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TMI Blog2019 (2) TMI 2093X X X X Extracts X X X X X X X X Extracts X X X X ..... est will not be the income of the assessee. Accordingly, following the decisions of Karnataka Urban Infrastructure Development Finance Corporation [ 2009 (1) TMI 243 - KARNATAKA HIGH COURT] as well as Rajasthan Avas Vikas Infrastructure Ltd [ 2016 (4) TMI 1099 - ITAT JAIPUR] we hold that the interest received by the assessee is not assessable to tax but it was received on behalf of the Government and will be forming part of the funds to be disbursed for implementation of various schemes and projects for public welfare. Hence, the addition made by the assessee is deleted. This issue is common for both the years, therefore, it stands adjudicated for assessment years 2013-14 2014-15. Status of the assessee is a Government company - As we have already discussed the facts and memorandum of association wherein the objects of the assessee has been set out. From the objects and purpose of creating the assessee it is clear that the state Government is helping more than 98% shares of the assessee, therefore, this issue though is only academic in nature, however, once the Government is holding more than 98% shares then the assessee company is a Government company. X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as to why the balance amount, the interest income less shown by Rs. 3,78,34,698/- should not be added to the total income. In response the assessee contended that the assessee is a Nodal Agency and receiving funds from the Central/State Government for allocating the same to the various schemes/projects of public welfare. Thus, the assessee contended that the said amount was kept by the assessee in the fiduciary capacity and the same was parked in the bank FDR during the period when there is time leg between the receipt of funds and direction for getting them disburse to various scheme/projects. The assessee further contended that the interest on the said amount does not belong to the assessee but it is part of the funds which is to be allocated on a particular projects or schemes. Even otherwise the balance of disburse funds along with interest is to be refunded to the consolidated funds or the funds of the State Government, therefore, the assessee explain that this is not the income of the assessee. The AO did not accept the contention of the assessee and treated the said interest amounting to Rs. 3,74,78,34,698/- as income of the assessee and added to the total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with or without interest/to give grants/ advances or otherwise to fund the projects/schemes/any developmental work related therewith of all or any municipalities, ULBs or/and any local bodies or/any person/organization as may be authorized by the aforesaid agencies. (9) To assist, co-ordinate, assess technical, legal and financial viability, arrange consortium/alliances, secure regulatory clearances, negotiate terms and conditions, approach banks and financial institutions funds, bodies corporate (whether or not incorporated) for the financing the project related to development, implementation, construction, operation, expansion, modernization, maintenance, management of infrastructure facilities, including provision of various guarantees, refinance schemes. (10) Without prejudice to the provisions under the law time being in force, to make recommendations to the State Government or to any local authority, as the case may be, as it any other matter referred to the corporation in the interest of sound municipal finance. (11) To plan and financially monitor, all types of project related to development of urban areas in the state of Rajasthan, financed or funded, wholly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming part of funds over which it has been received/ credited by bank. The capacity of appellant company is to be hold the same in fiduciary capacity/ as bailee and will never use same according to its own wishes as capacity of appellant company to work as NODEL AGENCY only and work of Nodal Agency is to disburse the funds to those ULB, Departments, Funds for which these are being received by them. That for levy of tax under Income tax Act, 1961 there should be an income to have taxation therein and in case there is no income then same cannot be taxed. The definition of Income u/s. 2(24) of Income Tax Act does not lay any clauses wherein the funds in form of interest therein for an on behalf of other person creates income. Further income tax is levied upon Person as defined u/s. 2(31) and the Central/ State Governments are out from preview of "Person", therefore there is no requirement to have PAN Numbers by Government. The funds which are disbursed by Central/ State Governments are deployed through Nodal Agency (appellant company) which are to be implemented upon various public welfare projects of Central/ State. 3.2 The ld. AR has pointed out that the assessee has alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt material on record. There is no dispute that the assessee was incorporated as a State Government company to function as a Nodal Agency for the purpose of monitoring and disbursing funds to the various welfare schemes and projects. The assessee is receiving funds from the Government and then disbursing the same to various projects and schemes as it is clearly spelt out in the objects of the assessee. During the year under consideration the assessee has received interest of Rs. 3,78,34,698/- on the FDRs which were made to park various amounts with the bank. There is no dispute that the amount which was put into the fixed deposit was received by the assessee from the Government for the purpose of disbursement of the same in the various schemes/projects sponsored by the Government. This fact has not been