Bangalore Metro Rail Corporation Ltd. Vs DCIT (ITAT Bangalore)
Facts- The assessee is a wholly owned company of Government established for the implementation of rail based mass rapid transit system which was called as “Bangalore Metro Rail Project” in five years in five stages.
During the previous year relevant to AY 2009-10, the funds received by the assessee which were not immediately required for execution of the project were invested in Fixed Deposit and Mutual Funds. The assessee claimed the said income as exempt. However, submissions made by the assessee for claiming the same as exempt income was not accepted by AO.
Conclusion- The Hon’ble Karnataka High Court in assessee’ s own case for Assessment Years 2007-08 and 2008-09 held that identical interest income is not taxable for the following reasons –
It is clear that the income generated out of earlier release of State Government for its project would have to be converted into State’s equity towards the project and the same cannot be counted as income of BMRCL. Thus, there is no profit motive as the entire fund entrusted and the interest accrued therefrom has to be utilized only for the purpose of scheme. Thus, it has to be capitalized and cannot be considered as revenue receipts.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal by the assessee against the order dated 15.03.20 12 of CIT(A)-1, Bengaluru, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’), relating to Assessment Year 2009-10.
2. The impugned order of CIT(A) was received on 22/03/2013 and the appeal ought to have been preferred within 60 days of receipt of the order of the CIT(A) i.e., on or before 21.05.2013. The appeal was filed only on 06.10.2015. There is therefore a delay in filing appeal. The actual number of days of delay would be 1240 days which has been affirmed in the revised application for condonation of delay in filing appeal. Before we deal with the application for condonation of delay in filing the appeal, we shall set out the facts and circumstances.
3. The assessee is a wholly owned company of Government of It was established with the approval of the Government of India, for the implementation of rail based mass rapid transit system which was called as “Bangalore Metro Rail Project” in five years in five stages. The Government of India contributed in the form of equity and sub-ordinate debt to the extent of 25% of the project cost. The design and technology for the project was as per the assessee’s project report which was also approved by the Government of Karnataka. It was the Government of India that assigned the working of the assessee to work as a ‘special purpose vehicle’ for the implementation of the project. Further, as per the directions of the Government of India, the Board of the asses see was to be reconstituted with ten Directors with each promoter nominating five Directors. The Chairman was to be The Secretary, Ministry of Urban Development, Government of India. Appointment of the Managing Director was at the option of the Govt. of Karnataka, with the prior consent of the Govt. of India. The entire operation of the assessee in implementation of the project was subject to the conditions as laid down by the Govt. of India, Ministry of Urban Development, Metro Rail Cell, vide communication dt 11th May, 2006.
4. Accordingly, the Govt. of Karnataka, among other things, was to :
1. bear the entire cost of the land,
2. ensure electric power supply to the project on NO PROFIT NO LOSS basis,
3. provide for equity contribution and subordinate debt before utilizing senior debt,
4. to facilitate metro ridership as part of integrated traffic rationalization plan to ensure projected ridership, etc.
5. Further, the cost of the project was to be financed by both the Union and the State Governments in the following manner :
Current cost .. Rs.5453 crore
Completion cost .. Rs.6395 crore
