TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 208
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....l as in law, the Ld. CIT(A) ought not to have upheld that the interest income of Rs. 20,42,86,950/- belonged to the appellant-Corpn. 3.1 The Ld.CIT(A) has erred in upholding that the interest income of Rs.20,42,86,950 was chajgeable in the hands of the appellant-Corpn." 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 24.12.2012 were that the assessee is in the construction activity for the project of Police Department. On perusal of income and expenditure account, it was noted by the AO that the assessee had shown an income of Rs. 21,30,95,206/- which comprises of mainly an interest income of Rs. 20,42,86,950/- received on ICD. However, as per the statement of income 'Nil' return was shown. The assessee was issued a show cause notice that why the interest was not to be added in the taxable income. The assessee's main reply was that the corporation is a wholly owned government company and a nodal agency for carrying out construction and maintenance for Home Department, Government of Gujarat. It was further explained that any income received such as interest income, tender fees were credite....
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....aced reliance upon the decision of Hon'ble Karnataka High Court in the case of CIT and Another Vs. Karnataka Urban Infrastructure, 284 ITR 582 (Karnataka). 4. The AO has further noted as follows: "The assessee received grant which is parked with GSFS, GSFS pays interst and claims interest as expenses. GSFC uses this amount for giving loan to another Government undertaking and received interest on that and shows it as income. The Government undertaking which has taken loan from GSFS claims interest as expenses. Thus in a process interest expenses are claimed as expenses two times. (i) By GSFS and (ii) By other Government undertaking who takes loan from GSFS. While Income is offered only in one hand i.e. in hands of (i) GSFS Thus Government funds are routed through GSFS in such a way that it enables one Government entity to claim interest expenditure and thereby reduce its tax liability without increasing tax liability of another Government entity. Thus entire income received as interest from GSFS remains out of tax net which is required to be added." 5. The AO has given a tabulation of the interest income and thereafter has calculated the interest income at Rs. 20,42,86,....
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....is not permissible under any provisions of the Income-tax Act." 7. From the side of the assessee, learned AR, Mr. S.N. Devitia has given a synopsis of the case as under: "The brief facts of the applicant's case are that the applicant is a a wholly- owned Govt. Company and acting as Nodal Agency for carrying out various types of construction, maintenance and repair work for Home Dept., Govt. of Gujarat, At present, its main activity is to monitor the funds and construction of residential/non-residential buildings for police/jail dept. The Central and State Government funds to the appellant for implementing the aforesaid objects. The money so received from the Govt. are parked by the appellant with Gujarat State Financial Services (for short "GSFS) and banks till the same are required for disbursement or expenditure. The buildings so constructed by the appellant corpn., belong to the Govt. and even no charges are recovered by the Corporation for acting as Nodal Agency for these activities. It is working as a Non Profit Organization and the entire income and cost are charged to the concerned projects. 2.1 During the course of asstt. proceedings the AO noticed that the appellant....
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.... overriding obligation to hold and utilize for Police Housing on behalf of the State Government. The interest income did not reach to the appellant as its own income so as to be chargeable in its hands, It may be stated that insofar as the buildings so constructed by the appellant, it has now been settled position that the same do not belong to the appellant-Corporation as held in its own case for A.Y.I996- 97 in Tax Appeal No. 1103 of 2009 by decision dated 1.3.2011 of Hon. Gujarat High Court. (P. 23-25). (ii) Secondly, the appellant Corporation has consistently followed the practice of accounting the funds received from Government and Others as current liability in the Balance Sheet and the construction work as current assets and not as fixed assets. Even, the chart enclosed herewith showing the application of interest income earned during the year also proves that the said funds have been utilized towards construction work as works completed or work-in- progress which has been shown in balance sheet. The note appended by way of accounting practice to the audited balance sheet, proves that the appellant is carrying on activities on no-profit no-loss basis and the funds are trans....
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....dabad in ITA No.2219/Ahd/2008 vide an order dated 30th September, 2008 has taken a view in respect of income from house property that there was no justification for the impugned addition on the notional rental value of the flats constructed by the assessee. It was also held by the Respected Co- ordinate Bench that there was no consistency of approach by the Revenue Department. The deletion by learned CIT(A) was therefore upheld. 8.1 Now before us, an order of Hon'ble Gujarat High Court pronounced in the case of Sar Infracon Pvt. Ltd. (Tax Appeal No.828 of 2013) wherein vide an order dated 30th of October, 2013 the view taken is as under: "5.1 It appears that the assessee received grant from the Central Government to the tune of Rs. 16.70 Crores and a sum of Rs. 5.56 Crores as contribution/grant from GHB. The assessee did not utilize the said grant, however, deposited the said sum in the Bank of India as fixed deposit and earned interest of Rs. 1,25,44,938/-. It appears that the Bank of India deducted TDS of Rs. 25,59,075/- on the said interest amount. The assessee claimed refund of Rs. 25,59,075/-, being the TDS deducted on the aforesaid amount of Rs. 1,25,44,938/- treating i....
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....ssee. The aforesaid contention has no substance. What is important is whether the interest earned on the Central Government grant is to be treated as the income earned or not, and not what the assessee claimed. As stated hereinabove, in the letter of the Central Government releasing the grant, which provides a condition that the interest earned on the central grant already released would form part of the central grant limit of Rs. 50 Crores, the amount of Rs. 1,25,44,938/- being interest earned on the fixed deposit of Rs. 16.70 crores which was the grant received by the assessee from the Central Government cannot be said to be its income and the aforesaid sum, as per the condition of release of grant, the interest earned on the Central Government grant ie., Rs. 1,25,44,938/- in the present case is to be included as a part of the grant received from the Central Government. 7. Under the circumstances, as such, no error has been committed by the Tribunal in deleting the addition of Rs. 1,25,44,938/- made by the Assessing Officer, treating it as the income of the assessee." 8.2 There is one more order of the Hon'ble Gujarat High Court pronounced in the case of CIT Vs. Gujarat Sta....