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Case Law Details

Case Name : ITO Vs M/s Factor Power Ltd,(ITAT Delhi)
Appeal Number : ITA Appeal No. 4300/Del/2012
Date of Judgement/Order : 10/06/2015
Related Assessment Year :
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Brief of the case:

ITAT Delhi has held in  the case of ITO vs. M/s Factor Power Ltd that Interest Earned on Fund Raised Through Share Capital for installation of thermal power plant , which is been deposited temporarily in bank as fund were lying idle, with a motive to reduce the capital cost of thermal power plant  is a Capital Receipt and cannot be taxed as Income From Other Sources.

Facts of the case:

Assessee had into a joint venture with some company for establishing thermal power plant for which it raised  capital from public. Assessee had given some advance money and placed the order of the capital goods required for establishment of the plant.Till the time the capital goods reached the plant the funds which asseesee raised from the public was lying idle .So it  decided to keep the funds in the bank in the form of FDR so that some cost of project may get reduced.  Assessee made the FDR of the Rs 1389 Lakhs and earned interest of Rs 70,75,813/-. Assessee treated the same as a capital receipt and deducted the same from the capital WIP but AO treated the same as a revenue receipt and taxed it under head Income from other sources. Aggrieved from the order of AO ,assessee filed an appeal with CIT(A) which allowed the appeal of assessee .Revenue ,being aggrieved from the decision of CIT(A) it filed an appeal with ITAT who dismissed its appeal.

Contention of the revenue:

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