised in the present appeal. The taxability of a particular receipt or income is to be determined in accordance with the nature and character of the receipt/income. There is no merit in the plea of the assessee that since the income earned is to be utilized in a particular manner, the same partakes the character of a capital receipt. The receipt is whether capital or revenue in nature, is to be determined in line with the provisions of Income Tax Act and also keeping in mind the nature and character of the said receipt/income. Another plea raised by the assessee was that the interest earned on the bank deposits was to be considered as additional equity of the company and the said interest belongs to the State Government and not to the assessee. The assessee in support thereof placed reliance on the Minutes of 15th Meeting of the Board of Directors of the assessee held on 20.2.2009 at Shimla and referred to Item No.2 of the supplementary/additional agenda items dealt with the issue of interest earned/accrued on the amounts received from he State Government as capital. As per the assessee it was decided in the said Board meeting that the interest 5

earned was to be converted into equity from the Himachal Pradesh Government. The CIT (Appeals) under para 4.4 at pages 6 and 7 has reproduced the Item No.2 of the supplementary/additional agenda items recorded in the said minutes wherein the issue of interest earned/accrued on the amounts received from the State Government as equity and amounts received from he Government of Delhi on account of construction of Renuka Dam Project, which in turn have been utilized for making short term deposits with the bank, was taken up and after discussion with the tax consultant, the Managing Director informed in the meeting that the advance tax is to be paid on such interest. The CIT (Appeals) has reproduced the relevant portion of the Minutes of Meeting and the same are not being reproduced for the sake of brevity. The assessee has filed copy of the said meeting at pages 72 to 84 of the Paper Book with the relevant Item No.2 at pages 83 and 84 of the Paper Book. In the said meeting two decisions were taken by the Members of the assessee Board, that the advance tax due on the said interest earned by the assessee is to be paid and further the amount is to be claimed as refund while filing the income tax return by taking the plea that the interest earned is to be converted into equity for the money coming from Himachal Pradesh Government and is not the income of the assessee and the interest on money from Delhi Government has to be spent on the work itself.

17. The assessee had further placed on record the sanction orders of allocation of funds by the Himachal Pradesh Government and also the Delhi Jal Board at pages 85 to 96 of the Paper Book. The perusal of the different sanction orders reflects the money to have been accorded to the assessee against equity shares of State Government or for utilization for the specific projects. It is also mentioned in the said sanction orders as to where the money cannot be utilized in the year of grant, then the same could be re- appropriated for providing equity to hydro power projects. While releasing the funds the sanction orders talks of its utilization for a specific purpose and recognizes that the same may not be utilized for the said purpose during the year of its grant and may be reallocated in the succeeding year. However, the said grant orders are silent about the utilization of those funds by the assessee during the intervening period i.e. from the date of allotment to its utilization. The assessee during both the years under appeal had admittedly not commenced its activities and the money which it had received from the H.P. State Government and from Delhi Jal Board on behalf of Government of Delhi was utilized for making short term deposits in bank on which interest was earned.

18. During the course of hearing, the learned A.R. for the assessee was asked to produce any agreement or any letter to the effect that the interest earned on such deposits is to be reverted back or partake the character of funds allocated to the assessee by way of any agreement or any sanction letter. The learned A.R. for the assessee though sought adjournment on this behalf but he was unable to file any evidence to justify its claim that the said interest earned on FDRs is not the property of the assessee but is the property of the principals who had allocated the said funds to the assessee. In the absence of the same and in view of the facts 6

and circumstances of the case, we find no merit in the plea raised by the assessee. The interest income earned by the assessee during the captioned assessment years is includible as income of the assessee and is to be assessed as income from other sources in the hands of the assessee. Merely because the said interest income in future would be utilized for carrying on the business of the assessee or applied to the projects undertaken by the assessee, does not make the said interest income as capital receipt in the hands of the assessee as the utilization of the income or the receipt does not determine the nature of the receipts. The interest income received by the assessee during the pre-operation period is assessable as income from other sources in the hands of the assessee in view of the ratio laid down by the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (supra). The Hon'ble Supreme Court (supra) held as under:

"If a person borrows money for business purpose but utilizes that money to earn interest, however temporarily, the interest so generated will be his income. This income can be utilized by the assessee whichever may he likes. He may or may not discharge his liability to pay interest with this income. Merely because it was utilized to repay the interest on the loan taken by the assessee, it did not cease to be his income. The interest earned by the assessee could have been used for many other purposes. If the assessee purchased a house or distributed dividend or paid salary to its employees with the money received as interest will the interest amount be treated as not his income? This is not a case of diversion of income by overriding title. The assessee was entirely at liberty to deal with the interest amount as he liked. The application of the income for payment of it could not affect its taxability in any way."

