2022 (6) TMI 190 - HC - Income Tax

Capitalisation of interest on FDRs earned during the period of construction - utilizing the ECB funds the assessee did not follow the RBI guidelines - Also submitted hat the ITAT has failed to consider the various decisions of the Apex Court including Tuticorin Alkali Chemicals and Fertilizers Limited vs CIT 1997 (7) TMI 4 - SUPREME COURT - HELD THAT - This Court vide its order 2022 (4) TMI 1233 - DELHI HIGH COURT dismissed a similar appeal preferred by the Revenue against the ITAT order passed in assessee s own case for the earlier Assessment Year 2012-13. This Court in 2022 (4) TMI 1233 - DELHI HIGH COURT held that The judgment passed in Tuticorin Alkali Chemicals (supra) referred to and relied upon by learned standing counsel for the Appellant has been considered and explained subsequently by the Apex Court in Commissioner of Income Tax Bihar II Patna vs. Bokaro Steel Ltd. Bokaro 1998 (12) TMI 4 - SUPREME COURT Keeping in view the aforesaid this Court is of the opinion that no substantial question of law arises for consideration as the questions sought to be raised in the present appeal are squarely covered by the decisions of the Apex Court as well as this Court. Accordingly the present appeal is dismissed.

Summary

Issues:
Challenge to ITAT order on capitalization of interest on FDRs during construction period without following RBI guidelines.

Analysis:
The High Court dealt with an Income Tax Appeal challenging the ITAT's Order dated 27th August, 2020 for the Assessment Year 2013-14. The Appellant argued that the ITAT erred in allowing the capitalization of interest on Fixed Deposit Receipts (FDRs) earned during construction without adhering to RBI guidelines. The counsel also contended that the ITAT failed to consider precedents, including the Tuticorin Alkali Chemicals case.

The Court referred to a previous order in a similar case for the Assessment Year 2012-13, where it dismissed the Revenue's appeal against the ITAT order. The Court cited the Tuticorin Alkali Chemicals case and the subsequent clarification by the Apex Court in the Bokaro Steel Ltd. case. It emphasized that amounts linked to setting up plant and machinery are of a capital nature and cannot be taxed as income. The Court also mentioned the Indian Oil Panipat Power Consortium case, where interest earned was not treated as income due to being linked with setting up the plant.

Based on these precedents, the Court concluded that no substantial question of law arises in the present appeal as the issues raised are already covered by decisions of the Apex Court and the High Court. Consequently, the Court dismissed the appeal, affirming the ITAT's decision on the capitalization of interest earned on FDRs during the construction period.