CHHATTISGARH STATE CIVIL SUPPLIES CORPORATION LIMITED, RAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX 3(1), RAIPUR

ITA 12/RPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4442 (ITAT-RAIPUR)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 25-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: PAUAN VED; S R RAO S
• Keywords: Revision of order; Question of law
• Section: 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH : RAIPUR BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.12/RPR/2018 ASSESSMENT YEAR: 2014-15 CHHATTISGARH STATE CIVIL SUPPLIES CORPORATION LTD., THE HITAVADA PARISAR, AVANI VIHAR, RAIPUR (CG). PAN: AACCC1772C VS. ASSISTANT COMMISSIONER OF INCOME TAX 3(1), AAYKAR BHAVAN, CIVIL LINES, RAIPUR (CG). (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PAUAN VED & SHRI S.R. RAO, ADVOCATES REVENUE BY : SHRI R.K. SINGH, CIT, DR DATE OF HEARING : 06.08.2018 DATE OF PRONOUNCEMENT: 23.10.2018 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.11.2017 OF THE CIT(A)-I, RAIPUR, RELATING TO ASSESSMENT YEAR 2 014-15. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE IS A NODAL DISTRIBUTION AGENCY OF THE GOVERNMENT OF CHHATTISGARH UNDER PUBL IC DISTRIBUTION SYSTEM AND IS ITA NO.12/RPR/2018 2 INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 WITH THE MAIN OBJECT OF CARRYING OUT ACTIVITIES RELATING TO FOOD GRAINS, OT HER COMMODITIES AND DISTRIBUTION THEREOF UNDER VARIOUS WELFARE SCHEMES OF THE GOVERN MENT. THE ASSESSEE DERIVES INCOME FROM PROCUREMENT AND DISTRIBUTION OF COMMODI TIES LIKE WHEAT, RICE, SUGAR, PADDY, ETC., UNDER PUBLIC DISTRIBUTION SCHEME. IT F ILED ITS RETURN OF INCOME ON 31 ST MARCH, 2016 DECLARING TOTAL INCOME OF RS.1,46,40,87 0/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON P ERUSAL OF FORM 3CD REPORT, FOUND THAT THE ASSESSEE HAS CHANGED ITS ACCOUNTING POLICY FOR THE YEAR UNDER CONSIDERATION RESULTING IN DECREASE IN PROFIT BY RS .194,31,98,824/- ON ACCOUNT OF SUBSIDY INCOME FROM GOVERNMENT OF INDIA AND STATE. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT B E DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT WAS EXPLAINED BY THE AS SESSEE THAT: A. UP TO PREVIOUS YEAR, EXCESS OF PROVISIONAL ECON OMIC COST (AS APPROVED BY GOV.) OVER SALE REALIZATION HAS BEEN AC COUNTED FOR AS PRICE DIFFERENCE CLAIM/CLAIM OF LOSS (HEREINAFTER R EFERRED AS SUBSIDY) ON ACCRUAL BASIS BASED ON THE QUANTITY D ISTRIBUTED (SOLD) UNDER VARIOUS SCHEME OF PDS. SINCE EXCESS/SH ORT SUBSIDY RECEIVED/CLAIMED ON THE BASIS OF PROVISIONAL ECONOM IC COST IS REFUNDABLE/RECEIVABLE AT THE TIME OF ASCERTAINMENT OF FINAL ECONOMIC COST HENCE DURING THE YEAR TO RECOGNIZE AP PROPRIATE SUBSIDY INCOME, THE CORPORATION HAS CHANGED POLICY AND ACCORDING TO NEW POLICY EXCESS OF ACTUAL COST (AS R ECKONED BY CORPORATION) OVER SALE REALIZATION IS ACCOUNTED FOR AS SUBSIDY INCOME AND EXCESS/SHORT RECEIPTS OF SUBSIDY ON DIST RIBUTED (SOLD) QUANTITY ON THE BASIS OF PROVISIONAL ECONOMIC COST (AS APPROVED BY GOVT./ PROPOSED TO STATE GOVT. ) IS RECOGNIZED A S REFUNDABLE TO/ RECOVERABLE FROM GOVERNMENTS. HENCE DUE TO CHANGE I N POLICY OF RECOGNISING SUBSIDY FROM CENTRAL/STATE GOVT., THE P ROFIT OF THE CORPORATION HAS BEEN DECREASED BY RS. 194,31,98,824 ,06 AS DISCLOSED IN NOTE NO. 25 OF THE ACCOUNT. B. PROVISION OF INTEREST ON DCP RICE IS NOT REQUIRE D NOW DUE TO CHANGE IN ACCOUNTING POLICY OF RECOGNIZING SUBSIDY AND THEREFORE ITA NO.12/RPR/2018 3 PROVISION OF INTEREST ON DCP RICE IS NOT MADE DURIN G THE YEAR AND THIS RESULTED THAT PROFIT FOR THE YEAR IS INCREASED BY RS. 111,94,86,414,08/-. SINCE THE CHANGE IN ACCOUNTING POLICY WAS FOUND TO BE APPROPRIATE AND WAS CHANGED TO RECOGNIZE APPROPRIATE SUBSIDY INCOME RECEIVABLE FROM GOVERNMENT AS PER ACCOUNTING STANDARD AS-12 RECOGN ITION OF GOVERNMENT GRANTS UNDER PARA 6 OF SUCH STANDARDS, THERE WERE NO QUALIFICATIONS IN OUR AUDITORS REPORT UNDER COMPANI ES ACT. 1956 DATED 30.03.2016 AND OUR REPORT IN FORM 3CD DATED 30.03.2 016. THERE IS NO CHANGE IN METHOD OF ACCOUNTING, BUT THE ABOVE MATTE R IS CHANGE OF ACCOUNTING POLICY TO RECOGNIZE APPROPRIATE REVENUE. 3. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, AS PER ACCOUNTING STANDARD-8, AN ENTITY IS PERMITTED TO CHANGE AN ACCOUNTING POLICY ONLY IF THE CHANGE I S REQUIRED BY A STANDARD OR INTERPRETATION; OR RESULTS IN THE FINANCIAL STATEM ENTS PROVIDING RELIABLE AND MORE RELEVANT INFORMATION ABOUT THE EFFECTS OF TRANSACTI ONS, OTHER EVENTS OR CONDITIONS ON THE ENTITYS FINANCIAL POSITION, FINANCIAL PERFORMA NCE OR CASH FLOWS. THE A.O. OBSERVED THAT THE ASSESSEE HAS SUPPRESSED ITS PROFI T BY CHANGE OF POLICY ON ITS OWN WITHOUT FOLLOWING ACCOUNTING STANDARD-8. FURTHER, THE AUDITORS WHO HAVE AUDITED THIS CASE HAS SUBMITTED A WRITTEN SUBMISSION ON 21 ST DECEMBER, 2016 RELATING TO ACCOUNTING POLICY, WHEREIN THEY REPORTED AS UNDER:- THE REPORT OF C&AG DATED 12.08.2016, DOES NOT HAVE ANY QUALIFICATIONS FOR ABOVE CHANGES IN ACCOUNTING POLI CY, WHICH CONFIRMS THE FACTS THAT THE SAID CHANGE IN ACCOUNTING POLICY WAS IN CONSONANCE WITH ACCOUNTING STANDARDS AND HAS NO BEARING ON FIN ANCIAL RESULTS OF THE CORPORATION. ITA NO.12/RPR/2018 4 4. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE, THE A.O. ADDED THE SUM OF RS.194,31,98,824/- ON ACCOUNT OF SUBSIDY REC EIVED FROM GOVERNMENT OF INDIA AND STATE GOVERNMENT TO THE TOTAL INCOME. 5. BEFORE CIT(A), THE ASSESSEE MADE EXTENSIVE ARGUMENT S. IT WAS SUBMITTED THAT THE IMPUGNED AMOUNT WAS PAID BY GOVERNMENT TO RUN T HE PUBLIC DISTRIBUTION SCHEME TO THE ASSESSEE IN THE CAPACITY OF NODAL AGENCY AND IT DOES NOT BELONG TO THE ASSESSEE, THEREFORE, IT IS NOT ITS INCOME. IT WAS ARGUED THA T THE ASSESSEE PROCURES THE COMMODITIES AT NOTIFIED PRICES AND DISTRIBUTES AT C ONCESSIONAL RATE PRESCRIBED BY THE GOVERNMENT FOR WHICH GOVERNMENT OF INDIA AND CHHATT ISGARH GOVERNMENT PAID THE CONCESSION COMPONENT (HEREINAFTER REFERRED TO AS SU BSIDY) IN ADVANCE TO THE NODAL AGENCY. THE ENTIRE MONEY PAID TO THE ASSESSEE REPR ESENTS GOVERNMENT MONEY AND NOT THAT OF THE ASSESSEE. THE ASSESSEE IS AN OUTFIT TO OPERATE IN FIDUCIARY CAPACITY. THE AMOUNT IS NOT REAL INCOME IN CHARACTER AND, THEREFO RE, NOT ASSESSABLE TO TAX. FOR THE ABOVE PROPOSITION, THE ASSESSEE RELIED ON THE DECIS ION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPME NT & FINANCE CORPORATION REPORTED IN (2006) 284 ITR 582 (KAR). IT WAS ARGUED THAT IN THE PRESENT CASE, THE ASSESSEE IS A NODAL AGENCY FOR IMPLEMENTI NG PDS AND THE MONEY PAID TO IT BY THE GOVERNMENT WAS TO OPERATE FOOD SECURITY SCHE ME OF THE GOVERNMENT OF INDIA AND THE STATE GOVERNMENT. THERE IS NO OTHER BUSINES S DONE BY THE ASSESSEE. RELYING ON VARIOUS DECISIONS, IT WAS SUBMITTED THAT THE AMO UNTS RECEIVED BEING THE MONEY OF ITA NO.12/RPR/2018 5 THE GOVERNMENT AND AT THE MOST A FORM OF ADVANCE RE FUNDABLE/ADJUSTABLE AGAINST FUTURE GRANTS IS NOT LIABLE TO TAX. 6. WITHOUT PREJUDICE TO THE ABOVE, IT WAS ARGUED TH AT IN THE PROCESS OF IMPLEMENTATION OF PDS, GOVERNMENT NOTIFIES BOTH PRO CUREMENT PRICE AND SALES REALIZATION PRICE ON YEAR TO YEAR BASIS. CONVERSE TO NORMAL BUSINESS ATTRIBUTE, SINCE COMMODITIES ARE NECESSARILY DISTRIBUTED AT CONCESSI ONAL RATES, THE SALE PRICE IS ALWAYS LOWER THAN THE PROCUREMENT PRICE. THE PAYMENT OF S UBSIDY IS GOVERNED BY TERMS CONTAINED IN PARA-8 TO 12 OF MOU SIGNED BETWEEN CEN TRAL GOVERNMENT AND THE GOVERNMENT OF CHHATTISGARH ON 12 TH DECEMBER, 2002. THE GOVERNMENT OF INDIA PAYS SUBSIDY ON DECENTRALIZED PROCUREMENT AS PER ABOVE T ERMS, HOWEVER, THE AMOUNT OF SUBSIDY SHALL NEVER EXCEED THE ACTUAL PROCUREMENT C OST. ACCORDINGLY, THERE WILL NEVER BE ANY PROFIT ACCRUED OR RECEIVED BY THE ASSESSEE. 7. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE MAINT AINED REGULAR BOOKS OF ACCOUNT WHICH WAS AUDITED BY THE STATUTORY AUDITORS UNDER T HE COMPANIES ACT AND INCOME-TAX ACT. BEING A GOVERNMENT COMPANY, THE COMPTROLLER & AUDITOR GENERAL OF INDIA (CAG) ALSO CONDUCTED AUDIT AND THE SAID AUDIT WAS C OMPLETED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH WAS FILED DURING THE ASSE SSMENT PROCEEDINGS. IT WAS SUBMITTED THAT ON THE BASIS OF PREVIOUS EXPERIENCE AND APPLICABLE ACCOUNTING STANDARDS, THE STATUTORY AUDITORS ADVISED THE ASSES SEE TO CHANGE ITS ACCOUNTING POLICY WITH RESPECT TO REVENUE RECOGNITION FOR BETTER DEPI CTION OF THE RESULTS. IN THE CASE OF THE ASSESSEE, GOVERNMENT OF INDIA NOTIFIES THE FINA L RATES FOR PROCUREMENT OF RICE AFTER ITA NO.12/RPR/2018 6 PASSING OVER OF SEVERAL FINANCIAL YEARS FROM THE RE LEVANT YEAR THAT TOO WITH SUBSTANTIAL VARIATIONS WITH REFERENCE TO PEC RATES. THEREFORE, BEING AN ADVICE BY THE AUDITORS, THE ASSESSEE HAD TO CHANGE ITS ACCOUNTING POLICY WI TH REFERENCE TO RECOGNITION OF SUBSIDY RATES FROM THE GOVERNMENT AND IT WAS ACCORD INGLY CHANGED BONA FIDELY FOR DEPICTING TRUE AND FAIR VIEW OF THE ACCOUNTS. RELYI NG ON VARIOUS DECISIONS, IT WAS SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER IS NOT JUSTIFIED. 8. HOWEVER, THE LD.CIT(A) ALSO WAS NOT SATISFIED WI TH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESS ING OFFICER BY OBSERVING AS UNDER:- 2.3 FACTS BEING AS ABOVE, THE LD AR HAS CONTENDED THAT THE ASSESSEE BEING A GOVERNMENT CONCERN ENTRUSTED TO IMPLEMENT G OVERNMENT PROGRAMMES, IT CANNOT HAVE INCOME. IT RECEIVES REIM BURSEMENT OF COST WHICH IS NOT INCOME. HOWEVER, AS PER THE MOU O F THE CORPORATION WITH THE GOVERNMENT 95 PERCENT OF THE E CONOMIC COST IS REIMBURSED IMMEDIATELY EVERY YEAR AND 5 PERCENT IS REIMBURSED AFTER SUBMISSION OF UTILIZATION CERTIFICATE. FURTHER A CE RTAIN PERCENTAGE FIXED BY THE GOVERNMENT IS PAID TO THE CORPORATION FOR ACTING AS AGENCY OF GOVERNMENT. THUS IT IS NOT CORRECT TO SAY THAT THE ASSESSEE CORPORATION HAS NO INCOME. IT WORKS ON COMMERCIAL L INES BY PURCHASE OF PRODUCE FROM FARMERS AND SALE THEREOF TO CUSTOME RS. PROFIT ELEMENT IS EMBEDDED IN THIS COMMERCIAL ACTIVITY AND RECEIVE D COMMISSION FROM GOVERNMENT. THE ASSESSEE HAS BEEN REGISTERED A S A COMPANY AND THEREFORE IT HAS TO BE TAXED AS COMPANY MAINTAINING IS ACCOUNTS ON MERCANTILE SYSTEM OF ACCOUNTING. IF FACT ASSESSEE H AS BEEN COMPUTING ITS INCOME AND OFFERING THE SAME FOR TAXES OF COMME RCIAL LINES TILL LAST AY 2013-14. AS PER ACCOUNTING PRINCIPAL ASSESSEE HAS TO ACCOUNT AN INCOME IN THE YEAR IN WHICH IT IS ACCRUED. ON THE FACTS OF THE CA SE WHEN THE GOVERNMENT ANNOUNCES RATES FOR A YEAR AND COMMITS I TSELF TO PAY TO THE STATE GOVERNMENT/CORPORATION AT SUCH ANNOUNCED RATES THE INCOME HAS ACCRUED. THEREFORE, ASSESSEE MUST ACCOUN T THAT INCOME FOR THAT YEAR. SUBSEQUENTLY IF AND WHEN THE FINAL R ATES ARE ANNOUNCED ITA NO.12/RPR/2018 7 AND THERE IS ANY CHANGE FROM THE PROVISIONAL RATES, ASSESSEE WILL ADJUST THE INCOME. IN THE FY 2013-14 RELEVANT TO AY 2014-15 ASSESSEE HAS INCURRED TOTAL COST OF RS.7108,29,77,0 96/- AND IT HAS SHOWN SALES REALIZATION OF RS. 1413,26,44,196/- IS THE AMOUNT TO BE RECOVERED OR CLAIMED AS PER THE NEW ACCOUNTING SYST EM WHICH ASSESSEE WANTS TO ADOPT. HOWEVER, IT HAS ALREADY CL AIMED FOR RECEIVED RS. 5890,72,42,263/- AS PROVISIONAL REIMBURSEMENT. THE EXCESS OF RS. 194,31,91,824/- H AS ALREADY BEEN RECEIVED AND UTILIZED BY THE CORPORATION. ON THE ONE HAND ASSESSEE HAS ALREADY R ECEIVED THE REIMBURSEMENT WITH EMBEDDED COMMISSION INCOME FROM GOVERNMENT ON THE OTHER HAD IT DOES NOT WANT TO PAY INCOME TAX ON THIS AMOUNT. MOREOVER, IT HAS NO SEPARATE SETS OF A CCOUNT ABOUT HOW MUCH AGENCY COMMISSION IT RECEIVED FOR WORKING AS G OVERNMENT AGENCY. THUS THE OLD METHOD OF COMPUTATION OF PROFIT WAS AN APPROPRIATE METHOD. IN ORDER TO CHANGE THE