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2014 (1) TMI 1327 - AT - Income TaxNature of income – Interest received on mobilization advance – Reduction in claim u/s 80IA of the Act - There was no merit in the order of authorities below with regard to reduction in 80IA claim - this amount is reduced from the cost of the project and as per the contract, this amount to be given credit as misc. receipts in the project account - There is diversion of this interest by overriding title with the contract conditions. The receipts were not taxable in the hands of assessee - Relying upon CIT vs. Bokaro Steel Limited [1998 (12) TMI 4 - SUPREME Court] - the interest earned on the advances made to the contractor to facilitate the construction activity of putting together a very large project were held to be capital in nature - As these advances are to ensure that the work of the contractors proceeded without any financial hitches so as to help the contractors - Such arrangements made are inextricably connected with the construction of the project and such receipts adjusted against the charges payable to the contractor reduce the cost of construction - As per the arrangement of the assessee with Railways, , interest charged on mobilization advances is to be credited to the concerned product under the misc. receipts which ultimately reduces the cost of the project and the project is the asset of the Ministry of Railways – order of the CIT(A) set aside – Decided in favour of Assessee.
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