When the Interest earned on FDR is not treated as Taxable: case Law

Interest earned on sums kept in FD out of sums granted by Govt. for infra development wasn't taxable

[2015] 57 taxmann.com 349 (Karnataka)

HIGH COURT OF KARNATAKA

Commissioner of Income-tax, Bangalore

v.

Karnataka State Agricultural Produce Processing & Export Corporation Ltd

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as (Interest) - Assessment year 2008-09 - Assessee was a Government owned company, engaged in trading in agricultural produce - In order to facilitate infrastructure facilities, for increasing export of horticultural produce, a sum of Rs. 10 crores was granted to assessee by State Government - Before utilisation of said grant, it was temporarily kept in fixed deposits and interest was earned - It was found that assessee was acted as a nodal agency for implementation of said scheme and there was no profit motive as entire fund entrusted and interest accrued from deposits had to be utilised only for purposes of scheme originally granted - Further, whole of fund belonged to State exchequer and assessee had to channelise them to achieve objects of centrally sponsored scheme of infrastructural development as specified in Government order - Whether, interest earned on depositing these grants was not an income in hands of assessee - Held, yes [Para 17][In favour of assessee]