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ITAT allowed the Assessee's appeal, holding that interest earned on deposits made solely to facilitate the acquisition of plant and machinery constitutes income incidental to and capitalized as part of the cost of acquiring the assets, rather than assessable as revenue income. The Tribunal treated the deposit-linked interest as integrally connected to asset formation and therefore not taxable as separate income. Consequently, any revenue assessment treating such interest as taxable income was set aside and the assessment modified to reflect capitalization of the interest into the asset cost.
ITAT allowed the Assessee's appeal, holding that interest earned on deposits made solely to facilitate the acquisition of plant and machinery constitutes income incidental to and capitalized as part of the cost of acquiring the assets, rather than assessable as revenue income. The Tribunal treated the deposit-linked interest as integrally connected to asset formation and therefore not taxable as separate income. Consequently, any revenue assessment treating such interest as taxable income was set aside and the assessment modified to reflect capitalization of the interest into the asset cost.
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