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By Vijay Kumar

Income Tax

Advance given to builder - no contract - interest taxable; Such interest is not capital receipt; expenditure incurred for earning interest deductible; Staff loans not for earning interest income, but to grant a benefit, interest not taxable : ITAT

THE appeal involved two issues. The first issue is whether the sum of Rs. 1.45 crore received by the assessee on settlement of its claim with Pure Drinks Ltd. ( PDL ) on account of breach of terms of the MOU dated 1.2.1995 was a capital receipt, to be set off against the expenses incurred by the assessee before the commencement of business? The alternative question was whether, even if the impugned amount was to be taxed under the residuary head, the assessee was entitled to deduct interest and other expenditure incurred for earning this income? The second issue was whether, interest on loan given to employees was chargeable to tax under the residuary head.

In the assessment order, it is inter-alia mentioned that the assessee company was incorporated on 22.10.1991 and it acquired rights in residential as well as flatted factory under DCM Green Area Scheme and DCM Techno Plaza Scheme for a consideration of Rs.251,17,17,965 /-. These rights were shown as such in the opening and closing stocks. There has been no purchase or sale of any right other than the ones mentioned above till this year. Therefore, in the past it was held that the business of the assessee had not commenced and this position was accepted by the assessee.

Central Excise

Central Excise – valuation – captive consumption – When independent factory sale price is available, that should be the basis for determining value of captively consumed goods : SC

The Supreme Court observed that the assessable value of the captively consumed grey yarn would be on the basis of the price at which the grey yarn was sold by the assessee to unrelated buyers in wholesale at the factory gate. The assessee had produced a number of invoices showing the sale to such independent buyers.

Revenue has not been able to point out any material on the record to come to a conclusion other than the one arrived at by the Tribunal. The finding recorded by the Tribunal is a finding of fact which cannot be interfered with.

See our columns tomorrow for the judgements