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2014 (3) TMI 66 - AT - Income TaxCapitalization of interest income after set off with interest expense - Income earned from other sources – Held that:- Assessee had to incur interest expenses on the loan taken from the bank - It was capitalized and the AO has accepted the same - The interest which was received on the fixed deposits was deducted from the capital work in progress of the assessee - fixed deposit was placed as margin in the bank - Relying upon Tuticorn Alkali Chemicals & Fertilizers Limited vs. CIT [1997 (7) TMI 4 - SUPREME Court] - the present case is not one where the assessee has made the deposit of surplus funds lying idle with an intention to earn the interest - On the contrary the amount of interest was earned from fixed deposit which was kept in the bank and marked as lien for furnishing the bank guarantees - Thus, it had an inextricable nexus with securing the contract - the assessee was justified in adjusting the interest earned from the interest payments on term loan and the balance of interest paid was capitalized in the books – thus, there is no infirmity in the order of the CIT(A) in directing that the addition made by the AO under the head 'income from other sources' was to be deleted – Decided against Revenue.
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