COMMISSIONER OF INCOME TAX GANDHINAGAR V. GUJARAT STATE POLICE HOUSING CORPORATION LTD.

TAXAP/63/2015

AI Insights

The case revolves around a dispute concerning the taxability of interest income earned by the Gujarat State Police Housing Corporation Ltd on funds temporarily parked from a government grant intended for constructing houses for the Police Department. The Income Tax Appellate Tribunal had earlier ruled in favor of the assessee, citing precedents that such interest income should not be taxed. The Commissioner of Income Tax, Gandhinagar, challenged this decision in the Gujarat High Court, which upheld the Tribunal's decision, referencing similar cases where the court had ruled that such interest income, when earned on government grants and as per government instructions, is not taxable.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 743647 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-04-2015
• Assessment Year: misc
• Other Referred Cases: General Motors India P. Ltd. Vs. Deputy Commissioner of Income-tax, Gujarat Power Corporation Limited Vs. Income Tax Officer, Sar Infracon Pvt. Ltd Vs. CIT Vs. Gujarat State Disaster Management Authority
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S N DIVATIA
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Government Grant; Income Tax; Interest income; Taxable income
• Section: 56

Judgement Text

"O/TAXAP/63/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 63 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== COMMISSIONER OF INCOME TAX GANDHINAGAR....Appellant(s) Versus GUJARAT STATE POLICE HOUSING CORPORATION LTD.....Opponent(s) ====================================== Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR SN DIVATIA, ADVOCATE for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 06/04/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 4 O/TAXAP/63/2015 JUDGMENT [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal “A” Bench, Ahmedabad (hereinafter referred to as the “Tribunal”) dated 18/07/2014 in ITA No.2549/Ahd/2013 for the Assessment Year 2010-11 by which the learned Tribunal has relying upon the decision of the Division Bench of this Court in the case of Sar Infracon Pvt. Ltd (Tax Appeal No.828/2013) and another decision of the Division Bench of this Court in the case of CIT Vs. Gujarat State Disaster Management Authority (Tax Appeal No.730/2010) has allowed th said appeal preferred by the respondent-assessee holding that the interest earned by the respondent-assessee on the temporary parking of the funds on the grant received from the Government of Gujarat as a nodal agency for constructing the houses for the Police Department is not liable to tax as income in the hands of the assessee, the revenue has preferred the present Tax Appeal with the following proposed substantial questions of law; (A) Whether on the facts and circumstances of the case and in law, the ITAT has erred in fact and law in holding that the interest receipt of Rs.20,42,86,950/- is not taxable in the hands of the assessee? (B) Whether on the facts and circumstances of the case and in law, the ITAT has failed to consider the findings of the AO and the CIT(A) that the funds remained unutilized by the appellant and were parked in fixed deposits in assessee’s own name on Page 2 of 4 O/TAXAP/63/2015 JUDGMENT long term basis and interest income which accrued out of such long term parking has not been disclosed as regular income under the head income from other sources / in the income and expenditure account but on the contrary has diverted such income directly to the balance sheet under the head WIP? (c) Whether on the facts and circumstances of the case and in law whether the interest income can still be taxable under Section 56 of the I.T. Act in the case of government companies where there is no profit motive? [2.0] We have heard Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue and Shri Vivek Chawda, learned advocate appearing for Shri S.N Divetia, learned advocate appearing on behalf of the respondent-assessee. [2.1] At the outset, it is required to noted and it is not disputed by Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue that the issue involved in the present Tax Appeal and the proposed substantial questions of law in the present Tax Appeal is squarely covered against the revenue in view of the decision of the Division Bench of this Court in the case of General Motors India P. Ltd. Vs. Deputy Commissioner of Income-tax reported in [2013] 354 ITR 244 (Guj) as well as another decision of this Court in the case of Sar Infracon Pvt. Ltd (Supra). In the identical facts and circumstances of the case, the Division Bench of this Court in the case of Gujarat Power Corporation Limited Page 3 of 4 O/TAXAP/63/2015 JUDGMENT Vs. Income Tax Officer reported in [2013] 354 ITR 201 (Guj) as well as in the case of Sar Infracon Pvt. Ltd (Supra) have held that the interest temporarily earned on the grant received from the Government and that too as per the instructions given by the State Government cannot be included in the income of the assessee. Under the circumstances, while passing the impugned order, the learned tribunal has followed the decision of the Division Bench of this Court in the case of Sar Infracon Pvt. Ltd (Supra) and, therefore, no error has been committed by the learned Tribunal while allowing the appeal preferred by the assessee. No question of law, much less substantial question of law, arises in the present Tax Appeal. [3.0] Under the circumstances, the present Tax Appeal fails and the same deserves to be dismissed and is accordingly dismissed. (M.R. SHAH, J.) (S.H. VORA, J.) Siji Page 4 of 4 "