PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S RAJASTHAN URBAN DRINKING WATER SEWERAGE AND INFRASTRUCTURE CORP. LTD.

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 95/2019 Principal Commissioner Of Income Tax, Jaipur-II, Jaipur ----Appellant Versus M/s Rajasthan Urban Drinking Water Sewerage And Infrastructure Corp. Ltd., Old Work Women Hostel Building, Lal Kothi, Jaipur ----Respondent For Appellant(s) : Mr. Nikhil Simlote with Mr. Salim Khan for Mr. R.B. Mathur For Respondent(s) : HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE KUMARI JUSTICE REKHA BORANA Order 08/11/2021 This appeal is filed to challenge the order passed by Income Tax Appellate Tribunal raising following questions for our consideration:- “(i) Whether on the facts and circumstances of the case and in law the ITAT was justified in deleting the addition of Rs.4,77,01957/- made on account of undisclosed interest earned on FDR and not appreciating the fact that as the assessee has claimed credit of the TDS deducted on the said interest as per section 199 of the I.T. Act, such income on account of interest assessable in the hands of the assessee.” The issue pertains to the assessment year 2014-15. The respondent-assessee-M/s Rajasthan Urban Drinking Water, Sewerage and Infrastructure Corporation Ltd. had filed the return of income for the said assessment year 2014-15 declaring total income of Rs.87.61 Lacs (rounded off). The Assessing Officer

(2 of 3) [ITA-95/2019] passed the order of assessment on 07.11.2016 assessing total income at Rs.5.65 Crores (rounded off). During the course of assessment, the Assessing Officer noticed that though the assessee had claimed interest expenditure, had not offered interest on FD’s to tax. The Assessing Officer therefore made an addition of Rs. 4.77 Crore (rounded off) as undisclosed interest earned on FDRs. The Tribunal by the impugned judgment while reversing the addition observed that the interest earned by the assessee on the Fixed Deposits out of the amount received from the Government for disbursement of the various schemes and projects for which the assessee has nodal agency for implementing the schemes and projects of the Government, the interest earned on such amount is therefore not an income of the assessee. The Tribunal noted that a similar issue was decided by the Co-ordinate Bench of the Tribunal and its decision was upheld by the Karnataka High Court. We notice that under similar circumstances and Gujarat High Court in the case of Gujrat Power Corpn. Ltd. Vs. ITO had made following observations: “To our mind, the assessee was justified in contending and claiming that such interest cannot be treated as income in the hands of the assessee and that the same, therefore, cannot be taxed accordingly. When the Government of Gujarat placed such funds at the disposal of the corporation, the specific stipulation was that the same should be utilized for the purpose of allotment of shares. If for whatever reason the assessee could not immediately allot the shares, the amount which remained with the corporation, must be held to have been held by the corporation in trust for and on behalf of the State of Gujarat. If during such period when the assessee was holding such amount in trust, any interest accrued by investment of such amount in short-term deposits, such interest also must belong to the Government and till it remained in the hand of the assessee, must be treated to have been held in trust.”

(3 of 3) [ITA-95/2019] In that view of the matter, no question of law arises and the Income Tax Appeal is dismissed. (REKHA BORANA),J (AKIL KURESHI),CJ AKG/BRIJ MOHAN GANDHI /31