19. The plea of the learned A.R. for the assessee before us was that the said decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (supra) had been reversed by the Hon'ble Supreme Court in CIT Vs. Bokaro Steel Ltd. [236 ITR 315 (SC). In the facts of the said case the assessee company had advanced money to contactors, who were to erect iron and steel plant for the assessee. On these advances to the contractors, the assessee was paid some interest. The company was also receiving hire charge on the plant and machinery let out to the contractors and housing quarters leased to the employees. The Hon'ble Supreme Court held that the ratio of Tuticorin Alkali Chemicals and Fertilizers Ltd., supra, was not applicable to such facts. The relevant extract from the judgment of the Hon'ble Supreme Court in the case of Bokaro Steel Ltd., supra, is as under:

"However, while interest earned by investing borrowed capital in short-term deposits is an independent source of income and not connected with the construction activities or business activities of the assessee, the same cannot be said in the present case where the utilization of various assets of the company and he payments received for such utilization are directly linked with the activity of setting up of the steel plant of the assessee. These receipts are inextricably linked 7

with the setting up of the capital structure of the assessee company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction."

20. The learned A.R. for the assessee has further placed reliance on decision of the Hon'ble Delhi High Court in Indian Oil Panipat C o n s o r t i u m L t d . V s . I T O [ ( 2 0 0 9 ) 3 1 5 I T R 2 5 5 ( D e l )] , i n t h e f a c t s of which the funds in the form of share capital were infused for a specific purpose of acquiring land and the development of infrastructure. The Hon'ble Delhi High Court held that since interest earned by Indian Oil Panipat Consortium Ltd. was inextricably linked with setting up of the plant of the assessee, it constituted a capital receipt in the hands of the assessee.

21. The CIT (Appeals) had also made a reference to another decision of the Hon'ble Delhi High Court in International M a r k e t i n g L t d . V s . I T O [ ( 2 0 0 7 ) 2 9 2 I T R 5 0 4 ( D e l )] w h e r e i n i t w a s held that interest earned in pre-operative stage of the business to be taxable in the hands of the assessee.

22. The CIT (Appeals) vide para 11 had held that the fact situation in that case was very similar to the case before Hon'ble Delhi High Court in International Marketing Ltd. Vs. ITO (supra) and where surplus funds were parked with different companies and the Hon'ble High Court applied the ratio laid down in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (supra) to bring the interest to tax.

23. In order to decide the issue and to apply the ratio laid down by the Hon'ble Supreme Court or other various High Courts, the first parameter to be applied is the facts of the case. We find that the facts of the present case are similar to the facts before the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (supra) and applying the ratio laid down by the Hon'ble Apex Court we hold that the interest earned by the assessee by parking its funds in short term deposits with the bank is assessable as income from other sources. We find no merit in the reliance placed upon the decision of the Hon'ble Delhi High Court by the learned A.R. for the assessee in Indian Oil Panipal Consortium Ltd. Vs. ITO (supra) as the facts of the said case were at variance. We also find no merit in the plea of the assessee that the interest earned by the assessee is to be infused as share capital and/or to be returned to the Principals who had had advanced the loans to the assessee as the assessee has failed to bring on record any evidence to establish its claim. Merely because the money in future would be utilized for capital expenditure does not make the receipts as capital receipts in the hands of the assessee.

