Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (1) TMI 243 - HC - Income TaxInterest Income - assessee is a nodal agency and is not carrying on any business of its own. It is only an implementing agency. The money received from the bank and interest accrued thereon is parked with the assessee for implementation of the scheme entrusted to it. It is not carrying on business activities of its own and every rupee received by it is accounted for held that - in computing the total income of the assessee for any previous year the interest accrued on the bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money given by the Government of India for the purpose of implementation of the mega city scheme interest income is not chargeable to tax.
Issues:
- Appeal under section 260A of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal regarding interest income deletion. - Whether interest income accrued on bank deposits can be considered as income for the nodal agency implementing a scheme. - Application of the judgment in a similar case involving the Karnataka Urban Infrastructure Development and Finance Corporation. - Determination of whether the interest earned on bank deposits is taxable income for the nodal agency. The High Court of Karnataka heard an appeal under section 260A of the Income-tax Act, 1961, concerning the deletion of interest income by the Income-tax Appellate Tribunal for the assessment year 2003-04. The appellants, a nodal agency for implementing schemes, challenged the order deleting interest income of Rs. 22,55,82,940. The agency was not engaged in business activities of its own and every rupee received was accounted for. The Tribunal, in a similar case involving the Karnataka Urban Infrastructure Development and Finance Corporation, had ruled in favor of the agency, emphasizing the agency's role as a nodal agency for public welfare projects. The Division Bench's judgment highlighted that the agency's funds were meant for public purposes and were to be utilized as per government guidelines. The interest earned on bank deposits was considered part of the funds provided by the government for implementing public projects, hence not taxable income for the agency. The court, based on the precedent and factual findings, concluded that no substantial question of law arose, leading to the dismissal of the appeal. In essence, the judgment revolved around the interpretation of whether interest income accrued on bank deposits by a nodal agency implementing public schemes should be considered taxable income. The court relied on a previous ruling involving a similar agency to establish that the agency's role was purely for public welfare and not for profit-making activities. The funds received were designated for specific public projects, and any interest earned on these funds was meant to be utilized for the same purpose. Therefore, the interest income was deemed inseparable from the government funds and not subject to taxation as income for the agency. The court emphasized the agency's function as a conduit for government funds and upheld the Tribunal's decision to delete the interest income from the agency's taxable income.
|