Income Tax Appellate Tribunal - Delhi
National Thermal Power Corporation vs Inspecting Assistant Commissioner Of ... on 18 July, 2000
ORDER
Sikander Khan, A.M.
1. Under s. 255(3) of the IT Act, 1961, the Special Bench was constituted to consider the following additional grounds of appeals :
"(1) The sum of Rs. 22,84,994 deducted from 'Statement of expenditure during construction' cannot be included in the total income.
(2) It is contended that on admission (erroneous), no income (the sum of Rs. 22,84,994) can be included in the total income.
(3) The authorities below have erred and failed in their duty in not adjudicating the facts and evidence on record and mechanically including Rs. 22,84,994 in the total income.
(4) Your appellant craves leave to add, amend any of the grounds of appeal at the time of hearing."
2. The brief facts and history of the case are as under. During the asst. yr. 1978-79, the assessee had deposited its funds which were not immediately required on short-term deposits with the banks. Interest received on such deposits during the previous year relevant to the asst. yr. 1978-79 amounted to Rs. 22,84,994. This was offered for the assessment and the assessment was completed on that basis.
3. Before the learned CIT(A) a number of grounds were taken by the assessee challenging the assessment, but the inclusion of this amount of Rs. 22,84,994 was neither challenged by the assessee nor considered by the learned CIT(A). From the order of the learned CIT(A), the assessee filed second appeal before the Tribunal. The inclusion of the said amount of Rs. 22,84,994 was not objected to in the grounds of appeals as originally filed before the Tribunal. However, by a forwarding letter dt. 16th July, 1983, the aforesaid additional grounds were sought to be raised by the assessee. It was contended that the interest income in question having been received before the commencement or even setting up of its business, it was not taxable as such but it would reduce the capital cost of its plant only. The Tribunal declined to entertain the aforesaid additional grounds. The matter regarding admission of the additional grounds travelled upto the Supreme Court who remanded the proceedings to the Tribunal for the consideration of the new grounds raised by the assessee on merits.
4. The matter came up for consideration before the Tribunal, Delhi Bench 'D' at New Delhi who recommended for constitution of the Special Bench in the matter. Accepting the recommendation, the Hon'ble President constituted the Special Bench.
5. The matter was heard by this Special Bench on 17th July, 2000. After hearing the learned authorised representative of the assessee Shri R. Ganeshan and Shri Abhey Tayal for the Department, we have come to the view that the question of taxability of the aforesaid amount of interest as income from other sources is fully covered by the Supreme Court decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT (1997) 227 ITR 172 (SC). The following observations of the Supreme Court in the case are relevant to the matter in dispute in the present case :
"Under the IT Act, 1961, the total income of a company is chargeable to tax under s. 4. The total income has to be computed in accordance with the provisions of the Act. Sec. 14 lays down that for the purpose of computation, income of an assessee has to be classified under six heads. 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 a 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. The company may keep the surplus funds in short-term deposits in order to earn interest. Such interests will be chargeable under s. 56. In other words, if the capital of a company is fruitfully untilised instead of being kept idle, the income thus generated will be of a revenue nature and not an accretion to capital. Whether the company raised the capital by issue of shares or debentures or by borrowing, will not make any difference to this principle. If borrowed capital is used for the purpose of earning income, that income will have to be taxed in accordance with law. Income is something which flows from the property, something received in place of the property will be a capital receipt. The amount of interest received by the company flows from its investments and is its income and is clearly taxable even though the interest amount is earned by utilising borrowed capital. It is true that the company will have to pay interest on the money borrowed by it. But that cannot be a ground for exemption of interest earned by the company by utilising the borrowed funds as its income. Any set off or deduction of any expenditure can only be made in accordance with the provisions of the Act.
Following the same, it is held that the interest amounting to Rs. 22,84,994 earned by the assessee was rightly taxed. Accordingly, the additional grounds are dismissed.