M/s Haryana State Agricultural Marketing Board, Panchkula V. DCIT, Panchkula

ITA 1245/CHANDI/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8885 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-09-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: HARISH NAYYAR
• Keywords: Business income
• Section: 56; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1103/CHD/2008 (ASSESSMENT YEARS : 2000-01) ITA NO.47/CHD/2009 (ASSESSMENT YEARS : 2001-02) HARYANA STATE AGRICULTURAL VS. THE A.C.I.T., MARKETING BOARD, PANCHKULA CIRCLE. SECTOR 6, PANCHKULA. PANCHKULA. PAN: AAALH 0016 R ITA NO.1104/CHD/2008 (ASSESSMENT YEARS : 2002-03) ITA NO.452/CHD/2010 (ASSESSMENT YEARS : 2003-04) HARYANA STATE AGRICULTURAL VS. THE A.C.I.T., MARKETING BOARD, PANCHKULA CIRCLE. SECTOR 6, PANCHKULA. PANCHKULA. PAN: AAALH 0016 R ITA NO.1245/CHD/2012 (ASSESSMENT YEARS : 2001-02) & ITA NO.1246/CHD/2012 (ASSESSMENT YEARS : 2002-03) HARYANA STATE AGRICULTURAL VS. THE D.C.I.T., MARKETING BOARD, PANCHKULA CIRCLE. SECTOR 6, PANCHKULA. PANCHKULA. PAN: AAALH 0016 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARISH NAYYAR 2 RESPONDENT BY : SHRI RAVI SARANGAL, DR DATE OF HEARING : 22.09.2016 DATE OF PRONOUNCEMENT : 21.12.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS BUNCH OF SIX APPEALS ARE ALL FILED BY THE SAME ASSESSEE AGAINST SEPARATE ORDERS PASSED BY COMMISSIONER OF INCOME TAX(APPEALS) , PANCHKULA. 2. THE APPEALS FILED IN ITA NOS.1103/CHD/2008, 47/CHD/2009, 1104/CHD/2008, & 452/CHD/2010 HAVE BEEN FILED AGAINST THE ORDERS PASSED BY THE COMMISS IONER OF INCOME TAX( APPEALS), PANCHKULA IN QUANTUM PROCEEDINGS FOR ASSESSMENT YEARS 200001 ,200102, 200203 AND 200304 DATED 24.10.08, 03.11.08, 24.1 0.08 & 01.03.10 RESPECTIVELY. THE APPEAL FILED BY THE AS SESSEE IN ITA NOS. 1245/CHD/12 AND 1246/CHD/12 ARE AGAINST ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA, DATED 17.09.12 ,UPHOLDING THE LEVY OF P ENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT,1961, AND PERTAIN TO ASSESSMENT YEAR 2001-02 AND 2002 03 RESPECTIVELY. 3. SINCE THE ISSUES INVOLVED IN THE APPEALS RELATI NG TO QUANTUM PROCEEDINGS WERE COMMON AND THE ISSUE IN THE PENALTY APPEALS RELATE TO THE QUANTUM PROCEEDINGS, ALL THE 3 APPEALS WERE TAKEN UP AND HEARD TOGETHER AND ARE BE ING DISPOSED OFF BY THIS COMMON ORDER. 4. WE SHALL FIRST BE DEALING WITH THE APPEALS OF T HE ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN QUANTUM PROCEEDINGS. THE ISSUES INVOLVED IN ITA NO.1103/CHD/2008, ITA NO.47/CHD/200 9 AND ITA NO.1104/CHD/2008 ARE COMMON AND IDENTICAL A ND THEREFORE FOR THE SAKE OF CONVENIENCE WE SHALL BE D EALING WITH THE FACTS IN THE CASE OF ITA NO. 1103/CHD/2008 . THE DECISION RENDERED IN THIS CASE WILL APPLY MUTATIS M UTANDIS IN THE OTHER APPEALS ALSO. ITA NO. 1103/CHD/2008 5. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE BOARD WAS SET UP UNDER SECTION 3 (1) OF TH E PAPM ACT BY THE GOVERNMENT OF HARYANA WITH A VIEW TO REG ULATE THE FUNCTIONING OF MARKET COMMITTEES IN THE STATE OF HARYANA. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE SHOWED REVENUE RECEIPTS IN ITS RETURN OF I NCOME COMPRISING OF PROFIT FROM RENT, INTEREST ON LOAN AN D CONTRIBUTIONS RECEIVED FROM MARKET COMMITTEES. ORIG INAL ASSESSMENT WAS FRAMED UNDER SECTION 143 (3) AT AN INCOME OF RS. 2,03,15,120/-IN THE STATUS OF AOP, VI DE ORDER DATED 09.12.2002. THE MATTER WAS TAKEN UP IN APPEAL AND THE ITAT, VIDE THEIR ORDER DATED 13.09.2 005 IN ITA NO. 1199/CHD/04, REMANDED THE CASE BACK TO THE 4 ASSESSING OFFICER, DIRECTING THAT THE ASSESSEE BE A SSESSED IN THE STATUS OF LOCAL AUTHORITY. THEREAFTER