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of <h1>Interest on Letter of Credit for Machinery Purchase Not Taxable as Income</h1> <h3>Commissioner of Income-Tax Versus Karnal Co-operative Sugar Mills Ltd.</h3> 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 ... Assessee had deposited money to open a letter of credit for the purchase of the machinery required for setting up its plant in terms of the assessee's agreement with the supplier - interest earned on that money - held that interest was a capital receipt 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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