ITO Vs Managing Director (ITAT Bangalore)
ITAT Bangalore held that interest received from amount of government grant which is remitted back to either central or state government and the benefit of the same is not received by the assessee is not to be added in the income of the assessee.
Facts- The case of the assessee was selected for scrutiny. AO noted that the assessee has received interest on FD of Rs.13,20,64,775 and interest on SB a/c. of Rs.69,82,761 which was not offered to tax as per revised return filed by the assessee. Accordingly, AO concluded that interest income of Rs.13,90,47,536 as income u/s. 56 of the Act.
The First Appellate Authority (FAA) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that assessee has been formed for implementation of the Smart City Scheme by the Central Govt. as well as State Govt of Karnataka. Grants are parked in the bank account until the same is used for the designated purpose of Smart City project and interest on such deposits in the case of Central Govt. funds is immediately returned to the Central Govt. as per Rule 230(8) of GFR, 2017 and interest is remitted to the State Govt. based on the extent of grant received to which the interest relates immediately after finalization of the accounts. On going through the documents, we note that there is no category of income to the assessee because the interest receive on Central fund is adjusted to the Consolidated Fund of India and interest received on State Govt. fund is adjusted in the subsequent grant.
