INCOME TAX ACT, 1961

Section 4

Income - Chargeability - Investment income credited to the corpus fund as per the directions of the Government of India -

Assessee-company was engaged in the business of Agriculture Corp Insurance. AO found that the profit and loss account of assessee excludes investment income amounting to Rs. 8.62 crores, which he found directly credited to the Corpus Fund of Central & State Government, as their share of income. Accordingly, AO made addition of said investment income. Assessee contended that the corpus fund held by it was on behalf of the Government and the interest accrued thereon also belonged to the Government. Therefore, interest accrued on the Corpus Fund was required to be added in the Corpus Fund and not to its income. Held: In the instant case, as the income received from investments was credited to the corpus fund as per the directions of the Government of India and as such income was earned out of the amount received from the Central Government and State Government in the corpus fund for specified purposes by the Government of India, assessee was justified in not crediting said income to the profit and loss account. Thus, addition made by AO was deleted.

REFERRED : CIT v. New Horizon Sugar Mill (P) Ltd. ((2000) 244 ITR 738 (Mad) : 2000 TaxPub(DT) 0216 (Mad-HC)), Bijli Cotton Mills (P) Ltd. ((1979) 116 ITR 60 (SC) : 1979 TaxPub(DT) 0812 (SC)), Dalmia Cement Ltd. ((1999) 237 ITR 617 (SC) : 1999 TaxPub(DT) 1276 (SC)), Associated Power Co. Limited v. CIT (1996) 218 ITR 195 (SC) : 1996 TaxPub(DT) 0674 (SC)

FAVOUR : In assessee's favour

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 14A

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