COMMISSIONER OF INCOME-TAX VS AUTOKAST LTD.
2001 P T D 2468
[248 I T R 110]
[Supreme Court of India]
Present: S. P. Bharucha, Doraiswamy Raju and Ms. Ruma Pal, JJ
COMMISSIONER OF INCOME‑TAX
Versus
AUTOKAST LTD
Civil Appeal No.5391 of 1997, decided on 21/11/2000.
(Appeal by special leave from the judgment and order, dated July 10, 1996 of the Kerala High Court in I. T. R. No. 103 of 1991.)
Income‑tax‑‑‑--
‑‑‑‑Interest‑‑‑Money borrowed for purchase of plant and machinery‑‑‑Placed in short‑term deposit with Bank till payment was made‑‑‑Used in bill discounting‑‑‑Taxable as income from other sources‑‑‑Indian Income Tax Act, 1961, S.56‑‑‑[CIT v. Autokast Ltd. 1999 PTD 3215 reversed].
From the decision of the Kerala High Court (see 1999 PTD 3215) holding that where the assessee kept the moneys borrowed from the Industrial Development Bank of India for purchase of plant and machinery in short term deposits in banks and used it in bill discounting until payment for the plant and machinery, the interest earned on the deposits was not taxable in the hands of the assessee as income from other sources but would go to reduce the actual cost of the plant and machinery, the Department took an appeal to the Supreme Court. The Supreme Court reversed the decision of the High Court holding that the interest was taxable in the hands of the assessee.
Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT (1997) 227 ITR 172 (SC) fol.
CIT v. Autokast Ltd. 1999 PTD 3215 reversed.
M. L. Verma Senior Advocate (S.W. A. Quadri, S. K. Dwivedi and Ms. Sushma Suri, Advocates with him) for Appellant.
Dr. S. Narayanan and Subramonium Prasad, Advocates for Respondent.
ORDER
The question that was before the High Court:
"Whether, on the facts and in the circumstances of the case, the interest income is not assessable to tax in the hands of the appellant?"
The High Court answered the question against the Revenue. The Revenue is in appeal by special leave.
It is not now in dispute that the appeal must succeed, having regard to the judgment of this Court in Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT (1997) 227 ITR 172.
The civil appeal is accordingly allowed. The judgment and order under challenge is set aside. The question is answered in the negative and in favour of the Revenue. In other words, the interest income is assessable to tax in the hands of the assessee.
No order as to costs.
M.B.A./941/FCAppeal allowed.