2014 (7) TMI 1005

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....ordinate Bench has admitted the appeal on the following substantial questions of law :- (i) Whether on the facts and circumstances of the case, the interest of Rs. 13,97,610/- earned by the assessee on the short term deposits (FDRs) made for the purpose of providing security for obtaining the letters of credit (LC's) to be opened for import of plant and machinery was assessable as income under the head "income from other sources"; (ii) Whether on the facts and circumstances of the case, interest of Rs. 13,97,610/- was in the nature of capital receipt and was therefore, liable to be adjusted against the pre-operative cost of the plant and machinery. The brief facts of the case are that the assessee has set up an industrial under....

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.... submits that the same is allowable as per ratio laid down by the following cases :- (a) CIT Vs. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC); (b) CIT Vs. Bakaro Steel Ltd. [1999] 236 ITR 315 (SC); (c) CIT Vs. Karnataka Power Corporation [2001] 247 ITR 268 (SC); (d) Bongai Gaon Refinery & Petro Chemical Ltd. Vs. CIT [2001] 251 ITR 329 (SC); (e) Challapalli Sugars Ltd. Vs. CIT [1975] 251 ITR 167 (SC); (f) Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT [1997] 227 ITR 172 (SC); (g) CIT Vs. L And T. Meneil Ltd. [1993] 202 ITR 662 (Bom); (h) CIT Vs. Messrs. Shoor Ji Vallabhdas and Co. [1962] 46 ITR 144 (SC); (i) CIT Vs. Coromandal Cements Ltd. [1998] 234 ITR 412 (SC) (DB); (j) CIT Vs. Bihar Al....

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.... other sources, but certainly money has not come from the production as during the assessment year under consideration, the production had not started. As a prudent businessman, the assessee has kept the available funds in the FDRs for a short period and earned the interest in question. Moreover, the said deposit was made under the compulsion for having the letter of credit. Without letter of credit/bank guarantee, plant and machinery cannot be imported and without plant and machinery, factory cannot be established. Hence, any income earned on such deposit is incidental acquisition of assets for setting up of the plant and machinery. In the case of CIT Vs. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC) Hon'ble Supreme Court ....