TaxTMI 
TaxTMI 
2014 (10) TMI 1054
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....Karnataka. It was established with the approval of the Government of India, for the implementation of rail based mass rapid transit system which was called as "Bangalore Metro Rail Project" in five years in five stages. The Government of India contributed in the form of equity and sub-ordinate debt to the extent of 25% of the project cost. The design and technology for the project was as per the assessee's project report which was also approved by the Government of Karnataka. It was the Government of India that assigned the working of the assessee to work as a 'special purpose vehicle' for the implementation of the project. Further, as per the directions of the Government of India, the Board of the assessee was to be reconstituted with ten Directors with each promoter nominating five Directors. The Chairman was to be The Secretary, Ministry of Urban Development, Government of India. Appointment of the Managing Director was at the option of the Govt. of Karnataka, with the prior consent of the Govt. of India. The entire operation of the assessee in implementation of the project was subject to the conditions as laid down by the Govt. of India, Ministry of Urban Developmen....
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.... of redemption of units with Mutual fund. However, it revised its income in the revised return of income. The revised Income offered by the assessee was NIL. It had also stated that it does not intend to claim any loss from Mutual funds in the revised return of income. 05. The reasons for filing the revised return of income were explained by the Assessee as follows: (a) The corporation is a special purpose vehicle to implement the metro Rail project. (b) The assessee had taken requisite permission and approval to invest the surplus funds. (c) The funds were invested in Fixed Deposits of Banks which earned interest until they are required for implementation of the project. (d) The assessee relied upon the case of Karnataka Urban Infrastructure Development & Finance Corporation (herein after referred to as KUIDFC) 155 Taxman 228 (Kar). 06. The submissions made by the assessee were however not accepted by the AO. The AO was of the view that the decision of the Hon'ble Karnataka High Court relied upon by the Assessee in the case of KUIDFC was distinguished by the AO by pointing out that KUIDFC after implementation of urban infrastructure would ....
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....icorn Alkali case 227 ITR 172 to bring the interest earned of Rs. 10,57,20,194/- to tax net. Besides the appellant in earlier A.Y. had shown these interest as income and paid tax thereon since 1995. Facts being same, it should not have opted to go out of tax net. In view of the above, I find no reason to interfere in the order of the A.O." 09. Aggrieved by the order of the CIT (A), the assessee has filed appeal in ITA.1070/Bang/2011, for A. Y. 2007-08. In A. Y. 2008-09, the facts are identical and the CIT (A) has followed his own order passed in A. Y. 2007- 08. 10. We have heard the rival submissions. The learned counsel for the assessee reiterated the submissions made before the lower authorities. He further placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT and Another v. Karnataka Urban Infrastructure and Finance Development Corporation (284 ITR 582) (Kar) and 315 ITR 301 (Kar). In both the aforesaid decisions, the Hon'ble Karnataka High Court took the view that where the assessee is a nodal agency for implementing public utility projects and in the process the unutilized funds are temporarily deposited in banks, interest on such....
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....implementation of the mega-city scheme undertaken by the Government of India. The interest earned and received by the assessee out of the amount which it had received from the Central and State Governments and deposited in various banks, was treated as an income of the assessee and the AO brought the aforesaid amounts to tax. The Tribunal held that the assessee was merely a trustee of funds entrusted to carry out the objects of the Government while implementing the scheme. The assessee in fact acted as an agent of the Governments of both the Central and the State for implementing the scheme of the Government. This being the factual position, the lower authorities committed serious error in treating the interest as income of the assessee and bringing the same to tax. On further appeal by the Revenue to the High Court, the Hon'ble High Court held: "The material on record shows that the very purpose of constitution of the assessee was to act as a nodal agency for implementation of mega-city scheme worked out by the Planning Commission. Both the Central and the State Governments are expected to provide requisite finances for implementation of the said project. The funds from t....