31 July 2008
Facts : A - State Govt. B - Govt. Company Purpose of B - Upliftment of the Horticulture and Agro based industries in state.
Transactions by A - Give non refundable funds to B for assisst the industies in state.
Transactions by B - Invest in agro based new projects in state as equity by holding as 26% shares which was buy back by promoters after 5 years with interest.
Income by B - Invest in FDR from the unused funds.
Q : 1. Whether interest income earned by B is the income of A or of B and whether it is taxable under Income Tax Act? 2. Whether these unused funds are to be shown as liablity in the books of B or not? 3. If this interest is also payable to State Govt. then who pay the tax on the same?
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