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TMI Blog2015 (7) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... dhinagar, dated 02.09.2013. The Appellant has raised one issue in respect of an addition pertaining to interest income of ₹ 20,42,86,950/-. However in respect of this single issue, the assessee has raised following grounds: 1. The order passed u/s.250 on 2-9-2013 for A.Y.2010-11 by C1T(A)-GNR Ahmedabad upholding the addition in respect of interest income of ₹ 20,42,86.950/- made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. C1T(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned addition. 2.1. The Ld. CIT(A) has grievously erred in law and on facts in confirming that the interest income of ₹ 20,42,86,950 belonged to the appellant-Corpn. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld that the interest income of ₹ 20,42,86,950/- belonged to the appellant-Corpn. 3.1 The Ld.CIT(A) has erred in upholding that the interest income of Rs.20,42,86,950 was chajgeable in the hands of the appellant-Corpn. 2. Facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a systematic investment in FDRs. When the FDR were kept it were kept for a long period of two years which means that at the time of keeping FDR it was known that it was a long term surplus funds available with the company. 2) Schedule 2 of printed balance sheet printed on page no. 18 shows status of different grants. There is no addition in the Grant account on account of interest this means that interest is not a part of grant as it is not included in grant as closing balance of the grant. The relevant Schedule is reproduced on subsequent page. 3) All the deposits are kept in the name of assessee and all credits of interest is received by the assessee. 4) All expenses shown under income Expenditure account are paid from respective grant account and are not adjusted against income. Hence question of allowing expenses against income does not arise. 3.1 The assessee has placed reliance upon the decision of Hon'ble Karnataka High Court in the case of CIT and Another Vs. Karnataka Urban Infrastructure, 284 ITR 582 (Karnataka). 4. The AO has further noted as follows: The assessee received grant which is parked with GSFS, GSFS pays interst and claims interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act that if an amount is debited at one side, it has to be credited on the other side in the same manner. In the case of GSFS, it is claiming the interest as a deduction which is required to be taxed in the hands of Gujarat State Police Housing Corporation Ltd. (iii) Though Gujarat State Police Housing Corporation Ltd got various directives through various letters of Addl. Secretaries and secretaries are on record on which basis the appellant has acted upon for placing the money as well as utilisation and treatment of surplus money, which are mere directives of the Government of Gujarat but not on the basis of any legislation which is overriding the provisions of Section 56 of IT Act, 1961. The fact is that there is an income of ₹ 20,42,86,950/- as interest earned and brought in the P L account of the appellant but ultimately transferred to the WIP account on the directions of Government of Gujarat which is not permissible under any provisions of the Income-tax Act. 7. From the side of the assessee, learned AR, Mr. S.N. Devitia has given a synopsis of the case as under: The brief facts of the applicant's case are that the applicant is a a wholly- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f police housing, the funds were placed at its disposal and utilized for construction maintenance and repairs of the residential and non- Gujarat State Police Housing Corp. Ltd. Vs. ACIT, GNR Circle, Gandhinagar For A.Y. 2010-11 residential buildings of Police and Jail department. Thus, it was established for non-profit motive and the interest income on ICD with GSFS though in the name of corporation was to be applied only for the said purpose. The whole of the funds belonged to the State Exchequer and the appellant was only to channelize them for the objects of Police Housing. The money so received till they were utilized, were to be parked with GSFS as per the order dated 31.12.1999. Therefore, the interest income earned from ICD with GSFS did not belong to the appellant corporation but to the Government. It was holding the funds received from Government including the interest income earned from parking with GSFS in Trust and there was an overriding obligation to hold and utilize for Police Housing on behalf of the State Government. The interest income did not reach to the appellant as its own income so as to be chargeable in its hands, It may be stated that insofar as the buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. (Refer to CIT Vs. Kamal Behari Lal Singha) [82 ITR 460] (SC). (iv) Fourthly, the case law relied upon by the appellant before the CIT(A) has been distinguished on incorrect reasoning. Say for example, the decision in the case of Karnataka Urban Infrastructure Development Fin. Corpn. (284 ITR 582) has been distinguished stating that there was no such Mega City Scheme launched by the State Govt. Similarly, the decision in the case of Gujarat Power Corpn. (354 ITR 201) has been distinguished by stating that there was specific stipulation for utilization of money, however, CIT(A) has escaped the fact the funds were placed at the disposal of appellant- corporation for specific purpose and they were so utilized. Hence, the impugned addition should be deleted. 8. We have heard both the sides. We have been informed that for A.Y. 1996-97 an appeal was filed by the Revenue Department before Hon'ble ITAT. Hon'ble ITAT 'B' Bench Ahmedabad in ITA No.2219/Ahd/2008 vide an order dated 30th September, 2008 has taken a view in respect of income from house property that there was no justification for the impugned addition on the notional rental value of the flats constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, while releasing the grant in favour of the assessee, when the interest earned on the Central grant already released was required to be forming part of the Central grant, the learned Tribunal has rightly held that the interest earned on ₹ 16.70 Crores and contribution/grant received from GHB cannot be said to be the income of the assessee. As such, the issue involved in the present Tax Appeal is directly covered by the decisions of this Court in case of Gujarat Municipal Finance Board v. Deputy Commissioner of Income-Tax [Assessment] {Supra} and in case of Gujarat Power Corporation Limited v. Income Tax Officer [Supra]. 6. Shri Manav Mehta, learned advocate appearing for the appellant-Revenue has as such tried to distinguish the facts by submitting that in the present case, the assessee itself claimed refund of the TDS deducted by treating the amount of interest as income, and therefore, the Tribunal has committed an error in not treating the amount of interest earned on the grant as income of the assessee. The aforesaid contention has no substance. What is important is whether the interest earned on the Central Government grant is to be treated as the income earned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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