Appeal details
Counselvise Citation
[2013] 122 COUNSELVISE.COM (IT) 8902 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
12-08-2013
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
12-08-2013
Assessment Year
2005-2006
Appeal Filed On
31-05-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.550 & 551(MDS)/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 AND C.O. NOS.29 & 30(MDS)/2010 IN ITA NOS.550 & 551(MDS)/2010 (A.YS.2005-06 & 2006-07 ) THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE II(1)I/C, CHENNAI. VS. M/S. TAMIL NADU TOURISM DEVELOPMENT CORPORATION LTD., 2-WALLAJAH ROAD, CHENNAI-600 002. PAN AAACT3453H. (APPELLANT) ( RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI T.N.BETGERI, I RS, JCIT RESPONDENT BY : SHRI J.CHANDRASEKARAN, C.A. DATE OF HEARING : 12 TH AUGUST, 2013 DATE OF PRONOUNCEMENT : 12 TH AUGUST, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THESE TWO APPEALS ARE FILED BY THE REVENUE. THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEARS ARE 2005-06 AND 2006-07. THE APPEALS AND THE CROSS OBJECTIONS ARE DIRECTED AGAINST THE ORDERS OF THE C OMMISSIONER - - ITA 550 & 551 OF 2010, ETC. 2 OF INCOME-TAX(APPEALS)-III AT CHENNAI, DATED 19-1-2 010 AND 20-1-2010. BOTH THE APPEALS ARISE OUT OF THE ASSES SMENTS COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THESE APPEALS WERE EARLIER DISMISSED BY THE TRIBUNAL ON THE GROUND THAT THE APPELLANT, BEING A STATE GOVERNMENT UNDERTAKING, HAS NOT OBTAINED CLEARANCE FROM THE HIGH POWERED COMMITTEE CONSTITUTED IN THIS REGARD, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ONGC VS. C OLLECTOR OF CENTRAL EXCISE, 1992(SUPPL.II) SCC 432. IN THE SAI D DECISION THE HONBLE APEX COURT HAS HELD THAT IN CASE OF LITIGAT ION BETWEEN THE GOVERNMENT AND GOVERNMENT UNDERTAKINGS, THE SAME CA N BE PROCEEDED WITH ONLY AFTER OBTAINING THE APPROVAL FR OM THE HIGH POWERED COMMITTEE, KNOWN AS COD. THE DISMISSAL ORD ERS OF THE TRIBUNAL WERE TAKEN IN APPEALS BEFORE THE HONB LE HIGH COURT OF MADRAS. THE HONBLE HIGH COURT FOUND THAT THE H ONBLE SUPREME COURT HAS LATER CHANGED ITS VIEW IN THE JUD GMENT OF THEIR LORDSHIPS RENDERED IN THE CASE OF ELECTRONICS CORPORATION OF INDIA LTD. VS. UNION OF INDIA AND OTHERS, 332 IT R 58 AND HAS HELD THAT THERE WAS NO NEED OF SUCH APPROVAL FROM T HE COD, IN VIEW OF THE FACT THAT DISPOSAL OF APPEALS WILL BE P ROLONGED IF - - ITA 550 & 551 OF 2010, ETC. 3 OBTAINING OF SUCH CLEARANCE IS INSISTED. ACCORDING LY, THE HONBLE HIGH COURT HELD THAT THE ORDER OF THE TRIBUNAL HAS TO BE SET ASIDE. ACCORDINGLY, THE HONBLE HIGH COURT SET ASIDE THE O RDER OF THE TRIBUNAL AND REMITTED THE MATTERS BACK TO THE TRIBU NAL TO DISPOSE OF THE APPEALS AND THE CROSS OBJECTIONS ON THE BASI S OF THE GROUNDS RAISED BY THE RESPECTIVE PARTIES. 