2015 (4) TMI 13 - HC - Income Tax

Taxability of the interest receipt in the hands of the assessee - ITAT not treating the interest as income of the assessee - Held that - The Hon'ble Tribunal on considering the letter of the Central Government while sanctioning the grant in favour of the assessee, more particularly the condition that, the interest earned on the central grant already released would form part of the central grant limit of ₹ 50 Crores and considering the decision(s) of the Hon'ble Gujarat High Court in the case of Gujarat Municipal Finance Board vs. Dy.CIT reported at (1996 (5) TMI 71 - GUJARAT High Court) as well as in the case of Gujarat Power Corporation Ltd. vs. ITO reported at (2012 (11) TMI 181 - Gujarat High Court), the Tribunal has correctly allowed the appeal by deleting the addition made by the AO. The Hon'ble Jurisdictional High Court affirmed the view taken by the Tribunal who has also has gone by its earlier decision in respect of the very assessee for the earlier assessment year 2007-2008 and assessment year 2010-2011 - Decided in favour of assessee.

Summary

Issues:
1. Taxability of interest receipt of Rs. 22,63,60,745 in the hands of the assessee.

Analysis:
The High Court of Gujarat considered an appeal by the revenue regarding the taxability of interest income of Rs. 22,63,60,745 in the hands of the assessee. The primary issue was whether the ITAT was justified in dismissing the appeal based on previous decisions. The AO had added the interest income to the assessee's total income, a decision upheld by the Commissioner (Appeals). However, the Tribunal, referring to previous cases, decided in favor of the assessee. The Tribunal highlighted that the assessee, a government-owned company acting as a Nodal Agency for infrastructure projects, credited the interest to the respective grant accounts. The High Court referred to a similar case where the Tribunal had deleted the addition of interest income, a decision affirmed by the High Court. The Court noted that the facts were identical, and the interest accrued was not treated as income. Consequently, the High Court upheld the Tribunal's decision to delete the addition of Rs. 22,63,60,745.

The Court also considered previous decisions involving the same assessee for earlier assessment years. Referring to judgments in Tax Appeal No.1181 of 2014 and Tax Appeal No.1248 of 2014, the Court found that the issue was already covered by its decision in the case of Gujarat Power Corporation Ltd. Vs. Income Tax Officer. As the substantial questions of law were not deemed to arise, the Court concluded that the order of the Tribunal did not warrant interference. Therefore, the appeal was dismissed as meritless.

In conclusion, the High Court of Gujarat upheld the Tribunal's decision to delete the addition of interest income in the hands of the assessee, citing previous judgments and established legal principles. The Court found that the issue had already been addressed in earlier decisions involving the same assessee, leading to the dismissal of the revenue's appeal.