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2023 (6) TMI 342 - AT - Income TaxInterest earned from FDRs during preoperative period - income from other sources or capital receipts - - whether the interest earned by the assessee from the short term fixed deposits with scheduled banks is liable to be credited in pre-operative expenses, treating the same being a capital receipt, thereby, reducing it from project cost? - HELD THAT:- The assessee company claims that during financial year it was in the process of setting up of a fertilizer manufacturing unit at Kanpur by revamping and renovating a sick industrial unit taken over under a Rehabilitation Scheme. For revamping and renovating of sick industrial unit, it arranged funds in the form of share holder’s and debt funds. These FDRs were kept as margin money for the project implementation, hence for business expediency. Thus, the interest being inextricably linked to project is a capital receipt that goes to reduce the cost of project and accordingly, the assessee correctly reduced the same from the cost of expenditure on the project. The fact that FDRs were utilized as margin money against bank guarantee, that was given to Indian Oil Corporation and other State entities, is not rebutted by the learned DR. Thus, the issue is squarely covered by the decision of Indian Oil Panipat Powers Consortium Ltd. [2009 (2) TMI 32 - DELHI HIGH COURT]. Assessee appeal allowed.
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