3. THIS IS HOW THESE PROCEEDINGS ARE PLACED FOR TH E SECOND TIME BEFORE THE TRIBUNAL. 4. WE HEARD SHRI T.N.BETGERI THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E AND SHRI J.CHANDRASEKARAN, CHARTERED ACCOUNTANT APPEARI NG FOR THE ASSESSEE. 5. FIRST WE WILL CONSIDER THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.550(MDS)/2010. 5.1. THE FIRST GROUND RAISED BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE DISALLOWANCE OF 30% DEDUCTION CLAIMED FROM FRANCHIS E INCOME. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS DECLARED AN INCOME OF ` 69,61,143/- AS INCOME FROM LEASE/FRANCHISE OF HOTE LS - - ITA 550 & 551 OF 2010, ETC. 4 IN THE PROFIT AND LOSS ACCOUNT AND TREATED AS PROPE RTY INCOME BY CLAIMING 30% STATUTORY DEDUCTION. 5.2. WE CONSIDERED THIS ISSUE VERY CAREFULLY. THE ASSESSEE IS A TAMIL NADU GOVERNMENT UNDERTAKING ENG AGED IN THE BUSINESS OF DEVELOPING TOURISM ACTIVITIES AT TO URISM DESTINATIONS AND THE ASSESSEE OWNS A NUMBER OF IMMO VABLE PROPERTIES IN THE NATURE OF HOTELS AND MOTELS AND O THER GUEST HOUSES. SOME OF THE GUEST HOUSES, MOTELS AND HOTEL S ARE DIRECTLY RUN BY THE ASSESSEE CORPORATION AND A FEW OF SUCH HOTELS, MOTELS AND GUEST HOUSES ARE LEASED OUT TO O THERS AND STILL SOME PROPERTIES ARE AGAIN HANDED OVER TO OTHER PERS ONS TO RUN THE ACTIVITIES ON THE BASIS OF THE FRANCHISEE RIGHT S GRANTED BY THE ASSESSEE CORPORATION. 5.3. THE ASSESSEE HAS ACCORDINGLY RECEIVED LEASE RENTALS AND WELL AS FRANCHISEE FEES FROM THE LESSEE S AND TREATED THE SAME AS HOUSE PROPERTY INCOME. THE ASSESSING O FFICER REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE INCOME AS BUSINESS INCOME. IN FIRST APPEAL THE COMMISSION ER OF INCOME-TAX(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT SUCH RENTAL/FRANCHISEE INCOME OF THE ASSESSEE - - ITA 550 & 551 OF 2010, ETC. 5 CORPORATION IS IN THE NATURE OF HOUSE PROPERTY INCO ME. IT IS AGAINST THAT THE REVENUE HAS COME IN SECOND APPEAL BEFORE US. 5.4. BY VIRTUE OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE CORPORATION, IT IS INCORPORATED FOR THE PU RPOSE OF CARRYING ON THE ACTIVITIES OF TOURISM AND TOURISM D EVELOPMENT IN THE STATE OF TAMIL NADU. IT IS A GOVERNMENT OF TAM IL NADU UNDERTAKING. THE ENTIRE SHARE CAPITAL OF THE ASSES SEE CORPORATION IS OWNED BY THE GOVERNMENT OF TAMIL NAD U. 5.5. THE ASSESSEE CORPORATION HAS LET OUT SOME OF ITS PROPERTIES TO OTHERS ON THE BASIS OF LEASE