DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD vs. L & T METRO RAIL (HYDERABAD) LIMITED, HYDERABAD

ITA 1412/HYD/2019Status: DisposedITAT Hyderabad21 January 2022AY 2016-1715 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, proportionate interest expenditure incurred on such idle funds can be claimed as a deduction.

What were the facts?

The assessee company earned interest income on fixed deposits during its business gestation period. The assessee claimed this interest as a capital receipt to be reduced from capital work-in-progress, while the AO treated it as income from other sources.

What were the issues?

Whether interest earned on idle funds during the pre-commencement period of business is a capital receipt or taxable 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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Cases cited in this judgment(15)Show list

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

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

For Appellant: Shri Ashik Shah
Hearing: 25/10/2021Pronounced: 21/01/2022

PER A. MOHAN ALANKAMONY, AM.:

This appeal is filed by the Revenue against the order of the Ld. CIT (A)-4, Hyderabad in appeal No. 4/10330/2018-19/ITO, Ward- 16(1)/CIT(A)-4, Hyd/19-20, dated 17/06/2019 passed U/s. 143(3) r.w.s 250(6) of the Act for the AY 2016-17. 2. The Revenue has raised three grounds in its appeal however, the crux of the issue is that:

“The Ld. CIT (A) has erred in treating the interest income earned by the assessee as “capital receipt” instead of treating

it as “income from other source” u/s. 56 of the Act, and reduced the same from “capital work in progress”

3.

The brief facts of the case are that during the relevant assessment year the assessee company had not commenced its business activities however, they earned inter

The order continues below.

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