24. The Mumbai Bench of the Tribunal in Whistling Woods International Ltd. Vs. ITO (supra) had considered similar issue and also adjudicated the submissions made therein that the principles laid down by the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (supra) had been diluted by the Hon'ble Supreme Court while deciding the case in CIT Vs. Bokaro Steel Ltd. (supra) and other cases. The relevant paras are as under:

8 "12. We have considered the rival submissions carefully in the light of the material on record as well as decisions cited by the parties. In the case of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [supra] the Hon'ble Supreme Court observed as under:

"The assessee was a company incorporated on 3rd Dec., 1971 for the purpose of, inter alia, manufacturing heavy chemicals such as ammonium chloride and soda ash. The trial production of the factories of the company commenced on 30th June, 1982. For the purpose of setting up of the factories, the company had taken term loans from various banks and financial institutions. That part of the borrowed funds which was not immediately required by the company was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. The company had also deposited certain sums with the Tamil Nadu Electricity Board. It had also given interest-bearing loans to its employees to purchase vehicles. Upto the asst. yr. 1980- 81, interests earned by the company from the various loans given by the company and also from the bank deposits were shown as income and was taxed accordingly. For the accounting year ending on 30th June, 1981, (asst. yr. 1982-83), the assessee received a total amount of interest of Rs. 2,92,440. In its return of income filed on 22nd June, 1982, the company disclosed the said sum of Rs. 2,92,440 as "Income from other sources".

It also disclosed business loss of Rs. 3,21,802. After setting off the interest income against business loss, the company claimed the benefit of carry forward of net loss of Rs.29,360. The company later on realised its mistake and on 26th Dec., 1984, it filed a revised return showing business loss of Rs. 3,21,802. It claimed that according to the accepted accounting practice, interest and finance charges along with other pre-production expenses will have to be capitalised, and that, therefore, the interest income of Rs.2,92,440 should go to reduce the pre- production expenses (including interest and finance charges), which would ultimately be capitalised. In this connection, the company highlighted the fact that during the previous year relevant to the asst. yr. 1982-83, it had incurred a sum of Rs. 1,13,06,068 as and by way of interest and finance charges, which had to be capitalised along with other pre-production expenses. In other words, according to the assessee, the interest income of Rs.2,92,440 was not exigible to tax. The ITO rejected the assessee's claim that the interest income was not exigible to tax.

The view of the ITO was upheld by the CIT(A). The company ' s further appeal to the Tribunal was dismissed. We are also concerned in this case with the asst. yr. 1983-84. During the previous year relevant to this assessment year, the assessee had received interest income of Rs.1,08,336. The assessee this assessment year, the assessee had received interest income of Rs. 1,08,336. The assessee filed its return in which it claimed that the interest income of 1,08,336 should go to 13 reduce the pre- production expenses including the interest and finance charges which would ultimately be capitalised. The Income-tax Officer rejected the assessee's claim that the interest income was not exigible to tax. The view of the ITO was upheld by the CIT[A] . The company's further appeal to the Income Tax Appellate Tribunal was dismissed. In view of the conflict of decisions between the Madras and Andhra Pradesh High Courts., the Tribunal referred the question regarding taxability of income, directly to the Supreme Court".

On the above facts, it was held as under:

The company had surplus funds in its hands. In order to earn income out the surplus funds, it invested the amount for the purpose of earning interest. The interest thus earned is clearly of revenue nature and will have to be taxed accordingly. The accountants may have taken some other view but accountancy practice is not necessarily good law. This case not a case of diversion of income 9

by overriding title. The assessee was at liberty to deal with the interest amount as it liked. The application of the income for payment of interest would not affect its taxability in any way. The company could not claim any relief. Under section 70 or section 71 since its business had not started and there could not be any computation of business income or loss incurred by the assessee in the relevant accounting years. in such a situation, the expenditure incurred by the assessee for the purpose of setting up its business could not be allowed as deduction, nor could it be adjusted against any other income under any other head. Similarly any income from a non-business source could not be set off against the liability to pay interest on funds borrowed for the purpose of purchase of plant and machinery even before commencement of the business of the assessee." In the detailed discussion while adjudication this matter, the Hon'ble Supreme Court had also observed at page 179 as under:

"The basic proposition that has to be borne in mind in this case is that it is possible for a company to have six different sources of income, each one of which will be chargeable to income tax. Profits and gains of business or profession is only one of the heads under which the company's income is liable to be assessed to tax. If a company has not commenced business, there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the company commences its business, its income from any other source will not be taxed. If the company, even before it commences business, invests the surplus fund in its hand for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head ' Capital gains ' . Similarly, if a company purchases a rented house and gets rent, such rent will be assessable to tax under s. 22 as income from House property. Likewise, a company may have income from other sources. It may buy shares and get dividends. Such dividends will be taxable under s. 56 of the Act. The company may also, as in this case, keep the surplus fund in short-term deposits in order to earn interest. Such interests will be chargeable under s. 56 of the Act."

