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2015 (2) TMI 1306 - HC - Income TaxAccrual of income - Interest received from banks on amounts of share capital temporarily deposited and on account of forfeiture of earnest money - Its return, assessee claimed that these amounts were inextricably linked with the capital stream and not taxable as income - AO treated the same as income - CIT differed from that view and directed the deletion of the amount from the assessment also confirmed by ITAT - HELD THAT - ITAT upheld the order of the CIT (Appeals). In doing so, the ITAT followed the decision of this Court in Indian Oil Panipat Power Consortium Limited v. Income Tax Officer 2009 (2) TMI 32 - DELHI HIGH COURT and the later decision of this Court in the case of NTPC Sail Power Company Private Limited v. CIT 2015 (7) TMI 193 - ITAT DELHI . Having considered the submissions, this Court is of the opinion that there is no infirmity in the order of the ITAT. No substantial question of law arises. The appeal is accordingly dismissed.
Issues:
1. Tax treatment of interest received from banks on share capital temporarily deposited. 2. Tax treatment of forfeiture of earnest money. 3. Interpretation of whether the amounts in question constitute "income" for tax purposes. Issue 1: Tax treatment of interest received from banks on share capital temporarily deposited. The appellant, the Revenue, challenged the ITAT's order regarding the tax treatment of interest received from banks on share capital temporarily deposited. The appellant argued that the interest amount, along with the forfeiture of earnest money, should be treated as income. The assessee, incorporated in 2003 and engaged in constructing a power plant, had temporarily deposited a portion of its capital in banks, earning interest. The Assessing Officer (AO) considered these amounts as income, relying on a prior Supreme Court decision. However, the CIT disagreed and directed the deletion of the amount from the assessment. The ITAT upheld the CIT's decision, citing precedents from previous court cases. The High Court, after reviewing the submissions, found no issue with the ITAT's order and dismissed the appeal, stating that no substantial question of law arose. Issue 2: Tax treatment of forfeiture of earnest money. In addition to the interest earned on temporarily deposited capital, the appellant contested the tax treatment of the forfeiture of earnest money. The assessee had forfeited earnest money from bidders/contractors, which the AO considered as income. However, the CIT and subsequently the ITAT disagreed with this classification, following previous court decisions. The High Court, after considering the arguments presented, found no fault with the ITAT's decision and dismissed the appeal, stating that no substantial question of law was raised. Issue 3: Interpretation of whether the amounts in question constitute "income" for tax purposes. The central issue revolved around whether the amounts in question, including interest from bank deposits and forfeiture of earnest money, should be classified as "income" for tax purposes. The AO initially treated these amounts as income, but the CIT and ITAT disagreed, citing precedents from previous court cases. The High Court affirmed the decisions of the lower authorities, stating that there was no legal flaw in their reasoning and that no substantial question of law arose from the case. Consequently, the High Court dismissed the appeal brought by the Revenue. This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, the decisions of the lower authorities, and the final ruling of the High Court, providing a comprehensive understanding of the legal aspects and reasoning behind the judgment.
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