Held  that the interest earned was not of borrowed funds. The assessee was not carrying out the construction for the purpose of setting up of business or for expansion of a business; but was engaged in the activity of construction self, with the funds made available by the Government. The interest income earned from the grants made by the Government for the purpose of construction of buildings for the Police Department could only be treated as income from other sources. It was not an activity inextricably connected with the construction of buildings and it did not in any manner reduce the cost of construction. In the case of the assessee the funds parked in deposits, out of the grants received, were surplus funds; since the amounts earned by the assessee from the deposit of such funds were set off from the grants for the subsequent year. That the circular of the State Government providing for deduction of grants in the successive years to the extent of the interest earned from the grants of the earlier year, cannot regulate the taxability under the Income-tax Act, 1961. If at all, Income-tax was deducted from the interest earned, the Corporation would be entitled to request the Government to not deduct the amounts paid as Income-tax from the grants of the subsequent years. The circular issued by the State Government regulating the business/transaction between the Government and its corporation could not have any effect on the taxability of the interest income, which was deemed to be income from other sources under section 56 of the Income-tax Act. There was no question of any deduction being permitted, as permissible under section 36(1)(iii) of the Act, which is with respect to interest paid on borrowed capital for the purpose of business or profession (AY. 2018-19)