Thus, it is clear from the above discussion that if whenever an assessee is in the process of setting up of the business, if any, income arises under any of the heads except under the head profits and gains of business, then such income has to charged to tax under that particular head.

13. The ld. counsel of the assessee had vehemently argued that this principle was diluted by Hon'ble Supreme Court while deciding the issue in the case of Bokaro Steel Ltd. [supra], Karnal Co-operative Sugar Mill Ltd. [supra] and CIT vs. Karnataka Power Corporation [supra]. But having read these judgments very carefully, we find that the ld. DR is right that in these later three decisions were rendered because of distinguishable facts. In the case of Bokaro Steel Ltd. [supra], the issue was whether rent received from contractors against houses given for staff of contractors, machine hire charges received from machines given by the assessee company and interest received 15 from contractors on advances made by the assessee company to such contractors, was assessable to tax. The Hon'ble Supreme Court observed that these receipts basically pertain to arrangements made by the assessee with contractors pertaining to the work of construction. To smoothly execute the work, some facilities were extended by the assessee company to the contractors to facilitate the work of construction and thus these receipts have been correctly adjusted by the assessee company against the charges payable to contractors. It was also observed that had the assessee not made these arrangements and had the contractors made these arrangements, charges to the company would have been more. It is significant to note that in this case itself one more issue was there, i.e. interest received from investments made out of borrowed funds which were not immediately required.

10 This interest was held to be taxable by following the decision of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [supra]. In fact, we are reproducing the para given at page-321 of the report-

"During these assessment years, the respondent assessee had invested the amounts borrowed by it for the construction work which were not immediately required, in short-term deposits and earned interest. It has been held in these proceedings that the receipt of interest amounts to income of the assessee from other sources. The assessee has not filed any appeal from this finding which is given against it. In any case, this question is now concluded by a decision of this court in of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [1997] 227 ITR 172. Hence, we are not called upto to examine that issue."

14. Thus, it is clear that as far as interest received from short term deposits which were not immediately required, were held to be taxable following the decision of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [supra]. Only those sums which were received from contractors, which we can say were inextricably connected with the construction activities, were held to be not taxable, rather than they were held to be reduced from the total capital expenditure.

15. In the case of Karnal Co-operative Sugar Mill Ltd. [supra], interest was received on the money deposited to open a letter of credit for purchase of machinery which is again directly connected with the purchase of machine and that is why the ratio of Bokaro Steel Ltd. [236 ITR 315] was made applicable. In the case of CIT vs. Karnataka Power Corporation [supra], the first question referred before the Hon'ble Court was as under-

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in upholding the order of the CIT(A) who deleted the addition of Rs.

1,30,44,518 being interest receipts and hire charges from contractors by holding that the same are in the nature of capital receipts which would go to reduce capital cost ?

From the question itself it is clear that in this case the issue was regarding interest receipts and hire charges from the contracts and that is why the principle laid down in Bokaro Steel Ltd. [supra] was followed.

16. We further find that Hon'ble Supreme Court has again followed the decision of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [supra] in the case of CIT vs. Coromandal Cements Ltd. [234 ITR 412]. In this case the head note reads as under:

"Against the judgment of the Andhra Pradesh High Court refusing to call for a reference of the question whether the Tribunal was right in holding that interest earned on short-term bank deposits during the pre-production stage could not be treated as income from other sources and should go towards the project cost, the Revenue filed an appeal to the Supreme Court. The Supreme Court, following its own judgment in of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [1997] 227 ITR 172, allowed the appeal of the Revenue and set aside the judgment of the High Court."