ASSE SSMENT WAS FRAMED VIDE ORDER DATED 22.12.2006, DENYING THE ASSESSEE EXEMPTION CLAIMED UNDER SECTION 10(20) OF THE INCOME TAX ACT,1961, FOR THE REASON THAT INCOME EAR NED BY IT DID NOT ARISE FROM SUPPLY OF SERVICES, AS REQ UIRED UNDER THE SECTION AND ALSO SINCE THE INCOMES DID NO T QUALIFY TO BE ASSESSED UNDER THE HEADS SPECIFIED FO R THE PURPOSE OF EXEMPTION UNDER SECTION 10 (20) OF THE A CT. THEREAFTER THE ASSESSING OFFICER ASSESSED THE EXCES S OF REVENUE RECEIPT OVER EXPENDITURE OF THE ASSESSEE, AMOUNTING TO RS. 2,03,15,118/- AS THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX AND MADE ADDITION THERET O OF THE FOLLOWING : 1. CONTRIBUTION TO UNAPPROVED PENSION FUND RS.1,45,00,000/-. 2. INTEREST EARNED ON DEPOSITS RS.7,43,56,181/- 3. MISCELLANEOUS INCOME RS.49,05,712/- AND ASSESSEED THE INCOME OF THE ASSESSEE AT RS.11,40,77,011/-. 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHO STATED THAT THE SURPLUS EARNED FROM CONTRIBUTIONS RECEIVED FROM MARKET COMMITTEES AS WE LL AS RENTAL INCOME OF THE ASSESSEE AROSE IN THE COURSE OF SUPPLY OF ITS SERVICES RENDERED WHILE CARRYING OUT ITS PRESCRIBED FUNCTIONS AND WERE THEREFORE EXEMPT UNDE R SECTION 10 (20) OF THE INCOME TAX ACT, 1961. AS FOR 5 ADDITION MADE OF INTEREST INCOME AND MISCELLANEOUS INCOME AND DISALLOWANCE OF CONTRIBUTION TO PENSION FUND, THE ORDER OF THE AO WAS UPHELD. 7. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. AT THE OUTSET IT MAY BE STATED THAT GROUND NOS. 1 AND 6 RAISED BY THE ASSESSEE ARE GENERAL IN NATUR E AND NEED NO ADJUDICATION. FURTHER THE GROUNDS RAISED B Y THE ASSESSEE HAVE NOT BEEN SERIALLY NUMBERED AND THERE IS NO GROUND NO.3 RAISED BY THE ASSESSEE. 8. GROUND NO. 2 AND 4 RAISED BY THE ASSESSEE ARE AGAINST THE ACTION OF THE CIT(APPEAL) IN UPHOLDING THE ADDITION ON ACCOUNT OF INTEREST EARNED ON DEPOSITS AMOUNTING TO RS. 7,43,56,181/-AND MISCELLANEOUS INC OME OF RS. 49,05,712/-.THE GROUNDS RAISED READ AS UNDER : 2] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LA W IN CONFIRMING THE DISALLOWANCE OF RS.74356181 ON ACCOUNT OF INTEREST EARNED ON BANK DEPOSITS. THIS ADDITION HAS BEEN MADE WITHOUT CONSI DERING THE FACTS OF THE CASE CORRECTLY AND APPLYING THE CORRECT PROVISIONS OF LAW. THE INCOME OF THE ASSESSEE DERIVED FROM OTHER SOURCES IS FULLY EX EMPT UNDER SECTION 10(20) OF INCOME TAX ACT. THE ADDITION IS UNJUSTIFIED, ILLEGAL AND DESERVES T O BE QUASHED. SUITABLE DIRECTIONS IN THE MATTER MAY BE GIVEN TO ALLOW EXEM PTION UNDER SECTION 10(20) OF THE INCOME TAX ACT IN RESPECT OF THE INTE REST EARNED FROM BANK DEPOSIT. IT IS PRAYED THAT THE ADDITION OF RS.74356181 MAY K INDLY BE ORDERED TO BE DELETED. 6 4] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.4905712, ON ACCOUNT OF MISCELLAN EOUS INCOME. THIS ADDITION IS ARBITRARY, ILLEGAL HENCE UNJUSTIFIE D AND DESERVES TO BE DELETED. IT IS PRAYED THAT THE ADDITION OF RS. 4905712 MAY K INDLY BE ORDERED TO BE DELETED. 9. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS. 7,43,56,1 81/- AND MISCELLANEOUS INCOME OF RS.49,05,712/-AS CAPITA L RECEIPTS. THE AO HELD THAT THE SAME WERE REVENUE RE CEIPTS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. L D. CIT (A) HELD THAT THE INTEREST INCOME HAVING BEEN EARNE D ON THE FUNDS RECEIVED FROM MARKET COMMITTEE FOR CARRYI NG OUT THE WORK, WHICH WERE DEPOSITED IN THE BANKS, HAD D IRECT NEXUS WITH THE FUNCTIONING OF THE ASSESSEE AND WAS THEREFORE TAXABLE AS BUSINESS INCOME, BUT SINCE IT HAD NOT BEEN EARNED BY PROVIDING ANY SERVICES OR COMMODITY IT WAS NOT ENTITLED TO EXEMPTION UNDER SECTION 10 (20) OF THE ACT. 10. BEFORE US LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE CIT( APPEAL) HAD ERRED IN HOLDING THAT THE SAME WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME SINCE THE ASSESSING OFFICER HIMSELF HAD IN THE REMAND REPORT FOR THE IMPUGNED YEAR, I.E. A.Y 2000-01 AND IN THE ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 200102 , HELD THE SAME TO BE INCOME ASSESSABLE UNDER THE HEA D INCOME FROM OTHER SOURCES WHICH IS EXEMPT UNDER SECTION 10(20) OF THE ACT. LD. COUNSEL FOR THE ASSE SSEE 7 RELIED UPON A NUMBER OF JUDGEMENTS, TO STATE THAT INTEREST EARNED ON IDLE/SURPLUS FUNDS WAS ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH IN T URN WAS EXEMPT UNDER SECTION 10 (20) OF THE ACT. ALTERN ATELY LD. COUNSEL FOR THE ASSESSEE ARGUED THAT INTEREST I NCOME EARNED WAS INCIDENTAL TO AND ACCRUED FROM THE SUPPL Y OF SERVICES TO MARKET COMMITTEE WHICH HAS BEEN HELD BY THE I.T.A.T. TO BE FALLING WITHIN THE PURVIEW OF SECTIO N 10(20) OF THE ACT VIDE ITS ORDER IN ITA NOS.18, 19 & 60/CH D/2009 DATED 29.7.2016. 11. AS FOR MISCELLANEOUS INCOME, LD. COUNSEL FOR T HE ASSESSEE ARGUED THAT THE DENIAL OF EXEMPTION UNDER SECTION 10 (20) OF THE ACT, WAS NOT DEALT WITH BY THE LD.CIT(A) WHO HAD MERELY UPHELD ITS TREATMENT AS RE VENUE IN NATURE AS AGAINST CAPITAL TREATED BY THE ASSESSE E, FURTHER LD. COUNSEL STATED THAT THE MISCELLANEOUS I NCOME EARNED COMPRISED OF SALE OF TENDER FORMS AND ENLIST MENT FEES RECEIVED FROM CONTRACTORS AND OTHER INCOMES ALL OF WHICH AROSE DURING THE COURSE OF RENDERING SERVICES TO THE MARKET COMMITTEES AND WAS THEREFORE EXEMPT UNDER SECTION 10(20) OF THE ACT. ALTERNATIVELY LD. COUNSE L ARGUED THAT EVEN IF IT WAS TREATED AS INCOME FROM OTHER SO URCES IT WAS EXEMPT UNDER SECTION 10(20) OF THE ACT. 12. LD.DR ON THE OTHER HAND RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 8 13. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELO W AS ALSO THE DOCUMENTS PLACED BEFORE US. 14. THE ISSUE IN DISPUTE BEFORE US IS WHETHER INTEREST EARNED ON DEPOSITS WITH BANKS AND MISCELLA NEOUS INCOME EARNED BY THE ASSESSEE ARE ELIGIBLE FOR EXEM PTION UNDER SECTION 10 (20) OF THE ACT. 15. THE UNDISPUTED FACTS NECESSARY FOR ADJUDICATIN G THE ISSUE ARE THAT THE ASSESSEE IS A BODY FORMED UN DER SECTION 3 (1) OF THE PAPM ACT BY THE GOVERNMENT OF HARYANA WITH A VIEW TO REGULATE THE FUNCTIONING OF MARKET COMMITTEES IN THE STATE. THE ACTIVITY CARRIED OUT B Y THE ASSESSEE, OF ASSISTING AND MONITORING THE FUNCTION S OF MARKET COMMITTEES HAS BEEN HELD BY THE CIT(A) AND UPHELD BY THE ITAT VIDE ITS ORDER DATED 29.07.16 I N ITA NO.18,19 & 60/CHD/2009, TO BE FALLING WITHIN THE A MBIT OF SECTION 10 (20) OF THE ACT. 16. AS PART OF ITS FUNCTION THE ASSESSEE BOARD CARRIES OUT CAPITAL WORKS FOR THE MARKET COMMITTEES WHO IN TURN PLACE LUMP SUM AMOUNTS AT THE DISPOSAL OF T HE ASSESSEE BOARD FOR THE SAME. THE ASSESSEE DEPOSITS THE AMOUNTS IN BANKS TILL THEY ARE UTILISED FOR THE EXE CUTION OF THE PROJECT AND EARNS INTEREST THEREON, WHICH DUR ING THE YEAR AMOUNTED TO RS.7,43,56,181/-. FURTHER THE MISCELLANEOUS INCOME IS ATTRIBUTABLE TO SALE OF TEN DER 9 FORMS, ENLISTMENT FEES FROM CONTRACTORS AND OTHER INCOMES. 17. HAVING OUTLINED THE FACTS OF THE CASE WE CONSIDER IT NECESSARY TO DEAL WITH THE PROVISIONS O F SECTION 10 (20) OF THE ACT, WHICH GRANTS EXEMPTION TO INCOM ES EARNED BY LOCAL AUTHORITIES. SECTION 10 (20) IS REP RODUCED HEREUNDER: 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR O F ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED . 