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By Vijay Kumar

Income Tax

Interest on deposits made compulsorily to get BG is not income; Fee paid to RoC is capital expenditure and loss on account of exchange rate fluctuation is admissible deduction

The Assessing Officer on perusal of schedule D to pre-operative expenses (pending allocation) attached to the balance sheet has found that a sum of Rs. 5 ,25,385.87 was credited to these pre-operative expenses on account of interest received. This amount was not offered for taxation by the assessee as its income, the assessee was, therefore, asked to show cause as to why this amount should not be treated as income in view of the of the Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT ( 2002-TIOL-489-SC-IT-LB ). The assessee in its reply submitted that out of total interest amounting to Rs.5,25,385.87 , Rs.3,42,891.14 had been received on account of fixed deposit kept with the bank as margin money against the letter of credit issued for import of capital goods. Balance Rs. 1 ,82,494.73 had been received on account of fixed deposit kept with the bank as margin money against bank guarantee, etc. the assessee further submitted that the purpose of keeping the deposits with the bank was to facilitate the import of capital goods and not to earn interest income. As per the assessee, as the production of the company had started after the close of financial year 1997-98, the said interest income of Rs.5 ,25,385.37 had rightly been credited to pre-operative expenses. However, the said submissions of the assessee did not find tenable by the Assessing Officer. He observed that in view of the decision of the Hon'ble Supreme court in the case of M/s Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) the interest received by the assessee from deposits kept with the banks is the income of the assessee chargeable under the head "Income from Other sources" and cannot be adjusted against pre-operative expenditure as business of manufacturing had not commenced during F.Y. 1997-98. Accordingly, he added the sum of Rs.5 ,25,386 to the income of the assessee.

Central Excise

Valuation – MRP mentioned but scored out - Torches cleared for free supply by manufacturers as advertisement propaganda to be assessed in terms of Section 4 of the CEA ' 44 : Tribunal

THE applicants are engaged in the manufacture of torches which are notified items under Section 4A of CEA . The revenue wants to assess these goods under Section 4A of the Act whereas the case of the applicant is that as the torches are for free supply for advertisement purposes to various other manufacturers, they are to be assessed under Section 4 of the Act.

Since the demand was confirmed, the appellant is before the Tribunal & places reliance on the SC decision in Jayanti Food Processing (P) Ltd ( 2007-TIOL-150-SC- CX ).

See our columns Monday for the judgements