Commissioner of Income Tax vs L.G. Electronics India Pvt. Ltd.

Madan B. Lokur, J.—The Revenue is aggrieved by an order dated 28th September, 2007 passed by the Income Tax Appellate Tribunal, Delhi Bench `E'', New Delhi (the Tribunal) in ITA Nos. 198 and 1999/D/2004 relevant for the Assessment Years 1998-99 and 2001- 02.

The present appeal is only against the order passed by the Tribunal in ITA No. 198/D/2004

Two questions have been urged by learned Counsel for the Revenue. The first pertains to an addition of Rs. 5,25,386/- made by the Assessing Officer towards interest credited to pre-operative expenses (pending capitalization) to the income of the Assessee.

It appears that the Assessee had deposited with the bank certain amounts towards margin money for issuance of letters of credit for import of capital goods. On this amount, the Assessee earned an interest of Rs. 5,25,385.87. The Assessing Officer treated this amount as income from other sources and taxed it accordingly.

The Commissioner of Income Tax (Appeals) [CIT(A)] decided against the Assessee but the Tribunal decided in favour of the Assessee and held that the amount cannot be taxed as income from other sources. That is how, the Revenue is before us.

We have heard learned Counsel for the parties and find that the issue is squarely covered in favour of the Assessee in view of the decision of the Supreme Court in Commissioner of Income Tax Vs. Karnal Co-operative Sugar Mills Ltd., . In that case also the Assessee had deposited some money with the Bank for opening a letter of credit for the purchase of machinery required for setting up its plant in terms of the Assessee''s agreement with the supplier. The Assessee had earned interest on the amount deposited and the Supreme Court held that since it was not an investment of money that was lying idle with the Assessee, the interest had to be adjusted against the cost of the machinery.

Insofar as the present case is concerned, the Assessee commenced its business on the subsequent assessment year and there is no dispute about the fact that the amount deposited by the Assessee was not idle money on which it was earning interest.

Under the circumstances, the interest earned to the tune of Rs. 5,25,385.87 is required to be credited against pre-operative expenses incurred by the Assessee.

In our opinion, no substantial question of law arises insofar as this issue is concerned.

The second issue urged by learned Counsel for the Revenue is with regard to disallowance of Rs. 2,59,02,013/- being the loss on account of foreign exchange rate fluctuation.

The admitted position is that in view of decision of this Court in Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd., , Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd., , no substantial question of law arises.

Under the circumstances, the appeal is dismissed.