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2018 (2) TMI 664 - AT - Income TaxAccrual of interest on FDRs - interest credited on Infrastructure Development Fund Account maintained by the assessee and considering by it as capital receipt in the books of account as being not offered for taxation - Held that - As relying on assessee s own case 2015 (6) TMI 1151 - ITAT AGRA the interest in question cannot be treated as income of the assessee, therefore, the grievance of the assessee is accepted and as such allowed. The grounds of the Department s appeal is found without merits and substance and hence, dismissed.
Issues Involved:
1. Deletion of addition of ?40,38,534/- made by AO for AY 2011-12. 2. Confirmation of addition of ?26,71,081/- made by AO for AY 2010-11. Issue-Wise Detailed Analysis: 1. Deletion of Addition of ?40,38,534/- for AY 2011-12: The primary issue pertains to the taxability of interest accrued on Fixed Deposit Receipts (FDRs) which are part of the Infrastructure Development Fund. The assessee, a statutory authority established under the Uttar Pradesh Planning and Development Act, 1973, argued that such interest should not be taxed as it is not income accruing to the assessee but is part of the corpus used as per government directives for infrastructure development. The CIT(A) deleted the addition made by the AO, relying on the decision of the ITAT Agra Bench in the assessee’s own case for AY 2006-07. The ITAT had observed that the interest income does not accrue to the assessee and is at the disposal of the government for infrastructure development. The AO’s remand report acknowledged that the department had not appealed against the ITAT’s decision due to the monetary limit, and the facts of the case for AY 2011-12 were similar to AY 2006-07. The ITAT upheld the CIT(A)’s decision, emphasizing judicial discipline and the binding nature of the ITAT’s prior ruling. The interest in question was not treated as income of the assessee, and the addition of ?40,38,534/- was deleted. 2. Confirmation of Addition of ?26,71,081/- for AY 2010-11: For AY 2010-11, the CIT(A) confirmed the AO’s addition of ?26,71,081/- being interest on Year Marked Funds (i.e., Development Fund & Infrastructure Development Fund). The CIT(A) found that ?10,97,500/- of the interest was earned on FDRs not marked as infrastructure fund and thus taxable as revenue receipt. The remaining ?15,73,581/- was also deemed taxable as the assessee had not maintained the Infrastructure Development Fund Account as per the government order dated 15.12.1998, and the funds were invested in FDRs for earning interest, not for infrastructure development. The CIT(A) distinguished the assessee’s case from other cases cited by the assessee’s counsel, noting that in those cases, the funds were kept in specific accounts for infrastructure development, unlike the present case where surplus funds were invested in FDRs. Combined Result: The ITAT, after considering the arguments and previous rulings, held that the interest in question for AY 2011-12 cannot be treated as income of the assessee, thereby allowing the assessee’s appeal and deleting the addition of ?40,38,534/-. For AY 2010-11, the ITAT found the CIT(A)’s reasoning valid and upheld the addition of ?26,71,081/-. Conclusion: The revenue’s appeal for AY 2011-12 was dismissed, and the assessee’s appeal for AY 2010-11 was allowed. The ITAT’s decision was pronounced in the open court on 25/01/2018.
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