https://www.taxtmi.com/caselaws?id=758041 ITAT Hyderabad held that interest income from fixed deposits made for project setup cannot be automatically adjusted against interest paid on borrowed funds. Following SC precedent in Tuticorin Alkali Chemicals, interest adjustment is not permitted before business commencement. However, per Karnal Co-operative Sugar Mills, if deposits are directly linked to plant and machinery purchase through letter of credit, interest income should be capitalized rather than taxed as other sources income. AO must verify direct relatability between deposit purpose and interest payments. Revenue's appeal allowed for statistical purposes with remand for verification. en-us Fri, 30 Aug 2024 00:00:00 +0530 Thu, 05 Sep 2024 15:48:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=758041 ITAT Hyderabad held that interest income from fixed deposits made for project setup cannot be automatically adjusted against interest paid on borrowed funds. Following SC precedent in Tuticorin Alkali Chemicals, interest adjustment is not permitted before business commencement. However, per Karnal Co-operative Sugar Mills, if deposits are directly linked to plant and machinery purchase through letter of credit, interest income should be capitalized rather than taxed as other sources income. AO must verify direct relatability between deposit purpose and interest payments. Revenue's appeal allowed for statistical purposes with remand for verification. Case-Laws Income Tax Fri, 30 Aug 2024 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=758041