PCIT-1 Vs Brahma Center Development Pvt. Ltd. (Delhi High Court)
In PCIT-1 Vs Brahma Center Development Pvt. Ltd., the Delhi High Court considered an appeal filed by the Revenue challenging an order of the Income Tax Appellate Tribunal (ITAT) dated 17.07.2023. The Tribunal had allowed the assessee’s appeal by holding that interest earned on fixed deposit receipts (FDRs) was not taxable as “income from other sources,” as it was linked to the business project.
At the outset, the Court condoned delays of 56 days in filing and 546 days in re-filing the appeal. The substantive dispute related to the taxability of interest earned on funds temporarily parked in FDRs. The assessee was engaged in promotion, construction, and development of projects on land allotted by Haryana State Industrial and Infrastructure Development Limited (HSIIDC). Under the agreement, the assessee was required to pay consideration for land in instalments.
To meet these obligations, the assessee raised funds from non-resident shareholders through Compulsory Convertible Debentures (CCDs), which carried interest at 12% per annum. The interest payable on these CCDs was capitalised as part of the project cost. However, funds not immediately required for instalment payments were deposited in banks as FDRs, generating interest income.
