TMI Blog2015 (11) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... UIDC case [2006 (2) TMI 114 - KARNATAKA High Court ] has held that the interest earned on these grants is not an income, which we do not find fault with. - Decided in favour of assessee. - I. T. A. No. 202 of 2014. - - - Dated:- 10-4-2015 - VINEET SARAN and MRS. S. SUJATHA, JJ. K. V. Aravind, Advocate, for the appellant. Smt. Jinita Chatterjee, Advocate, for S. Parthasarathi, Advocate, for the respondent. JUDGMENT The judgment of the court was delivered by 1. Mrs. S. Sujatha J.-The Revenue has challenged the order dated December 20, 2013, passed by the Income-tax Appellate Tribunal, B Bench, Bangalore. 2. The only question involved in this appeal is, Whether the interest earned on grants made by the State Government kept in fixed deposits pending utilisation should be treated as additional grant of the scheme or a revenue receipt exigible to tax under the head 'Income from other sources' ? 3. The facts leading to this appeal are that the assessee is a company fully owned by the Government of Karnataka engaged in trading in agricultural produce and is an approved channelising agent for Bangalore in respect of rose, onion and niger seeds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the learned counsel Sri K. V. Aravind, appearing for the Revenue as well as Ms. Jinita Chatterjee appearing for the respondent- assessee. 6. Though the matter is listed for admission, with the consent of the parties the matter is taken for final disposal. 7. The learned counsel, Sri K. V. Aravind, placed reliance on the judgment of the apex court in Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) and argued that the proceedings of the Government of Karnataka by which a sum of ₹ 10 crores was granted to the assessee did not contain any condition with respect to the utilisation of interest. The assessee being a company engaged in trading of agricultural produce is not entitled to the benefit of interest earned from the fixed deposits to get it capitalised and made an attempt to distinguish the judgment of CIT v. Karnataka Urban Infrastructure Development and Finance Corporation [2006] 284 ITR 582 (Karn). 8. Learned counsel appearing for the assessee Ms. Jinita Chatterjee, contended that the Government of Karnataka, while granting ₹ 10 crores for improvement of infrastructure to promote agricultural exports, has categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than for which it was sanctioned as per the Government order dated January 23, 2007. Thus, the emphasis made by the Revenue that the assessee-company being engaged in trading activities cannot be considered as a nodal agency of the State Government and the interest earned on the grants by the assessee-company has to be treated as income is not acceptable in view of the specific directions issued by the State Government regarding the utilisation of the amount granted and on the interest accrued thereon. 10. The Tribunal relied on the judgment of this court in the case of Karnataka Urban Infrastructure Development (KUIDC) case (supra) wherein it is held that (page 584 of 284 ITR) : The material on record shows that the very purpose of constitu tion of the assessee was to act as a nodal agency for implementation of the mega city scheme worked out by the Planning Commission. Both the Central and the State Governments are expected to provide requisite finances for implementation of the said project. The funds from the Central and State Governments will flow directly to the spe cialised institutions/nodal agencies as grant and the nodal agency will constitute a revolving fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Tribunal is purely a question of fact. We do not find any sub stantial question of law involved in this appeal and therefore this appeal is liable to be dismissed at the stage of admission itself. 11. In Tuticorin case (supra), the apex court has held that (page 182 of 227 ITR) : There is another aspect of this matter. The company, in this case, is at liberty to use the interest income as it likes. It is under no obli gation to utilise this interest income to reduce its liability to pay inter est to its creditors. It can reinvest the interest income in land or share, it can purchase securities, it can buy house property, it can also set up another line of business, it may even pay dividends out of this income to its shareholders. 12. In the case of Karnataka Power Corporation (supra), the apex court following the judgment of Bokaro Steel Ltd.'s case (supra) has held that interest receipts and hire charges from contractors are in the nature of capital receipts . 13. In the case of Bongaigaon Refinery and Petrochemicals Ltd. v. CIT [2001] 251 ITR 329 (SC) the apex court considering the decision in Tuticorin Alkali Chemicals Ltd.'s case (supra) and Bok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, 2007, by which the grant of ₹ 10 crores is made by the Government of Karnataka it is clear that in view of the National Horticultural Machine Programme implemented in Karnataka and major thrust given by the State Government for the development of horticultural sector, there is unlimited potentiality for export of horticultural produce but the main constraint is lack of post harvest infrastructures, viz., procurement centres, grading, washing, waxing, packing units, refrigerated transport, pre-cooling and cold storages, intermediate cold storages, processing units and export house. In order to harness the potentiality and to increase exports. Further, KAPPEC has proposed to create these infrastructure facilities in various parts of the State in a phased manner and efforts will also be made to rope in funds from the Government of India under the relevant scheme from different agencies . The object of the scheme is to facilitate the farmers and to promote export of horticultural produce. 17. Hence, the very purpose of granting ₹ 10 crores to the assessee was to act as a nodal agency for implementation of the scheme. There is no profit motive as the entire fund entru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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