2024 (6) TMI 1055 - AT - Income Tax

Accrual of income - Interest income received on the unutilised grants given by the Government of Karnataka - HELD THAT - We have gone through the above said findings and found that the same is based on the earlier order of this Tribunal in which this Tribunal had held that the interest earned from the unutilised grant-in-aid is also a part of the grant-in-aid and therefore the same is not an income under the provisions of the Act. The said orders are in respect of the assessee s own case for AYs 2014-15, 2015-16, 2017-18 and 2018-19. We also find no materials to take a different view in the present appeal and also the department has not furnished any orders of the Hon ble High Court or Supreme Court overruling the orders of the Coordinated Bench of this Tribunal. We, therefore, fully agreed with the view of the CIT(A) and confirm the order of the learned CIT(A) on the interest income issue. Nature of income - expenditure incurred towards sponsorship by treating - capital expenditure or revenue expenditure - HELD THAT - We find that the CIT(A) had given a finding that the sponsorship expenditure incurred by the assessee is in the nature of revenue expenditure since the same has been incurred in giving award, price, etc. pursuant to the objectives of the assessee and therefore there is a statutory obligation on the part of the assessee to promote solar energy for which the contribution was made and therefore the same would amounts to business expenses and eligible for deduction as revenue expenditure. In support of its finding the CIT(A) also relied on the judgement of the Hon'ble Supreme Court in the case of Lakshmi Ji Sugar Mills Co. Pvt. Ltd. 1971 (8) TMI 13 - SUPREME COURT and the judgement of Raj Spinning and Weaving Mills Ltd 2003 (11) TMI 6 - RAJASTHAN HIGH COURT . Decided in favour of assessee.

Summary

Issues Involved:
- Appeal challenging order by National Faceless Appeal Centre under Income Tax Act for AY 2020-21.
- Treatment of interest income on fixed deposits.
- Classification of expenditure for setting up Karnataka Visveswaraya Solar Award.

Analysis:

1. Interest Income on Fixed Deposits:
The appeal contested the treatment of interest income on fixed deposits received by the assessee. The Revenue argued that the interest should be considered income under the Act, citing a pending case before the Supreme Court. However, the CIT(A) ruled in favor of the assessee, following precedent decisions by the Tribunal. The Tribunal upheld the CIT(A)'s decision, stating that the interest earned from unutilized grants is part of the grant and not taxable income. The Tribunal found no reason to deviate from previous judgments, affirming the CIT(A)'s order on this issue.

2. Expenditure for Karnataka Visveswaraya Solar Award:
The second issue revolved around the classification of expenditure incurred for setting up the Karnataka Visveswaraya Solar Award. The AO treated the expenditure as capital, disallowing it, while the CIT(A) reversed this decision, considering it as revenue expenditure. The CIT(A) justified this by highlighting the business purpose behind the expenditure and statutory obligations of the assessee to promote solar energy. The Tribunal supported the CIT(A)'s reasoning, citing relevant case laws and previous decisions. It emphasized that the expenditure was in line with the core activities of the assessee and eligible for deduction as revenue expenditure. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on this issue as well.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s orders on both issues related to the treatment of interest income on fixed deposits and the classification of expenditure for setting up the Karnataka Visveswaraya Solar Award. The Tribunal found the CIT(A)'s decisions to be in accordance with the provisions of the Income Tax Act and consistent with previous Tribunal rulings, ultimately ruling in favor of the assessee.