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2016 (2) TMI 349 - ITAT CHENNAI

2016 (2) TMI 349 - ITAT CHENNAI - TMI - Interest income - treated as income from other sources or capital gain - Held that:- The Delhi High Court, after considering decision in the case of Bongaigaon Refinery & Petrochemicals Ltd. vs. CIT( 2001 (7) TMI 4 - SUPREME Court ), in the case of CIT v. Jaypee DSC Ventures Ltd. (2011 (3) TMI 309 - Delhi High Court ), observed that the interest earned by the assessee on the fixed deposit made for performance guarantee of contract was capital in nature and .....

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the Respondent : Shri A. V. Sreekanth, JCIT ORDER Per Chandra Poojari, Accountant Member These appeals by the assessee are directed against the common order of the Commissioner of Income-tax(Appeals) dated 29.9.2015 for the asst. years 2005-06 and 2006-07. 2. The common ground raised in these appeals is that the CIT(Appeals) erred in confirming the action of the Assessing Officer in treating the interest income as income from other sources. 3. The facts of the case are that as the assessee has n .....

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for the asst. year 2002-03, wherein the Tribunal allowed the claim of the assessee. However, the order of the Tribunal was not accepted by the AO, he assessed the interest income of 11,97,715/- as income from other sources. Aggrieved by this, the assessee went in appeal before the CIT(Appeals). 4. Before the CIT(Appeals), the assessee contended that interest earned from fixed deposit with State Bank of Travancore to open bank guarantee in favour of M/s. GAIL (India) Ltd. is to be treated as inc .....

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ed in favour of the assessee by the decision of the Hon ble Apex Court in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd. (243 ITR 2). In this case, it was held that interest earned during construction period on money deposited to open letters of credit for purchase of machinery is incidental to the acquisition of assets and has to be capitalised. It cannot be assessed as income from other sources . Examining the present case on this touchstone, we find that the borrowed funds in this c .....

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