ACCOUNTING OF ONE OF THE ITE MS I.E RECEIPT IN THIS CASE, FROM MERCANTILE TO CASH SYSTEM AND TO AC COUNT OTHER ITEMS OF EXPENDITURE AND INCOME ON MERCANTILE SYSTEM IS N OT A LOGICAL AND APPROPRIATE WAY TO COMPLETE THE ACCOUNTS. MOREOVER THERE IS LARGE TIME LAPSE BETWEEN THE ANNOUNCEMENT OF PROVISIONAL RATES AND FINAL RATES. FOR THE YEAR 2008-09 PROVISIONAL RATES WERE ANNOUNCED VIDE ORDER DATED 11/11/2008. FINAL RATES WERE ANNOUNCED VIDE ORDER DATED 14/01/2016. THE FINAL RATES WERE ANNOUNCED 8 YEARS AFTER THE INITIAL RATES. IN PAST EXCEPT FOR TWO YEARS 2009-10 AND 201 0- 11, IN ALL OTHER YEARS FINAL RATES WERE ALWAYS MORE THAN THE PROVISI ONAL RATES. IF ASSESSEE IS ALLOWED TO ADOPT THE CASH SYSTEM, WHENE VER FINAL RATES ARE ANNOUNCED AND THESE ARE MORE THAN PROVISIONAL RATES , THERE IS NO RECOURSE WITH THE DEPARTMENT TO TAX THE ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE AS A RESULT OF FINAL ORDER, A S THE CASE CANNOT BE REOPENED BEYOND THE PERIOD OF SIX YEARS. SUCH A SIT UATION WILL NOT BE OCCASIONAL OR RARE BUT WILL HAPPEN YEAR AFTER YEAR. THEREFORE, IN THE INTEREST OF GOVERNMENT REVENUE AND IN ACCORDANCE WI TH THE ACCOUNTING PRINCIPLES, THE CHANGE IN THE SYSTEM OF ACCOUNTING TO CASH CANNOT BE ALLOWED. THE ADDITION MADE BY THE AO IS T HEREFORE SUSTAINED AND APPELLANTS GROUNDS ARE REJECTED. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT CORREC T IN CONFIRMING ITA NO.12/RPR/2018 8 THE ADDITION OF RS. 1,94,31,98,284/- MADE BY ASSESS ING OFFICER SOLELY ON THE BASIS OF AUDITORS OBSERVATION IN FORM NO.3C D WITHOUT CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE IN THEIR ENTIRETY? ADDITIONAL GROUNDS OF APPEAL 2. IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NO T CORRECT IN NOT APPRECIATING THE FACT THAT CONCESSION COMPONENT REC EIVED BY APPELLANT GOVT, COMPANY IN THE COURSE OF IMPLEMENTING GOVT.S PROJECT OF PUBLIC DISTRIBUTION SYSTEM AS ITS AGENT, THE SURPLUS OF WH ICH, IF ANY, WAS REFUNDABLE OR ADJUSTABLE IN FUTURE, WAS NOT INCOME ASSESSABLE TO TAX UNDER THE INCOME-TAX ACT, 1961. 3. IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THERE WAS NO REAL INCOME ACCRUED OR ARISEN TO THE ASSESSEE. 4. IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJECTING THE CHANGE IN ACCOUNTING POLICY TO COMPLY WITH ACCOUNTI NG STANDARD AS- 12 RECOGNITION OF GOVERNMENT GRANTS, WITHOUT CHAN GE IN METHOD OF ACCOUNTING. 5. THE APPELLANT RESERVES THE RIGHTS TO ADD, AMEND, OM IT OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL WITH PERMISSION OF THE HONBLE APPELLATE AUTHORITY. 10. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOS ED THE ORDER OF THE CIT(A). REFERRING TO PAGE 75 OF THE PAPER BOOK, IT DREW THE ATTENTION OF THE BENCH TO THE NOTE GIVEN BY THE AUDITORS REGARDING CHANGE IN ACCOUNTING POLI CY WHICH READ AS UNDER:- 1.4 CHANGE IN ACCOUNTING POLICY A. UPTO PREVIOUS YEAR, EXCESS OF PROVISIONAL, ECONOMIC COST (AS APPROVED BY GOVT.) OVER SALE REALISATION HAS BEEN A CCOUNTED FOR AS PRICE DIFFERENCE CLAIM /CLAIM OF LOSS (HEREIN AFTER REFERRED AS 'SUBSIDY') ON ACCRUAL BASIS BASED ON THE QUANTITY D ISTRIBUTED (SOLD) UNDER VARIOUS SCHEME OF PDS, SINCE EXCESS/SHORT SUB SIDY ITA NO.12/RPR/2018 9 RECEIVED/CLAIMED ON THE BASIS OF PROVISIONAL ECONOM IC COST IS REFUNDABLE/RECEIVABLE AT THE TIME OF ASCERTAINMENT OF FINAL ECONOMIC COST HENCE DURING THE YEAR TO RECOGNISED APPROPRIAT E SUBSIDY INCOME, THE CORPORATION HAS CHANGED POLICY AND ACCORDING TO NEW POLICY, EXCESS OF ACTUAL COST (AS RECKONED BY CORPORATION) OVER SALE REALISATION IS ACCOUNTED FOR AS SUBSIDY INCOME AND EXCESS/SHORT RECEIPTS OF SUBSIDY ON DISTRIBUTED (SOLD) QUANTITY ON THE BASIS OF PROVISIONAL ECONOMIC COST (AS APPROVED BY GOVT/ PRO POSED TO STATE GOVT.) IS RECOGNISED AS REFUNDABLE TO/ RECOVERABLE FROM GOVERNMENTS. HENCE DUE TO CHANGE IN POLICY OF RECOGNISTING SUBSI DY FROM CENTRAL/STATE