AGREEMEN TS NOT IN ITS CAPACITY AS LANDLORD. IT IS REGULARLY EARNING RENT AL INCOME. THE ASSESSEE CORPORATION HAS SET UP THOSE PROPERTIES PR IMARILY FOR CARRYING ON ITS OWN BUSINESS ACTIVITIES. LATER ON, IN THE COURSE OF PERIOD IT WAS FELT BY THE ASSESSEE CORPORATION THAT LETTING OUT SOME OF THE PROPERTIES WOULD BE MORE BENEFICIAL TO THE INTERESTS OF THE ASSESSEE CORPORATION. THE PERSONS WHO HAVE TAKEN THOSE PROPERTIES ON LEASE FROM THE ASSESSEE CORPORATION A RE CARRYING ON THE SAME BUSINESS WHICH IS SUPPOSED TO BE CARRIE D ON BY THE ASSESSEE CORPORATION. IN OTHER WORDS, THE ASSESSEE IS CARRYING ON ITS BUSINESS IN THOSE PROPERTIES THROUGH THE MED IUM OF - - ITA 550 & 551 OF 2010, ETC. 6 LESSEES/FRANCHISEES. THEREFORE, IT IS QUITE CLEAR AND EVIDENT THAT CERTAIN PROPERTIES OF THE ASSESSEE CORPORATION HAVE BEEN LET OUT, LEASED OUT, GIVEN ON FRANCHISEE RIGHT IN THE COURSE OF CARRYING ON OF ITS BUSINESS IN THE USUAL MANNER. THOSE PROPERT IES WERE LET OUT TO THE LESSEES NOT BECAUSE THE ASSESSEE CORPORA TION HAS WITHDRAWN ITS BUSINESS OF CARRYING ON TOURISM ACTIV ITIES. IT IS NOT THE CASE THAT THE ASSESSEE CORPORATION HAS LEASED O UT ALL OF ITS PROPERTIES TO OTHERS. THE ASSESSEE CORPORATION HAS LET OUT ONLY A FEW OF THE PROPERTIES TO THE LESSEES/FRANCHISEES. THIS IS ON THE BASIS OF THE POLICY DECISION OF THE GOVERNMENT TO P ARTICIPATE PRIVATE INITIATIVE ALSO IN THE ACTIVITIES OF TOURIS M DEVELOPMENT IN THE STATE. THESE DECISIONS HAVE BEEN TAKEN FOR THE OVERALL BETTERMENT OF THE BUSINESS CARRIED ON BY THE ASSESS EE. 5.6. IT IS NOT THE MAIN OBJECTIVE OF THE ASSESSEE CORPORATION TO CONSTRUCT BUILDINGS AND LET OUT THEM TO OTHER PARTIES AS LANDLORD. IT IS ONLY ONE OF THE ANCILLA RY OBJECTIVES OF THE ASSESSEE CORPORATION WHICH PERMITS THE ASSESSEE TO GIVE ITS PROPERTIES ON LEASE TO OTHER WILLING PARTIES. IF T HE ASSESSEE CORPORATION HAS CEASED CARRYING ON OF ITS REGULAR B USINESS OF TOURISM DEVELOPMENT, THEN THE CONTENTION OF THE ASS ESSEE COULD - - ITA 550 & 551 OF 2010, ETC. 7 HAVE BEEN PRIMA FACIE ACCEPTABLE. IN THE PRESENT C ASE, FOR BETTER CARRYING ON OF ITS BUSINESS, THE ASSESSEE HA S LET OUT SOME OF ITS PROPERTIES TO OTHER PERSONS ON THE BASIS OF LEASE AGREEMENTS. 5.7. THE RENTAL/FRANCHISEE INCOME RECEIVED BY THE ASSESSEE CORPORATION IS NOTHING LESS THAN THE INCOM E DERIVED BY THE ASSESSEE CORPORATION IN CARRYING ON OF ITS BUSI NESS IN THE USUAL COURSE. THE PROPERTIES LET OUT BY THE ASSESS EE ARE INVARIABLY THE BUSINESS ASSETS OF THE ASSESSEE CORP ORATION. THE ASSESSEE CORPORATION HAS NEVER TREATED THOSE LEASED OUT PROPERTIES AS NON BUSINESS ASSETS OF THE ASSESSEE CORPORATION. 