N.P.GUPTA, J. - (1.) THIS appeal has been filed by the Revenue, against the judgment of the learned Tribunal, dt. 18th March, 2004 [reported as Neha Proteins Ltd. v. Asstt. CIT (2004) 83 TTJ (Jd) 236.], partly allowing the appeal of the assessee and holding that the assessee is entitled to set off interest earned by it on the deposits of the public issue money, against the expenses incurred for the public issue, and for this finding, the learned Tribunal has relied upon the judgment of the Hon'ble Supreme Court, in CIT v. Bokaro Steel Ltd. : [1999]236ITR315(SC) .
(2.) THE appeal was admitted vide order dt. 10th Aug., 2005, by framing the following substantial question of law: Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that interest earned by the assessee from short -term deposits of the share application amount received is not taxable as income from other sources, but is income from profit and gains of business and was liable to be set off against the other liability of the assessee to pay interest on borrowed money ? The necessary facts are, that the assessee filed a return which was processed under Section 143(1)(a). Thereafter, the case was selected for scrutiny, and notices were issued under Sections 143(2) and 142(1), from time to time, and query letters were also issued. In response whereto, the assessee appeared through authorised representative, and produced the relevant books of account, and fresh assessment order was passed under Section 143(3). By this assessment, fresh computation of income was made. However, since the controversy relates only to one item, being an amount of Rs. 12,10,286 being the amount which had been set off by the assessee, against the public issue expenses, which are to be amortized in future, and this amount represented the interest earned by the assessee on the share application money, we need not go into the other part of this fresh assessment order. The learned AO relying upon the decision of Hon'ble the Supreme Court, in Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT : [1997]227ITR172(SC) held that this set off is not allowable, and thus the amount was added to the income of the assessee. This finding was recorded by the learned AO in para 15 of the assessment order.
(3.) AGGRIEVED of this, the assessee filed an appeal before the learned CIT(A), and the learned CIT(A), in paras 18 and 19 dealt with this controversy, and held, that the AO was justified in taxing the interest received by the assessee on deposits of share application money in bank, as income under the head other sources, and the appellant was not entitled to set off, in respect of this income against expenses, and for that purpose the learned CIT(A) relied upon the judgment of the Hon'ble Supreme Court in CIT v. Coromandal Cements Ltd. (1999) 153 CTR (SC) 209 : (1998) 234 ITR 412 .;