Income and expenses of pre-commencement period

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: such time the money is required for disbursement, the money had to be kept in deposit with a bank. Keeping the money in a current account would not yield any interest income.

Therefore, during the period of construction the monies were kept in deposits with the bank. In these circumstances in the light of the Supreme Court decisions in the cases of Bokaro Steel Ltd, Karnal Co-operative Sugar Mills Ltd, and Karnataka Power Corporation, the claim of the assessee was reasonable and had to be accepted.

The high court held that the tribunal allowed the claim of the assessee by following its own earlier order and had rightly come to the conclusion that interest on monies borrowed for the period prior to the commencement of business could be allowed as deduction from the interest under section 57, while computing income from other sources in respect of the interest earned.

The aforesaid decision would set at rest the controversy on this subject. While the tax department has the right to appeal to the Supreme Court, the court is likely to uphold the high court's decision, which has relied on the earlier decisions of the Supreme Court on this very point.