Capitalization of interest income

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Querist : Anonymous

Querist : Anonymous (Querist)

04 November 2015 Hello,

Please suggest reference of case laws involving below mentioned issue:-

A Private limited company borrowed some money for capital expenditure. It invested unutilized funds in Fixed deposits and reduced the interest income from CWIP on assumption that it is income from funds borrowed for capital expenditure.
Is company correct in its treatment or the income is chargeable to tax.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 November 2015 Not correct. Assessable under IFOS.
Inference is from -
Tuticorin Alkali Chemicls & Fertilizers Ltd Vs. CIT (1997)227 ITR 172 (SC).

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Querist : Anonymous

Querist : Anonymous (Querist)

04 November 2015 Thank you sir,
But according to company it is a preoperative income, like interest expenditure is capitalized before the asset is put to use, in the same manner why interest income from that borrowed fund for asset cant be capitalized.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 November 2015 PL go through the following decision to substantiate your view.

CIT Vs.Jaypee DSC Ventures Ltd (2011) 335 ITR 132 (Del).

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