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2016 (6) TMI 1049 - GUJARAT HIGH COURT

2016 (6) TMI 1049 - GUJARAT HIGH COURT - TMI - Interest income - taxability - amount of deposit kept with the bank for the purpose of opening of Letter of Credit (LC) used for the purchase of Plant & Machinery - whether would be taxable as ‘income from other sources’ and the same shall not got to reduce the preoperative expenses or the fixed assets of the appellant? - Held that:- Considering the decision of the Hon’ble Supreme Court in the case of Karnal Cooperative Sugar Mills Ltd (1999 (4) TMI .....

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nt and machinery. - Interest shall go to reduce the cost of the asset - Decided in favour of the assessee - TAX APPEAL NO. 1534 of 2007 with TAX APPEAL NO. 309 of 2008 - Dated:- 22-6-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR BANDISH SOPARKAR, ADVOCATE WITH MRS SWATI SOPARKAR, ADVOCATE FOR THE OPPONENT : MR NITIN K MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned order passed by the Income Tax .....

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ept with the bank for the purpose of opening of Letter of Credit (LC) used for the purchase of Plant & Machinery would be taxable as income from other sources and the same shall not got to reduce the preoperative expenses or the fixed assets of the appellant? 3. The assessee is engaged in the process of establishing project to manufacture Cold Rolled Steel Sheets and Coils. The Assessing Officer was of the view that since the assessee had surplus funds which were not used for business purpos .....

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of the assessee. 4. On appeal before the ITAT, by impugned order, ITAT reversed the finding of the CIT(A) and allowed the appeals filed by the revenue. Being aggrieved and dissatisfied with the impugned order passed by the ITAT, the assessee has preferred the present Tax Appeals for consideration of the aforesaid substantial question of law. 5. Mr. Bandish Soparkar, learned advocate appearing for Ms. Swati Soparkar, learned advocate on behalf of the assessee submitted that the Tribunal has erre .....

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case where the deposit of money is directly linked with the purchase of plant and machinery, any income earned on such deposit was incidental to the acquisition of assets for the setting up of the plant and machinery and thus the interest is a capital receipt which would go to reduce the cost of asset. 6. Mr. Nitin Mehta, learned advocate appearing for the revenue has supported the impugned order and submitted that the Tribunal is justified in holding that the CIT(A) is not justified in his act .....

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tive Sugar Mills Ltd (Supra), the question which is raised in the present appeal is required to be answered in favour of the assessee. The Apex court in the case of Karnal Co-operative Sugar Mills Ltd (Supra), has observed as under: 2. In the present case, the assessee had deposited money to open a letter of credit for the purchase of the machinery required for setting up its plant in terms of the assessee's agreement with the supplier. It was on the money so deposited that some interest has .....

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