20) THE INCOME OF A LOCAL AUTHORITY WHICH IS CHARGE ABLE UNDER THE HEAD [* * *] INCOME FROM HOUSE PROPERTY, CAPITAL GAINS OR INCOME FROM OTHER SOURCES OR FROM A TRADE OR BUSINESS CARRIED ON BY IT WHICH ACCRUES OR ARISES FROM THE SUPPLY OF A COMMODITY OR SERVICE [(NOT BEING WATER OR ELECTRICITY) WITHIN ITS OWN JURISDICTIONAL AREA OR FROM THE SUPPLY OF WATER OR ELECTRICITY WITHIN OR OUTSIDE ITS OWN JURISDICTI ONAL AREA]. 18. A PLAIN READING WOULD SHOW THAT THE SECTION EXEMPTS INCOME OF LOCAL AUTHORITIES WHICH ARE CHARG EABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, INCOME F ROM OTHER SOURCES AND CAPITAL GAINS AND ALSO INCOME FRO M TRADE OR BUSINESS ARISING FROM SUPPLY OF COMMODITY/ SERVICES WITHIN THE JURISDICTION OF THE LOCAL AUTHO RITY OR INCOME FROM THE SUPPLY OF WATER AND ELECTRICITY. 19. WHAT HAS NOW TO BE SEEN IS WHETHER THE INTERE ST INCOME AND MISCELLANEOUS INCOME EARNED BY THE ASSES SEE QUALIFIES TO BE EXEMPT UNDER SECTION 10 (20) OF THE ACT. 10 20. IN THE CASE OF INTEREST INCOME, THE FACTS DEMONSTRATE, THAT THE SAME WAS EARNED FROM THE FUND S RECEIVED FROM MARKET COMMITTEES FOR INVESTING IN CA PITAL PROJECTS, WHICH WERE HELD IN BANK DEPOSITS TILL THE Y WERE UTILISED FOR THE EXECUTION OF PROJECTS. THERE IS NO DISPUTE ABOUT THIS FACT. THUS INTEREST WAS EARNED ON TEMPO RARILY AVAILABLE FUNDS WITH THE ASSESSEE. IT IS ALSO A FAC T ON RECORD THAT EARNING OF INTEREST IS NOT THE BUSINESS OF THE ASSESSEE. NOTHING WAS BROUGHT ON RECORD BEFORE US O R EVEN THE LOWER AUTHORITIES TO SHOW THAT THE ASSESSEE IS ENGAGED IN SOME KIND OF MONEY LENDING OR DEPOSIT BUSINESS W ITH THE SURPLUS FUNDS. IN SUCH CIRCUMSTANCES THE INTERE ST EARNED BY THE ASSESSEE CANNOT BE ATTRIBUTED TO ARIS ING FROM THE BUSINESS OF THE ASSESSEE OF RENDERING SERV ICES AND IS CLEARLY ASSESSABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES. THE HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICAL VS. CIT (1997) 227 ITR 17 2 HAS CATEGORICALLY STATED THAT INTEREST RECEIVED BY A CO MPANY FROM BANK DEPOSITS AND LOANS WOULD BE CHARGEABLE AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. FOLLOWING THE DECISION OF THE APEX COURT, THE MADHY A PRADESH HIGH COURT IN THE CASE OF FERRO CONCRETE CONSTRUCTION (INDIA) (P) LTD. VERSUS CIT (2007) 290 ITR 713 HAS HELD THAT INTEREST ON SHORT-TERM DEPOSITS, NOT BEING IN THE NATURE OF THE BUSINESS OF THE ASSESSEE , WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . THE HONBLE HIGH COURT RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICAL (199 7) 227 11 ITR 172 (SUPRA) AND STATED THAT THOUGH THE ISSUE BE FORE THE SUPREME COURT WAS SLIGHTLY DIFFERENT YET OBSERV ATIONS MADE THEREIN WERE BINDING. THE RELEVANT PARA 8 TO 1 2 OF THE ORDER ARE REPRODUCED HEREUNDER: 8. IN OUR OPINION, THE INCOME EARNED BY WAY OF INTEREST ON SHORT-TERM DEPOSIT (FDR) BY AN ASSESSEE HAS TO BE TAXED AS AN INCOME CHARGEABLE UNDER SECTION 56 OF THE ACT, I.E., INCOME FROM OTHER SOURCES IN VIEW OF THE FACTS EMERGING FROM STATEMENT OF FACTS. THOUGH THE ISSUE BEFORE THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V. CIT (1997) 227 ITR 172 WAS SLIGHTLY DIFFERENT, YET SOME OF THE OBSERVATIONS MADE BY THE SUPREME COURT WHILE DECIDING THE SAID CASE CANNOT BE IGNORED BY THIS COURT AS BEING EVEN OBITER. SINCE EVEN THE OBITER OF THE SUPREME COURT IS BINDING ON US, WE ARE INCLINED TO RELY UPON THE SAID OBSERVATIONS OF THE SUPREME COURT FOR ANSWERING THE QUESTION REGARDING INCOME EARNED OUT OF INTEREST AGAINST AN ASSESSEE. THESE OBSERVATIONS READ AS UNDER (PAGE 178) : IN THE USUAL COURSE, INTEREST RECEIVED BY THE COMPANY FROM BANK DEPOSITS AND LOANS WOULD BE TAXABLE AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME TAX ACT 9. FURTHER DOWN AT PAGE 179 : LIKEWISE, A