February 2023
Capital or revenue receipt — Interest — Interest earned from fixed deposits of unutilised foreign external commercial borrowing loans during period of construction — Interest received was capital receipt
By K. B. Bhujle, Advocate
Reading Time 2 mins
74 Principal CIT vs. Triumph Realty Pvt Ltd (No. 1)[2022] 450 ITR 271 (Del)
A. Y.: 2012-13
Date of order: 31st March, 2022
Capital or revenue receipt — Interest — Interest earned from fixed deposits of unutilised foreign external commercial borrowing loans during period of construction — Interest received was capital receipt
The assessee availed foreign external commercial borrowings of Rs. 82.37 crores for the purpose of acquisition of a capital asset, i. e., renovation and refurbishment of hotel acquired by the assessee under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. The entire loan was disbursed in a single tranch in the A. Y. 2012-13 and during this year, the assessee could utilise only Rs. 33.70 crores. Therefore, the assessee had temporarily made fixed deposits of the external commercial borrowing funds till utilisation for fixed asset or capital expenditure. The assessee had paid interest of Rs. 13.38 crores on the borrowings and had earned interest of Rs. 4.03 crores on the fixed deposits. The net interest of Rs. 9.35 crores was added to the preoperative expenditure pending capitalization.
The Tribunal allowed the capitalisation of interest on fixed deposit receipts earned during the period of construction.
The Delhi High Court dismissed the appeal filed by the Revenue and held as under
