RIYAZ S. PADVEKAR, J.M. ORDER assessee has filed these appeals challenging orders of CIT(A)- II, Kochi for asst. yrs. 1995-96, 1996-97 and 1997-98. 2 . assessee has filed concise grounds of appeal and only taken following ground which is common in all appeals : "Ought not lower authorities have held that interest, income, etc. earned during construction period or during his setting up of factory is capital receipt and set off against expenditure incurred during said period." 3. issue which arises for our consideration is regarding taxability of interest received by assessee company from bank deposit before commencement of business of running of hospital. assessee company was i n process of setting up modern specialist hospital, Mulakuzha, Chengannur during these three assessment years and assessee company had not commenced business. assessee received following interest from bank deposits in respective assessment years : Sr. Asst. Interest received on bank No. year deposit 1. 1995-96 Rs. 6,15,510 2. 1996-97 Rs. 16,88,290 3. 1997-98 Rs. 6,46,290 4. AO brought to tax entire amount of bank interest received by assessee under head "Income from other sources". assessee s contention was that interest income earned during construction period is capital receipt and assessee has rightly set off expenditure i.e. preoperative expenditure incurred during said period and balance amount was capitalized. AO rejected assessee s contention. 5 . assessee challenged impugned orders of AO before CIT(A). CIT(A) was of opinion that in view of decision of Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC), AO has rightly brought to tax interest received by assessee even during construction period of its hospital, treating it as revenue receipt. CIT(A), therefore, declined to interfere with orders of AO. Now, assessee has challenged impugned orders of CIT(A) before us. 6. We have heard parties. learned Authorised Representative for assessee reiterated arguments which were advanced before CIT(A). learned Authorised Representative also relied on following precedents : (i) CIT vs. Bokaro Steel Ltd. (1999) 151 CTR (SC) 276 : (1999) 236 ITR 315 (SC); (ii) CIT vs. Karnal Co-operative Sugar Mills Ltd. (2000) 161 CTR (SC) 241 : (2000) 243 ITR 2 (SC); (iii) Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (supra); (iv) ITO vs. A.V. Photochem (P) Ltd. [ITA No. 4955/Mum/1999 : BCAJ]. 7 . Per contra, learned Departmental Representative supported orders of authorities below. 8. short controversy before us is in respect of treatment to be given to interest received by assessee on bank deposit before commencement of its business. assessee did not treat said interest as its income before AO. assessee deducted preoperative expenses from gross amount of bank interest in respective assessment years and capitalized net amount treating it as capital receipt. other facts of this case are not in dispute. 9 . In case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra), petitioner assessee had borrowed term loan from various banks and financial institutions for setting up factory and part of borrowed funds which was not immediately required by company was invested in short-term deposit with bank. On that amount, assessee received interest. trial production of assessee commenced on 30th June,1982. Up to asst. yr. 1980-81, interest earned by assessee from bank deposit was shown as income and same was taxed. Subsequently, assessee filed revised return stating that there was mistake and interest charges along with other preoperative expenses should have been capitalized and therefore, interest income received by assessee should have been reduced by preproduction expenses which would ultimately be capitalized. Hon ble Supreme Court held as under : "In case before us, company had surplus funds in its hands. In order to earn income out of surplus funds, it invested amount for purpose of earning interest. interest thus earned is clearly of revenue nature and will have to be taxed accordingly. accountants may have taken some other view but accountancy practice is not necessarily good law. In B.S.C. Footwear Ltd. vs. Ridgway (Inspector of Taxes) (1972) 83 ITR 269 (HL), House of Lords had no hesitation in holding that accounting practice for calculating its profit followed by assessee and accepted by Revenue for 30 years could not be treated as sanctioned by law and was not acceptable for purpose of computation of taxable income." 10. In case of Bokaro Steel Ltd. (supra), different assessment years were involved but on issue in respect of interest on short-term deposit, Hon ble Supreme Court has held as under : "During these assessment years, respondent assessee had invested t h e amounts borrowed by it for construction work which were not immediately required, in short-term deposits and earned interest. It has been held in these proceedings that receipt of interest amounts to income of assessee from other sources. assessee has not filed any appeal from this finding which is given against it. In any case, this question is now concluded by decision of this Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC). Hence, we are not called upon to examine that issue." 1 1 . In case of Karnal Co-operative Sugar Mills Ltd. (supra), assessee has deposited money to open letter of credit for purchase of machinery required for setting up its plant in terms of assessee s agreement with supplier and it was on money so deposited that some interest had been earned by assessee. Hon ble Supreme Court held that deposit of money by assessee in that case was directly linked with purchase of plant and machinery and hence any income earned on said deposit is incidental to acquisition of asset for setting up of plant and machinery. 12. As far as facts of present case are concerned, it is not case of assessee that deposit kept with bank had any nexus with setting up of plant. In fact, it is surplus fund which was kept with bank on which assessee earned interest. In our opinion, principles laid down by Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) are squarely applicable and interest earned by assessee even during construction period on short-term deposit kept with bank is assessable as income which AO has done and CIT(A) has rightly upheld. We do not find any reason to interfere with order of CIT(A) on this issue which is accordingly, confirmed. 13. In asst. yr. 1995-96, assessee has taken one more ground on issue of limitation. learned Authorised Representative submitted that as per instructions of his client, he is not pressing said ground. In view of above, said ground is rejected. 14. In result, all appeals of assessee are dismissed. *** CENTRAL TRAVANCORE SPECIALISTS HOSPITAL LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX