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of <h1>Interest on letter-of-credit deposit for buying plant and machinery treated as capital receipt, not 'other sources' income</h1> Interest earned on money deposited to open a letter of credit for purchase of plant and machinery raised the issue whether such income was taxable as ... Deposit money to open a letter of credit for the purchase of the machinery required for setting up its plant - HELD THAT:- The deposit of money in the present case is directly linked with the purchase of plant and machinery. Hence, any income earned on such deposit is incidental to the acquisition of assets for the setting up of the plant and machinery. In this view of the matter the ratio laid down by this court in Tuticorin Alkali Chemicals and Fertilizers Limited [1997 (7) TMI 4 - SUPREME COURT], will not be attracted. The more appropriate decision in the factual situation in the present case is in CIT v. Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME COURT]. The appeal is dismissed. The Supreme Court held that interest earned on money deposited to open a letter of credit for purchasing machinery is incidental to acquiring assets for setting up a plant. The case is not about surplus share capital money deposited for earning interest. The decision in CIT v. Bokaro Steel Ltd. is more relevant than Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT. The appeal was dismissed with no order as to costs.
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