CIT-II, CHANDIGARH V. M/S PUNJAB ENERGY DEVELOPMENT AGENCY

ITA/588/2009

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-II, Chandigarh against the order of the Income Tax Appellate Tribunal (ITAT), which had favored the Punjab Energy Development Agency regarding the treatment of grants-in-aid and interest income under the Income Tax Act, 1961. The primary legal issues were whether the receipts of grants-in-aid from the government were to be considered as voluntary contributions for the purposes of sections 11 and 12 of the Act, and whether the interest income earned on surplus funds was exempt under section 11. The ITAT and the Commissioner of Income Tax (Appeals) had previously ruled in favor of the assessee, leading to the Department's appeal, which was ultimately dismissed by the High Court.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 743482 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 01-12-2009
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Chandigarh-II Vs. M/s Punjab State Sports Council, Commissioner of Income Tax Chandigarh-II Vs. M/s Punjab Energy Development Agency
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Exempt income; Grants-in-aid; Income Tax; Interest income; Voluntary contributions
• Section: 11; 12; 260-A

Judgement Text

"Income Tax Appeal No.588 of 2009 1 IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH. Income Tax Appeal No.588 of 2009 Date of Decision:-1.12.2009 Commissioner of Income Tax-II-, Chandigarh ...Appellant Versus M/s Punjab Energy Development Agency, Chandigarh ...Respondent CORAM: HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE MEHINDER SINGH SULLAR Present: Ms.Urvashi Dhugga, Advocate for the appellant. Satish Kumar Mittal J. (Oral): The Department has filed the instant appeal under section 260-A of the Income Tax Act, 1961 (hereinafter to be referred as “the Act”) against the order dated 29.4.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench-A (hereinafter to be referred as “the ITAT”), in ITA No.764/Chandi/2008 in case of the assessee for the assessment year 2005-2006 by raising following substantial questions of law:- i. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was correct in holding that the receipts of grants-in-aid by the assessee from Central/State Govt. are not voluntary contributions for Income Tax Appeal No.588 of 2009 2 the purpose of section 11 read with 12 of the Income Tax Act and are thus, not required to be taken into account as income of the assessee for the purpose of ascertaining the amount expended or the amount to be accumulated? ii. Whether on the facts and the circumstances of the case, the Hon'ble ITAT was right in holding interest income to be exempt under section 11 of the Income Tax Act, 1961? In the aforesaid assessment year, the assessee received grants to the tune of Rs.21,98,35,447/- from the Central and State Governments and as per instructions, 85% out of the above said amount which comes to Rs.18,68,60,130/- was required to be spent but only an amount of Rs.13,02,12,366/- was spent leaving the balance of Rs.5,23,55,740/-. During the course of arguments, learned counsel for the appellant has stated that the ITAT has wrongly mentioned in the order that the balance amount was Rs.5,23,55,740/-. In fact, the balance amount comes to Rs.5,66,47,764/- instead of Rs.5,23,55,740/- and the same should be read as such. The Assessing Officer while invoking the provisions of section 11 (1) read with section 12 (1) of the Act has held that since the assessee has not spent 85% amount of above said grants (i.e.Rs.18,68,60,130/-), therefore, the remaining amount of Rs.5,66,47,764/- is liable to be assessed to tax as income of the assessee. Assessing Officer also disallowed the interest income earned on surplus funds by holding that the interest income cannot be treated as income from voluntary contributions. Consequently, the Income Tax Appeal No.588 of 2009 3 income of Rs.28,95,927/- was also held to be taxable. The said order of the Assessing Officer was set aside in appeal by the Commissioner of Income Tax (Appeals), Chandigarh vide order dated 25.6.2008 while holding that these tied up grants cannot be equated with the voluntary contributions and, therefore, it would not be treated as the income of the assessee. While coming to the said conclusion, the CIT(A) relies upon the decision of ITAT in ITA No.904/Chandi/2006 dated 20.7.2007. The second issue was also decided in favour of the assessee while holding that the interest earned by the assessee on the aforesaid surplus fund will be treated its income for the purpose of sections 11, 12 and 13 of the Act. While deciding this issue, the learned CIT(A) has again relied upon the aforesaid decision in ITA No.904/Chandi/2006 dated 20.7.2007. Against the aforesaid decision of the CIT(A), the Department filed the appeal, which was dismissed by ITAT vide impugned order dated 29.4.2009. Against the said order, the instant appeal has been filed. Learned counsel for the appellant very fairly states that both the aforesaid questions of law have already been answered by this Court against the revenue. Question No.1 was answered against the revenue by this Court in ITA No.190 of 2008 titled “Commissioner of Income Tax, Chandigarh-II Vs. M/s Punjab State Sports Council, SCO 116-117, Sector 34-A, Chandigarh”, which was arising from the order of ITA No.904/Chandi/2006 dated 20.7.2007. The second question has been decided against the revenue by this Court in ITA No.666 of 2008 on 31.7.2009 in case of Commissioner of Income Tax Chandigarh-II Vs. M/s Punjab Energy Development Agency, Plot Income Tax Appeal No.588 of 2009 4 No.1-2, Sector 33-A, Chandigarh. In view of the aforesaid factual position, we find no merit in this appeal as both the questions of law have already been decided against the revenue by this Court. Dismissed. (Satish Kumar Mittal) Judge (Mehinder Singh Sullar) Judge 1.12.2009 AS "