COMPANY MAY HAVE INCOME FROM OTHER SOURCES. IT MAY BUY SHARES AND GET DIVIDENDS. SUCH DIVIDENDS WILL BE TAXABLE UNDER SECTION 56 OF THE ACT. THE COMPANY MAY ALSO, AS IN THIS CASE, KEEP THE 12 SURPLUS FUNDS IN SHORT-TERM DEPOSITS, IN ORDER TO EARN INTEREST. SUCH INTEREST WILL BE CHARGEABLE UNDER SECTION 56 OF THE ACT. 10. IN VIEW OF THE AFORESAID OBSERVATIONS WHICH ARE SUBTLE IN THEIR EXPRESSION, WE CANNOT HOLD THAT INTEREST EARNED BY AN ASSESSEE IS THEIR BUSINESS INCOME. IN THE FIRST PLACE, IT IS NOT THEIR MAIN OR ANCILLARY BUSINESS. SECONDLY, NO MEMORANDUM OF ASSOCIATION IS FILED OR RELIED UPON TO SHOW THAT THE ASSESSEE IN ADDITION TO ITS MAIN BUSINESS OF CIVIL CONSTRUCTION, ETC., ARE ALSO ENGAGED IN SOME KIND OF MONEY-LENDING OR DEPOSIT BUSINESS WITH THEIR SURPLUS FUNDS. WE CANNOT IGNORE THE POINTED OBSERVATIONS AND/OR FINDINGS OF THE SUPREME COURT QUOTED SUPRA ON THE GROUND THAT IT WAS MADE IN ALTOGETHER DIFFERENT CONTEXT AND, HENCE, THE SAME IS LIABLE TO BE IGNORED. ON THE OTHER HAND, WE ARE INCLINED TO RESPECTFULLY FOLLOW BEING A LAW LAID DOWN BY THE SUPREME COURT ON THE SUBJECT HOLDING THE FIELD. 11. LEARNED COUNSEL FOR THE ASSESSEE NO DOUBT CITED SOME OF THE AUTHORITIES OF THE VARIOUS HIGH COURTS WHICH TO SOME EXTENT CAN BE CONSTRUED AS SUPPORTING HIS SUBMISSIONS. THESE AUTHORITIES ARE-CIT V. MADRAS REFINERIES LTD. [1997] 228 ITR 354 (MAD), SNAM PROGETTI S.P.A. V. ADDL. CIT [1981] 132 ITR 70 (DELHI), CIT V. TIRUPATI WOOLLEN MILLS LTD. [1992] 193 ITR 252 (CAL). HOWEVER, IN VIEW OF THE DECISION OF THE SUPREME COURT RELIED ON BY US SUPRA, WE CANNOT PLACE RELIANCE ON THE DECISIONS RENDERED BY THE HIGH COURTS. 13 12. IN THIS VIEW OF THE MATTER, WE HOLD THAT INCOME EARNED BY THE ASSESSEE ON THEIR FUNDS INVESTED IN SHORT-TERM DEPOSITS IN ORDER TO EARN INTEREST IS NOT TO BE TREATED AS THEIR BUSINESS INCOME BUT IT IS CHARGEABLE TO TAX UNDER SECTION 56 OF THE ACT AS AN INCOME FROM OTHER SOURCES. 21. THE ISSUE IN THE PRESENT CASE BEING IDENTICAL TO THAT DECIDED BY THE HONBLE COURT ,THE DECISION REN DERED THEREIN SQUARELY APPLIES TO THE PRESENT CASE FOLLOW ING WHICH WE HOLD THAT THE INTEREST EARNED BY THE ASSES SEE ON ITS SURPLUS/IDLE FUNDS WAS ASSESSABLE UNDER THE HEA D INCOME FROM OTHER SOURCES. 22. WE FIND NO MERIT IN THE ARGUMENT OF THE LD.DR THAT THE INTEREST INCOME EARNED HAS DIRECT NEXUS WI TH THE ACTIVITY OF THE ASSESSEE AND THEREFORE IS TAXABLE A S BUSINESS INCOME ,IN VIEW OF THE CLEAR-CUT OBSERVATI ON OF THE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA), RELIED UPON BY THE MADHYA PRADES H HIGH COURT IN ITS DECISION. FOR THE SAME REASON THE CASE LAWS RELIED UPON BY THE LD. DR ALSO MERIT NO CONSIDERATION. 23. IN VIEW OF THE ABOVE WE HOLD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE AMOUNTING TO RS.7,43,51,181/-IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND IS THEREFORE EXEMPT UNDER SE CTION 10 (20) OF THE ACT. 14 24. AS FOR THE MISCELLANEOUS INCOME, THE FACTS ON RECORD DEMONSTRATE THAT IT HAS BEEN EARNED FROM TH E SALE OF TENDER FORMS, ENLISTMENT FEES RECEIVED FROM CONTRACTORS AND OTHER MISC. INCOME. THE ASSESSING OFFICER, WE FIND, MADE THE ADDITION HOLDING IT TO B E REVENUE IN NATURE AS AGAINST CAPITAL SHOWN BY THE ASSESSEE, WHICH WAS UPHELD BY THE CIT(A). THE ASSES SEE IS NOT AGGRIEVED BY THE TREATMENT OF THE MISC. INCOME AS REVENUE, BUT HAS ALL ALONG CLAIMED THE SAME TO BE EXEMPT UNDER SECTION 10(20) OF THE ACT. THIS ISSUE HAS NE ITHER BEEN DEALT WITH BY THE ASSESSING OFFICER NOR THE CI T(A). BEFORE US THE LD COUNSEL FOR THE ASSESSEE STATED TH AT THE MISC. INCOME EARNED BY THE ASSESSEE IS ASSESSABLE U