M/S Z. Square Shopping Mall Pvt. Ltd., ... vs Department Of Income Tax on 9 September, 2015
In the case of NTPC - Sail Power Supply Co. Ltd. vs. CIT (supra),
the assessee-company was in the business of running a power plant and
under its expansion plan, it proposed to set up a new unit. It raised a
term loan for setting up new plant and separate books of account were
maintained for the same. For financing the expansion plan, the
assessee-company raised additional capital of Rs.45,000 lakhs during
the year. The assessee-company earned total interest receipts of
Rs.616.73 lakhs during the year. The interest was earned on temporary
deposits from the surplus funds and on the deposits made with banks by
way of margin or giving advances, etc. for the purpose of expansion.
Such interest earned was of Rs.331.58 lakhs. The balance or difference,
of interest of Rs.285.15 lakhs, which had been admitted as a normal
income, did not relate to expansion work. The interest earned on the
surplus fund by way of margins or giving advances for the purpose of
expansion was adjusted to the incidental expenses during construction.
The interest was adjusted on account of the matching principle since the
interest earned on deposits kept in relation to the expansion were
credited to/reduced from the incidental expenses during construction
(IEDC).