2019 (12) TMI 257

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....blic limited company engaged in setting up of refinery for refining petroleum oil and other related productions. While making the assessment for the assessment year 2013-14, the AO added Rs. 10,44,34,042/- interest income earned by the assessee on the margin money kept in deposits against the letter of credit for supply of equipment, scrap sales, etc., U/s.56. The Assessing Officer has also noted that the assessee is still in the stage of setting up of its manufacturing unit. The assessee relied on the decisions of the Hon'ble Supreme Court in the cases of CIT vs. M/s. Bokaro Steel Ltd, 236 ITR 315 and M/s. Karnal Cooperative Sugar Mills Ltd., 234 ITR 2. However the Assessing Officer relied on the Hon'ble Supreme Court decisions in the case....

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....the acquisition of plant and machinery and equipments which is in the nature of capital receipt and hence not taxable. 2.4 The CIT(A) ought to have appreciated that with the introduction of Provisio to Section 36(1)i(ii) interest payable on borrowals of acquisition for plant and machinery should be capitalized and in such cases only the gross interest payable as reduced by interest income receivable on such borrowings should be capitalized. 2.5 The Appellant relies on the decision in Indian Oil Panipet Power Consortium Ltd 315 ITR 255 wherein the Court held that Interest which accrued on funds deployed with the bank during pre-operative period could not be taxed as income from other sources but constituted capital receipt ....

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....ade and used in bill discounting was taxable as 'income from other sources'. In the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., supra, the Hon'ble Supreme Court observed that "the argument based on accountancy practice has little merit if such practice cannot be justified by any provision of statute or in contrary to it. .................................................................................................. The accountants may have taken some other view but accountancy practice is not necessarily good law. ................................................................................................... It is true that this court has very often referred to accounting prac....