5.8. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, W E FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ER RED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE L EASE/FRANCHISE INCOME WAS IN THE NATURE OF HOUSE PROPERTY INCOME. WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A PPEALS) ON THIS POINT AND RESTORE THE ORDER OF THE ASSESSING O FFICER. AS HELD BY THE ASSESSING OFFICER, THE LEASE/FRANCHISE INCOM E OF THE ASSESSEE CORPORATION SHALL BE ASSESSED AS BUSINESS INCOME. - - ITA 550 & 551 OF 2010, ETC. 8 5.9. THE FIRST ISSUE IS ACCORDINGLY DECIDED IN FAV OUR OF THE REVENUE. 5.10. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE DISALLOWANCE OF INTEREST ON GOVERNMENT LOANS OF ` 17,55,632/-. IT IS THE CASE OF THE REVENUE THAT THE ENTIRE AMOUNT D UE TOWARDS INTEREST ON LOANS FROM STATE GOVERNMENT WAS NOT PAI D BEFORE FILING THE RETURN OF INCOME. AS RIGHTLY HELD BY TH E COMMISSIONER OF INCOME-TAX(APPEALS), THE AMOUNT OF INTEREST PAYA BLE BY THE ASSESSEE CORPORATION TO THE STATE GOVERNMENT IS NOT HIT BY THE PROVISIONS OF SECTION 43B OF THE ACT AND, THEREFORE , THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THIS REGARD IS NOT PROPER. THE ORDER OF THE COMMISSIONER OF INCOME-TA X(APPEALS) ON THIS ISSUE IS UPHELD. 5.11. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE DISALLOWANCE OF THIRUVALLUVAR STATUE EXPENSES OF ` 45,34,350/-. THIRUVALLUVAR STATUE WAS CONSTRUCTED BY THE GOVERNM ENT OF TAMIL NADU THROUGH THE STATE CONSTRUCTION CORPORATI ON LIMITED. THE COST OF THE CONSTRUCTION WAS ` 6.10 CRORES. THE ENTIRE - - ITA 550 & 551 OF 2010, ETC. 9 EXPENDITURE WAS MET BY THE STATE GOVERNMENT. THERE AFTER, THE STATE GOVERNMENT THROUGH ITS ORDER DIRECTED THE ASS ESSEE CORPORATION, WHICH IS A FULLY OWNED UNDERTAKING OF THE GOVERNMENT OF TAMIL NADU, TO TAKE CARE OF THE MAINT ENANCE OF THE STATUTE AT KANYAKUMARI. THE EXPENDITURE INCURR ED BY THE ASSESSEE CORPORATION IS IN THE NATURE OF SECURITY C HARGES, ELECTRICITY CHARGES, ESTABLISHMENT CHARGES AND EXPE NSES FOR COATING THE STATUTE WITH POLY SILICON, ETC. KANYAK UMARI IS ONE OF THE MOST IMPORTANT TOURIST DESTINATIONS NOT ONLY FO R TAMIL NADU, BUT FOR THE ENTIRE NATION. IT IS THE MAIN OBJECTIV E OF THE ASSESSEE CORPORATION TO DEVELOP AND CARRY ON THE TOURISM ACT IVITIES IN THE STATE OF TAMIL NADU. THEREFORE, IT IS IN THE FITNE SS OF THINGS THAT THE ASSESSEE CORPORATION IS DIRECTED BY THE GOVERNM ENT OF TAMIL NADU TO PROPERLY MAINTAIN THE STATUE OF THIRUVALLUV AR. THIRUVALLUVAR IS A GREAT SAINT OF TAMIL LEGACY. TH E STATUE OF THIRUVALLUVAR ATTRACTS A LOT OF CROWDS IN KANYAKUMA RI. IN THAT WAY, IT PROMOTES TOURISM AS WELL. THE ASSESSEE, BE ING A FULLY OWNED GOVERNMENT OF TAMIL NADU UNDERTAKING, IS BOUN D BY THE ORDERS OF THE STATE GOVERNMENT, ISSUED ON THE BASIS OF THE LARGER POLICY DECISION TAKEN BY THE GOVERNMENT. THE GOVER NMENT OF - - ITA 550 & 551 OF 2010, ETC. 10 TAMIL NADU HAS ENTRUSTED THE ASSESSEE CORPORATION T O MAINTAIN THE STATUE IN LARGER PUBLIC INTEREST, WHICH IS IN T UNE WITH THE DECLARED OBJECTIVES OF THE ASSESSEE CORPORATION TO DEVELOP THE TOURISM DRIVE IN TAMIL NADU. AS THE EXPENDITURE IN CURRED BY THE ASSESSEE IS RECURRING IN NATURE FOR THE PURPOSE OF MAINTENANCE OF THE STATUE, THE SAME IS ONLY REVENUE EXPENDITURE IN NATURE. IT IS TO BE SEEN THAT THE STATUE OF THIRUVALLUVAR IS A PUBLIC PROPERTY AND NOT THE PROPERTY OF THE ASSESSEE CORPORATION. THEREFORE, BY ANY STRETCH OF IMAGINATION, THE EXPENDITURE CANNOT BE TREATED AS CAPITAL. WE, THEREFORE, AGREE WITH THE ORDER OF TH E COMMISSIONER OF INCOME-TAX(APPEALS) AND THIS GROUND RAISED BY TH E REVENUE IS REJECTED. 5.12. THE LAST GROUND RAISED BY THE REVENUE IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE DISALLOWANCE MADE ON ACCOUNT OF ADDED GOVERNMENT GRANTS/REVENUE RECEIPTS. 5.13. THE ASSESSEE CORPORATION IN THE RELEVANT PRE VIOUS YEAR HAS RECEIVED GOVERNMENT GRANTS IN THE FOLLOWIN G MANNER:- 1. GOVERNMENT OF INDIA GRANT .. ` 478.70 LAKHS 2. HADP GRANT .. ` 18.50 LAKHS - - ITA 550 & 551 OF 2010, ETC. 11 3. WGDP GRANT ` 45.00 LAKHS -------------------- ` 542.20 LAKHS -------------------- 5.14. THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE GRANTS RECEIVED FROM THE GOVERNMEN T CANNOT BE TREATED AS REVENUE GRANTS IN THE ABSENCE OF GOVERNM ENT ORDERS FOR THE SAME. IT WAS STATED THAT GOVERNMENT CLARIF ICATION WAS SOUGHT AND IN THE ABSENCE OF CLARIFICATION AS TO TH E NATURE OF GOVERNMENT ASSISTANCE, THESE RECEIPTS CANNOT BE TRE ATED AS REVENUE RECEIPTS AND ADDED TO THE INCOME. BUT, THE ASSESSING OFFICER ADDED THE SAME AS INCOME OF THE ASSESSEE, S TATING THAT NO GOVERNMENT ORDER WAS PRODUCED BEFORE HIM. 5.15. IN THE FIRST APPELLATE PROCEEDINGS THE ASSES SEE CORPORATION HAS PRODUCED ALL THE RELEVANT GOVERNMEN T ORDERS AND CLARIFICATIONS BEFORE THE COMMISSIONER OF INCOM E- TAX(APPEALS). ON PERUSAL OF THOSE PAPERS, THE COMM ISSIONER OF INCOME-TAX(APPEALS) FOUND THAT THE GOVERNMENT OF IN DIA HAS GIVEN A GRANT OF ` 478.70 LAKHS. THIS AMOUNT WAS MAINLY GIVEN BY THE GOVERNMENT OF INDIA TO ERECT ROPEWAY FACILIT IES AT OOTY AND KODAIKANAL IN TAMIL NADU. AN AMOUNT OF ` 2.70 LAKHS WAS MENTIONED AS GRANT FOR OTHERS. - - ITA 