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TMI Blog2013 (12) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 31-7-2012 - Hon'ble Sunil Ambwani And Hon'ble Aditya Nath Mittal,JJ. For the Petitioner : S. C., A. Kumar, A. N. Mahajan, B. Agarwal, D. Awasthi, G. Krishna,R. K. Upadhyay, S. Chopra For the Respondent : R. S. Agarwal ORDER We have heard Sri Shambhu Chopra for the revenue. Sri R.S. Agarwal appears for the respondent assessee. This Income Tax Reference raises the following question of law, to be decided by the Court:- "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the interest income earned on FDR is not taxable? The facts giving rise to this reference are stated as follows:- "The assessee company is a subsidiary of M/s. U.P. State Handloom Corporation Ltd., Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in its P L A/c. Being aggrieved by the said order, the assessee preferred an appeal before the CIT (A) who vide his order dated 25.03.1988 allowed the appeal filed by the assessee. The Department did not accept the order by the CIT (A) and a IInd appeal had been filed before the ITAT. The ITAT dismissed the appeal filed by the Department." The Assessing Authority found that unutilized interest was received, on the amount of grant received from the State Government, and kept in FDRs by the assessee, which is a Government Corporation, fully and controlled by the State. The entire amount of interest, was credited into the account of grant in aid. On being asked, the assessee had informed the Assessing Officer that interest was tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain conditions the amounts are kept in Bank, which results in addition of interest to the capital account of grant-in-aid. The letter clarifies that such interest did not form part of profit and loss account of the Corporation, but it shall be part of the grant-in-aid given by the State Govt to the Corporation. The Secretaries were directed to oversee and that these directions were complied with. 4. It has been stated that the company is fully owned by the Govt. of U.P., most of the officers are senior officers of the State Govt., regular book of accounts have been maintained which have been audited by Govt. auditors. The un-utilised grants were kept in Bank in the shape of FDRs. The interest accrued on this FDRs cannot be taken to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax, Lucknow decided on 3.12.2004, in which after discussing the law upon the point, this Court held that since no material has been placed on record to show that there was any stipulation that the interest earned on such grant/aid, if kept in fixed deposit in a commercial Bank, would not accrue to the appellant but to the State Government, the Tribunal was justified in holding that the interest was taxable at the hands of the appellant. Sri R.S. Agarwal appearing for the assessee informs that U.P. Bhumi Sudhar Nigam Lucknow has filed a Special Leave to Appeal (Civil) No. 16797 of 2005 in which the Supreme Court while granting liberty to the appellant, for moving an application for clarification before the High Court if there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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