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2017 (4) TMI 515 - AT - Income TaxInterest income earned from mobilization advance to contractor Railway Vikash Nigam Ltd. - treated as capital receipt - Held that:- The advance which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee company and the contractors pertaining to these three receipts were arrangements which were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee form any independent sources. Thus find that the facts of the instant case are similar to the facts of the case which were before the Hon’ble Supreme Court in the above case of Bokaro Steel Ltd (1998 (12) TMI 4 - SUPREME Court). In the instant case also, the mobilization advance given to the contractor were for the purpose of contract work of laying down the railway line and intrinsically connected with the capital expenditure of the appellant prior to the commencement of its business. Thus the interest income earned by the assessee from mobilization advance to contractor Railway Vikash Nigam Ltd., is rightly treated by the assessee as capital receipt which goes on to reduce the cost of capital work in progress. Therefore, delete the addition and allow the grounds of appeal of the assessee.
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