Commissioner of Income Tax, Chandigarh-I v. HFCL Infotel Limited

1. FACTS OF THE CASE

Revenue’s two appeals concerned AYs 1999-2000 and 2000-01. Fixed deposits of Rs.6.25 crore supported licence-related bank guarantees before operations commenced on 24 July 2000. The dispute was whether the interest reduced project cost or was taxable as other-source income.

Source: PDF p. 1

2. DISCUSSION BY THE COURT

The Tribunal found the deposits directly connected to mandatory guarantees and the project. The High Court also stressed that Revenue had accepted the same treatment for AY 1998-99 and offered no satisfactory explanation for the different position, applying consistency.

Source: PDF p. 3

3. JUDICIAL DECISION

Both Revenue appeals were dismissed because no substantial question of law arose.

Source: PDF p. 3

4. OUTCOME

The assessee retained the capital-cost treatment for the two years in these appeals.

Source: PDF p. 3

5. Expert Comments

AKHB editorial analysis, distinct from the Court’s findings.

The project nexus distinguishes these deposits

The source links the deposits to licence-required guarantees. It does not classify all pre-operative interest, including unrelated surplus investments, as a reduction of project cost.

Source: PDF p. 2

Preserve the High Court’s consistency rationale

Acceptance of the same issue for the preceding year was expressly questioned and left unexplained by Revenue. That case-specific history is part of the ratio, not merely incidental background.

Source: PDF p. 3

Retain both appeal identities and both years

The common order disposes of ITA 616 and 617 of 2006. AY 1998-99 is the comparison year, not a third appeal disposed of in this order; the blank fourth physical page is retained in the original PDF.

Source: PDF p. 3