TaxTMI 
TaxTMI 
2021 (6) TMI 212
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.... by holding that the same cannot be considered as income. 3. The Ld CIT(A) erred in law and facts by entertaining an altogether an allegation new additional ground by treating the same as revised ground without granting any opportunity to Revenue & without admitting the same as such. 3. Apropos Ground No. 1 Brief facts the assessee is a government company in which 100% share capital is held by the Maharashtra State Government. The assessee is engaged in the development of Tourism & allied activities in the state of Maharashtra on behalf of the State Government. For this, the appellant company receives grant from the Government which are to be utilized only for the purposes specified by the Government. Any unutilized grants are parked by the assessee company in form of the FDs with the banks. The appellant company earns interest income on such FDs made out of the unutilized grants. Up to AY 2006-07, the appellant company had offered such interest earned for tax under the head 'Business Income.' However, the Department had taxed the same under the head 'Income from Other Sources'. This has been upheld by Hon'ble ITAT Mumbai till AY 2006-07 and the assessee is ....
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....ashtra as per the mandate given by the State Government. The Assessing Officer rejected the contention of the appellant primarily relying on assessment orders of earlier years and appellate decisions thereon including decision of Hon'ble ITAT Mumbai on this issue to assessment year 2006-07. In my opinion, the Assessing Officer has not dealt with the change in government policy effective from FY 2006-07, relevant to the instant assessment year 2007-08. Further, despite acknowledging that Hon'ble ITAT Mumbai had set aside this issue for re-adjudication on account of above mentioned OM dated 04/01/2014, the Assessing Officer has not discussed the import the said OM. 6. Learned CIT(A) held as under :- "5.1.6 As is evident from the concluding lines of the OM quoted above, any interest earned by the appellant company on FDs made out of an utilised grants even disbursed before the said OM has to be mandatorily considered as part of the Grant-in-aid. Very clearly, in my opinion, this direction of the State Government is clarificatory in nature and applies to all grants including those disbursed in the past. Being a state PSU, this clarification is binding upon the appellant co....
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.... every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where, by obligation, income is diverted before it reaches the assessee, it is deducted; but where the income is required to be applied to discharge the obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second kind of payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable". 5.1.9 In the facts and circumstances of the case, the interest arising out of the FD stands diverted to form part of the grant-in-aid before it reaches the hands of the appellant. The appellant is not free to apply the amount in any manne....
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....eal before us. Learned Departmental Representative relied upon the order of Assessing Officer. 8. Per contra, learned Counsel of the assessee stated that learned CIT(A) has taken a correct view of the matter. He has submitted a detailed paper book alongwith following submissions :- "At the outset, ratio of decision of Hon'ble ITAT in assessee's own case for AY 2006-07 is not applicable to present appeals since in the said year, the limited question for consideration before Hon'ble ITAT was whether the interest would be taxable under the head 'Business Income' or 'Other Sources'. In AY 2006-07 it was never contested by the assessee that the interest is not taxable. It was only in AY 2007-08 that the stand in regard to taxability of the interest was first time changed by the assessee, in view of the Office Memorandum dated 06/12/2006. > There are a number of decisions of various appellate authorities, upholding the stand taken by the assessee that interest earned on unutilized grants will be in the nature of grant itself and therefore not chargeable to tax. The said decisions have been included in the legal paperbook handed over during the hearing on ....
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....le of Consistency * CIT VS Excel Industries Ltd. 358 ITR 295 * Radhasoami Satsang vs. CIT (193 ITR 321) 10. Upon careful consideration, we find that learned CIT(A) has taken a correct view of the matter. The Government directive which has been relied upon by him is duly applicable for the current assessment year. As per the said direction the interest on unutilised grant has to be treated a part of the grant itself. Hence, it cannot be subject to tax by the Revenue. In this view of the matter, there is change in circumstances and the ITAT order relied upon by the Assessing Officer is not at all applicable. As at that time there was no direction for such treatment. Further submission and case laws referred by the learned Counsel of the assessee is duly applicable on the facts and circumstances of the case. Nothing was brought before us referring the cogent finding of learned CIT(A). Hence, we uphold the order of learned CIT(A). Apropos ground No. 2 11. Brief facts during the year under consideration, the appellant had received a Revenue grant of Rs. 15 crores towards Publicity and an amount of Rs. 6.08 crore was spent therefrom, during the year under consideration. The balance....