TaxTMI 
TaxTMI 
2016 (11) TMI 1314
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....nterest income earned on the amount of deposit kept with the Bank for the purpose of opening of Letter of Credit (LC) used for the purchase of plant and machinery would be taxable as "income from other sources" and the same shall not go to reduce the preoperative expenses or fixed assets of the assessee, the assessee has preferred present Tax Appeal to consider following substantial question of law: "Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that interest income earned on the amount of deposit kept with the bank for the purpose of opening Letter of Credit (LC) used for the purchase of plant and machinery would be taxable as "income other source" and the same shall not ....
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....nd dissatisfied with the order passed by the learned CIT(A) deleting the aforesaid addition, Revenue preferred appeal before the learned Tribunal. Before the learned Tribunal a direct decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Karnal Cooperative Sugar Mills Ltd reported in (2000) 243 ITR 2(SC) was pointed out. However, considering the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Autokast Ltd reported in (2001) 241 ITR 110 (SC) by impugned judgment and order the learned Tribunal has held that decision of the Hon'ble Supreme Court in the case of Autokast Ltd shall be applicable as it is three Judge Bench Judgement and the decision of the Hon'ble Suprem....
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....ive project expenses. In light of the aforesaid facts, more particularly, when the interest earned by the assessee was on the fixed deposit which was required for obtaining LC for purchase of plant and machinery, we are of the opinion that the decision of the Hon'ble Supreme Court in th case of Karnal Cooperative Sugar Mills Ltd (supra) shall be directly applicable to the facts of the case on hand. In the case of Karnal Cooperative Sugar Mills Ltd (supra) also assessee earned the interest on deposit made to open the Letter of Credit for purchase of machinery required for setting up of its plant. The Hon'ble Supreme Court has held that such interest was a capital receipt which would go capital shifted, which would go to reduce cost of asset ....