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The Division Bench of the Delhi High Court in the case of Pr. Commissioner of Income Tax-7 vs M/S Triumph Realty Pvt. Ltd. consisting of Justices Manmohan and Manmeet Pritam Singh Arora reiterated that if an assessee receives any amounts which are inextricably linked with the process of setting up its plant and machinery, such receipts will go to reduce the cost of its assets. These are receipts of a capital nature and cannot be taxed as income.
Facts and Contentions Made
This Income Tax Appeal was filed challenging the order passed by the Income Tax Appellate Tribunal (‘ITAT’) for the Assessment Year 2013-14. Learned counsel for the Appellant submitted that the ITAT erred in allowing the capitalisation of interest on FDRs earned during the period of construction without appreciating the fact that while utilizing the ECB funds the assessee did not follow the RBI guidelines. He also submitted that the ITAT failed to consider the various decisions of the Apex Court including Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT.
Observations of the Court
The Bench noted that it had dismissed a similar appeal preferred by the Revenue against an ITAT order passed in assessee’s own case for the earlier Assessment Year 2012-13 wherein it had reiterated the decree in Commissioner of Income Tax, Bihar II, Patna vs. Bokaro Steel Ltd., Bokaro that “if the assessee receives any amounts which are inextricably linked with the process of setting up its plant and machinery, such receipts will go to reduce the cost of its assets. These are receipts of a capital nature and cannot be taxed as income.”
n Indian Oil Panipat Power Consortium Limited, New Delhi vs. Income Tax Officer, a Division Bench of this Court had held that “if the funds infused in the assessee by the joint venture partner were inextricably linked with the setting up of the plant, the interest earned by the assessee could not be treated as income from other sources”. This principle was also reiterated by this Court in Principal Commissioner of Income Tax vs. Facor Power Ltd.
Judgment
So, keeping in view the aforesaid, the Bench opined that there was no substantial question of law as the questions sought to be raised in the present appeal were squarely covered by the decisions of the Apex Court as well as this Court. Hence, this appeal was dismissed.
Case: Pr. Commissioner of Income Tax-7 vs M/S Triumph Realty Pvt. Ltd.
Citation: ITA 177/2022
Bench: Justice Manmohan, Justice Manmeet Pritam Singh Arora
Decided on: 1st June 2022
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