2011 (5) TMI 932 - AT - Income Tax

Summary

Issues involved:
1. Deletion of addition of interest relating to relocation of industries.
2. Deletion of addition relating to scheme of Delhi Government for low cost housing and maintenance charges.
3. Deletion of addition made on account of capital grant.
4. Taxability of interest on refund of income tax in respect of Relocation of Industries and CETP.

Deletion of addition of interest relating to relocation of industries:
The issue was raised regarding the addition of &8377; 30,24,83,000/- made by the Assessing Officer on account of interest relating to relocation of industries. The Ld. Commissioner of Income Tax (Appeals) deleted this addition based on the precedent set by the Hon'ble Apex Court and other higher authorities in the appellant's own case. The Ld. Commissioner directed the assessing officer to delete the addition, stating that the matter is covered by previous orders. The ITAT upheld the order of the Ld. Commissioner, as the issue was found to be covered in favor of the assessee.

Deletion of addition relating to scheme of Delhi Government for low cost housing and maintenance charges:
Another issue raised was the deletion of addition of &8377; 1,23,84,000/- and &8377; 60 lacs relating to a scheme of the Delhi Government for low-cost housing and maintenance charges. The Ld. Commissioner of Income Tax (Appeals) also deleted this addition based on previous ITAT decisions in the appellant's own case for earlier years. The ITAT found that the issue was covered in favor of the assessee by the ITAT decisions, and hence upheld the order of the Ld. Commissioner.

Deletion of addition made on account of capital grant:
The Assessing Officer made an addition of &8377; 4,10,00,000/- on account of a capital grant received by the Corporation from the Government of Delhi for the promotion of exports. However, the Ld. Commissioner of Income Tax (Appeals) examined the relevant documents and found that the amount received was a capital grant meant for specific purposes and not for incurring administrative expenditure. The Ld. Commissioner deleted the addition, stating that the amount was utilized for the purpose for which it was sanctioned. The ITAT upheld this decision, as the amount was deemed to be a capital grant and not taxable income.

Taxability of interest on refund of income tax in respect of Relocation of Industries and CETP:
The issue revolved around the taxability of interest amounting to &8377; 2,57,55,508/- received on the refund of income tax in relation to the Relocation of Industries and CETP scheme. The Assessing Officer considered this interest income as chargeable to tax. The Ld. Commissioner of Income Tax (Appeals) upheld the taxability of this interest, stating that it was not directly earned from the funds of the schemes but was interest on income tax refund, which is taxable. However, the ITAT, upon hearing both parties, found merit in the assessee's argument that the interest and refund belonged to the Government of Delhi and should not be taxable in the hands of the assessee. The ITAT directed the Assessing Officer to verify whether the entire amount had been paid to the Delhi Government and allowed the assessee's claim accordingly.