TMI Blog2013 (12) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... paperbook. The relevant part of the proceedings in so far as it is material to the present case is as follows:- Government Order No.AHD 88 HPP 2006 Bangalore, dated 23.01.2007 Government is .pleased to sanction new scheme namely, Support to KAPPEC (2401-00-800-2-29) during 2006-07. 2. The Director of Horticulture is permitted to release ₹ 10.00 crores (Rupees Ten crores only) to KAPPEC for creation, of infrastructure facilities in various parts of the State for increasing the export of horticultural produce. 3. KAPPEC shall make earnest efforts to get matching contribution from Government of India through its agencies/ schemes such as ASIDE, National Horticulture Mission for the purpose. 4. KAPPEC shall prepare viable and implementable schemes and obtain approval from the KAPPEC Board. The approved schemes will be submitted to the Department of Horticulture. 5. KAPPEC shall submit progress reports on physical and financial achievements to the Director of Horticulture every month, which will reviewed in the monthly MMR meetings. 6. No part of the funds shall be utilised by KAPPEC for meeting expenses towards salary and establishment. 7. The KA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors of the assessee dated 31.08.2007 relevant for the A.Y. 2007-08 in which they pointed out that the assessee should not show the interest income earned on grant amount deposited in the bank pending utilization and that the same should be capitalised as part of the grant. It has also been pointed out in the aforesaid letter that as per the Accounting Policy-7 of the assessee, grants received are treated as capital grants and shown under reserves surplus . Therefore there is an overstatement of liability and understatement of reserves surplus. The assessee also pointed out that the Expert Advisory Committee of ICAI, on a query with regard to treatment of interest accruing on short term deposits made with the banks out of grants-in-aid received from Govt. of India, has opined that the treatment of such interest income would depend on the terms of the agreement under which the grant was given. If the agreement provides that the interest will be used only for the same purpose for which the grant is used, then the same should be added to the grant and accounted in the balance sheet by routing it through the income expenditure account. If the treatment provides that the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take back the grant given to the assessee because of non-utilisation, no such return of grant was made by the assessee. He therefore held that the assessee was the owner of the interest income and it cannot be argued that interest income did not belong to the assessee, but to the Government. The CIT(A) also rejected the argument of the assessee that since the grant was made for capital purposes, interest earned on deployment of such funds should also be capitalised and not treated as revenue receipt. The CIT(A) thereafter referred to the decision of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Ltd. v. CIT, 227 ITR 172 (SC), CIT v. Coromondel Cements Ltd., 234 ITR 412 (SC) and CIT v. Bokaro Steel Ltd., 236 ITR 315 (SC) and concluded that the interest income earned on deposits parked temporarily would be income chargeable to tax under the head income from other sources . 10. For all the above reasons, the CIT(A) dismissed the appeal of the assessee. 11. Aggrieved by the order of the CIT(A), the assessee has preferred the present appeal before the Tribunal. 12. We have heard the submissions of the ld. counsel for the assessee, who reiterated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submitted that these documents transpired after the conclusion of the proceedings before the CIT(A). It has further been submitted that the above documents clearly show that the Government of Karnataka had specifically directed that interest earned on deposits of grand in aid pending utilization should be treated as additional grant of the scheme and not treated as income of the company. We are of the view that the documents filed by way of additional evidence are necessary for rendering a decision on the issue before the Tribunal and therefore the same are admitted as additional evidence. 17. It is seen from the additional documents that Government of Karnataka has informed the assessee vide letter dated 12.11.2013 and 18.06.2013 that interest earned on Government grants should also be spent for the purpose for which the grant is given. Reference has been made in this letter to the proceedings of the 8th Meeting of the State Level Sanction Committee of Rashtriya Krishi Vikas Yojana held on 16.03.2012. In the aforesaid proceedings, the Committee considered the utilization of interest on unspent grants and directed that such interest should also be spent for the purpose for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka State Government owned company. It was appointed as a nodal agency for the implementation of the mega-city scheme worked out by the Planning Commission of Ministry of Urban and Employment for development of urban infrastructure to Bangalore city. The Central Government has provided the money to the assessee for implementing the said scheme. The money so received from the Government of India was parked by the assessee in various bank deposits during the unutilised period. The interest earned during the year on these deposits were transferred to the mega-city scheme account directly with an appropriate disclosure in the notes to the accounts. The assessee has been involved in other projects of development of infrastructure apart from the activity as a nodal agency for the implementation of the mega-city scheme undertaken by the Government of India. The interest earned and received by the assessee out of the amount which it had received from the Central and State Governments and deposited in various banks, was treated as an income of the assessee and the AO brought the aforesaid amounts to tax. The Tribunal held that the assessee was merely a trustee of funds entrusted to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in a bank to earn interest. That interest earned is also again utilised for the implementation of the mega-city scheme which is also permitted under the scheme. Therefore, in computing the total income of the assessee for any previous year the interest accrued on bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money given by the Government of India for the purpose of implementation of mega-city scheme. Therefore, there is no error in the conclusion reached by the Tribunal that there was no income earned by way of interest by the assessee and setting aside the order of AO which is affirmed by the first appellate authority. The finding given by the Tribunal is purely a question of fact. No substantial question of law is involved in this appeal and therefore, this appeal is liable to be dismissed at the stage of admission itself. 21. We are of the view that the aforesaid decision of the Hon ble Karnataka High Court will clear apply to the facts o ..... 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