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2013 (6) TMI 159 - AT - Income TaxAddition of interest in the assesee’s income - Whether interest received in respect of Grant in Aid can be treated as income of the assessee or not? - As per appellant he was custodian of money of Central Government and GHB/SGCC. It had no entitlement either to contribution, grant or to interest earned on the subjected money placed in Bank FD. The appellant contended before the A.O. that this interest earned on the grant and contribution not earned by it as grant and contribution is alongwith interest was either belonged to Central Government or GHB. There was a rider on this grant/contribution. He further placed reliance on Hon'ble Gujarat High Court decision in case of Gujarat Municipal Finance Board v. DCIT [1996 (5) TMI 71 - Gujarat High Court], wherein the Hon'ble Gujarat High Court has categorically held that interest received in respect of Grant in Aid cannot be treated as income of the assessee in view of the specific directive of the Government that interest earned will be treated as part of Grant. Held that:- The appellant was a custodian and Government of India had prohibited grant as well as interest from any use, except the purposes given in the approval letter. In case of project is not materialized the same has not be repaid to the respective agencies with interest. The case laws cited by the appellant i.e. Gujarat Municipal Finance Board v. DCIT (supra), are squarely applicable. It is true that the appellant had been granted refunds on the basis of TDS Certificate, even though, income earned by way of the interest earned on FDs had not been disclosed as income but the appellant has to refund the grant/contribution with interest to the Government of India and GHB. Thus, we have considered view that in both the years, the CIT(A) was not justified in confirming the addition. Accordingly, appeals in both years are allowed.
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