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2023 (4) TMI 640 - GAUHATI HIGH COURTCharacterization of receipt - revenue or capital receipts - interest earned by the assessee from borrowed funds (short-term/temporary deposits) - whether these amounts of interest would be liable to be taxed or would be exempted income? - HELD THAT:- When an assessee who is involved in the task of setting up of a project, places the unutilized part of the capital funds in short term bank deposits and earns interest thereupon, the same would be added to the capital funds, and hence it would definitely have an inextricable link with the project cost. Thus, such interest income cannot be considered to be profit earned by the assessee and would definitely have to be treated as capital gains and cannot be clubbed to revenue receipts. Assessee rightly claimed this amount as exempted income under the head of capital gains. Interest received by the respondent assessee from short term deposits made out of unutilized capital subsidy, unutilized debt funds, unutilized equity funds received as capital during the formative years till the project was completed, was rightly claimed by the assessee under the head of capital receipts. Revenue’s stand that this interest income should be treated as revenue receipts so as to make it taxable income is not acceptable in view of the law as laid down in the case of Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME COURT] - No substantial question of law.
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