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TMI Blog2024 (9) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... against the interest earned by it. Thereafter, another judgment was passed in the case of CIT Vs. Karnal Co-operative Sugar Mills [ 1999 (4) TMI 7 - SC ORDER] wherein the Hon'ble Supreme Court has distinguished the decision in the case of Tuticorin Alkali Chemicals and Fertilizers Limited [ 1997 (7) TMI 4 - SUPREME COURT] In our view, a close reading of the Hon'ble Supreme Court in the case of Karnal Co-operative Sugar Mills what has been laid by the Hon'ble Supreme Court was that the interest income earned on such deposits, which is a direct link for the purchase of plant and machinery, had been capitalized and could not be assessed as income from other sources. We are of the opinion that the AO is required to verify as to wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is barred by limitation by 6 days. It has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having considered the reasons given in the petition, we condone the delay and admit the appeal for hearing. 3. The brief facts of the case are that the assessee is a limited company, filed its return of income for A.Y. 2014-15 on 26.11.2014 electronically u/s 139(1) of the Income Tax Act, 1961 declaring total income of Rs. 5,00,16,690/-. The said return was selected for scrutiny under CASS. Notice u/s 142(1) and questionnaire were issued and served upon the assessee. In response, assessee furnished information as called for. After examination and verification of the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wish to submit that we are setting up state of the art Power generation plant at Visakhapatnam, A P. The total cost of out project would run in to thousands of crores and a part of these costs of the Project is being met through borrowed funds from various financial institutions. Also as the project is a mega power project and involves complex engineering, planning, execution, and equipment, we have given the work of erection etc., to industry leaders like BHEL, Gammon India Limited etc. During the setup process, the supplies, insist on opening letter of credit (LC) for honouring their payments. Accordingly, for opening such LCs the bankers ask to deposits certain sums in Fixed deposits as margin money for opening the LCS. The interest rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. interest set off be payable to the bank amounting to Rs. 9,66,36,005/-. He relied upon the case of assessee s own case passed by the Tribunal in AY 2012-13 and 2013-14 in ITA Nos.1263 1264/Hyd/2018 dt. 18.02.2021. 8. We have heard the rival submissions and perused the material on record. The issue to be decided in the present case is whether the interest paid by the assessee can be adjusted against the earned income by the assessee on the fixed deposit made by it or not. The law has been settled by the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Limited reported in 227 ITR 172, wherein it has held that prior to the commencement of the business, there cannot be any adjustment of interest payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of the matter the ratio laid down by this court in Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT , will not be attracted. The more appropriate decision in the factual situation in the present case is in CIT v. Bokaro Steel Ltd. The appeal is dismissed. There will be no order as to costs. 9. In light of the above, we are of the opinion that the AO is required to verify as to what was the amount deposited by the assessee to open the letter of credit for honoring its payment, which are directly relatable for setting up of its plants. In case, on verification, the AO concludes that the interest of Rs. 9,66,36,005/- is directly relatable to the interest payment made for deposit in the bank for obtaining a letter of credit, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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