Thus, it is clear that whenever interest is received during preproduction stage from short term deposits, same has to be taxed as income from other sources. This decision has been again followed by the Hon'ble Supreme Court in the case of CIT vs. Autokast Ltd. [248 ITR 110]. The head note of this decisions reads as under-

11 "From the decision of the Kerala High Court (see [1998) 229 ITR 789) holding that where the assessee kept the money borrowed from the Industrial Development Bank of India for purchase of plant and machinery in short-term deposits in banks and used it in bill discounting until payment for the plant and machinery, the interest earned on the deposits was not taxable in the hands of the assessee as income from other sources but would go to reduce the actual cost of the plant and machinery. The Department took an appeal to the Supreme Court, the Supreme Court reversed the decision of the High Court holding that the interest was taxable in the hands of the assessee."

This judgment has been rendered on November 21, 2000 i.e., much after the decision of Bokaro Steel Ltd. [supra] which was rendered on September 3, 1999 and the decision in the case of CIT vs. Karnataka Power Corporation [supra] which was rendered on July 27, 2000. Thus, it is clear that the principles laid down in of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd's case [supra] were never diluted and the decisions of Bokaro Steel Ltd. [supra] and Karnal Co- operative Sugar Mill Ltd. [supra] and CIT vs. Karnataka Power Corporation [supra], operates in different field. As far as the decision of Tribunal in the case of Shapoorji Pallonji Power Co. Ltd. vs. ITO [supra] is concerned, the Tribunal made the distinction from of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd's principle [supra], because money was deposited as security deposit with the electricity board which was part of the condition of the contract which the assessee company was to execute by way of construction of power plant for the Government of Madhya Pradesh but that contract could not be executed. Therefore, this decision is clearly distinguishable, particularly in the light of the principles laid down by the Hon'ble Supreme Court.

17. As far as the second limb of the argument is concerned, to which the ld. counsel of the assessee has referred to the decision of the Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited vs. ITO [supra], it was observed by the Hon'ble Delhi Court at placitum as under:

"4. It is important to note that the Tribunal without holding that the finding of fact of the Commissioner of Income-tax (Appeals), that the interest earned was 'inextricably linked' with the setting up of the power plant reversed the decision of the Commissioner of Income-tax (Appeals)by making a bald observation that the "deposit of share capital has no or very remote connection with setting up of plant and machinery". The Tribunal further observed that it was an independent income earned in a similar fashion as was the case in Tuticorin Alkali Chemicals [1997] 227 ITR 172 (SC)."

From the above, it is clear that there was already a finding by the first appellate authority that interest earned was inextricably linked with the setting up of the power plant. Whereas in the case before us, there is no such finding and the funds raised through share capital which were not required for the construction of the training institute has been placed with banks and other companies as short term deposits.

18. As far as the decision in the case of CIT vs. Aspentech India (P) Ltd. [supra] is concerned, again the facts are quite distinguishable. In that case the assessee had claimed expenditure of Rs.2.53 crores against the meager income of Rs.4,93,343/-. The assessee was engaged in the business of software development and the expenditure was mainly incurred on account of employee's salary amounting to Rs.1.72 crores, travelling cost of Rs.30.61 lakhs and other administrative expenses of Rs.39.65 lakhs. Thus, it is clear that assessee had already started generating income because receipts were also shown at 12

Rs.4,93,343/- and the other expenses were claimed as revenue expenditure and were not claimed as reduction from capital expenditure as has been done in the case before us.

19. From the above discussion, it is clear that both the decisions of Hon'ble Delhi High Court are not applicable to the facts of the assessee's case before us. Thus, it is clear that in the case before us, assessee was still constructing the building for the institute which was to establish for training of peoples. During this phase, assessee has raised a share capital and funds raised from such share capital have been invested in fixed deposit receipts of the banks as well as deposits with various companies and assessee has earned interest on the same. The same has to be taxed as 'income from other sources' in the light of the decision of the Hon'ble Supreme Court in the case of M/s Tuticorin Alkali Chemicals & Fertilisers Ltd. v/s. CIT [supra], which we have discussed in detail."

25. We are in conformity with the order of the CIT (Appeals) relating to assessment year 2009-10 and reliance placed on various case laws and upholding both the orders of the CIT (Appeals) we dismiss the grounds of appeal raised by the assessee in both the appeals.

8. Following the above order, we decided the issue raised by the assessee

against the assessee.

9. In the result appeal is dismissed.

(BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : June, 2015 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR