Hll Biotech Limited Vs CIT (Kerala High Court)
Kerala High Court held that the “interest income” on the short-term deposits of the funds infused by the Government are in the nature of “capital receipt” and not “revenue receipt” and hence the same are not taxable as ‘income from other sources’.
Facts- The appellant Company is set up by the Ministry of Health and Family Welfare to manufacture and supply vaccines. It is a 100% subsidiary Company of M/s HLL Life Care Ltd., a wholly owned Government of India enterprise.
Issue involved in the present appeal is that whether the interest income earned by the assessee from the funds received from the Government of India for setting up of the Company, taxable as ‘income from other sources’?
Conclusion- It has been categorically mandated that the funds and income earned out of the funds provided by the Government shall be utilised only for the purpose for which they are released. It has also been clarified that any interest income from the said funds consequent on bank deposits, shall also be utilised only for the purpose of the project. Therefore it is evident that the deposits and the income are inextricably linked with the setting up of the project. It is not in dispute that the setting up of the project was not over and is in the process. The funds disbursed and utilised are stage-wise. The portion of the funds kept in short-term deposits could not be termed as “surplus amounts” which could be utilised as per the wish and will of the Company. The funds, with the income derived therefrom are to be used exclusively for the setting of the project.