GOVT, THE PROFIT OF THE CORPORATION H AS BEEN DECREASED BY RS.194,31,98,824.06 AS DISCLOSED IN,NOTE NO. 25 OF THE ACCOUNT. B. PROVISION OF INTEREST ON DCP RICE IS NOT REQUIRE D NOW DUE TO CHANGE IN ACCOUNTING POLICY OF RECOGNISING SUBSIDY AND THEREFORE PROVISION OF INTEREST ON DCP RICE IS NOT MADE DURIN G THE YEAR AND THIS RESULTED THAT PROFIT FOR THE YEAR IS INCREASED BY R S. 111,94,86,414.08 11. REFERRING TO PARA 2.3 OF THE ORDER OF THE CIT(A ), HE SUBMITTED THAT THE CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS CHANGED I TS SYSTEM OF ACCOUNTING TO CASH SYSTEM WHICH IS FACTUALLY INCORRECT SINCE THE ASSES SEE IS ALWAYS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. REFERRING TO THE CERTIFICATE ISSUED BY THE AUDITORS, A COPY OF WHICH IS PLACED ON PAGE 98 OF THE PAPER BOOK, HE DR EW THE ATTENTION OF THE BENCH TO THE COMMENTS OF THE AUDITOR REGARDING CHANGE IN ACC OUNTING POLICY. REFERRING TO PAGE 99 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE ACCOUNTING TREATMENT OF GOVERNMENT GRANTS WHERE IT HAS BEEN ME NTIONED THAT THE GRANT AND EXPENDITURE HAS TO BE TAKEN SIMULTANEOUSLY. REFERR ING TO PAGE 100 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO PARA 6.5 OF T HE ACCOUNTING TREATMENT OF GOVERNMENT GRANTS. HE SUBMITTED THAT THERE SHOULD BE A MATCHING PRINCIPLE FOR ACCOUNTING THE GOVERNMENT GRANTS AND EXPENDITURE TO BE INCURRED THEREON AND THE ASSESSEE HAS FOLLOWED THE SAME. REFERRING TO PAGE 109 OF THE PAPER BOOK, HE DREW THE ITA NO.12/RPR/2018 10 ATTENTION OF THE BENCH TO THE COMMENTS OF THE CAG A ND SUBMITTED THAT NOWHERE THE CAG HAS GIVEN ANY ADVERSE COMMENTS. REFERRING TO P AGE 113 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE MOU BETWEEN THE CENTRAL GOVERNMENT AND THE GOVERNMENT OF CHHATTISGARH AND SUBSEQUENTLY DREW TH E ATTENTION OF THE BENCH TO PARA 8 OF THE SAID MOU WHICH READ AS UNDER:- 8. THE ECONOMIC COST OF RICE WILL BE FIXED BY THE CENTRAL GOVERNMENT ON PROVISIONAL BASIS SUBJECT TO THE FINA L ADJUSTMENT ON THE SUBMISSION OF AUDITED ANNUAL ACCOUNTS BY THE STATE GOVERNMENT, NOT LATER THAN SIX MONTHS AFTER THE CLOSE OF THE RELEVA NT MARKETING SEASON. . . 10. ADVANCE SUBSIDY WILL BE RELEASED BASED ON QUART ERLY CLAIM OF SUBSIDY IN THE FIRST MONTH OF EVERY QUARTER. THIS A DVANCE WILL BE BASED ON THE ANTICIPATED LEVEL OF DISTRIBUTION OF FOOD GR AINS IN THAT QUARTER. THE ADVANCE WILL BE RELEASED SUBJECT TO PRODUCTION OF THE UTILIZATION CERTIFICATES FOR THE PREVIOUS QUARTER. FOR EXAMPLE, ADVANCE. 12. REFERRING TO PAGE 121A OF THE PAPER BOOK, HE DR EW THE ATTENTION OF THE BENCH TO THE FOLLOWING:- STATE GOVERNMENT IS REQUESTED TO SUBMIT FINAL SUBS IDY CLAIM FOR 2010-11 ON THE BASIS OF THIS ECONOMIC COST AT THE E ARLIEST AFTER CONSIDERING THE OPENING STOCK. IF NO FINAL SUBSIDY CLAIM IS SUBMITTED WITHIN 30 DAYS, FINAL SUBSIDY WILL BE CALCULATED ON THE BASIS OF AVAILABLE INFORMATION AND ANY EXCESS SUBSIDY RELEAS ED WILL BE ADJUSTED FROM CURRENT YEAR SUBSIDY CLAIM. 13. REFERRING TO THE DECISION OF THE HON'BLE ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. UP UPBHOKTHA SAHAKARI SANGH LTD ., HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE, A COOPERATIVE SOCIETY FROM THE STATE GOVERNMENT FOR D ISBURSEMENT TO ITS BHANDARS TO ITA NO.12/RPR/2018 11 MEET OUT THE EXPENSES OF SALARY OF CERTAIN EMPLOYEE S OF BHANDARS WHICH HAS BEEN DISTRIBUTED AMONG THE BHANDARS IN COMPLIANCE OF THE GOVERNMENT ORDER WAS NOT INCOME OF THE ASSESSEE. 14. RELYING ON VARIOUS OTHER DECISIONS, HE SUBMITTE D THAT THE AMOUNT RECEIVED BY THE ASSESSEE UNDER NO CIRCUMSTANCES CAN BE CONSIDER ED AS INCOME OF THE ASSESSEE. HE FURTHER SUBMITTED THAT NO ADDITION HAS BEEN MADE IN SUBSEQUENT YEARS ON THIS ISSUE ALTHOUGH THE ASSESSMENTS HAVE BEEN COMPLETED U/S 14 3(1) OF THE ACT. HOWEVER, THERE WAS NO REOPENING U/S 147 OR U/S 263 OF THE IT ACT. HE, ACCORDINGLY, SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THE GROUND S RAISED BY THE ASSESSEE BE ALLOWED. 15. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED O N THE ORDER OF THE CIT(A). 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE IS A NODAL DISTRIBUTION AGENCY OF THE GOVERNMENT OF CHHATTISGA RH UNDER PDS AND IS INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 WIT H THE MAIN OBJECT OF CARRYING OUT THE ACTIVITIES RELATING TO FOOD GRAINS AND OTHER C OMMODITIES AND DISTRIBUTION THEREOF UNDER VARIOUS WELFARE SCHEMES OF THE GOVERNMENT. TH E ASSESSEE DERIVES INCOME FROM PROCUREMENT AND DISTRIBUTION OF COMMODITIES LIKE WH EAT, RICE, SUGAR, PADDY, ETC. UNDER PDS. DURING THE IMPUGNED ASSESSMENT YEAR, TH E ASSESSEE HAS CHANGED ITS ITA NO.12/RPR/2018 12 ACCOUNTING POLICY RESULTING IN DECREASE IN PROFIT B Y RS.194,31,98,824/- ON ACCOUNT OF SUBSIDY INCOME FROM GOVERNMENT OF INDIA AND CHHATTI SGARH STATE. WE FIND THE ASSESSING OFFICER REJECTING THE VARIOUS EXPLANATION S GIVEN BY THE ASSESSEE, BROUGHT THE SAME AMOUNT TO TAX ON THE GROUND THAT THE ASSES SEE HAS SUPPRESSED ITS PROFIT BY CHANGE OF POLICY ON ITS OWN WITHOUT FOLLOWING ACCOU NTING STANDARD-8. WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICE R WHICH HAS BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING, ITS ACCOUNTS ARE AUDITED, BOOKS OF ACCOUNTS ARE PRODUCED BEFORE THE ASSESSING OFFICER AND THERE IS NO ADVERSE COMMENT BY THE STATUTORY AUDITORS OR THE CAG. IT I S ALSO HIS SUBMISSION THAT FOR REFLECTING THE TRUE INCOME THE ASSESSEE HAS CHANGED ITS ACCOUNTING POLICY, BUT, AT THE SAME TIME, THERE IS NO SUPPRESSION OF PROFIT. IT I S ALSO HIS SUBMISSION THAT THE IMPUGNED AMOUNT WAS PAID BY GOVERNMENT TO RUN THE P UBLIC DISTRIBUTION SCHEME TO THE ASSESSEE IN THE CAPACITY OF A NODAL AGENCY AND, THEREFORE, IT DOES NOT BELONG TO THE ASSESSEE AND IT CANNOT BE TREATED AS ITS INCOME. 17. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. THE ASSESSEE IN THE INSTANT CASE PROCURES THE COMMODITI ES AT THE NOTIFIED PRICE AND DISTRIBUTES AT CONCESSIONAL RATE PRESCRIBED BY GOVE RNMENT FOR WHICH THE GOVERNMENT OF INDIA AND CHHATTISGARH GOVERNMENT PAY THE CONCES SION COMPONENT WHICH IS REFERRED TO AS SUBSIDY IN THE INSTANT CASE. THE E NTIRE MONEY PAID TO THE ASSESSEE REPRESENTS GOVERNMENT MONEY AND NOT THAT OF THE ASS ESSEE. THE ASSESSEE IS AN OUTFIT ITA NO.12/RPR/2018 13 TO OPERATE IN FIDUCIARY CAPACITY AND THE AMOUNT, IN OUR OPINION, IS NOT REAL INCOME IN CHARACTER AND, THEREFORE, NOT ASSESSABLE TO TAX. W E FIND THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA URBAN INFRAS TRUCTURE DEVELOPMENT AND FINANCE CORPORATION (SUPRA), HAS HELD THAT WHERE TH E ASSESSEE HAS BEEN CONSTITUTED BY CENTRAL GOVERNMENT TO ACT AS A NODAL AGENCY FOR IMP LEMENTING MEGA CITY PROJECTS, INTEREST FROM UNUTILIZED FUNDS KEPT AS DEPOSIT IN B ANK IS NOT CHARGEABLE TO INCOME-TAX. THE RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT AT PARA 6 OF THE ORDER READ AS UNDER:- 6. WE HAVE NO DOUBT IN OUR MIND THAT THE SAID JUDG MENT SQUARELY COVERS THE ISSUE INVOLVED IN THIS APPEAL. IT HAS BE EN HELD BY THE DIVISION BENCH OF THIS COURT IN THE AFORESAID JUDGM ENT IN THE RELEVANT PARA AS UNDER (P. 584) : 'THE MATERIAL ON RECORD SHOWS THAT THE VERY PURPOSE OF CONSTITUTION OF THE ASSESSEE WAS TO ACT AS A NODAL AGENCY FOR IMPLE MENTATION OF THE MEGA CITY SCHEME WORKED OUT BY THE PLANNING COMMISS ION. BOTH THE CENTRAL AND THE STATE GOVERNMENTS ARE EXPECTED TO P ROVIDE REQUISITE FINANCES FOR IMPLEMENTATION OF THE SAID PROJECT. TH E FUNDS FROM THE CENTRAL AND STATE GOVERNMENTS WILL FLOW DIRECTLY TO THE SPECIALISED INSTITUTIONS/NODAL AGENCIES AS GRANT AND THE NODAL AGENCY WILL CONSTITUTE A REVOLVING FUND WITH THE HELP OF CENTRA L AND STATE SHARES OUT OF WHICH FINANCE COULD BE PROVIDED TO VARIOUS A GENCIES SUCH AS WATER, SEWERAGE BOARDS, MUNICIPAL