- (1.) THE present appeal is filed by the assessee under Section 260A of the Income Tax Act, against the judgement and order dated 22.07.2002 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 3724/DEL/95 for the Assessment Year 1992 -93. On 9.4.2003, a coordinate Bench has admitted the appeal on the following substantial questions of law : - (i) Whether on the facts and circumstances of the case, the interest of Rs. 13,97,610/ - earned by the assessee on the short term deposits (FDRs) made for the purpose of providing security for obtaining the letters of credit (LC's) to be opened for import of plant and machinery was assessable as income under the head "income from other sources"; (ii) Whether on the facts and circumstances of the case, interest of Rs. 13,97,610/ - was in the nature of capital receipt and was therefore, liable to be adjusted against the pre -operative cost of the plant and machinery.
(2.) THE brief facts of the case are that the assessee has set up an industrial undertaking for the manufacture of halogen lamps/compact fluorescent lamps at NEPZ, Noida U.P. For the project, the assessee has obtained the secured loans from financial institutions and equity share capital etc. The application money was received from the promoters, which was not immediately required for the purpose of acquisition of capital assets. Machines were likely to be imported, so the assessee, for the short period, kept the amount in the Bank in the form FDRs/ICDs. During the assessment year under consideration, no manufacturing activity was started. The interest of Rs. 13,97,610/ - was earned on short deposit and the same was claimed by the assessee as pre -operative expenses, but the A.O. has not allowed the same and treated the interest income under the head "income from other sources". The CIT(A) as well as Tribunal upheld the same.
(3.) NOT being satisfied, the assessee has filed the present appeal. With this background Shri Shashwat Vajpayee, learned counsel for the assessee submits that undoubtedly, during the assessment year under consideration, no production was started for the reason that the machines were awaited from abroad. He submits that deposits were made as security for grant of letters of credit for Rs. 9,75,00,000/ - to purchase the machinery worth of Rs, 11,36,85,123/ -. An interest of Rs. 13,55,110 received during the assessment year 1992 -93 was claimed as pre -operative expenses as per the form 4CD.;