2006 (2) TMI 114 - HC - Income Tax

Computing the total income - interest accrued on the bank deposits - Revenue has preferred this appeal against the order passed by Tribunal, setting aside the orders passed by the assessing authority as well as the first appellate authority holding that the income earned by the respondent cannot be treated as income liable to tax, as the respondent is acting as a nodal agency for implementing certain Central and State Government projects. - 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 - we do not find any error in the conclusion reached by the Tribunal that there was no income earned by way of interest by the assessee - finding given by the Tribunal is purely a question of fact. We do not find any substantial question of law involved in this appeal and therefore this appeal is liable to be dismissed at the stage of admission itself.

Summary

Issues: Appeal against order treating income earned by the respondent as taxable under the Income-tax Act.

Analysis:
The judgment pertains to an appeal filed by the Revenue against a decision of the Income-tax Appellate Tribunal setting aside orders treating the income earned by the respondent as taxable. The respondent, a Karnataka State Government-owned company, acted as a nodal agency for implementing a mega city scheme funded by the Central Government. The funds received were parked in bank deposits, and the interest earned was utilized for the scheme. The Tribunal held that the respondent acted as a trustee of funds for the government and was not liable to pay tax on the interest earned. The Revenue contended that all incomes not exempted under Section 10 of the Income-tax Act are taxable under Section 4. However, the court found that the respondent, as a nodal agency, had no profit motive and the funds were to be utilized for public welfare as per guidelines. The interest accrued on bank deposits, derived from government funds, was not considered as income of the respondent for tax purposes. The court upheld the Tribunal's decision, stating it was a factual finding with no substantial question of law involved, leading to the dismissal of the appeal at the admission stage.