disputed by the authority below that the assessee is working as a Nodal Agency and it is not the assessee own activity of providing such activation or carrying out the activity of development or infrastructure under the welfare schemes but the assessee is only disbursing the funds as intermediary between the Government and the actual execution of the scheme. Therefore, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. The objective is to create and maintain a fund for the development of infrastructural assets on a continuing basis and, therefore, the assessee is a nodal agency formed/created by the Government of Karnataka as per the guidelines ; there is no profit motive as the entire fund entrusted and the interest accrued therefrom on deposits in bank though in the name of the assessee has to be applied only for the purpose of welfare of the nation/States as provided in the guidelines ; the whole of the fund belongs to the State Exchequer and the assessee has to channelise them to the objects of the Centrally sponsored scheme of infrastructural development for the mega city of Bangalore. Funds of one wing of the Government are distributed to the other wing of the Government for public purpose as per the guidelines issued. The monies so received, till they are utilised, are parked in a bank. The finding recorded by the Tribunal clearly shows that the entire money in question is received for implementation of the scheme which is for a public purpose and the said scheme is implemented as per the guidelines of the Central Government and, therefore, the assessee is only acting as a nodal agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt against the assessee and in favour of the Revenue." Therefore, the Hon'ble High Court has upheld the order of the Tribunal that there was no income earned by way of interest by the assessee as the entire money was received for implementation of the scheme which is for the public purpose the said scheme implemented by the Central Government. It was also held that the assessee is only acting as a Nodal Agency for the Government for implementation of those projects. Thus, once the assessee has not carried out any business activity of its own while implementing the scheme floated by the Government then, the unutilized money during which the project could not be fully implemented is deposited in the Bank to earn interest, the same would not be the income of the assessee. The Coordinate Bench of this Tribunal in case of Rajasthan Avas Vikas & Infrastructure Ltd. vs. DCIT (supra) while dealing with an identical issue of not granting the TDS credit in respect of the interest of such deposit has held in para 4.3 and 5 as under:- "4.3. We have heard rival contentions and perused the material available on record. In our view the issue involved in the present appeal had already been adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by a ruling of the Division Bench of the Andhra Pradesh High Court in CIT v. Bhooratnam & Co. [2013] 357 ITR 396/216 Taxman 6/29 taxmann.com 275 where the Court noted as follows: "In our view, the CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company. They have considered the terms of the agreement dated 12-03-2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee. ** ** ** The Revenue cannot be allowed to retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for the A.Y. 2010-11 in favour of the assessee." The Coordinate Bench has again considered the issue of non grant of TDS credit in case of Rajasthan Avas Vikas & Infrastructure Ltd. vs. ACIT in ITA No. 391 & 392/JP/2016 vide order dated 12.05.2017 has held in para 2.2 to 2.5 as under:- "2.2 At the outset, the ld. AR drawn our attention to the decision passed by the Coordinate Bench in ITA No. 247 & 248/JP/2014 dated 18.3.2016 in assessee's own case for A.Y 2009-10 and 2010-11 and submitted that issue was decided in favour of the assessee by the said decision passed by the Coordinate Bench and hence, the same should be followed in respect of impugned matters before us. 2.3 The issue under consideration before the Coordinate Bench for A.Y 2009-10 and 2010-11 are as under:- ITA No. 247/JP/2014 (Assessment Year 2009-10): "In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in not allowing credit of TDS of Rs. 4502798, deducted by our Bank on interest and deposited to the Income Tax Department and holding that the interest belongs to Police Department and the provisions of section 199 are applicable.' ITA No. 248/JP/2014 (Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nodal agency with the undertaking to return the amount to the State of Rajasthan. In view of thereof and also in view of the judgment referred hereinabove, the TDS deducted by the Income Tax Department is directed to be paid to the assessee and we accordingly hold the same. In this view of the matter, the appeal of the assessee is allowed" 2.4 The facts of the instant case are pari materia to the facts of the case before the Coordinate Bench in respect of assessee's own case for A.Ys 2009-10 and 2010-11. The Revenue has not brought to our notice any contrary authority on the said issue. Hence, we do not see a reason to deviate from the view taken by the Coordinate Bench in assessee's own case. 2.5 Undisputedly, the interest income has not been brought to tax by the Revenue accepting the assessee's contention that the receipt of funds and interest thereon is in the judiciary capacity on behalf of the State of Rajasthan. The State of Rajasthan being not a taxable entity, there should not be any TDS at first place. For reasons best known to the assessee and the bank, the TDS has been deducted. Given that interest income is not taxable either in the hands of the assessee or t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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