What did the High Court hold?

The tribunal held that the interest income was not taxable in the hands of the assessee as HUDCO was merely a canalising agency and never became the owner of the funds. The interest earned could only be used as per the project agreement stipulations.

The assessee, HUDCO, received funds from KFW Germany through the Government of India to provide loans for housing schemes. The revenue contended that the interest received on these sub-loans was taxable in HUDCO's hands.

What were the issues?

Whether interest received on sub-loans disbursed from funds received as a canalising agency is taxable income of the assessee.

CIT vs Housing & Urban Devlopment… | Delhi High Court 2010

THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 15.04.2010

+ ITA 430/2010

COMMISSIONER OF INCOME-TAX

… Appellant

- versus –

HOUSING & URBAN DEVELOPMENT CORPORATION LIMITED

... Respondent

Advocates who appeared in this case: For the Appellant : Mr Sanjeev Sabharwal For the Respondent : Mr Johnson Bara

CORAM:- HON’BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MR JUSTICE V.K. JAIN

Whether Reporters of local papers may be allowed to see the judgment ?

To be referred to the Reporter or not ?

Whether the judgment should be reported in Digest ?

BADAR DURREZ AHMED, J (ORAL) CM No.3918/2010

The delay in re-filing the appeal is condoned.

This application stands disposed of. ITA 430/2010 1. The present appeal, filed by the revenue, is directed against the order dated 30.04.2008 passed by the Income-tax Appellate Tribunal in ITA No.2040/Del/2002, relating to the assessment year 1997-98. KFW Germany 2010:DHC:2049-DB

housing schemes for economically weaker sections. Consequently, funds were made available to the Government of India and the same were canalised through the assessee [HUDCO]. The assessee, in turn, gave loans to suitable agencies, such as NGOs, which were to be selected by the assessee on the criteria prescribed by KFW Germany.

The issue in this appeal pertains to the interest received on these sub-loans. According to the revenue, the interest thereon would be taxable in the hands of the assessee. However, the tribunal held in favour of the assessee and came to the conclusion that the same would not be taxable in the hands of the assessee inasmuch as the funds were not the property of the assessee. The tribunal came to the conclusion that from the terms of the agreement entered into between KFW Germany and the Government of India as well as the project agreement entered into between KFW Germany and the assessee [HUDCO], it was clear that the funds were received by the Government of India and the assessee merely acted as a canalising agency. The assessee never became the owner of the funds given to it under the project agreement. Nor could the assessee use the funds for anything other than the specified purposes and in the specified manner. Even the interest earned on the sub-loans given out of the funds received from KFW Germany could be used only as per the stipulation contained in the project agreement, which, in turn, was governed by the laws of Germany. Consequently, the tribunal came to the conclusion that the interest earned on sub-loans granted by the assessee did not become its income. The tribunal 2010:DHC:2049-DB

tax v. Delhi State Industrial Development Corporation: [2007] 295 ITR 419 (Delhi).

We see no reason to interfere with the findings returned by the tribunal. In any event, it has followed the decision of this court. No substantial question of law arises for our consideration. The appeal is dismissed.

BADAR DURREZ AHMED, J

V.K. JAIN, J APRIL 15, 2010 dutt

2010:DHC:2049-DB

COMMISSIONER OF INCOME TAX vs. HOUSING & URBAN DEVLOPMENT CORPORATION

What did the High Court hold?

What were the facts?

What were the issues?

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