TMI Blog2018 (6) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Company on bank deposits made out of share capital received by it from the Reserve Bank of India could not be taxed as “Income from Other Sources” as the said interest income was earned prior to commencement of operations of the company during the construction period. Also in the case of ‘Commissioner of Income Tax v. Karnataka Urban Infrastructure and Development and Finance Corporation [2006 (2) TMI 114 - KARNATAKA HIGH COURT] held that such interest income would go to reduce the capital cost of the project and is on the capital account and the same cannot be taxed during the relevant year in which such interest income is earned. Held tht:- No substantial question of law arises in the present case and the Appeal filed by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng/2015 for Assessment Year 2011-12 in the case of Income Tax Officer v. Bank Note Paper Mill India Pvt. Ltd.,. 2. By the impugned Order, the learned Tribunal following the decision of the Hon ble Supreme Court in the case of Commissioner of Income Tax Bihar II, Patna Vs. Bokaro Steel Limited [236 ITR 315], which distinguished the earlier view of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Vs. Commissioner of Income Tax [(1997) 227 ITR 172] and held that the interest income earned by the Assessee-Company on bank deposits made out of share capital received by it from the Reserve Bank of India could not be taxed as Income from Other Sources as the said interest income was earned prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the respondent-assessee made deposits with bank on which assessee earned inerest. This interest income was treated as abatement of capital cost of the project/factory by the assessee-company in the books of account, whereas the AO was of the opinion that the same should be treated as revenue receipt and brought to tax placing reliance on the decision of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. (supra). The decision of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. (supra) was distinguished by the Hon ble Supreme Court in the case of Bokaro Steel Ltd. ((236 ITR 315) (SC) wherein it was held that the ratio of the decision of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 582) held that such interest income would go to reduce the capital cost of the project, is on the capital account and should not be brought to tax. 5. Learned Counsel for the Revenue, Mr. K.V. Aravind has fairly submitted that in the recent decision rendered by the Hon ble Supreme Court on 24.04.2018 in the case of Commissioner of Income Tax-IV, Ahmedabad v. Shree Rama Multi Tech Ltd., [(2018) 92 taxmann.com 363 (SC)], the Hon ble Supreme Court has again reiterated a similar position and held that such interest earned before the commencement of business operations is not liable to be taxed and is eligible for deduction against the public issue expenses incurred by the Company. The relevant portion of Paragraphs 12 and 13 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t off against the public issue expenses that the company has incurred as the interest earned was inextricably linked with requirement of the company to raise share capital and was thus adjustable towards the expenditure involved for the share issue. 13) In view of the forgoing discussion, we are of the view that the High Court was right in upholding the decision of the Tribunal dated 21.10.2011 that the interest income earned out of the share application money is liable to be set off against the public issue expenses. The judgment passed by the Division Bench of the High Court in remanding the matter to the Tribunal on other issues requires no interference. 6. In view of the said legal position with regard to aforesaid issue, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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