TaxTMI 
TaxTMI 
2022 (2) TMI 1520
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....rgy and is also executing projects under Lift Irrigation Schemes (LIS) at various places in the erstwhile state of Andhra Pradesh. For each project the Govt. of AP (GoAP) releases the grants and the assessee keeps the unutilized grants as fixed deposits with the banks and earns interest thereon. During the year under consideration, the assessee company claimed TDS on this interest income. When asked for clarification by the Assessing Officer (AO), the assessee stated that this interest income is not offered as income as the same is transferred to the respective deposit account of Govt. of AP. The assessee further stated that the interest earned on these deposits is part and parcel of the original grants received from the GoAP. Notice u/s 142(1) dated 19.12.2018 was issued to the assessee to furnish a note on this and to show cause as to why the interest on deposits - GoAP's Lift Irrigation Scheme accrued during the year should not be treated as income of the assessee and added back to the total income of the assessee. In response to the notice, the assessee filed letter dated 20.12.2018. After considering the submissions and facts of the case, the AO observed that the submissions o....
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....ting. The AO viewed that the assessee instead of recognizing the interest accrued on deposits made with DISCOMS as revenue, credited to "Deposits from GoAP for LIS account" and claimed the credit for the TDS made on the same, which is self defeating / contradicting action on the part of the assessee. To allow the claim of TDS, the provisions of section 199 are clearly applicable to the instant case. As per the provisions of sec.199, tax credit would be given only when the assessee offers corresponding income for tax purpose. However, in the present case, the assessee failed to offer the interest income on Deposits from GoAP for LIS account. Accordingly, the AO treated the amount of Rs. 87,96,21,811/- being the interest earned by the assessee on the deposits / investments made from unutliized LIS funds as income and added back to the total income of the assessee. 4. On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld. CIT(A) deleted the addition made by the AO, relying on the assessee's own case for the A.Ys 2008-09 to 2013-14, wherein, the ITAT dismissed the appeals of the revenue in ITA Nos. 366 to 372/Hyd/18 dated 13.06.2018. 5. On being aggrie....
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....the total income of the assessee, but the Ld. CIT(A) wrongly deleted the same. Hence, the orders of the AO to be confirmed. 7. On the other hand, the Ld. Counsel for the assessee has submitted that the Ld. CIT(A) considered the orders passed by the ITAT in assessee's own case on similar set of facts and allowed the assessee's appeal. Therefore, the orders passed by the Ld. CIT(A) to be upheld. 8. We have heard both the parties and perused the material placed on record. The only issue before us is whether the interest received by the assessee is revenue in nature or not. It is admitted fact that the Ld. CIT(A) on similar set of facts deleted the addition made by the AO relying on the decision of Coordinate Bench in the assessee's own case in ITA Nos. 366 to 372/Hyd/2018 dated 13.06.2018. For the sake of clarity and convenience, we extract relevant copy of the order of the Ld. CIT(A), which reads as under : "....These are seven appeals by Revenue from AYs. 2008-09 to 2013-14 and cross-objections by assessee. The Ld. CIT(A) has passed common order vide order dt. 20-11-2017 and amongst various issues decided by the Ld. CIT(A), Revenue is aggrieved on the exclusion of int....
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....ts only for the implementation of LIS Projects. ● The LIS Grant amount has to be deposited in a separate Bank Account and maintained separately for rendering account to the State Government. The same has been treated as a current Liability in the Balance Sheet to the extent of unutilised Grant amount. ● Interest earned/ accrued on the deposits of LIS Grant amounts is also to be utilised for the implementation of the Schemes only and therefore, the same is also shown under the current Liabilities as an accession to the LIS Grant Funds. ● The Appellant cannot exercise any discretion or right over such interest amounts except to utilise the same for the LIS Projects and as directed by the State Government of Andhra Pradesh. ● The Appellant has furnished communication received from Special Secretary to Government, Energy Department, Government of A.P. dated 21/10/2011 through which the Secretary directed the Appellant Company to remit to Government Account the amount of interest accrued on deposits. ● The Appellant Company is a State Government Public Sector Undertaking and is bound to follow the Government dire....
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....deposits made from "Specific or Tagged Grants" cannot be taxed as revenue receipt. 1. Tax Appeal No.855 of 2013 in the case of Commissioner of Income Tax-II V/s. SAR Infracon P Ltd. 2. Gujarat Municipal Finance Board V/s. Dy. CIT reported in (1996) 318 ITR 317. 3. Gujarat Power Corporation Limited V/s. Income tax Officer reported in (2013) 354 ITR 201(Guj.) 4. Karnataka Urban Infrastructure Development and Finance Corporation 150 ITR 533. 5. Hyderabad Infrastructure & Technologies Limited V/s. Addl. Director of Income Tax (International Taxation)-l, Hyderabad reported in-(2014) 45 Taxmann.com 339. 6. CIT v Punjab State E-Governance Society in ITA No. 75 of 2011. The assessee also relied on the ratio laid down by the Hon'ble Supreme Court in the case of M/s Bokaro Steel 236 ITR 315 (SC) to contend that interest which is inextricably connected to the Capital Grant is to be treated as Capital Receipt only which will go to reduce the cost of the Capital Asset that is corning into existence by the utilisation of the Capital Grant along with the interest thereon. Further, it was pointed out that the interest earned was reduced whi....
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....erred to the detailed submissions made before the CIT(A). 5. After considering the rival contentions, we do not find any merit in Revenue grounds. As can be seen, the funds are clearly allocated for a specific purpose and assessee has no control over the funds, except utilizing them for the scheme for which it was granted. These funds are also kept separately and the interest was also accounted for on behalf of the Government and has kept separately from assessee's transactions. Hence, on the principles laid down by the Hon'ble Supreme Court in the case of M/s Bokaro Steel [236 ITR 315] (SC) and also relying on various case law on the issue, we are of the opinion that the decision of Ld. CIT(A) does not require any modification. Nothing was placed on record to counter the findings of CIT(A) both on facts and on law. In the result, all the Revenue appeals are dismissed. 6. The cross-objections are in support of the order of Ld. CIT(A), hence no separate discussion is required. Accordingly, all the cross objections are considered dismissed. 7. To sum-up, all Revenue appeals and cross-objections are dismissed. The Coordinate Bench of the Tribunal also....