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TMI Blog2017 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment of the bank interest of Rs. 1,14,45,691/- under the head "Income from other Sources." 2.2 The CIT(A) erred in not appreciating the fact that the bank deposit had to be made to give bank guarantee in connection with import of capital goods required for the purpose and the interest earned has intrinsic and insegregable nexus with the business of the appellant and therefore the interest earned cannot be assessed under "Income from other sources." 2.3 The CIT(A) ought to have appreciated that in the appellant's case, the bank interest is not assessable under income from other sources, in light of the following judgements: i) CIT Vs Jaypee DSC Ventures Limited (204 ITR 169) dated 11.03.2011, Delhi HC. ii) Pr. CIT Vs. Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icense under Zero Duty EPCG scheme and the capital goods are required for the project. During the period September, 2011 the capital goods were imported under the EPCG scheme and also executed EPCG Bonds and provided Four Bank guarantees which were submitted to the custom authorities. These fixed deposits are aggregate to Rs. 15,84,20,486/- and interest accured on the fixed deposits was Rs. 1,14,45,691/-. The assessee's company contention was that the interest received on FDR are not out of surplus funds and such deposits are given as Bank guarantee for import of capital goods required for the project. And these fixed deposits have intrinsic and insegregable nexus with the Business of the assessee and the interest earned is in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits submitted for the purpose of bank guarantee as income from other sources and Ld. CIT(A) overlooked reasons and the basic necessity of 100% Bank guarantee required in importing capital goods and relied on the judicial decisions and emphasized that the interest income has nexus with the project and in the nature of capital receipt and has to be set off against the project cost and prayed for allowing the appeal. Contra, the Ld. DR relied on the orders of the CIT(A). 6. We heard the rival submissions, perused the material on record and judicial decisions. The sole crux of the disputed issue that the interest on Bank fixed deposits provided as Bank guarantee on EPGS scheme for the purpose of import of capital goods. The assessee company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. AR relied on the decision of CIT(A) Vs. Jaypee DSC Ventures Ltd., (2012) 335 ITR 132 (Delhi) also Apex Court decision CIT(A) Vs Bokaro Steel Ltd., (1999) 236 ITR 315(SC) and also relied on the decision of Delhi High Court in the case of Pr. CIT Vs Facor Power Ltd., 380 ITR 474 (Del), it was held that where assessee is engaged in generating electric power, kept margin money in the form of fixed deposits for procurement of various capital goods for setting up the power project, interest earned on fixed deposits would be in nature of capital receipt, not liable to tax. The assessee company had made fixed deposits to procure capital goods for project as per terms of EPCG Scheme. We rely on the decision of jurisdictional High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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