Law:

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Section 4 of the Income-tax Act, 1961 - Income - Chargeable as Where assessee was a nodal agency and was not carrying on any business of its own and it was only an implementing agency and money received from bank and interest accrued thereon was parked with assessee for implementation of scheme entrusted to it, interest income was not taxable in its hand [Assessment year 2003-04] [In favour of assessee] CIT v. Karnataka Urban Infrastructure Development & Finance Corpn. [2009] 315 ITR 301 (Kar.) Where the assessee was a nodal agency and was not carrying on any business of its own but it was only an implementing agency and the money received from the bank and interest accrued thereon was parked with the assessee for implementation of the scheme entrusted to it, in view of the decision in CIT v. Karnataka Urban Infrastructure Development and Finance Corporation [2006] 284 ITR 582 interest income earned by it was not taxable in its hands. CASE REVIEW CIT v. Karnataka Urban Infrastructure Development and Finance Corporation [2006] 284 ITR 582 (Karn.) followed and relied upon. M.V. Seshachala for the Appellant. JUDGMENT Deepak Verma, J. - Sri M. V. Seshachala, learned counsel appeared on behalf of the appellants. 2. Heard on admission. Records perused. 3. The Revenue is in appeal under section 260A of the Income-tax Act, 1961, against the order dated September 7, 2007, passed by the Income-tax Appellate Tribunal, Bangalore Bench "B", in Appeal I. T. A. No. 1106/Bang/ 06 for the assessment year 2003-04. 4. The appellants had approached the Tribunal challenging the order passed by the Commissioner of Income-tax (Appeals) in deleting the interest income brought to tax amounting to Rs. 22,55,82,940. It is not in dispute that the 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. 5. An identical question had come up for consideration before a Division Bench of this court…

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