K.S.JHAVERI,J. - (1.) By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee and his income which was earned on FDR was taken as a business income.
(2.) Counsel for the appellant has framed the following substantial question of law:- "Whether in the facts and circumstances of the case and law the ITAT was justified in deleting the addition of Rs. 3,37,76,623/- made by the assessing officer on account of income from other source ignoring the fact that the assessee capitalized the interest income received from the FDR's thereby reducing the cost of fixed assets."
(3.) While considering the matter, tribunal has observed as under:- "4. We have heard the rival contentions and perused the material available on record. The issue under consideration for the both the years relate to treatment of the interest received prior to commencement of commercial operations of the specified mega road projects. As per the Revenue, the same is to be brought to tax under the head "income from other sources." As per the assessee, it is in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources." The said issue has been examined at great length by the Coordinate Bench in its decision referred supra and therein the decision of the Hon'ble Supreme Court in case of Tuticorin Alkali Chemicals and Fertilizers (227 ITR 172) as well as decision in case of Bokaro steel Ltd. (236 ITR 316) has been duly considered. The relevant findings of the Coordinate Bench in assessee's own case in ITA No.628/JP/2014 for A.Y. 2009-10 dated 11.08.2016 are reproduced as under: "2.18 From the above, it is evident that there are two sets of judgments of Hon'ble Supreme Court, proceedings on different lines of reasonings. The Hon'ble Delhi High Court in case of Indian Oil Panipat Consortium Ltd. (supra) has considered and interpreted the decisions of Hon'ble Supreme Court in case of Tuticorin Alkali Chemicals and Fertilizers (supra) as well as Bokaro Steel Ld. (supra). After analyzing both the decisions of Hon'ble Supreme court, it held that "the test which premeates through the judgment of the Supreme Court in Tuticorin Alkali Chemicals and fertilizers Ltd's case (supra) is that if funds have been borrowed for setting up of a plant and if the funds are 'surplus' and then by virtue of that circumstance they are invested in fixed deposits the income earned in the form of interest will be taxable under the head "income from other sources". On the other hand the ratio of the Supreme court judgment in Bokaro Steel Ltd.'s case (supra) to our mind is that if income earned, whether by way of interest or in any other manner on funds which are otherwise 'inextricably linked" to the setting up of the plant such income is required to be capitalized to be set off against preoperative expenses." "2.19 The facts in the instant case are pari materia with the facts of the Indian Oil Panipat (supra) and the ratio decidendi of Hon'ble Delhi High Court in that case will squarely apply to the facts of the assessee. In the instant case, undisputedly, the funds have been borrowed for the specific purpose of execution of the mega road projects and as per the loan agreement executed between the consortium of bankers and the assessee dated 23.11.2005, all the disbursements shall be deposited in the trust and retention account which shall be subject to strict control and verification by the Senior lenders and all disbursements shall be utilized solely for the purposes of implementation of the project and no other purpose. The funds are thus inextricably linked to the setting up of the mega road projects and interest earned on such borrowed funds infused in the business could be classified as income from other sources. We also note a distinguishing feature in the instant case that the assessee is all liberty to use the interest so earned as per its will and discretion unlike the case in Tuticorin Alkali Chemicals and Fertilizers (supra) and the interest has to be used solely for the purposes of implementation of the specified projects only. The impugned interest receipt of Rs. 35,39,479/- on such borrowed funds relates to the mega road projects/stretches which were under construction and the completed road projects/stretches upto the date of commencement of commercial operations. Therefore, the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "income from other sources". Hence, ground no.1 of the assessee is allowed." 5. Undisputedly, there are no changes in the facts and circumstances of the case. No contrary authority has been brought to our notice subsequent to above decision of the Coordinate Bench or the fact that said decision of the Coordinate Bench has been stayed by the Hon'ble High Court. In view of the similar facts and circumstances of the case and respectfully following the decision of Coordinate Bench in assessee's own case (supra), we hold that the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the preoperative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources".;