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2017 (5) TMI 1660 - AT - Income TaxTaxability of interest earned on Fixed Deposits during pre-operative period when business has not commenced - correct head of income - HELD THAT:- It is clear that assessee, even though has borrowed funds has not utilised them for the purpose of project and has kept them in short term FDs with another bank, not in the bank from which it has obtained loan. This indicates that the funds are not utilised for the purpose of business in the project construction. Therefore, on facts alone, the set-off cannot be given. The issue of interest earned on FDs of surplus funds are considered by the Hon'ble Supreme Court in a series of judgments. If the receipts are inextricably connected to the project or construction, then, the amounts are to be set-off to the capital expenditure incurred during the pre-operative stage. The interest on FDs have no connection with the project/construction activity, then the same is to be brought to tax under the head ‘Other Sources’. The order of the CIT(A) has clearly demarcated the distinguishing features of various judgments of Hon'ble Supreme Court and has correctly came to the conclusion that interest on FDs is taxable during the pre-operative period under the head ‘Other Sources’. Respectfully following the jurisdictional High Court judgment as supported by the principles laid down by the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., [1997 (7) TMI 4 - SUPREME COURT], BONGAIGAON REFINERY AND PETROCHEMICALS LTD.[2001 (7) TMI 4 - SUPREME COURT] and AUTOKAST LTD. [2000 (11) TMI 7 - SUPREME COURT] appeal of assessee dismissed.
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