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TMI Blog2019 (3) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... D THAT:- Tribunal noted that the assessee is not a Banking Company as defined under the Banking Regulations Act, 1949. It is also not a company registered under the Companies Act 1956. In fact, the assessee was a public finance institution constituted under the Act. The Tribunal also noted that the assessee had substantial own funds which were deployed in bonds and securities which yielded receipts exempt under Section 10(23G) of the Act. In our opinion, the Tribunal, therefore, correctly applied the decision of this Court in the case of Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Revenue had not been able to establish any direct co-relation between the assessee's local borrowings and its investments in infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the account whichever is earlier. In this context, the Tribunal correctly observed that though the assessee was not required to or even eligible to file return, it had maintained accounts and the interest income was embedded in the profit / loss. This was during the period which such income was exempt from tax. - decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... 889) which ruled that such interest become taxable in the year of receipt is also directly applicable on the facts of the case?" 3. The assessee is a Public Financial Institution within the meaning of Section 4A of the Companies Act, 1956 and was formed under the Export Import Bank of India Act, 1981. The questions relate to the return of income of the respondent assessee for the assessment year 2000-01. 4. The first question arises out of the dispute between the Revenue and the Assessee regarding restriction of exemption under Section 10(23G) of the Income Tax Act,1961 ("the Act" for short). The Assessing Officer held that such exemption would be available on net income and not on the gross interest receipt. We notice th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal also noted that the assessee had substantial own funds which were deployed in bonds and securities which yielded receipts exempt under Section 10(23G) of the Act. In our opinion, the Tribunal, therefore, correctly applied the decision of this Court in the case of Reliance Utilities & Power Ltd (supra). In the context of expenditure under Section 36(1)(iii) of the Act, the Court after referring to and relying upon the decision of the Supreme Court in the case of S.A. Builders Ltd Vs. CIT [2007] 288 ITR 1 (SC) had held that when the assessee had made investments in sister concerns out of interest free funds and claimed expenditure of interest on borrowed capital used for business, the same was allowable. We notice that the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the impugned judgment rejected such a contention inter alia observing that the interest income during the earlier period when it accrued, was exempt and the assessee was not even required to file return, however, the assessee had maintained accounts clearly establishing the accrual of income. The Tribunal further noted that Section 43D of the Act would not apply to the assessee. 11. We are broadly in agreement with the view of the Tribunal. Learned counsel for the assessee was correct in pointing out that the income in question would be taxable on the basis of accrual. When such income accrued, it was not taxable. The Revenue now cannot bring the income to tax in the current year simply because such exemption was withdrawn relying upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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