CORPORATIONS, ETC . THE OBJECTIVE IS TO CREATE AND MAINTAIN A FUND FOR THE DEVELOPMENT O F INFRASTRUCTURAL ASSETS ON A CONTINUING BASIS AND, THEREFORE, THE AS SESSEE IS A NODAL AGENCY FORMED/CREATED BY THE GOVERNMENT OF KARNATAK A AS PER THE GUIDELINES; THERE IS NO PROFIT MOTIVE AS THE ENTIRE FUND ENTRUSTED AND THE INTEREST ACCRUED THEREFROM ON DEPOSITS IN BANK THOUGH IN THE NAME OF THE ASSESSEE HAS TO BE APPLIED ONLY FOR THE PURP OSE OF WELFARE OF THE NATION/STATES AS PROVIDED IN THE GUIDELINES; THE WH OLE OF THE FUND BELONGS TO THE STATE EXCHEQUER AND THE ASSESSEE HAS TO CHANNELISE THEM TO THE OBJECTS OF THE CENTRALLY SPONSORED SCHE ME OF INFRASTRUCTURAL DEVELOPMENT FOR THE MEGA CITY OF BA NGALORE. FUNDS OF ONE WING OF THE GOVERNMENT ARE DISTRIBUTED TO THE O THER WING OF THE GOVERNMENT FOR PUBLIC PURPOSE AS PER THE GUIDELINES ISSUED. THE ITA NO.12/RPR/2018 14 MONIES SO RECEIVED, TILL THEY ARE UTILISED, ARE PAR KED IN A BANK. THE FINDING RECORDED BY THE TRIBUNAL CLEARLY SHOWS THAT THE ENTIRE MONEY IN QUESTION IS RECEIVED FOR IMPLEMENTATION OF THE S CHEME WHICH IS FOR A PUBLIC PURPOSE AND THE SAID SCHEME IS IMPLEMENTED AS PER THE GUIDELINES OF THE CENTRAL GOVERNMENT AND, THEREFORE , THE ASSESSEE IS ONLY ACTING AS A NODAL AGENCY OF THE CENTRAL GOVERN MENT FOR IMPLEMENTATION OF THESE PROJECTS. IT IS NOT THE CAS E OF THE REVENUE THAT THE ASSESSEE WAS CARRYING ON ANY BUSINESS OR ACTIVI TIES OF ITS OWN WHILE IMPLEMENTING THE SCHEME IN QUESTION. THE UNUT ILISED MONEY, DURING WHICH THE PROJECT COULD NOT BE FULLY IMPLEME NTED, IS DEPOSITED IN A BANK TO EARN INTEREST. THAT INTEREST EARNED IS ALSO AGAIN UTILISED FOR THE IMPLEMENTATION OF THE MEGA CITY SCHEME WHICH IS ALSO PERMITTED UNDER THE SCHEME. THEREFORE, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE INTEREST ACCRUED ON THE BANK DEPOSITS CANNOT BE TREATED AS AN INCOME OF THE ASSE SSEE AS THE INTEREST IS EARNED OUT OF THE MONEY GIVEN BY THE GOVERNMENT OF INDIA FOR THE PURPOSE OF IMPLEMENTATION OF THE MEGA CITY SCHEME. THEREFORE, WE DO NOT FIND ANY ERROR IN THE CONCLUSI ON REACHED BY THE TRIBUNAL THAT THERE WAS NO INCOME EARNED BY WAY OF INTEREST BY THE ASSESSEE AND SETTING ASIDE THE ORDER OF THE AO WHIC H IS AFFIRMED BY THE FIRST APPELLATE AUTHORITY. THE FINDING GIVEN BY THE TRIBUNAL IS PURELY A QUESTION OF FACT. WE DO NOT FIND ANY SUBST ANTIAL QUESTION OF LAW INVOLVED IN THIS APPEAL AND, THEREFORE, THIS AP PEAL IS LIABLE TO BE DISMISSED AT THE STAGE OF ADMISSION ITSELF. 18. WE FIND THE HON'BLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS. UP UPBHOKTHA SAHAKARI SANGH LTD., REPORTED IN 288 ITR 106 (ALL) HAS HELD THAT THE SUM RECEIVED BY THE ASSESSEE, A COOPERATIVE SOCIETY FRO M THE STATE GOVERNMENT FOR DISBURSEMENT TO ITS BHANDARS TO MEET OUT THE EXPENS ES OF SALARY OF CERTAIN EMPLOYEES OF BHANDARS WHICH HAS BEEN DISTRIBUTED AMONG THE BH ANDARS IN COMPLIANCE OF THE GOVERNMENT ORDER WAS NOT INCOME OF THE ASSESSEE. TH E RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT READ AS UNDER:- 8. AFTER TAKING INTO ACCOUNT THE FACTS, CIRCUMSTAN CES OF THE CASE AND THE ENTIRE MATERIAL PLACED BEFORE US, WE ARE OF THE OPINION THAT THE ITA NO.12/RPR/2018 15 STATE GOVERNMENT HAS APPOINTED THE ASSESSEE AS THE DISBURSING AGENCY FOR A SUM OF RS. 2,75,000 VIDE GO ORDER DT. 15 TH APRIL, 1981, AS REFERRED TO ABOVE TO KENDRIYA UPBHOKTA BHANDAR AND AS SUCH THE ASSESSEE WAS ONLY THE DISBURSING AGENCY AND THE ITO WAS NOT AT ALL JUSTIFIED IN HOLDING THAT A SUM OF RS. 2,75,000 WAS THE INCOME OF THE ASSESSEE. THE CIT(A) IS ACCORDINGLY JUSTIFIED IN H OLDING THAT THE SUM OF RS. 2,75,000 HAD BEEN PLACED AT THE DISPOSAL OF THE ASSESSEE FOR DISBURSEMENT TO TO THE VARIOUS BHANDARS TO MEET THE SALARY BILLS OF THE MANAGERS AND SECRETARIES. THEREFORE, IT WAS NOT THE INCOME OF THE ASSESSEE AND IT WAS INCORRECTLY ADDED BY THE ITO TO WARDS THE INCOME OF THE ASSESSEE. WE, THEREFORE, UPHOLD THE FINDING OF THE LEARNED CIT (A) ON THIS ISSUE. 