COMMISSIONER OF INCOME TAX V. M/S N.S. COMMITTEE

IAPL/759/2012

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax against the decision of the ITAT, which confirmed the CIT (A)'s order. The dispute centered on whether the funds received by M/S N.S. Committee from the State Government for road construction projects should be considered as income under the Income Tax Act, 1961. The department argued that the funds, although used for specific projects, resulted in a surplus and should be taxed. However, both the CIT (A) and the ITAT found that these funds were not part of the assessee's income as they were specific grants for specific purposes and did not form part of the normal business activities.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 691386 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 16-01-2018
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. U.P. Upbhokta Sahkari Sangh Ltd. (2007) 288 ITR 106 (Allahabad)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVINDRA SINGH; DIPTIMAN SINGH
• Assessee Lawyers: MANISH GOYAL
• Keywords: Grant-in-Aid; Income tax appeal; Revenue receipt; Road Construction; Surplus Income; Cane Cooperative Society
• Section: 11; 260A; 2(24)

Judgement Text

"Court No. - 35 Case :- INCOME TAX APPEAL No. - 759 of 2012 Appellant :- Commissioner Of Income Tax Respondent :- M/S N.S. Committee Counsel for Appellant :- S.S.C. I.T.,Manish Goyal Counsel for Respondent :- Ravindra Singh,Diptiman Singh Hon'ble Bharati Sapru,J. Hon'ble Neeraj Tiwari,J. Heard learned counsel for the department and Sri Diptiman Singh, learned counsel for the assessee. This is an appeal filed by the department under section 260A of the Income Tax Act, 1961 for the assessment year 2006-07 against the order of the Tribunal dated 4.4.2012. The questions of law sought to be answered are hereunder; \"1. Whether on the facts and circumstances of the case the Hon'ble ITAt is justified in confirming order of the CIT (A) that the Anshdan & Nirman Yojna Fund received for the sanctioned project and spent by the assessee is not forming part of total receipts by ignoring the fact that the assessee has not utilised these funds. 2. Whether on the facts and circumstances of the case the Hon'ble ITAT is justified in confirming order of the CIT (A) that Anshdan and funds for Nirman Yojna were given to the assessee for specific project of road construction and these funds have been spent for those specific project ignoring that the funds have not been spent for specific project of road construction which resulted in surplus of income. 3. Whether on the facts and circumstances of the case the Hon'ble ITAT is justified in confirming order of hte CIT (A) that mere generation of surplus will not amount to generation of profit so long as surplus is not distributed, ignoring that the assessee is having specific project of road constructions and also ignoring that income of the assessee is not exempt under section 11 of the I.T. Act, 1961.\" Both the CIT as well as the Tribunal after examining the matter have come to the conclusion that money advanced by the State Government to the assessee Cane Cooperative Society were in the nature of grant in aid for construction of roads and the sum which was given by the State Government and the funding given by State Government for grant in aid was used for that very purpose. No surpluses were created. The Tribunal after examining the matter has come to the conclusion that the provisions of Section 2(24) of the Act would not cover such grant in aid to be included as an income for reasons that it cannot be naturally imputed that the activity of the construction of roads was any part of the business of Cane Cooperative Society and it did not relate to the normal business activities of the assessee cane committee. The grant in aid that was extended to them for a specific purpose and expenditure, therefore, could not be termed as a revenue receipt so as to form part of the total income. Learned counsel for the respondents-assessee had relied on a decision of this Court in the case of Commissioner of Income Tax Vs. U.P. Upbhokta Sahkari Sangh Ltd. (2007) 288 ITR 106 (Allahabad) wherein a similar question had arisen with regard to the income of cane society and this Court has held hereunder; \"8. From a perusal of the aforesaid findings, we are of the considered opinion that the amount in question was given by the State Government for specific purpose. It did not partake of the nature of income of the respondent-assessee. Even if it is to be treated as an income, it would not be liable to be taxed as it is stated that there was diversion of the income by way of overriding title on the said amount by way of a condition to distribute it as the salary to the employees of the bhandars.\" The assessee in that case was also Cane Cooperative Society. In view of above, the questions of law are answered in favour of the assessee and against the department. The appeal is accordingly, dismissed. Order Date :- 16.1.2018 Arvind "