2010 (7) TMI 1147 - HC - Income Tax

Summary

Issues involved: Assessment of interest income u/s Government orders, conversion of loan amount to equity, cancellation of interest income assessment by Tribunal.

In the judgment, the High Court of Kerala addressed the issue of assessing interest income u/s Government orders at the hands of the respondent-assessee, a Government of Kerala company. The company had given advances to two other companies under the control of the Kerala Government, and upon instructions from the Government, converted the loan amount to equity shares. The Tribunal had cancelled the assessment of interest income as there was no accrual or receipt of interest, considering the loans as advances made for investments in equity. The Court agreed with the Tribunal's finding, stating that as long as there was no evidence of interest accruing to the assessee, there was no basis for assessment. The Court dismissed all three appeals filed by the department, as the other questions raised were not considered by the Tribunal, and therefore did not arise from its orders.