2011 (9) TMI 211

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.... and offered for taxation relying on the decision of the Hon'ble Supreme Court in Bokaro Steel Limited, (1998) reported in 236 ITR 315, even though the decision is not applicable in assessee's case. 3. Facts in brief are that the assessee company was incorporated on 25.02.1994 and was in the process of setting up of refinery in Bina and its business was yet to commence. The assessee furnished its return of income for assessment year 2007- 08 on 25.6.2007 declaring total income at Rs. 4,17,14,064/-, which represented the interest income earned on bank and deposits with Governments. The AO noticed from the statement of preoperative expenditure that the assessee had shown misc. income of Rs. 18,56,427/- which was not offered for tax. The as....

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.... as arising out of a source of income separate from the business which was being set up. Since, the business had not been fully set up, the receipts and payments would be clearly on capital account and hence not liable to tax. In a case where these receipts and payments pertains to the fixed structure of the company's business that was being set up, it would be inconsistent to hold that the expenditure incurred by the assessee prior to the setting up would be of a capital nature but the receipts would be of a revenue nature. Hence, the impugned receipts were of a capital nature and were not liable to tax." The above decision of Hon'ble Delhi High Court has been approved by the Hon'ble Supreme Court in Bokaro Steel Limited, (1998) 236 ....

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....s much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee company and the contractors pertaining to these three receipts were arrangements which were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractor and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee from any independent sources. " Therefore, considering the facts and circumstances of the case and legal position of the issue, it is held that the receipts on account of tender forms, house rent and fur....