550 & 551 OF 2010, ETC. 12 5.16. ANOTHER TWO GRANTS TOTALING TO ` 63.50 LAKHS WERE GIVEN BY THE GOVERNMENT OF TAMIL NADU. THIS AMOUNT WAS LATER CONVERTED BY THE GOVERNMENT OF TAMIL NADU INTO EQUI TY SHARES. THE ROPEWAY FACILITIES PROPOSED FOR OOTY AND KODAIK ANAL WERE LATER DROPPED BY THE GOVERNMENT OF INDIA. THE COMM ISSIONER OF INCOME-TAX(APPEALS) HELD THAT THE GRANTS GIVEN BY T HE GOVERNMENT OF INDIA TOWARDS OOTY AND KODAIKANAL PRO JECTS CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE, AS THOSE PROJECTS HAVE ALREADY BEEN DROPPED BY THE CENTRAL G OVERNMENT. HE ALSO HELD THAT THE GRANTS GIVEN BY THE GOVERNMEN T OF TAMIL NADU AMOUNTING TO ` 63.50 LAKHS ALSO CANNOT BE TREATED AS INCOME OF THE ASSESSEE, AS THOSE GRANTS WERE LATER ON CONVERTED INTO EQUITY CAPITAL. ACCORDINGLY HE DELETED ALL TH OSE ADDITIONS. 5.17. BUT, HE HELD THAT THE AMOUNT OF ` 2.70 LAKHS INCLUDED IN GOVERNMENT OF INDIA GRANT MARKED FOR O THERS SHALL BE IN THE NATURE OF REVENUE INCOME IN THE HANDS OF THE ASSESSEE CORPORATION. ACCORDINGLY HE SUSTAINED AN ADDITION OF ` 2.70 LAKHS UNDER THE CAPTION OF GOVERNMENT GRANT. 5.18. WE CONSIDERED THE ISSUE. THE GRANTS GIVEN B Y BOTH THE GOVERNMENTS OF INDIA AND TAMIL NADU WERE CAPITA L GRANTS FOR - - ITA 550 & 551 OF 2010, ETC. 13 DEVELOPING INFRASTRUCTURAL FACILITIES AT TOURIST DE STINATIONS WHERE THE ASSESSEE CORPORATION IS OPERATING. GOVERNMENT OF INDIA HAS DISBURSED SUCH GRANTS ALSO FOR RESTORATION OF TOURI SM FACILITIES DAMAGED DUE TO TSUNAMI IN TAMIL NADU. IT IS TO BE SEEN THAT THE GRANTS WERE GIVEN BY THE CENTRAL AND STATE GOVERNME NTS TOWARDS SPECIFIC CAPITAL PROJECTS, EITHER FOR RENOV ATION OF DAMAGED FACILITIES OR FOR ERECTING NEW FACILITIES S UCH AS ROPEWAY. THE ENTIRE GRANT HAS BEEN SANCTIONED BY THE RESPECT IVE GOVERNMENTS TO DEVELOP THE TOURISM FACILITIES AVAIL ABLE IN THE STATE OF TAMIL NADU. THEY ARE ALL BASICALLY CAPITA L OUTLAYS. THE GRANTS ARE NOT MADE FOR ANY REVENUE EXPENDITURE IN MAINTAINING SUCH BASIC FACILITIES. 5.19. THE NATURE OF GOVERNMENT GRANTS HAS TO BE EXAMINED IN THE ABOVE SCENARIO. BY ACTING AS PER T HE DIRECTIONS OF THE CENTRAL AND STATE GOVERNMENTS, THE ASSESSEE CORPORATION IS ALSO DEVELOPING BASIC FACILITIES IN TOURISM DEST INATIONS WHERE SUCH FACILITIES ARE PUBLIC PROPERTIES. THE GRANTS ARE NOT GIVEN FOR MEETING THE DAY-TO-DAY EXPENSES OF THE ASSESSEE COR PORATION. 