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2012 (11) TMI 181 - GUJARAT HIGH COURTDiversion of income by overriding title - Whether interest income received by the assessee from investment of the share capital money received from the Government which was deposited in fixed deposit, can be treated to be the income of the assessee or that of the Government – Held that:- Government of Gujarat, as a promoter of the assessee company, had paid a sum of Rs.6 crores as contribution towards the share capital. Such sum was invested by the assessee in short term deposits earning interest thereon. Subsequently, pursuant to the directive issued by the Government, the assessee paid such interest earned by it to the Government. It was in this background that the Tribunal held that this was a case of diversion of income by overriding title. The Government was free to impose conditions regarding the payment of interest earned, until it gave permission for the issue of share capital, which was done later. The Tribunal held that the mere fact that the amount was shown in the balance sheet of the assessee was also not relevant. The interest earned could not, therefore, be considered to be the income of the assessee. Mere fact that in the earlier year, the assessee had treated such income differently, or that in the year under consideration, initially had paid advance tax on such basis, would not be conclusive of the nature of the income. Income was of the Government of Gujarat and not of assessee, therefore, it cannot be taxed in the hands of the assessee - In the result, the appeal is allowed. The judgement of the Tribunal dated 16.12.1999 is set aside to that extent - in favour of the assessee and against the revenue.
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