INCOME TAX OFFICER, WARD-2(1), HYDERABAD vs. KSK WIND ENERGY HALAGALI BENCHI PRIVATE LIMIED, HYDERABAD

ITA 33/HYD/2019Status: DisposedITAT Hyderabad25 January 2022AY 2014-1518 pages
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What did the Tribunal hold?

The Tribunal held that interest earned on idle funds, even if meant for capital expenditure, is taxable as income from other sources. However, it clarified that any interest expenditure incurred on funds kept aside for capital expenditure can be deducted from this interest income.

What were the facts?

The assessees, companies in the process of setting up projects, earned interest income on fixed deposits of idle funds meant for capital expenditure. They claimed this interest as a capital receipt to be reduced from capital work-in-progress.

What were the issues?

Whether interest earned on idle funds during the gestation period of a project is a capital receipt or income from other sources, and whether related interest expenditure is deductible.

Which sections of the Income-tax Act were involved?

Section 56,Section 57(iii)

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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD

Before: SHRI A. MOHAN ALANKAMONY & SHRI S.S. GODARA

Hearing: 24/11/2021Pronounced: 25/01/2022

PER A.

The order continues below.

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