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2016 (10) TMI 349 - AT - Income TaxInterest on deposit received from banks - CIT(A) confirming the assessment to income of the interest on deposit received from banks out of surplus funds from the defined agency activities on behalf of the Govt. of Kerala in setting up of Vizhinjam International Seaport at Vizhinjam in Thiruvananthapuram - Held that:- The assessee is only an extended arm/wing of the Government set up wholly and exclusively for undertaking certain sub-sovereign functions on behalf of the Government of Kerala for the public utility project involving providing support/assistance for setting up a deep sea international seaport and therefore, is not engaged in any business activities involving a profit motive. In the assessee’s case, Govt. orders as stated clearly stipulated the activities that have to be undertaken by the assessee and neither the grant nor the interest can be used for any purpose. The Ld. CIT(A) has hypothetically visualized that assessee is having own activities not undertaken on behalf of the Government unrelated to project which is only a illusory figment of imagination. This is so as the assessee’s only objective was to undertake smooth and efficient rendering of agency services entrusted by the Government and hence treating interest income as separate income or own income of the assessee not earned or received for implementation of the project is only a coloured and misdirected application of mind by the Ld. CIT(A) as there is no such own income or own activity All the receipts and income are on behalf of the GoK for implementation of the project. The following decisions of other High Courts in similar or identical situations and also of various Income Tax Appellate Tribunals passed relying on the above decision of Hon’ble Karnataka High Court in Karnataka Urban Infrastructure Development and Finance Corporation reported in (2009 (1) TMI 243 - KARNATAKA HIGH COURT )also fortify and strengthen the assessee’s case for exemption of income tax on interest income earned from investment of surplus funds. - Decided in favour of assessee.
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