1995 (3) TMI 19

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....by T. N. C. RANGARAJAN J.--The admitted facts relating to the case are that the assessee was established with the main object of manufacture and sale of steel castings. For the assessment year 1979-80, corresponding to the previous year ended May 31, 1978, the assessee had shown "Interest received" as Rs. 34,713. This amount consisted of three items ; the first being a sum of Rs. 10,394 which r....

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....the following question of law has been referred for our decision : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that interest received on deposits in bank could not be brought to tax as income under the head 'Other sources' ? " Learned counsel for the applicant submitted that the Appellate Tribunal had followed the de....

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.... payable on the borrowed funds. We are unable to accept this contention for two reasons. The first is that there was no investigation as to the question of the source of funds, which were used for giving margin money for obtaining bank guarantee. More significantly in the decision of this court in CIT v. Derco Cooling Coils Ltd. [1992] 198 ITR 375, the accounting standards explained in the booklet....

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....on such income (paragraph 8.4). " This summary indicates that there must be a nexus between the two transactions giving rise to the receipt and expenditure which can be setoff for taking the net amount either for capitalisation or even for treatment as "deferred revenue expenditure". It was by applying this principle to the facts of that case, where the amount of interest earned was on share ca....