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2011 (3) TMI 309 - HC - Income TaxAddition - Interest on FDRs - Capital or revenue in nature - the very award of the contract to the assessee rested on providing a performance guarantee in terms of the agreement and, therefore, there is an inextricable link between the furnishing of the performance guarantee and the execution of the contract - It is further contended that furnishing of bank guarantee at the pre-operative or pre-commencement period cannot be given emphasis totally brushing aside the real crux that submission of performance guarantee is the sine qua non for the purpose of entering into business and to sustain the business expediency - The non-submission of the guarantee would have entailed termination of the agreement and NHAI would have been at liberty to appropriate the bid security - it is clearly evincible that the bank guarantee was furnished as a condition precedent to entering into the contract and further it was to be kept alive to fulfil the obligations - interest earned by the assessee on the FDRs has intrinsic and inseggregable nexus with the work undertaken and, therefore, the interest earned by the assessee is capital in nature and shall go towards adjustment against the project expenditure and the same cannot be assessed as income from other sources - Decided in favour of the assessee
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