5.20. FURTHER, IT IS TO BE SEEN THAT THE GRANTS GI VEN BY THE STATE GOVERNMENT HAVE ALREADY BEEN CONVERTED INTO E QUITY - - ITA 550 & 551 OF 2010, ETC. 14 CAPITAL. THEREFORE, IT DOES NOT PARTAKE THE CHARAC TER OF INCOME. AS FAR AS THE GRANTS GIVEN BY THE GOVERNMENT OF IND IA ARE CONCERNED, THE PROPOSED PROJECTS WERE DROPPED AND T HE FUNDS ARE DIRECTED TO BE KEPT IN TRUST SO THAT THE FUNDS CAN BE SPENT FOR OTHER ALTERNATE PROJECTS, AS DIRECTED BY THE GOVERN MENT FROM TIME TO TIME. THEREFORE, IN RESPECT OF GOVERNMENT OF INDIA GRANTS ALSO THE FINAL PICTURE IS NOT CLEAR. 5.21. AT ANY RATE, THESE ARE ALL FISCAL GRANTS FRO M GOVERNMENTS TO GOVERNMENT CORPORATION AND THEY DO N OT COME IN THE NATURE OF REVENUE INCOME OF THE ASSESSEE COR PORATION. THOSE GRANTS ARE GIVEN TO THE ASSESSEE CORPORATION BY VIRTUE OF THE DECISIONS TAKEN BY APPROPRIATE GOVERNMENTS TO A DDRESS CERTAIN ISSUES BROUGHT BEFORE THEM. THE ASSESSEE C ORPORATION IS ONLY THE IMPLEMENTING AGENCY. 5.22. THEREFORE, THE COMMISSIONER OF INCOME- TAX(APPEALS) IS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER AGAINST THE GRANTS RECEIVED FROM CENTRAL AND STATE GOVERNMENTS. THIS ISSUE IS DECIDED AGAINST T HE REVENUE. 6. THE APPEAL FILED BY THE REVENUE FOR THE ASSESSM ENT YEAR 2005-06 IS PARTLY SUCCESSFUL. - - ITA 550 & 551 OF 2010, ETC. 15 7. NEXT WE WILL CONSIDER THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL FOR THE ASSESSMENT YEAR 2006 -07 ARE EXACTLY SIMILAR TO THOSE GROUNDS CONSIDERED FOR THE ASSESSMENT YEAR 2005-06. IN VIEW OF OUR ORDER PASSED FOR THE ASSESSMENT YEAR 2005-06, WE ACCEPT THE CONTENTION OF THE REVEN UE IN RESPECT OF RENTAL/FRANCHISE INCOME AND HOLD THAT TH E ASSESSING OFFICER IS JUSTIFIED IN TREATING THE SAID INCOME AS PART OF ASSESSEES BUSINESS INCOME. 7.1. AS FAR AS THE OTHER GROUNDS ARE CONCERNED, TH EY ARE ALL DISMISSED, AS HAS BEEN DONE FOR THE ASSESSMENT YEAR 2005-06. 8. THE APPEAL FILED BY THE REVENUE FOR THE ASSESSM ENT YEAR 2006-07 IS PARTLY SUCCESSFUL. 9. NEXT WE WILL CONSIDER THE CROSS OBJECTIONS FILE D BY THE ASSESSEE. THE GROUNDS RAISED IN THE CROSS OBJE CTIONS ARE POISED TO SUPPORT THE ORDERS OF THE COMMISSIONER OF INCOME- TAX(APPEALS). AS THE GROUND OF THE REVENUE IN RESP ECT OF RENTAL INCOME VIS--VIS BUSINESS INCOME IS ALLOWED BY THE TRIBUNAL AND THE OTHER GROUNDS RAISED BY THE REVENUE ARE DISMISS ED, WE FIND - - ITA 550 & 551 OF 2010, ETC. 16 THAT THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE LIABLE TO BE REJECTED AS INFRUCTUOUS. 10. IN RESULT, THE APPEALS FILED BY THE REVENUE AR E PARTLY ALLOWED AND THE CROSS OBJECTIONS FILED BY THE ASSES SEE ARE DISMISSED. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON MONDAY, THE 12 TH OF AUGUST, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 12 TH AUGUST, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.
