TaxTMI 
TaxTMI 
2021 (12) TMI 754
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....n of residential buildings, offices, hospitals, schools etc for the State Government and its employees. Hence the assessee is a civil contractor. The assessments of the years under consideration were completed by the AO making various disallowances and additions. The assessee got partial relief in the appeals filed before Ld CIT(A). Hence both the parties have filed these appeals. 3. We shall first take up the appeals filed by the revenue. The only common issue urged by the revenue in all the four appeals relates to the relief granted by Ld CIT(A) holding that the interest received on bank Deposits could not be treated as assessee's income. 3.1 The facts relating to the above said issue are set out in brief. The AO noticed that the assessee has earned interest income on deposits, but did not declare the same as its income. It was the case of the assessee that it is receiving grants from State Government of Karnataka and it was a condition that, if any part of the grant is kept in deposits, the interest earned thereon would also be treated as grant. Accordingly, the assessee did not declare interest income and treated the same as part of grant received from Government of Karnataka....
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....ow:- "8...... The assessee has treated such interests received from depositing the unutilised grants also part of grants and thereby provided that the interest so received will not attract any income tax liability as per orders of the Government of Karnataka. 9. Further out of the received interest of Rs. 13,68,35,991/- corporation had undertaken additional work amounting to Rs. 5,68,30,424/-. The same was allowed by the AO. However, the remaining amount of Rs. 8,00,05,567/- was added to the income of the appellant. The appellant contended that this income did not belong to him and the entire income vested in the government and consequently the appellant was not liable to be assessed. He further argues that the interests earned on Fixed Deposits out of unutilised grants never reached him. Even if the appellant were to collect interest, it does so, no as part of its own income, but for and on behalf of the person to whom it is payable. 10. Further, the appellant has claimed that vide Government order No.HD 173 EFS 2010, Bangalore dated 05.01.2012, the Government of Karnataka directed that the interest earned on the grants released by the Government to the appellant Corporati....
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....) (b) the interest accrued on Government funds given for specified scheme with Karnataka State Police Housing Corporation Limited, Bangalore should be utilised for the same specific scheme under any circumstances should not be diverted or utilised for any other schemes without prior approval of the Government (Government Order No. HD 173 EFS 2010, Bangalore dated 10-02-2012). We also noticed that the Ld CIT(A) has also followed the ratio laid down by the jurisdictional Hon'ble Karnataka High Court in various cases (referred supra), wherein the interest earned on deposits made out of Government grants was held to be not income of the assessee. Since the Ld CIT(A) has deleted this addition in all the years following the binding decision rendered by jurisdictional High Court, we do not find any reason to interfere with his decision rendered on this issue in all the years under consideration. The Ld D.R submitted that the interest income assessed in AY 2013-14 was Rs. 11,50,60,757/-, whereas the Ld CIT(A) has erroneously mentioned the figure of Rs. 15,06,55,029/- in his order. Since it is a typographical mistake, we order that the amount mentioned in paragraph 19 of order passed by ....
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.... or furniture used for the purposes of business, irrespective of whether the assessee is the owner of the assets or has only used them. The expression "current repairs" denotes repairs which are attended to when the need for them arises from the viewpoint of a businessman. The word "repair" involves renewal. However, the words used in Section 31(i) are "current repairs". The object behind Section 31(i) is to preserve and maintain the asset and not to bring in a new asset. In our view, Section 31(i) limits the scope of allowability of expenditure as deduction in respect of repairs made to machinery, plant or furniture by restricting it to the concept of "current repairs". All repairs are not current repairs. Section 37(1) allows claims for expenditure which are not of capital nature. However, even Section 37(1) excludes those items of expenditure which expressly falls in Sections 30 to 36. The effect is to delimit the scope of allowability of deductions for repairs to the extent provided for in Sections 30 to 36. To decide the applicability of Section 31(i) the test is not whether the expenditure is revenue or capital in nature, which test has been wrongly applied by the High Court,....
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....case it was observed as follows: "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of "repairs" because it is only by reason of this definition of repairs that the expenditure is a revenue expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the Legislature has permitted under section 10(2)(v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure." In our considered view, the claim of repair and maintenance expenses has to be examined on the basis of principles explained in the above said case. Before us, the Ld A.R placed his reliance on the decision rendered by Hon'ble Karna....
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....ad debts claimed by the assessee. The AO noticed that the assessee has written off a sum of Rs. 2,27,56,882/-, being excess expenditure incurred in respect of "Additional Housing Scheme 1 (AHS 1), since the Government of Karnataka did not reimburse above expenses. The assessee wrote off the above said amount as expenditure. The AO noticed that the Government of Karnataka has directed the assessee to meet the above expenses out of interest earned on deposits. Since the assessee has claimed that the interest income also partakes the character of "grant" and hence not taxable, the AO held that the expenditure which is required to be met out of such interest income cannot be claimed as deduction. The Ld CIT(A) also confirmed the same. 8.1 We heard the parties on this issue and perused the record. We have earlier upheld the claim of the assessee that the interest income earned on deposits made out of Government grants is not taxable in the hands of the assessee, since the said interest income is also treated as "government grant" only, as per the directions of Government of Karnataka. Further, the above said view has also got support of Hon'ble High Court of Karnataka. 8.2 With regard....
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.... with the Civil Contractors. Accordingly he submitted that the skill development expenses are related to the business activities of the assessee. He further submitted that the CSR expenses have been held to be not deductible only in subsequent years. On the contrary, the Ld D.R submitted that this expenditure is not related to the business activities of the assessee. 9.2 We heard the parties and perused the record. The assessee could claim this expenditure u/s 37(1) of the Act, as per which the expenditure should be laid out or expended wholly and exclusively for the purpose of business. We notice that the tax authorities have given a specific finding that this expenditure is not related to the business activities of the assessee, viz., construction of buildings for police and allied departments and project monitoring. The contentions of Ld A.R are that the children trained under skill development scheme could be employed by the Civil Contractors, which will in turn facilitate the business activities of the assessee. In our view, the connection with the business activities of the assessee sought to be established by Ld A.R is far fetched one. Accordingly, we are of the view that t....