Law: Income Tax Act, 1922

Section:

Income-tax---Income or capital---Business of oil refinery and petrochemicals---Period of formation Income from house property, guest house charges for equipment and recoveries from contractors for supply of water and electricity---Received during period of, formation---Capital receipts and not income---To be adjusted against project cost for main business--­Indian Income Tax Act, 1961---[CIT v. Bongaigaon Refinery and Petrochemical Ltd. (2000) 245 ITR 708 reveled]. From the decision of the High Court [see (2000) 245 ITR 708], to the effect that, inter alia, income from house property and guest house, hire charges, for equipment and recoveries from contractors on account of water and electricity supply, received during the period of formation of the assessee-company's main business of oil refinery and petrochemicals which was being set up, were taxable as "Income from other sources", the assessee preferred an appeal to the Supreme Court: Held, reversing the decision of the High Court in relation to these items of income, that these items of receipts were not taxable income but were to be adjusted against the project cost for the business of oil refinery and petrochemicals. CIT v. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC) applied. CIT v. Bongaigaon Refinery and Petrochemical Ltd. (2000) 245 ITR 708 reversed. CIT v. Karnal Cooperative Sugar Mills Ltd. (2000) 243 ITR 2 (SC); CIT v. Karnataka Power Corporation (2001) 247 ITR 268 (SC) and Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) ref. ORDER The order under challenge was passed on a reference to the High Court (see (2000) 245 ITR 708), under the Income Tax Act, 1961, made at the instance of the Revenue. The High Court answered in the negative and against the assessee the following question (page 109): "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the items of income derived by the assessee during the formation period for the main business, were not taxable income but were to be adjusted against the project cost for the oil refinery and petrochemicals, the main business for which the company was It did so…

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