Case Law Details
Orissa Power Transmission Corporation Ltd Vs ACIT (ITAT Cuttack)
Introduction: The case of Orissa Power Transmission Corporation Ltd (OPTCL) vs. ACIT, adjudicated by ITAT Cuttack, involves two significant issues – the taxation treatment of interest income and the disallowance of prior period expenses. The discussion covers the assessment years 2011-12, 2012-13, and 2013-14.
Detailed Analysis:
Interest Income Treatment: Admittedly, OPTCL, a loss-making entity, deposited surplus funds in short-term deposits. The maximum period for these deposits was 91 days. The contention arose regarding the taxation treatment of interest income earned on these deposits. The Assessing Officer (AO) treated it as “income from other sources,” challenging OPTCL’s claim of it being “income from business.”
The key argument revolved around whether the interest earned on short-term deposits should be set off against the interest expenditure incurred by OPTCL on its substantial loan liability. The Tribunal supported OPTCL, emphasizing the netting principle. The nature of the deposits, being short-term and for immediate business needs, influenced the decision. The Tribunal directed the AO to allow the set-off of interest income against interest expenditure.
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