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2017 (8) TMI 1626 - ITAT ALLAHABADCharacterization of income - interest Receipt during construction period - income from other sources or capital receipt - HELD THAT:- In the present case, the interest was not earned on the surplus funds but were equity contribution by the joint venture of partners for acquisition, construction and setting up of a plant and other infrastructure facilities. The funds kept in the current account of the company were used for on-going construction activity as and when required. In the present case, the funds were never invested or deposited in any long term deposit instrument but automatically transferred by the bank in short term MODs Accounts in accordance with the account terms and conditions. The said MODs were reversed automatically as and when the assessee withdrew the amounts from account. There was no intention to earn any interest on such funds. The funds were kept in liquid so as to use them as and when required, since, the interest on short term MODs were inextricably link to the construction and acquisition activities in the regular courses of the assessee’s activities. The interest was not earned out of the surplus funds so to treat the said income as income from other source is not justified. This claim of the assessee sustains because the equity contribution by the Joint Venture partners cannot be termed as surplus funds because it was having a short term MODs as per the requirement of day to day construction activities of the assessee - Decided in favour of assessee.
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