The Income Tax Appellate Tribunal ( ITAT ) has ruled that, Interests from Fixed Deposit Receipts ( FDRs ) not to be assessed under ‘Income from Other Sources’.
The assessee company M/s Jaypee Powergrid Ltd. was incorporated on 05.10.2006. The source of the funds as per their balance-sheet on 31.03.2011 are share capital of Rs.250 crores and secured loans of Rs.576.94 crores.
During the course of assessment proceedings, the company was granted licence for construction and maintenance of certain transmission lines and evacuation of power from Karcham-Wangtoo HEP located in the State of Himachal Pradesh to Abdullapur sub-station located in the State of Haryana. All the expenses incurred during the year was shown in the balance-sheet as Incidental Expenses During Construction [IEDC]. Examination of the IEDC statement revealed that the company had earned an amount of Rs.1,53,70,579/- as “Interest on short term deposits with Banks” which was deducted from the expenditure mentioned in the said statement. After reduction of this amount, IEDC expenditure was shown at Rs.239,45,85,724/-. Thus, the interest income earned during the year, instead of being shown separately, was used towards abatement of capital cost. The assessing officer considered this interest income from Fixed Deposit Receipts (FRDs) as income from other sources after receiving explanation from the company contending otherwise.
Accountant Member B.R.R. Kumar and Judicial member Bhavnesh Saini relied on a previous order of the same tribunal on a similar issue with the same company and ruled in favor of the company stating, “Considering the above facts in the light of the Order of the Tribunal Dated 24.07.2018 (supra) in the case of the same assessee, we find the issue is covered in favour of the assessee by the aforesaid decision of the Tribunal. We, accordingly, following the same reasons for decision, set aside the Orders of the authorities below and direct that impugned interest income is capital receipt not chargeable to tax during assessment year under appeal. Accordingly, appeal of the Assessee is allowed.”
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