NDER THE HEAD INCOME FROM OTHER SOURCES, SINCE IT IS NOT CARRYING ON ANY BUSINESS OTHER THAN RENDERING SERVI CES IN ITS OWN JURISDICTION. ALTERNATIVELY IT WAS ARGUED THAT THE INCOME COMPRISING OF SALE OF TENDER FORMS, ENLISTME NT FEES FROM CONTRACTORS AND OTHER INCOME AROSE DURING THE COURSE OF RENDERING SERVICES TO MARKET COMMITTEES. LD.AR STATED THAT EITHER WAYS THE INCOME WAS EXEMPT AS PE R SECTION 10(20) OF THE ACT. 25. WE FIND MERIT IN THE CONTENTIONS OF THE LD.AR. THE ASSESSEE BEING ENGAGED IN THE ACTIVITY OF PROMO TION AND DEVELOPMENT OF MARKET COMMITTEES AND IN THE PRO CESS ENGAGING IN UNDERTAKING CAPITAL PROJECTS OF THE MAR KET COMMITTEES, THE INCOME FROM SALE OF TENDER FORMS AN D ENLISTMENT FEES OF CONTRACTORS HAS DIRECT NEXUS WI TH THE 15 MAIN ACTIVITY CARRIED OUT BY THE ASSESSEE AND THERE FORE IS TO BE TREATED AS HAVING BEEN EARNED IN THE COURSE O F CARRYING OUT ITS ACTIVITIES. FURTHER THE ACTIVITIE S OF THE ASSESSEE HAVING BEEN HELD TO BE FALLING IN THE PURV IEW OF SECTION 10(20) OF THE ACT BY THE I.T.A.T. VIDE ITS ORDER IN ITA NOS.18, 19 & 60/CHD/2009 DATED 29.1.2016, THESE INCOMES ARE ALSO EXEMPT UNDER SECTION 10(20) OF THE ACT. THE REST OF THE INCOME, BEING MISCELLANEOUS IN CHAR ACTER IS ASSESSABLE AS INCOME FROM OTHER SOURCES, WHICH I S ALSO EXEMPT U/S 10(20) OF THE ACT. THEREFORE THE ENTIRE MISCELLANEOUS INCOME AMOUNTING TO RS.49,05,712/- IS HELD TO BE EXEMPT UNDER SECTION 10 (20) OF THE ACT. 26. GROUND NO. 2 AND 4 RAISED BY THE ASSESSEE ARE THEREFORE ALLOWED 27. GROUND NO. 5 HAS BEEN RAISED BY THE ASSESSEE AGAINST THE DISALLOWANCE MADE OF CONTRIBUTION TO PE NSION FUND HOLDING THAT THE SAME TO BE TO AN UNRECOGNISED FUND. THE GROUND RAISED READS AS UNDER: 5] THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.14500000 ON ACCOUNT OF CONTRIBUTION TO PENSION FUND. THIS ADDITION HAS BEEN MADE WITHOUT CONSIDERING THE FACTS CORRECTLY. THE ADDITION HAS BEEN MADE IN AN ARBITRARY MANNER, ILLEGAL AND DESERVES TO BE QUASHED. 28. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE CONTRIBUTION MADE BY THE ASSESSEE TO PENSION FUND W AS 16 DISALLOWED SINCE IT WAS FOUND TO HAVE BEEN MADE TO AN UNRECOGNISED FUND. THE SAME WAS UPHELD BY THE CIT ( A) RELYING UPON THE DECISION RENDERED IN THE PRECEDIN G YEAR BY THE CIT (APPEAL) AND FURTHER RELYING ON CERTAIN JUDICIAL PRONOUNCEMENTS IN THIS REGARD. BEFORE US THE ASSESS EE ARGUED THAT EVEN CONTRIBUTIONS TO UNRECOGNIZED PRO VIDENT FUNDS ARE ALLOWABLE AND RELIED UPON VARIOUS JUDICIA L PRECEDENTS IN THIS REGARD. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT (A). 29. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELO W AS ALSO THE DOCUMENTS PLACED BEFORE US. 30. WE FIND THAT THERE IS NO CASE FOR MAKING THE IMPUGNED DISALLOWANCE AT ALL. THE ASSESSEES ENTIRE INCOME EARNED BY WAY OF CONTRIBUTION TO FUND, RENTA L INCOME, INTEREST INCOME AND MISCELLANEOUS INCOME HA S BEEN HELD TO BE EXEMPT UNDER SECTION 10 (20) OF THE ACT. THE INCOME EARNED BY WAY OF CONTRIBUTION RECEIVED F ROM MARKET COMMITTEES AND RENTAL INCOME HAD BEEN HELD T O BE EXEMPT UNDER SECTION 10 (20) OF THE ACT, BY THE CIT (A) WHICH HAS BEEN UPHELD BY THE ITAT VIDE ITS ORDER DA TED 29-07-16 IN ITA NO.18,19 & 60/CHD/2009. IN THE PRESENT APPEAL THE INTEREST INCOME EARNED AND MISCELLANEOUS INCOME HAVE ALSO BEEN HELD TO BE EXEM PT AT PARA 23 & 25 OF THE ORDER RESPECTIVELY. IN SUCH CIRCUMSTANCES WHERE THE ENTIRE INCOME OF THE ASSESS EE HAS BEEN HELD TO BE EXEMPT UNDER SECTION 10 (20) OF THE 17 ACT THERE IS NO CASE FOR MAKING DISALLOWANCE OF ANY EXPENSE AT ALL. ANY DISALLOWANCE MADE OF EXPENDIT URE WILL ONLY RESULT IN ENHANCING THE INCOME OF THE ASS ESSEE WHICH IN ANY CASE HAS BEEN HELD TO BE EXEMPT FROM T AX. FURTHER THE ENTIRE INCOME EARNED FROM RENDERING SER VICES HAD BEEN HELD TO BE EXEMPT AT THE THRESHOLD ITSELF THEREFORE THERE IS NO REQUIREMENT OF RESORTING TO T HE COMPUTATIONAL PROVISIONS RELATING TO INCOME UNDER THE HEAD BUSINESS AND PROFESSION STIPULATED UNDER SECTI ON 28 TO 44 OF THE INCOME TAX ACT ,1961. 