Home Case Index All Cases Income Tax Income Tax + AAR Income Tax - 2010 (7) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (7) TMI 58 - AUTHORITY FOR ADVANCE RULINGSSpecial Reserve - Section 36(1)(viii) - Tripartite Agreement - a public financial institution (corporation) and state electricity board and state government - deduction upto 20% u/s 36(1)(viii) - whether issuance of bonds and accrual of interest be held as income from Long Term Finance for the purpose of Deduction u/s 36(1)(viii)? - department contended that the direct nexus is lacking in the instant case because the income has been earned by the applicant on bonds issued by the Government of M.P. which has never taken any loan. It is pointed out that there is no real connection between the interest earned on bonds and the business of the assessee i.e. financing Power Projects - Held that: - The direct link is not in any way snapped and the interest income accruing from the issue of bonds by the State Government is, in our view, directly and inextricably related to the long term loan provided by applicant to MP SEB to which the M.P. Government stood as a guarantor. The execution of bonds is a part of the same transaction. The guarantor assumed the position of principal debtor, pursuant to the tripartite agreement. - applicant is eligible for deduction upto 20% u/s 36(1)(viii) - pre-payment premium to repay the long term loan before its maturity received by the applicant is income from long term finance for the purpose of deduction under section 36(1)(viii) - Instead of receiving interest over a long period a time as per the original loan agreement, a lump sum amount has been received by the applicant in full satisfaction of its claim. - the fact that the entries were made in the accounts showing the same as "other income" is not really material to determine the true character of the receipt. The pre-payment premium with which we are concerned in the present application is no different from the 'swapping premium' - answered in favor of assessee
|