LAWS(RAJ)-1995-3-59

COMMISSIONER OF INCOME TAX Vs. MANGLAM CEMENT LIMITED

Decided On March 22, 1995
COMMISSIONER OF INCOME-TAX Appellant
V/S
MANGLAM CEMENT LTD. Respondents

JUDGEMENT

(1.) ON the request of the Revenue, the following two questions of law arising out of the order of the Income-tax Appellate Tribunal, Jaipur, dated May 7, 1985, have been referred under Section 256(1) of the Act in respect of the assessment year 1979-80 :

(2.) WHETHER, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that interest received of Rs. 2,58,089 on short-term deposits with banks was to be reduced from the interest payments while capitalising the various expenditure to capital account ?"

(3.) THE Delhi High Court in the case of CIT v. Modi Rubber Ltd. [1994] 208 ITR 379 has considered a case where the business was not commenced and the money which was received from the shareholders towards share capital was deposited in the bank. THE interest on deposits so earned was not considered as incidental to the business and was not related to the activity of construction of the factory, and as such was considered as not part of the cost of construction of the factory. THE interest from bank deposit was considered to have arisen out of an independent source when the business had neither been set up nor commenced.