Tribunal upholds non-taxability of pre-operative bank interest as capital receipt

The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s decision to delete the addition of pre-operative bank interest receipts as taxable income from other sources. The Tribunal held that the Jurisdictional High Court's decision, which deemed interest earned on funds brought for business purposes before business commencement as a capital receipt and not taxable under income from other sources, was binding on all authorities within its jurisdiction. The Tribunal emphasized that this decision must be followed until modified or reversed by the Apex Court.

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Issues involved:
The issue involves the deletion of an addition made by the Assessing Officer amounting to Rs. 2,08,14,134/- on account of pre-operative bank interest receipts being taxable under the head income from other sources for the Assessment Year 2008-09.

Summary:

Issue 1: Taxability of pre-operative bank interest receipts under income from other sources

The appeal by the Revenue challenged the order of the CIT(A) which deleted the addition made by the Assessing Officer. The counsel for the assessee argued that the issue is covered by a decision of the Jurisdictional High Court in a specific case. The counsel contended that the decision of the High Court is binding on all authorities within its jurisdiction, regardless of a Special Leave Petition (SLP) filed by the Department. The Tribunal found that the facts of the present case were similar to the case before the High Court, where it was held that interest earned on funds brought for business purposes prior to commencement of business is a capital receipt, not taxable under income from other sources. The Tribunal upheld the CIT(A)'s decision, emphasizing the binding nature of the High Court's decision on the authorities within its jurisdiction, irrespective of the SLP filed by the Department.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision of the CIT(A) to delete the addition of pre-operative bank interest receipts as taxable income from other sources. The Tribunal held that the decision of the Jurisdictional High Court was binding on all authorities within its jurisdiction, and until modified or reversed by the Apex Court, it must be followed.

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