Interest on short-term deposits for letters of credit is incidental to asset acquisition and treated as non-taxable capital receipt

HC had held that interest earned on short-term deposit receipts used to enable opening a letter of credit for procuring plant and machinery was incidental to the acquisition and therefore a capital receipt, not taxable as income. The SC disposed of the special leave petition on account of low tax effect, keeping any question of law open. All pending applications, including those for condonation of delay, were dismissed as not surviving.

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Learned A.S.G. for the petitioner/Revenue submitted that the special leave petition would not survive for further consideration "owing to low tax effect," and that submission was placed on record. The special leave petition is accordingly "disposed of owing to low tax effect." The Court expressly stated that "The question of law, if any, is kept open," leaving substantive legal issues undetermined. All pending application(s), including the application(s) for "condonation of delay," were indicated to "not survive for further consideration" and "shall also stand disposed of." The order thus resolves the petition on the basis of minimal tax impact without adjudicating underlying legal questions, and terminates ancillary proceedings connected to the petition.

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