2007 (2) TMI 247

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....at interest income etc., earned during the construction period or during his setting up of a factory is a capital receipt and set off against expenditure incurred during the said period." 3. The issue which arises for our consideration is regarding the taxability of interest received by the assessee-company from bank deposit before the commencement of business of running of hospital. The assessee-company was in the process of setting up a modern specialist hospital, Mulakuzha, Chengannur during these three assessment years and the assessee-company had not commenced the business. The assessee received the following interest from the bank deposits in the respective assessment years:- -----------------------------------------------------....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... brought to tax the interest received by the assessee even during the construction pet1od of its hospital treating it as a revenue receipt. The CIT (Appeals), therefore, declined to interfere with the orders of the Assessing Officer. Now, the assessee has challenged the impugned orders of the CIT (Appeals) before us. 6. We have heard the parties. The learned Authorised Representative for the assessee reiterated the arguments which were advanced before the CIT (Appeals). The ld. AR also relied on the following precedents:- (i) CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC); (ii) CIT v. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC); (iii) Tuticorin Alkali Chemicals & Fertilizers Ltd.'s case; (iv) ITO v. A.V. Phot....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....on expenses which would ultimately be capitalized. The Hon'ble Supreme Court held as under:- "In the case before us, the company had surplus funds in its hands. In order to earn income out of the surplus funds, it invested the amount for the purpose of earning interest. The interest thus earned is clearly of revenue nature and will have to be taxed accordingly. The accountants may have taken some other view but accountancy practice is not necessarily good law. In B.S.C Footwear's case [1972] 83 ITR 269, the House of Lords had no hesitation in holding that the accounting practice for calculating its profit followed by the assessee and accepted by the revenue for 30 years could not be treated as sanctioned by law and was not acceptable for....