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Facts
The Revenue challenged the CIT(A)'s deletion of an addition of Rs. 159,28,36,080/-, which represented interest income generated on funds received from the Government of India (GoI) that the assessee did not declare. The assessee argued that this issue was covered by previous tribunal decisions in its own case, asserting that the interest income belonged to GoI and had already been deposited into the Consolidated Fund of India.
Held
The Tribunal, following a consistent view and precedent from the assessee's own prior cases, remitted the matter back to the Assessing Officer (AO). The AO is directed to verify the assessee's claim that the entire interest income was indeed deposited into the Government Account and then to decide the issue based on the binding precedent.
Key Issues
Whether interest income generated on funds received from the Government of India (GOI) and subsequently deposited back into the Consolidated Fund of India is taxable in the hands of the assessee.
Sections Cited
Section 194A of the Income Tax Act
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Income Tax Appellate Tribunal, DELHI BENCH “E” : NEW DELHI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals), dated 01.09.2023, pertaining to the assessment year 2020-21. The Revenue has raised following grounds of appeal:
“1. Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 159,28,36,080/- made on account of interest income generated on the funds received from GOI ignoring the fact that the assessee has not included the same in its ITR as income from interest as per provision of section 194A of the Income Tax Act?
Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 159,28,36,080/- made on account of interest income generated on the funds received from GOI ignoring the fact that tax is attracted at the point when the income is earned and taxability of income is not depended upon its destination or the manner of its utilization.” 2. At the outset learned counsel for the assessee contended that the issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case for A.Y. 2016-17 to 2018-19 in 50 & 132/Del/23 dated 06.11.2023.
The only effective ground raised by the Revenue is against the deletion of addition of Rs. 159,28,36,080/- made by the AO.
Learned DR supported the assessment order and submitted that the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals Vs. CIT 141 CTR SC 387 has categorically ruled that the interest earned by the assessee would be subjected to income tax under the head income from other sources and it is not the hand which ultimately receives such income and therefore the AO was justified in making the addition.
We have heard rival submissions and perused the material on record. We find that under the identical facts the Coordinate Bench of the Tribunal in assessee’s own case for A.Y. 2016-17 to 2018-19 rendered in 50 & 132/Del/23, in paras 14 & 15 of its order dated 06.11.2023 has observed as under:
“14. Therefore, considering the facts of case and respectfully following the judicial pronouncements relied upon by the appellant company as well as the judgement of Hon'ble Jurisdictional High Court in the case of Delhi State Industrial Development [supra] and the decision of ITAT in the case of Council of Handicrafts Development Corporation (Supra), the Id. CIT(A) held that the interest income generated on funds owned by GoI is not an income in the hands of the appellant company but it is the income of GoI and accordingly it is not required to be taxed in the hands of the Appellant Company. Therefore, the Id. CIT(A) held that the action of the AO treating the interest income in the hands of the appellant is not sustainable on the facts of the case as well as the law.
Before us, it has been submitted the "Entire interest earned" has already been deposited in to the consolidated fund of India by way of challans. Since the entire amounts received as interest stands deposited in the consolidated fund of India, we hold that no addition is called for in the hands of the assessee. For the limited purpose of reconciliation of the interest earned and deposited in the CFI, we direct the assessee to furnish the entire details of receipt of interest income earned, TDS deducted and the total amounts deposited in CFI before the AO in a consolidated statement, which the AO shall verify and accord the benefit.” 5.1 We, therefore, taking a consistent view remit this matter to the file of the AO to verify the correctness of the claim of the assessee that entire interest income was deposited in the Government Account and decide the issue in the light of the aforementioned binding precedent. Grounds raised by the Revenue are allowed for statistical purposes.
Appeal of the Revenue is allowed for statistical purposes.
Order pronounced in open court on 8th February, 2024.