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2023 (9) TMI 371 - AT - Income TaxCapitalization of interest on FDRs earned during the period of construction - as argued funds (ECB) were completely free from any encumbrances as there was neither any legal requirement nor any compulsion on the part of the assessee company to make the FDR - assessee acquired an existing hotel from State Bank of India under SARFEASI Act and was in the process of renovating this hotel in the year under consideration - HELD THAT:- Since, the foreign currency loan was disbursed in single tranche, the assessee invested some part of the foreign currency loan, not immediately required for business activities, in fixed deposits and earned interest income - After netting of the interest income against the interest cost, the assessee declared finance cost - While examining the issue in course of assessment proceedings, the AO was of the view that the interest income earned on the FDRs has to be treated as income from other sources, as it is not related to assessee’s business activities. Following the decision taken by him in assessee’s case in assessment years 2012-13 and 2013-14, the Assessing Officer added the interest income as income from other sources. The assessee contested the aforesaid addition before Commissioner (appeals). Having taken note of the fact that the Tribunal and the Hon’ble High court has decided identical issue in favour of the assessee in assessment years 2012-13 and 2013-14, learned Commissioner (appeals) deleted the addition. Addition u/s 56(viia)(ii) - assessee has received an amount as share premium - HELD THAT:- The value of shares, for which the money was received from the holding company was substantiated by a valuation report obtained from a registered valuer, wherein the value was determined by applying DCF method, an approved method under rule 11UA. As rightly observed by learned first appellate authority, the transaction relating to purchase and sale of shares is between a holding company and its subsidiary and no third party is involved. Therefore, no undue benefit has been derived by a third party. Even otherwise also, the valuation of share as per DCF method has been determined by a registered valuer, which is in terms of section 56(2)(viib) of the Act read with Rule 11UA. Even, the alternative method adopted by the assessee for valuation of share was found as per FMV. The aforesaid factual findings of the first appellate authority remain uncontroverted before us, as the Revenue has failed to bring on record any contrary material. Another pertinent fact, which the learned Commissioner (Appeals) has rightly observed, is, the share application money was received in financial year 2012-13 and the terms and conditions of allotment were also decided in the said year. No addition can be made in the impugned assessment year. Accordingly, we uphold the decision of learned Commissioner (Appeals). Appeal of revenue dismissed.
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