Taxability of interest on infrastructure development fund depends on whether the assessee has an unrestricted right to use the receipts.

Interest earned on fixed deposits linked to an infrastructure development fund was not taxable where a statutory development authority held the funds under government directions and lacked an unfettered right to treat the interest as its own income. The decisive factor was the restricted application of the receipts: the interest was available only in accordance with the governing instructions and had to be used for the specified developmental purpose. On those facts, the interest did not accrue as income of the assessee and was therefore not taxable in its hands.

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Issues: Whether interest earned on fixed deposits representing amounts linked with the infrastructure development fund was taxable as income of the assessee.

Analysis: The funds were held by a statutory development authority under government directions governing their deployment for infrastructure development. The decisive consideration was not the form of investment, but whether the assessee had an unfettered right to use the interest as its own income. The interest receipts were available only in accordance with the government instructions and were required to be applied for the specified developmental purpose. On those facts, the interest could not be treated as income accruing to the assessee.

Conclusion: The interest on the infrastructure development fund was not taxable in the hands of the assessee.

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