9. FROM PERUSAL OF THE AFORESAID FINDINGS, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT IN QUESTION WAS GIVEN BY TH E STATE GOVERNMENT FOR SPECIFIC PURPOSE. IT DID NOT PARTAKE THE NATURE OF THE 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 SALAR Y TO THE EMPLOYEES OF THE BHANDARS. 19. WE FIND THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CIVIL SUPPLIES CORPORATION LTD., 280 I TR 148 (P&H), HAS HELD THAT:- REIMBURSABLE EXPENDITURE INCURRED BY ASSESSEE, A N OMINEE OF THE GOVERNMENT FOR DISTRIBUTION OF LEVY SUGAR AT NOTIFI ED PRICES, COULD NOT BE DISALLOWED AS THE ASSESSEE WAS FOLLOWING HYBRID METHOD OF ACCOUNTING CONSISTENTLY WHEREBY THE EXCESS REALISAT IONS WHICH ARE PAYABLE TO THE GOVERNMENT ARE BEING DEBITED TO THE TRADING ACCOUNT ON THE BASIS OF PAYMENT AND THE SUBSIDY IS BEING ACCOU NTED FOR ON ACTUAL RECEIPT BASIS. 20. WE FIND THE AHMEDABAD BENCH OF THE TRIBUNAL IN DCIT VS. GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD. IN ITA NO.334/AHD/2014 & CO NO.186/AHD/2014, ORDER DATED 01.06.2017 HAS OBSERVED AS UNDER:- ITA NO.12/RPR/2018 16 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL AS PER RECORD. WE HAVE NOTICED THAT THE ASSESSEE COMPANY W AS SET UP BY THE GOVERNMENT OF GUJARAT UNDER THE COMPANIES ACT, 1956 . THE ASSESSEE COMPANY MANAGE THE PUBLIC DISTRIBUTION SYSTEM AND O THER PUBLIC WELFARE SCHEME ON BEHALF OF THE GOVERNMENT OF GUJAR AT. THE GOVERNMENT OF GUJARAT HAS BEEN PROVIDING HANDLING C OMMISSION AS PER THE GOVERNMENT OF GUJARAT (GR) GOVERNMENT RESOL UTION .WE OBSERVED THAT THE SURPLUS WHICH WAS EARNED BY THE A SSESSEE FOR THE ACTIVITIES CARRIED OUT ON BEHALF OF THE GOVERNMENT OF GUJARAT BELONGED TO THE GOVERNMENT AND PAYABLE TO THE GOVERNMENT ALO NG WITH INTEREST AFTER DEDUCTING OF COMMISSION EARNED BY THE ASSESSE E. WE FURTHER OBSERVED THAT THE COMMISSION INCOME EARNED BY THE A SSESSEE ON THE ACTIVITIES CARRIED ON BEHALF OF THE GOVERNMENT AND OTHER INCOME FROM ITS OWN ACTIVITIES ARE TAXABLE IN THE HAND OF THE A SSESSEE. 5.1 WE HAVE FURTHER NOTICED THAT IN THE EARLIER ASS ESSMENT YEAR THE ASSESSING OFFICER HAS ACCEPTED THE SIMILAR ACCOUNTI NG PRACTICES FOLLOWED IN THE CASE OF THE ASSESSEE. WE CONSIDERED THAT SURPLUS EARNED ON BEHALF OF THE GOVERNMENT FOR CARRYING OUT FUNCTION OF PUBLIC DISTRIBUTION SYSTEM AS AGENT OF GOVERNMENT I S NOT TAXABLE IN THE HAND OF THE ASSESSEE. 5.2 WE HAVE ALSO PERUSED THE DETAIL FACTS AND FINDI NGS ELABORATED IN THE ORDER OF THE LD.CIT(A) AND CONSIDERED THAT THE LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER BY STATING THAT SURPLUS EARNED FROM FUNCTIONING OF PDS ON BEHALF OF GOVERNMENT CANNOT BE TAXED IN THE HAND OF THE ASSES SEE. IN VIEW OF THE ABOVE STATED FACTS AND FINDINGS WE UPHOLD THE O RDER OF THE LD.CIT(A). 21. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. CO UNSEL FOR THE ASSESSEE IN THE PAPER BOOK ALSO SUPPORTS ITS CASE. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN SUBSEQUENT YEARS, SINCE SUBSIDY RECEIPT HAS BEEN ACCEPTED BY THE REVENUE, ALTHOUGH U/S 143(1), AND NO ACTION U/S 147 OR 263 H AS BEEN TAKEN COULD NOT BE CONTROVERTED BY THE LD. DR. WE, THEREFORE, ARE OF T HE CONSIDERED OPINION THAT THE CONCESSION COMPONENT RECEIVED BY THE ASSESSEE GOVER NMENT COMPANY IN THE COURSE ITA NO.12/RPR/2018 17 OF IMPLEMENTING GOVERNMENT PROJECTS OF PDS AS ITS A GENT, THE SURPLUS OF WHICH, IF ANY, WAS REFUNDABLE OR ADJUSTABLE IN FUTURE WAS NOT INCOME OF THE ASSESSEE. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND TH E GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 3.10.2018. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 23 RD OCTOBER, 2018 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR SR. PRIVATE SECRETARY FOR ASSTT. REGISTRAR, ITAT, RAIPUR