31. SINCE THE ADDITION MADE ON ACCOUNT OF CONTRIBUTION TO PENSION FUND HAS BEEN DELETED FOR THE ABOVE REASON, WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE MERITS OF THE ARGUMENTS MADE BEFORE US. 32. IN VIEW OF THE ABOVE THE DISALLOWANCE MADE ON ACCOUNT OF CONTRIBUTION TO PENSION FUND IS DELETED AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 33. THE APPEAL OF THE ASSESSEE THEREFORE STANDS ALLOWED. ITA NO. 47/CHD/2009 34. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE I N THIS APPEAL ARE AS FOLLOWS : 2] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LA W IN NOT GIVING SPECIFIC FINDINGS IN RESPECT OF THE GROUND TAKEN UP TO CHALLENGE THE DISALLOWANCE OF RS.11035518 ON ACCOUNT OF INTEREST EARNED ON BANK 18 DEPOSITS, RS.5633092 ON ACCOUNT OF RENT RECEIVED FR OM GODOWNS AND RS.54449580 ON ACCOUNT OF BUSINESS RECEIPTS (TOTAL RS.71118190) . THE EXEMPTION UNDER SECTION 10(20) OF .THE ACT DENIED W ITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY AND APPLYING THE CO RRECT PROVISIONS OF LAW. THE ACTION OF CIT(A) NOT PASSING A SPEAKING ORDER I N THE MATTER IS UNJUSTIFIED, ILLEGAL AND DESERVES TO BE QUASHED. SU ITABLE DIRECTIONS IN THE MATTER MAY BE GIVEN TO PASS A SPEAKING ORDER AFTER ALLOWING EXEMPTION UNDER SECTION 10(20) OF THE INCOME TAX AC T IN RESPECT OF THE INCOMES AS STATED ABOVE. 4] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LA W IN CONFIRMING THE DISALLOWANCE OF RS.64525986.23, ON ACCOUNT OF MISCELLANEOUS INCOME. THE ADDITION MAD~E BY AO IS ARBITRARY, ILLEGAL HENCE UNJUSTIFIED AND DESERVES T O BE DELETED. IT IS PRAYED THAT THE ADDITION OF RS.64525986.23 MA Y KINDLY BE ORDERED TO BE DELETED. 5] THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.16312892 ON ACCOUNT OF CONTRIBUT ION TO PENSION FUND. THIS ADDITION HAS BEEN MADE WITHOUT CONSIDERING THE FACTS CORRECTLY. THE ADDITION HAS BEEN MADE IN AN ARIBITRARY MANNER, ILL EGAL AND DESERVES TO BE QUASHED. IT IS PRAYED THAT THE ADDITION OF RS.16312892 MAY K INDLY BE ORDERED TO BE DELETED. 35. AT THE OUTSET IT MAY BE STATED THAT IT WAS CONCEDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT T HE ASSESSEE IS NOT AGGRIEVED AGAINST THE ORDER PASSED BY THE LD. CIT (APPEALS) ON THE ISSUE RAISED IN GROUND NO. 2 PERTAINING TO DENIAL DISALLOWANCE OF EXEMPTION UNDE R SECTION 10(20) OF THE ACT ON ACCOUNT OF RENT RECEIV ED FROM GODOWNS, INTEREST EARNED ON BANK DEPOSITS AND BUSIN ESS RECEIPTS TOTALING IN ALL TO RS.7,11,18,190/-, SINCE THE ASSESSEE HAD BEEN GRANTED RELIEF ON THE ENTIRE INCO ME. THIS GROUND WAS, THEREFORE, NOT PRESSED BEFORE US A ND IS, 19 THEREFORE TREATED AS DISMISSED. FURTHER NO GROUND NO.3 WAS RAISED BEFORE US. 36. AS REGARDS THE ISSUE RAISED IN GROUND NOS.4 AN D 5 PERTAINING TO DISALLOWANCE OF RS.6,45,25,986/- ON ACCOUNT OF MISCELLANEOUS INCOME AND RS.1,63,12,892/ - ON ACCOUNT OF CONTRIBUTION TO PF, IT WAS CONCEDED BY B OTH THE PARTIES THAT THE ISSUE WAS IDENTICAL TO THAT RAISED IN GROUND NOS. 2, 3 AND 4 IN ITA NO.1103/CHD/2008. TH E GROUND NOS.4 AND 5 OF THE PRESENT APPEAL ARE, THERE FORE, COVERED BY OUR DECISION IN ITA NO.1103/CHD/2008 VI DE PARAS 25 AND 30-32 RESPECTIVELY AND THE FINDINGS GI VEN THEREIN SHALL APPLY TO THIS CASE ALSO WITH