The Tax Publishers2020 TaxPub(DT) 4180 (Ctk-Trib)

INCOME TAX ACT, 1961

Section 143(3)

As per specific directions of the Govt. of India interest on capital asset replacement reserve fund and the repayment of loan and contingency reserve fund was required to be utilized for specific purposes of development of Port and not in connection with regular operations of assessee, therefore, interest accruing on these funds stood diverted at source and could not, therefore, be held to be assessee's income.

Income - Taxability - Interest on capital asset replacement reserve fund and the repayment of loan and contingency reserve fund to be utilized as per specific directives of government -

Assessee was engaged in running of a major port. AO made disallowance towards interest accrued on investment in replacement, rehabilitation, modernisation of capital asset fund and towards interest accrued on investment of development, repayment of loans and contingencies fund. Held: In assessee's case, capital asset replacement reserve fund and repayment of loan and contingency reserve fund were created under specific directions of the Govt. of India. As per said directions, interest accruing on these funds along with corpus thereof was required to be utilized for specific purposes of development of Port and not in connection with regular operations of assessee. Hence, by the Govt. directive, a specific charge was created both on corpus and interest of these funds whereby same were to be diverted for specific uses. The assessee was not left with any discretion to utilize this interest in any manner he saw fit but was bound by the directives of the Govt. of India. Interest accruing on these funds stood diverted at source and could not, therefore, he held to be assessee's income.

Relied:CIT v. Sitaldas Tirathdas (1961) 41 ITR 367 (SC) : 1961 TaxPub(DT) 145 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15


INCOME TAX ACT, 1961

Section 32(1)

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