2017 (8) TMI 1419 - HC - Income Tax

Taxability of interest income as dependent upon subsequent use of the interest income - Held that - The undisputed fact, as noted by the ITAT, is that the said interest income was earned by the Assessee on the deposit of advances received from REC Ltd. for Rajiv Gandhi Gramin Vidyutikaran Yojana ( RGGVY ). A Memorandum of Understanding ( MOU ) was signed on 16th August 2004 between REC and the Assessee whereby inter alia it was agreed that interest earned on the deposits would be used as part of the cost of the projects and no other purpose. In the circumstances, the view taken by the CIT (A) and affirmed by the ITAT, does not suffer from legal infirmity so as to give rise to any substantial question of law.

Summary

The Delhi High Court dismissed the appeal by the Revenue against the ITAT order regarding the taxability of interest income of Rs. 19,87,59,407 earned by the Assessee. The interest income was earned on deposits from REC Ltd. for RGGVY, with a MOU stating it should be used for project costs only. The court found no legal infirmity in the decision of the CIT (A) and ITAT, affirming that the interest income's taxability depends on its subsequent use.