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Commissioner of Income Tax-I Versus Accession Buildwell (P) Ltd.

2015 (5) TMI 482 - DELHI HIGH COURT

Treatment to interest income on the FDR's - ITAT treated as part of its business income - Held that:- This Court, in Indian Oil Panipat Power Consortium Ltd v. ITO (2009 (2) TMI 32 - DELHI HIGH COURT) held that where interest on money is received as share capital, and is temporarily placed in fixed deposit awaiting acquisition of land, a claim that such interest is in a capital receipt entitled to be set off against pre-operative expenses, is admissible, as the funds received by the assessee .....

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[2001 (7) TMI 4 - SUPREME Court ]. This Court is consequently of the opinion that the Revenue’s contentions have to perforce, fail. Furthermore, the mandate of Section 117C of the Companies Act also supports this view, because a debenture debtor such as the assessee in this case, is compelled to a certain margin separately, to secure the interest of the debenture holders. - Decided against revenue.

Disallowance of business expenditure - ITAT allowed the claim - Held that:- The CIT (A) .....

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State Industrial Development Corporation Ltd. v Commissioner of Income Tax [1996 (12) TMI 6 - SUPREME Court]. The ITAT upheld this view. - Decided against revenue. - ITA 153/2014 - Dated:- 27-4-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Petitioner : Sh. M.S. Syali, Sr. Advocate with Sh. Abhimanyu Lamba, Sh. Mayank Nagi, Sh. Tarandeep Singh and Sh. Tarun Singh, Advocates. For the Respondent : Sh. Kamal Sawhney, Sr. Standing Counsel with Sh. Shikhar Garg and Sh. Mukul Mathur, Advocates. .....

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ncome? (ii) Whether the ITAT was in error in allowing the business expenditure of ₹ 1,40,575/- as revenue expenditure? 2. The assessee company engages in business as builders and the developer. During the relevant period in the assessment year, it earned interest to the extent of ₹ 77,25,153/- on FDRs which was not offered for taxation; instead it was set-off with projects in progress. Holding that interest income was unrelated to the business activity of the assesse the A.O. treated .....

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mount, which earned interest. The debentures were issued by the assessee for raising finances for the purpose of its business. The amounts were utilized mainly for the purpose of land. The investment in bank FDRs was made as per the terms of the Debenture Trust Deed with a view to maintain the Minimum Interest Reserve Account for the purpose of servicing the interest burden on debentures. In view of these facts, the CIT (A) held that- I find that the interest accrued on the bank FDRs forms part .....

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ived from financial institutions. As against the above, in the instant case, interest has accrued to the appellant on the bank FDRs after the commencement of the appellant's business. The said investment in bank FDRs was not out of surplus funds but for creating a Minimum Interest Reserve Account to service the interest burden on the above debenture as per the terms of the above Debenture Trust Deed. In view of the above, the facts in the instant case are clearly distinguishable. Considering .....

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terest income as a separate source should not, in the circumstances, have been interfered with. 3. In Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra) the Supreme Court held as follows: "if the company, even before it commences business, invests the surplus funds in its hands for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head capital gains‟. Similarly, if a company purchases a rented house and gets .....

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wed capital in short-term deposits is an independent source of income not connected with the construction activities or business activities of the assessee, the same cannot be said in the present case where the utilisation of various assets of the company and the payments received for such utilisation are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee-company. The .....

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