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2008 (8) TMI 432 - AT - Income TaxTDS credit - CIT(A) confirmed the action of the AO in not granting the credit for TDS with regard to interest income which was deducted from the expenditure incurred on installation of machinery - business of co-generation of power - HELD THAT:- We note that the deposit on interest earned by the assessee is mandatory as per statute required. Therefore, the interest income earned on the deposit is not out of surplus fund of the assessee but due to the statutory requirement under which the deposit was made for availing the credit facility of installation of machinery. In view of the decisions of the Supreme Court of CIT vs. Karnal Co-operative Sugar Mills Ltd [1999 (4) TMI 7 - SC ORDER] and Toyo Engg. India Ltd. vs. Jt. CIT[2005 (9) TMI 237 - ITAT BOMBAY-J], it is clear position of law that when TDS is made on a particular income which is otherwise not liable for tax, the assessee is entitled for the said credit of the TDS. In the case in hand when the assessee has earned interest on deposit mandatory for acquisition on installation of machinery then the interest was earned by the assessee and is directly incidental to the acquisition in respect of machinery and therefore the same has been rightly reduced from the cost of the machinery. In this way the assessee has indirectly disclosed income and has offered for assessment. We are of the considered view that even if the income earned by the assessee has not been offered for tax being not liable for tax, the assessee is entitled for credit of TDS made in respect of that income. Accordingly, we set aside the orders of the lower authorities and hold that the assessee is entitled for credit of TDS relating to interest income. In the result, the appeal of the assessee is allowed.
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