| The Tax Publishers2021 TaxPub(DT) 1713 (Del-Trib) INCOME TAX ACT, 1961
Section 143(3)
Following the decision in case of CIT v. New Horizon Sugar Mills (P) Ltd. (2000) 244 ITR 738 (Mad) : 2000 TaxPub(DT) 216 (Mad-HC), amount of corpus funds cannot be treated as income of assessee as it was a diversion of income by overriding title, therefore, interest accrued on the corpus fund was required to be added in the corpus fund only and accordingly, appeal of Revenue was dismissed.
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Assessment - Validity - Addition on account of income earned on investment of corpus fund -
Assessee-company was set up to provide financial security to persons engaged in agriculture and elite activities, through insurance product and other support services, as per declared policy of Government of India. Assessee's case was reopened under section 148 by AO on the ground that assessee was earning income from investing in corpus funds which was not credited in the profit & loss account. In response, assessee had submitted that the corpus fund pertains to the Government and income there from was credited directly to the corpus fund. However, AO held that assessee enjoyed all the rights of an ownership of the fund, and therefore, he was obliged to account the resultant revenue in the profit & loss account. Assessee had diverted the income on investment made out of corpus fund after its receipt, and therefore, the gross revenue was under reported.Held: Following the decision in case of CIT v. New Horizon Sugar Mills (P) Ltd. (2000) 244 ITR 738 (Mad) : 2000 TaxPub(DT) 216 (Mad-HC), amount of corpus funds cannot be treated as income of the assessee as it was a diversion of income by overriding title in view of letter from the Government of India, Ministry of Agriculture, wherein it was clearly stated that corpus fund belongs to the Central and State Government and the interest thereto also belongs to the Government. Therefore, interest accrued on the corpus fund was required to be added in the corpus fund only. Accordingly, appeal of Revenue was dismissed.
Followed:Dalmia Cement Limited v. CIT (1999) 237 ITR 617 (SC) : 1999 TaxPub(DT) 1276 (SC), Associated Power Co. Limited v. CIT 1996 TaxPub(DT) 674 (SC), CIT (Central), New Delhi v. Bijli Cotton Mills (P) Limited (1979) 116 ITR 60 (SC) : 1979 TaxPub(DT) 812 (SC), CIT v. New Horizon Sugar Mills (P) Ltd. (2000) 244 ITR 738 (Mad) : 2000 TaxPub(DT) 216 (Mad-HC) and Dy. CIT, Circle-1 (2), New Delhi v. Agriculture Insurance Company of India Ltd. 2019 TaxPub(DT) 7464 (Del-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
INCOME TAX ACT, 1961
Section 14A
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