2006 (2) TMI 114

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....rned by the respondent to the tune of Rs. 4,66,75,814 cannot be treated as income liable to tax under the provisions of the Income-tax Act (for short hereinafter referred to as "the Act"), as the respondent is acting as a nodal agency for implementing certain Central and State Government projects. A few facts leading to this appeal, are as under: The respondent-M/s. Karnataka Urban Infrastructure Development and Financial Corporation (for short hereinafter referred to as "the assessee"), is a fully Karnataka State Government owned company. The assessee was appointed as a nodal agency for the implementation of the mega city scheme worked out by the Planning Commission of the Ministry of Urban and Employment for development of urban inf....

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....l and the State for implementing the scheme of the Government. This being the factual position, the lower authorities committed a serious error in treating the interest as income of the assessee and bringing the same to tax. Therefore, the Tribunal set aside the orders of the Assessing Officer and the first appellate authority and the claim of the assessee was allowed. As noticed by us earlier, aggrieved by the said order, the Revenue has preferred this appeal. Sri M.V. Sesachala, learned counsel for the Revenue, submitted that all incomes, which are not exempted under section 10 of the Act, are liable to tax under section 4 of the Act and therefore the order of the Tribunal requires to be set aside. The material on record shows that ....

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....ed 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 of the Central Government for implementation of these projects. It is not the case of the Revenue that the assessee was carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in a bank to earn interest. That interest earned is also again utilised for the implementation of the mega city scheme which is....