Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessee, a State Government-owned company, was appointed as a nodal agency for implementation of Mega-city Scheme worked out by Planning Commission - Both Central and State Governments provided requisite finances for implementation of said project - Assessee parked money so received in various bank deposits during unutilized period - Interest earned during year on those deposits was directly transferred to Mega-city Scheme account - Assessing Officer treated interest so earned and received by assessee to be an income of assessee and brought interest amounts to tax - Whether interest accrued on bank deposits could not be treated as income of assessee as interest was earned out of money given by Government of India for purpose of implementation of Mega-city Scheme and interest earned was also utilised for implementation of Mega-city Scheme - Held, yes M.V. Sesachala for the Applicant. JUDGMENT N. Kumar J. - The revenue has preferred this appeal against the order passed by the Income-tax Appellate Tribunal, Bangalore Bench in ITA No. 868/Bang./2000, dated 3-11-2004 setting aside the orders passed by the assessing authority as well as the first appellate authority holding that the income earned 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. 2. Few facts leading to this appeal, are as under : The respondent-M/s. Karnataka Urban Infratructure 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 Ministry of Urban and Employment for Development of Urban Infrastructure to Bangalore city. The Central Government has provided the money to the assessee for implementing the said scheme. The money so received from the Government of India was parked…

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