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Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
Before: Shri S.S.Godara & Dr. A.L. Saini
आदेश /O R D E R PER BENCH:- This Revenue’s appeal for assessment year2011-12 arises against the Commissioner of Income Tax (Appeals)-Shillong’s order dated 01.03.2016 passed in case No.AGT-06/2014-15, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’ Heard both the parties. Case file perused.
The Revenue’s sole substantive ground canvassed in the instant lis seeks to revive the taxpayer’s interest income addition on grant received from the central government resulting in interest derived after investment in fixed deposits in its own hand. The Assessing Officer was of the view that since
ITA No.65/Gau/2016 A.Y. 2011-12 ACIT,Cir-Agartala vs. Tripura Industrial Dev. Corp. Ltd. Page 2 assessee follows mercantile system of accounting had made the impugned fixed deposits in its own name the corresponding interest income deserves to be assessed in its hands. The CIT(A) has reversed the said addition in his lower appellate detailed discussion as under:- “5.Ground No. 4 In this ground, appellant is challenging the addition of Rs.2,97,50,160/- as "Income from undisclosed interest in Fixed Deposit". 5.1 Facts leading to the addition may briefly be summarized. Appellant, during relevant period, was a totally owned Govt. company. Besides.jts own business activities it was acting as implementation agency of certain projects of the Central Government. In its capacity as an implementing agency, the company received funds from the government which had to be exclusively used till the last pie to execute the specific project. Funds received from the Governments of Tripura or that of India for execution of projects which were not for immediate utilization were parked in Fixed Deposits, Bonds etc. Interest accrued from those deposits was not shown as income by the company. During the year, out of total interest-received amounting to Rs.3,87,59,664/-only a sum of Rs. 90,08,904/- was shown as income. Fear of the company was that interest earned from deposits made out of government funds were credited to the respective funds as the corporation did not possess any ownership of such surplus funds. 5.2. AO was not impressed by the explanation given by the appellant. Reasons given by him for not allowing the claim of appellant are summarized below: (i) In the notes on account, it was mentioned that interest in term deposits are recognized as income on accrual. Therefore accrued- interest should have been included in the income. (ii) There was no arrangement with Government which mandated the assessee to credit interest accrued on deposits to respective project fund. (iii) Surplus fund was available with assessee and the same was invested which yielded interest and the investments were made in the name of assessee. Thus there was no reason why the same should not be taxed in the hand of assessee. (iv) AO relied on the decision of the Hon'ble Tribunal in case of National Thermal Power Vs CIT [1988] 24 ITFI wherein it was held that-when income arose under mercantile system of accounting, that accrued income cannot disappear by any consideration of subsequent utilization of such income. 5.3. The matter has been carefully considered. Money sanctioned to appellant for execution of projects was not appellant's money. It had to be utilized to the
ITA No.65/Gau/2016 A.Y. 2011-12 ACIT,Cir-Agartala vs. Tripura Industrial Dev. Corp. Ltd. Page 3 last pie for execution of the projects. Mere fact that FDs were invested in appellant's name is of no moment as the amount of FD and the interest there on were not to be used for appellant's business. Appellant furnished detailed written submission. In a similar kind of situation, the Hon'ble High Court of Karnataka in the case of CIT vs Urban Infrastructural Development & Finance Corporation [2006] 155 Taxmann 228 ( Kar) had decided this kind of issue in favour of assessee. Relevant portion of the decision is reproduced below. “4. The material on record shows that the very purpose of constitution of the assessee was to act as a nodal agency for implementation of Mega-city scheme worked out by the Planning Commission. Both the Central and the State Governments are expected to provide requisite finances for implementation of the said project. The funds from the Central and State Governments will flow directly to the specialised institutions/nodal agencies as grant and the nodal agency will constitute a revolving fund with the help of Central and state shares out' of which finance could be provided to various agencies such as water, sewerage boards; municipal' corporations, etc. The objective is to create and maintain a fund for the .development of infrastructural assets on a continuing basis and, therefore, the assessee is a nodal agency formed/created by the Government of Karnataka as per the guidelines; there is no profit