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TMI Blog2019 (2) TMI 2068X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: 1. Whether the ld. CIT(A) has erred on fact and in law in deleting the disallowance made on interest earned on fixed deposit. The said income was not the business receipt of the assesse company but was income from Other sources. 4. The brief facts qua the issue are that assessee is a State Government Corporation incorporated with the objects to promote tourism in the state and to create infrastructure for tourism on behalf of the Central Government and State. It gets funds from Central Government/State Government for making payment in accordance with the guidelines of the government for approved projects of the government and the appellant is liable to refund the unutilized fund as and when government makes requisition for the same. It also submitted that the appellant keeps the portion of unutilized fund in short term bank deposits and interest earned from these deposits are transferred to the respective fund account of the government. In support it also relied on the office memorandum, dated 06.12.2006 issued from the Ministry of Tourism, Govt. of India, wherein it has been directed to the appellant that funds released as instalments of Central Financial Assistance from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) belonged to the respondents which were invested in bank deposits. In the present case the funds always remained the property of the government and the appellant was directed to use the funds as well as directed on how to manage the surplus. [5.4] Facts in the case of Tuticorin Alkali (supra) were that the assesse Tuticorin Alkali Chemicals & Fertilisers Ltd. (formerly known as Tuticorin Alkali Ltd.) was incorporated on 03.12.1971 for the purpose of, inter alia, manufacturing heavy chemicals such as ammonium chloride and soda ash. The trial production of the factories of the company commenced on 30.06.1982. For the purpose of setting up of the factories, the company had taken term loans from various banks and financial institutions. That part of the borrowed fun was not immediately required by the company was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. The assesse corn had also deposited certain sums with the Tamil Nadu Electricity Board. It also given interestbearing loans to its employees to purchase vehicles. Up to assessment year 1980- 81, Interests earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government/State Government were disbursed to the appellant for making payment in accordance with the guidelines of the government for approved projects of the government and the appellant is liable to refund the unutilized fund as and when government made requisition for the same. It is also noted that the appellant keeps the portion of unutilized fund in short term bank deposits and interest earned from these deposits are transferred to the respective fund account of the government. It is evident from the office memorandum, dated 06.12.2006 issued from the Ministry of Tourism, Govt. of India, wherein it has been directed to the appellant that funds released as instalments of Central Financial Assistance from Ministry of Tourism were to be deposited in saving accounts or fixed deposits in bank and as a result a substantial amount accrues as interest on the deposits made out of Central Financial Assistance. It has also been directed to all concerned to ensure utilization of earned interest on deposits made out of CF A only for the execution and completion of the concerned project without deviation to any other head of expenditure. In case there is no scope to utilize the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible,* but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment-is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. " [5.10] In the case of Poona Electric Supply Co. Ltd v CIT 57 ITR 521 (SC) the facts were that the assessee was commercial undertaking. It did business of the supply of electricity subject to the provisions of the Act. As a business concern its real profits had to be ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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