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2017 (10) TMI 1087 - AT - Income TaxAllowability of expenditure prior to commencement of the business - Held that:- This Tribunal in the case of Thermal Powertech Corporation India Ltd. vs. DCIT [2017 (5) TMI 903 - ITAT HYDERABAD] held that the preoperative expenditure was to be capitalized to the assets and Assessee was eligible for depreciation on the value of assets. Therefore in the given facts of the case, we hold that Assessee has only setup the business but has not commenced the business, therefore, the claim of revenue expenditure is not allowable as the provisions of Sec. 28 of the IT Act does not apply. The Hon'ble jurisdictional High Court in the case of CIT Vs. Rasi Cement Ltd.[1998 (4) TMI 132 - ANDHRA PRADESH High Court] has answered similar questions involved in favour of the Revenue as held that such interest has to be separately treated as income from other sources and cannot be taken as part of the capital structure. interest earned on surplus funds deposited in banks during installation of company, prior to commencement of business, has to be brought to tax as ‘income from other sources’ u/s. 57. - Decided against assessee. Since it has been held that the assessee has not commenced its business, we direct the AO to capitalize the expenditure and direct him to allow depreciation thereon after commencement of its business. Nature of income - earning interest income on the temporary parking of equity funds - business income OR income from other sources - Held that:- We have already directed while dealing with Ground No.5 that the expenditure incurred by the assessee be capitalized and depreciation thereon is to be allowed. The treatment to be given to the interest earned on temporary parking of equity funds has actually not been considered by the authorities below. This is a legal ground and can be raised at any point of time as held by the Hon'ble Supreme Court in the case of Hon'ble Supreme Court in the case of NTPC Ltd. (1996 (12) TMI 7 - SUPREME Court). In view of the same, we deem it fit and proper to admit the additional ground of appeal and remand the issue to the file of the AO for consideration in accordance with the law. The assessee is also directed to produce the additional evidence in support of such ground.
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