Case Law Details
ACIT Vs Bokaro Power Supply Company Pvt. Ltd. (ITAT Delhi)
In a recent case of ACIT Vs Bokaro Power Supply Company Pvt. Ltd., adjudicated by the Income Tax Appellate Tribunal (ITAT) Delhi, significant clarifications were provided regarding the taxation of interest earned on business deposits and the authority of Assessing Officers (AO) to estimate gross profit.
The dispute centered around the treatment of interest earned on margin money deposits and advances, with the Revenue contesting its inclusion in the Expenditure during Construction Period. The Tribunal referenced previous decisions, including the case of CIT Vs. Sasan Power Ltd., wherein the Hon’ble Delhi High Court held that interest earned on funds infused for business projects cannot be taxed separately and must be treated as capital receipt.
Similarly, the Tribunal referred to the case of NTPC SAIL Power Company Pvt Ltd Vs. CIT, where it was ruled that interest earned on deposits linked to business projects should only reduce the cost of the project and not be taxed independently.
The Tribunal affirmed that interest earned on deposits related to business activities is not taxable as income from other sources, in line with established legal precedents.
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