Andhra Pradesh H.C : The interest received on short-term bank deposits during the pre-production stage cannot be treated as income from other sources and should go towards the project cost

High Court Of Andhra Pradesh

CIT vs. Coromandal Cements Ltd.

Sections 56, 256(2)

Lingaraja Rath & B. Sudershan Reddy, JJ.

ITC No. 87 of 1996

26th February, 1997

Counsel Appeared

S.R. Ashok, for the Applicant : None, for the Respondent

JUDGMENT

LINGARAJA RATH, J. :

The following question arose for decision :

“Whether, on the facts and circumstances of the case, the Tribunal was correct in law in holding that the interest received on short-term bank deposits during the pre-production stage cannot be treated as income from other sources and should go towards the project cost ?”

2. The question urged in this case is whether the interest earned on “surplus deposits on borrowed capital”, borrowed for the purpose of setting up an industry would constitute “income” of the assessee for the purpose of tax. The Tribunal rejected the case of the Revenue relying upon the decision of this Court in CIT vs. Nagarjuna Steels Ltd. (1988) 71 CTR (AP) 118 :(1988) 171 ITR 663 (AP) : TC 41R.551, in which it was observed as follows :”We have heard the parties in this application. Since the issue involved is already covered by the decision of the jurisdictional High Court in CIT vs. Nagarjuna Steels Ltd. (1988) 71 CTR (AP) 118 : (1988) 171 ITR 663 (AP) : TC 41R.551 and since the decision of the Tribunal is based on that very decision, in our view, no referable question of law arises. We accordingly decline to refer the question proposed by the Revenue and reject this application.”

The case above squarely covers this case. We do not find any case to call for a reference. The ITC is dismissed.

[Citation : 234 ITR 413]

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