ACIT Vs Gujarat State Road Development Corporation Ltd. (ITAT Ahmedabad)
ITAT Ahmedabad held that interest income earned by depositing surplus grants in a particular mode as per the directions of the State Government is also treated as part of the grants and hence it cannot be treated as income of the assessee.
Facts- The assessee is domestic company engaged in building infrastructure projects including roads. Its main objects, for which it has been incorporated, is to carry out construction and development of roads and do all work being handled by the Roads and Building department of the Government of Gujarat, under the BOT, BOOT or BOLT schemes or any other manner, and also to undertake projects outside Gujarat, develop and provide consultancy and construction services in connection with the infrastructure building activities.
AO made various additions towards unutilized grant; project development fee spread over 3 years; interest on deposits with GSFS and expenses of project for which no income was offered.
CIT(A) deleted all the additions made by the AO except that relating to the interest on deposits with GSFS and a part of expenses of project for which no income was offered. Accordingly, the appeal filed by the assessee was partly allowed by CIT(A). Aggrieved by the same, both the Revenue and the assessee have come up in appeal before us.
Conclusion- Held that the assessee was a mere nodal agency to implement certain schemes of the Government of Gujarat and the unspent grant remained property of the Government and had to be returned to the Government as and when demanded; that therefore, there was no question of treating the grant as income of the assessee.
Held that the Hon’ble jurisdictional High Court in the case of Gujarat Municipal Finance Board has categorically held that the grants given by the State Governments stipulating deposits of the surplus grants in a particular mode and interest earned thereon ,also treated as part of the grants, the same could not be treated as income of the assessee. In the present case, the assessee has deposited surplus grants admittedly as per the directions of the State Government with GSFS and earned interest income amounting to Rs.2,54,85,315/-.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These are cross-appeals by the Revenue and assessee against order passed by the ld. Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad [hereinafter referred to as “Ld. CIT(A)”] dated 28.10.2013 pertaining to the Asst. Year 2010-11 under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act’ for short).
2. Brief facts relating to the case are that the assessee is domestic company engaged in building infrastructure projects including roads. Its main objects, for which it has been incorporated, is to carry out construction and development of roads and do all work being handled by the Roads and Building department of the Government of Gujarat, under the BOT, BOOT or BOLT schemes or any other manner, and also to undertake projects outside Gujarat, develop and provide consultancy and construction services in connection with the infrastructure building activities. The main objects of the company for which it was established as noted in the Memorandum and Association of the company is reproduced hereunder:
3. The assessee was financed for the work to be carried out by it, from various sources, which included grants received from the State Government for the said purpose. In the assessment framed for the impugned year, the Assessing Officer (AO);
