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2022 (4) TMI 1233 - HC - Income TaxCapitalisation of interest on FDRs earned during the period of construction - while utilizing the ECB funds the assessee did not follow RBI guidelines - HELD THAT:- The admitted facts of the present case are that the assessee had taken Foreign ECB loan of ₹ 82.37 crores for the purpose of acquisition of a capital asset i.e. renovation and refurbishment of hotel acquired by the assessee under SARFEASI Act. The entire ECB loan was disbursed in a single trench in the year under consideration and during this year, the assessee could utilise only ₹ 33.70 crores. Therefore, the assessee had temporarily parked the ECB loan in FDRs till utilisation for fixed asset/capital expenditure strictly in compliance with RBI instructions. The assessee had paid interest of ₹ 13.38 crores and has earned interest on FDRs of ₹ 4.03 crores. The net amount of interest of ₹ 9.35 crores has been added to the preoperative expenditure pending capitalization. The judgment passed in Tuticorin Alkali Chemicals [1997 (7) TMI 4 - SUPREME COURT] referred to and relied upon by learned standing counsel for the Appellant has been considered and explained subsequently by the Apex Court in Commissioner of Income Tax, Bihar II, Patna vs. Bokaro Steel Ltd., Bokaro [1998 (12) TMI 4 - SUPREME COURT] wherein it has been held "if the assessee receives any amounts which are inextricably linked with the process of setting up its plant and machinery, such receipts will go to reduce the cost of its assets. These are receipts of a capital nature and cannot be taxed as income.” The aforesaid principle has also been reiterated by this Court in Principal Commissioner of Income Tax vs. Facor Power Ltd [2016 (1) TMI 461 - DELHI HIGH COURT] Keeping in view the aforesaid, this Court is of the opinion that no substantial question of law arises for consideration as the questions sought to be raised in the present appeal are squarely covered by the decisions of the Apex Court as well as this Court. Accordingly, the present appeal is dismissed.
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