motive as the entire fund entrusted arid the interest accrued therefrom on deposits in bank thought in the name of the assessee has to be applied only for the purpose of welfare of the National States as provided in the guidelines; the whole of the fund. belongs to the State Exchequer and the assessee has to channelise them to the objects of centrally sponsored scheme of infrastructural development for Mega-city of Bangalore. Funds of wing of the Government' IS distributed to the other wing of the Government for public purpose as per the guidelines issued. The monies so received, till it is utilised, is parked in a bank. The finding recorded by the Tribunal clearly shows that the entire money in question is received for implementation of the scheme which is for a public purpose and the said scheme is implemented as per the guidelines of the Central Government fund, therefore, the assessee is only acting as a nodal agency of Central Government jar implementation of these projects, It is not the case of the revenue that the assessee was currying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project, could not be fully implemented, is deposited In a bank to earn interest. That interest earned is also again utilised for the implementation of the Mega-city scheme which is also permitted under the scheme. Therefore, in computing the total income of the assessee for any previous year the interest accrued on bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money given by the Government of India for the purpose of implementation of Mega-city scheme. 5. Therefore, we do not find any error in the conclusion reached by the Tribunal that there was no income earned by way of interest by the
ITA No.65/Gau/2016 A.Y. 2011-12 ACIT,Cir-Agartala vs. Tripura Industrial Dev. Corp. Ltd. Page 4 assessee and setting aside the order of Assessing Officer which is affirmed by the first appellate authority. The finding given by the Tribunal is purely a question of fact. We do not find any substantial question of law involved in this appeal and, therefore, this appeal is liable to be dismissed at the stage of admission itself." The facts contained in the case noted above and that of appellant are similar. Respectfully following the judgement of the Hon'ble Court, interest that had accrued on the fixed deposit made out of funds received for implementation of projects sanctioned by the Governments are not to be assessed as income of appellant. Ground No. 4 is decided in favour of appellant.” 3. Mr. Bhardwaj vehemently contends during the course of hearing that although CIT(A) has gone by hon'ble Karnataka high court’s decision in CIT vs. Urban Infrastructural Development & Finance Corporation (2006) 155 Taxmann 228 (Kar) holding that such interest income arising on grant-in-aid funds parked in fixed deposits is not exigible as income the same has to be considered in the light of corresponding grant-in-aid scheme under which the assessee has received the capital amount. Mr. Biswas has placed before the assessee’s detailed paper book running into 39 pages. His case is that the CIT(A) has examined all the said grant-in-aid scheme documents whilst coming to the impugned conclusion that this interest income is not liable to be assessed in assessee’s hands. The fact remains that neither the Assessing Officer nor the CIT(A) have examined the corresponding scheme clauses regarding assessee’s grant-in-aid which stood parked in fixed deposit in issue. Both parties are fair enough at this stage to unanimously agree that we ought to restore the instant lis back to the Assessing Officer for scheme-wise analysis of the interest income in issue. We appreciate this unanimity between the parties direct the Assessing Officer to adjudicate as to whether the impugned interest amounts are chargeable assessee’s hand or not as per the scheme-wise details. The assessee is directed to file all the necessary details before the Assessing Officer within three effective opportunities of hearing.
ITA No.65/Gau/2016 A.Y. 2011-12 ACIT,Cir-Agartala vs. Tripura Industrial Dev. Corp. Ltd. Page 5 4. This Revenue’s appeal is allowed for statistical purposes in above terms. Order pronounced in accordance with Rule 34(3) of the ITAT Rules by putting on Notice Board 02/07/2019
Sd/- Sd/- (लेखा सद#य) (%या&यक सद#य) ( A.L.Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Guwahati, *Dkp 'दनांकः- 02/08/2019 गूवाहाठ� । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-ACIT, Circle-Agartala Paradise Chowmuhani, City Centre, 5th Fl. Agartala, West Tripura-799001 2. ��यथ�/Respondent-Tripura Industrial Dev. Corp. Ltd., Nehru Complex, Kunjaban, Agartala-799006 3. संबं2धत आयकर आयु3त गृवाहाठ8 / Concerned CIT Guwahati 4. आयकर आयु3त- अपील / CIT (A) Guwahati 5. ;वभागीय �&त&न2ध, आयकर अपील�य अ2धकरण, गूवाहाठ8 खंङपीठ / DR, ITAT, Guwahati 6. गाडA फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary (on tour) आयकर अपील�य अ2धकरण, गूवाहाठ� ।