Interest Earned On Funds Granted By Government, Kept In Bank Till Its Utilization Is Capital Receipt: Kerala HC

The Kerala High Court ruled that interest earned on funds granted by the government, which are kept in a bank until utilization, should be treated as a capital receipt. The court emphasized that such interest is incidental to the capital grant and, therefore, should not be taxed as revenue income. This ruling provides relief to organizations receiving government grants and clarifies the tax treatment of interest earned on unused funds. It aligns with previous judicial precedents that distinguish between capital and revenue receipts in such circumstances.