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2016 (9) TMI 957 - AT - Income TaxInterest earned on shortterm receipts (STR) prior to commercial operations of the roads - treated as income from other sources rather than reducing it from the capital cost of construction of the roads - Held that:- In the instant case, undisputedly, the funds have been borrowed for the specific purpose of execution of the mega road projects and as per the loan agreement executed between the consortium of bankers and the assessee dated 23.11.2005, all the disbursements shall be deposited in the trust and retention account which shall be subject to strict control and verification by the Senior lenders and all disbursements shall be utilised solely for the purposes of implementation of the project and no other purpose. The funds are thus inextricably linked to the setting up of the mega road projects and interest earned on such borrowed funds infused in the business could not be classified as income from other sources. We also note a distinguishing feature in the instant case that the assessee is not at liberty to use the interest so earned as per its will and discretion unlike the case in Tuticorin Alkali Chemicals & Fertilizers (1997 (7) TMI 4 - SUPREME Court) and the interest has to be used solely for the purposes of implementation of the specified projects only. The impunged interest receipt of ₹ 35,39,479/- on such borrowed funds relates to the mega road projects/stretches which were under construction and the completed road projects/stretches upto the date of commencement of commercial operations. Therefore, the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head “Capital work in progress” and the same cannot be brought to tax under the head “income from other sources”. - Decided in favour of assessee Double taxation of interest income - Held that:- From the perusal of the CIT(A)’s order it is noted that the interest income of ₹ 1,64,07,481/- was reduced from the interest expenditure debited in the P&L account in other words the interest expenditure has been shown net of interest income of ₹ 1,64,07,481/-. This shows that the interest income has already been credited in the profit and loss account. However, the way it has been reflected in the profit and loss account is by way of reduction from the overall interest expenditure. We accordingly agree with the contentions of the ld. AR that where the income has already been offered in the profit and loss account there is no occasion for the AO to bring the same income to tax again as this will result in double taxation. Hence we direct to delete the addition in the hands of the assessee - Decided in favour of assessee
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