Interest received on FDR made from grant received from Govt. can’t be considered as assessee’s income if such interest is to be treated as part of the grant as per the terms of release of such grant:

AO made addition in respect of interest on FDR received by the assessee which was confirmed by CIT(A) but deleted by ITAT. On Revenue’s appeal, Hon’ble High Court observed that the assessee received grant from Central Govt. (CG) and the same was deposited in bank as FDR. AO made the impugned addition since he found that the assessee had claimed refund in respect of TDS on such interest deducted by the concerned bank. ITAT found from the letter issued by CG while releasing the grant that interest earned on grant already released shall form part of central grant limit. Hence, relying on decisions in the case of “Gujarat Municipal Finance Board vs. DCIT – 318 ITR 317 (Guj)” and “Gujarat Power Corporation Ltd. vs. ITO – 354 ITR 201 (Guj)], the impugned addition was deleted. Hon’ble High Court also held that in light of the aforesaid stipulated condition and the two decisions cited above, such interest shall be treated as part of grant received from CG and hence, it can’t be treated as assessee’s income. Accordingly, Revenue’s appeal was dismissed.

[CIT vs. Sar Infracon Pvt. Ltd. – Tax Appeal No.855 of 2013 and 828 of 2013]