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2020 (1) TMI 84 - AT - Income TaxAddition of interest on Fixed Deposits made by the assessee out of capital subsidy received from the Government of India under Rajiv Gandhi Gramin Vidyutikaran Yojana (in short RGGVY) - HELD THAT:- The interest so earned thus was received by REC as well as all the Implementing Agencies including the assessee-company for and on behalf of the Government of India, Ministry of Power and since the same was to be used for cost of the project by way of adjustment in the last instalment of capital subsidy, the REC as well as all the Implementing Agencies including the assessee-company never had any title or right in the interest so earned as they were under an obligation to use the amount of interest for cost of the Project by way of adjustment in the last instalment of capital subsidy receivable from the Government of India, Ministry of Power. It is thus not a case where the interest income was earned by the assessee-company and the same was applied to discharge any obligation after such income reached the assessee. The amount of interest in question, going by the nature of obligation as stipulated by the Government of India, Ministry of Power in the letter dated 25.09.2008 did not form part of the income of the assessee as the same was liable to be used for the cost of Project by way of adjustment in the last instalment of capital subsidy and the same thus was in the nature of capital receipt being capital subsidy received from the Government of India, Ministry of Power. The interest so earned thus was received by REC as well as all the Implementing Agencies including the assessee-company for and on behalf of the Government of India, Ministry of Power and since the same was to be used for cost of the project by way of adjustment in the last instalment of capital subsidy, the REC as well as all the Implementing Agencies including the assessee-company never had any title or right in the interest so earned as they were under an obligation to use the amount of interest for cost of the Project by way of adjustment in the last instalment of capital subsidy receivable from the Government of India, Ministry of Power. It is thus not a case where the interest income was earned by the assessee-company and the same was applied to discharge any obligation after such income reached the assessee. On the other hand, the amount of interest in question, going by the nature of obligation as stipulated by the Government of India, Ministry of Power in the letter dated 25.09.2008 did not form part of the income of the assessee as the same was liable to be used for the cost of Project by way of adjustment in the last instalment of capital subsidy and the same thus was in the nature of capital receipt being capital subsidy received from the Government of India, Ministry of Power. Keeping in view all the facts of the case in the light of judicial pronouncement as discussed above, we are of the view that the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest in question by treating the same as income of the assessee is not sustainable. We accordingly delete the said addition and allow this appeal of the assessee.
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