2008 (8) TMI 432

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....51,21,287 which was deducted from the expenditure incurred on installation of machinery; (ii) The CIT(A) erred in confirming the levy of interest under ss. 234B and 234C of IT Act. 2. The brief facts of the case are that the assessee is a domestic company engaged in the business of co-generation of power. The assessee filed a return of income for the asst. yr. 2003-04 and claimed a refund of Rs. 11,47,817. There was a TDS of Rs. 12,46,112 in respect of interest income of Rs. 51,21,287 earned by the assessee during the previous year relevant to the assessment year under consideration from the deposits kept with the banks which had been lodged with IREDA. The assessee worked out book profit tax of Rs. 98,295 and after adjusting a portio....

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....cannot claim the credit of TDS. Therefore, the lower authorities were justified in denying the credit of TDS to the assessee. He has relied upon the orders of the lower authorities. 6. After hearing the rival contentions and considering the material on record, we note that the deposit on interest earned by the assessee is mandatory as per statute required. Therefore, the interest income earned on the deposit is not out of surplus fund of the assessee but due to the statutory requirement under which the deposit was made for availing the credit facility of installation of machinery. In the case of CIT vs. Karnal Co-operative Sugar Mills Ltd., the Hon'ble Supreme Court has held: "In the present case, the assessee had deposited money to o....

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....efunded to the assessee or the assessee is entitled for the credit of the same. The Government cannot benefit itself by taking advantage of legal technicalities. Even otherwise, once the income receipt has been deducted from the cost of machinery to be installed the assessee has indirectly offered the same for assessment and taxation because due to the reduction of cost of the machinery the depreciation on the said machinery would be lesser and the net result of this would be offering the same income otherwise. 7. In case of Toyo Engg. India Ltd. vs. Jt. CIT, the Mumbai Benches of this Tribunal has held: "The expression 'income' includes not merely what is received or what comes in by exploiting use of a property but also what one sav....

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.... said certificate the assessee becomes entitled for the credit of TDS even if the assessee has not directly offered the said income for tax as the assessee considered the same was not liable to tax. 10. In view of the above-mentioned decisions of the Supreme Court and order of this Tribunal, it is clear position of law that when TDS is made on a particular income which is otherwise not liable for tax, the assessee is entitled for the said credit of the TDS. In the case in hand when the assessee has earned interest on deposit mandatory for acquisition on installation of machinery then the interest was earned by the assessee and is directly incidental to the acquisition in respect of machinery and therefore the same has been rightly reduce....