Law: Income Tax Act, 1961

Section: 4,260A

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as (Interest) - Assessment year 2009-10 - Assessee-company was incorporated to generate electric power by establishing thermal power plants, atomic power plants, etc. - In year under consideration, no business activity was carried out by assessee as project was under implementation - Assessee received certain amount as interest on FDRs which were placed with bank as margin money for procurement of various capital goods for setting up of power project - Assessing Officer added said interest to assessee's income as 'income from other sources' - Whether since money placed in fixed deposit was inextricably linked with setting up of power plant, revenue generated on account of interest on said fixed deposits would be in nature of a capital receipt not liable to tax - Held, yes [Para 13][In favour of assessee] FACTS â–  The assessee-company was incorporated to carry on business to generate, receive, produce, improve, buy, sell etc. electric power by establishing thermal power plants, atomic power plants etc. In the year under consideration, no business activity was carried out by the assessee as the project was under implementation. â–  In the course of assessment, the Assessing Officer noted that the assessee had received certain amount as interest on fixed deposits. The assessee submitted that it had earned interest on FDRs which were placed with the bank as margin money for procurement of various capital goods for setting up of the power project. The Assessing Officer did not accept the explanation offered by the assessee and added interest to assessee's income as 'income from other sources'. â–  The Commissioner (Appeals) as well as the Tribunal held that the interest income earned by the assessee in the pre-commencement period could not be stated to be 'income from other sources'. The Tribunal confirmed the finding of fact returned by the Commissioner (Appeals) that the amount raised as additional share capital from the shareholders and put in fixed deposits was inextricably linked with the acquisition of plant and machinery by the assessee. The Tribunal thus, deleted addition made by the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492