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The Assessee Company was in the process of setting up a power project for which additional share capital was raised from share holders. The amount was invested in FDRs for a temporary period till the orders for machineries were placed wherefrom various payments were made to the vendors. The Ld. AO treated the interest earned on FDRs as revenue receipt and assessed the same as income from other sources.
The Hon’ble High court relying on the judgment of Indian Oil Panipat Power Consortium Limited 315 ITR 255 (Delhi High Court) held that interest income was earned in a period prior to commencement of business and the money invested in the fixed deposit was inextricably linked with the setting up of the power plant hence it is in the nature of capital receipt liable to be set off against pre-operative expenses.
The appeal was dismissed. Pr. CIT Vs. Factor Power Ltd., I.T.A. No. 1011/2015, Date of Judgement: 07.01.2016, High Court of Delhi
In the given case, the Ld. AO during the assessment proceedings recorded some undisputed facts on the basis of which the Ld. AO disallowed the claims of the assessee. The same was upheld by the Ld. CIT (A).
However, the Hon’ble ITAT allowed the claim of assessee considering the order passed by them in the assessee’s own case in the previous assessment year where similar facts were in question.
The Hon’ble High Court disallowed the claim of the assessee, after considering the facts brought on record during the assessment proceedings, which are independent of the facts considered by the Hon’ble ITAT.
The Hon’ble Supreme Court upheld the order of the High court stating that the Tribunal is the final fact-finding authority and it is beyond the power of the High Court, in the exercise of its reference jurisdiction, to reconsider such findings on a reappraisal of the evidence and materials on record unless a specific question with regard to an issue of fact being opposed to the weight of the materials on record is raised in the reference before the High Court. The appeal was dismissed. M/s. Ganapathy & Co. Vs. CIT, Civil Appeal No. 1964 of 2008, Date of Pronouncement: 18.01.2016, Supreme Court of India
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