EQUAL FO RCE. 37. THE APPEAL OF THE ASSESSEE IS, THEREFORE, PART LY ALLOWED. ITA NO. 1104/CHD/2008 . THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THIS APPEAL READ AS UNDER : 2] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.27892651 BY MAKING A DISALLOWANC E ON ACCOUNT OF CONTRIBUTION TO PENSION FUND. THE ADDITION MADE IS ILLEGAL, ARBITRARY AND NOT IN CONSONANCE WITH THE PROVISIONS OF LAW. 3] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.90292 ON ACCOUNT OF EXPENDIT URE INCURRED ON KRISHAK UPHAR YOJNA. THE ADDITION MADE IS ILLEGAL, ARBITRARY AND NOT IN CONSONANCE WITH THE PROVISIONS OF LAW. 20 IT IS PRAYED THAT THE ADDITION OF RS. 90292 MAY KIN DLY BE ORDERED TO BE DELETED. 4] THAT CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.11518370 ON ACCOUNT OF REPAIR OF GODOWNS/BOUNDARY WALLS/ ROADS. THE ADDITION MADE IS ILLEGAL, ARBITRARY AND NOT IN CONSONANCE WITH THE PROVISIONS OF LAW. IT IS PRAYED THAT THE ADDITION OF RS.11518370 MAY KINDLY BE ORDERED TO BE DELETED . 5] THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.12894316 ON ACCOUNT OF MISCE LLANEOUS INCOME. THE ADDITION MADE IS ILLEGAL, ARBITRARY AND NOT IN CONSONANCE WITH THE PROVISIONS OF LAW. 39. GROUND NOS.2 AND 5 RAISED BY THE ASSESSEE PERTAIN TO THE DISALLOWANCE UPHELD BY THE LD. CIT (APPEALS) ON ACCOUNT OF CONTRIBUTION OF PENSION FUN D AND ADDITION MADE OF MISCELLANEOUS INCOME. IT WAS CONC EDED BY BOTH THE PARTIES THAT THAT THE ISSUE WAS IDENTIC AL TO THAT RAISED IN GROUND NOS.5 AND 4 IN ITA NO.1103/CHD/2008. THE GROUND NOS.2 AND 5 OF THE PRESENT APPEAL ARE, THEREFORE, COVERED BY OUR DECIS ION IN ITA NO.1103/CHD/2008 AND VIDE PARAS 30-32 AND 25 RESPECTIVELY AND THE FINDINGS GIVEN THEREIN SHALL A PPLY TO THIS CASE ALSO WITH EQUAL FORCE. 40. GROUND NO.3 RAISED BY THE ASSESSEE WAS NOT PRESSED BEFORE US, SINCE IT WAS WRONGLY TAKEN IN AP PEAL AS THE LD. CIT (APPEALS) HAD ALLOWED THIS GROUND OF TH E ASSESSEE AND THE ASSESSEE WAS NOT AGGRIEVED AGAINST THE SAME. 21 THIS GROUND RAISED BY THE ASSESSEE IS, THEREFORE, DISMISSED. 41. GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.1,15,18,370/- ON ACCOUNT OF REPAIR OF GODOWNS/BOUNDARY WALLS/ROADS. 42. BRIEFLY STATED, THE ASSESSING OFFICER HAD DENI ED THE CLAIM OF THE ASSESSEE HOLDING THE SAME TO BE CA PITAL IN NATURE. SINCE THE ASSESSEE HAD HIMSELF ADMITTED TH IS DURING THE ASSESSMENT PROCEEDINGS, THE LD. CIT (APP EALS) UPHELD THE SAME. 43. WE FIND NO REASON TO UPHOLD THE DISALLOWANCE F OR THE SAME REASON AS THAT STATED IN ITA NO.1103/CHD/2 008 IN GROUND NO.4 WHILE DEALING WITH THE DISALLOWANCE MADE ON ACCOUNT OF CONTRIBUTION OF PENSION FUND. UNDENI ABLY THE ENTIRE INCOME OF THE ASSESSEE EARNED BY WAY OF CONTRIBUTION OF FUND, RENTAL INCOME, INTEREST INCOM E AND MISCELLANEOUS INCOME HAS BEEN HELD TO BE EXEMPT UND ER SECTION 10(20) OF THE ACT. THE INCOME EARNED BY WA Y OF CONTRIBUTION RECEIVED FROM MARKET COMMITTEE AND RENTAL INCOME HAS BEEN HELD TO BE EXEMPT UNDER SECTION 10( 20) OF THE ACT BY CIT (APPEALS), WHICH HAS BEEN UPHELD BY THE I.T.A.T. VIDE ITS ORDER DATED 29.7.2016 IN ITA NOS. 18, 19 & 60/CHD/2009. IN THE PRESENT APPEAL, MISCELLANEOUS INCOME HAS BEEN HELD TO BE EXEMPT FOLLOWING THE DEC ISION RENDERED ON IDENTICAL FACTS IN THE CASE OF THE ASS ESSEE IN ITA NO.1103/CHD/2008. IN SUCH CIRCUMSTANCES, WHERE 22 ENTIRE INCOME OF THE ASSESSEE HAS BEEN HELD TO BE E XEMPT UNDER SECTION 10(20) OF THE ACT, THERE IS NO CASE F OR MAKING DISALLOWANCE OF ANY EXPENSES AT ALL. ANY DISALLOWANCE MADE WILL ONLY RESULT IN ENHANCING THE INCOME OF THE ASSESSEE WHICH IN ANY CASE HAS BEEN H ELD TO BE EXEMPT FROM TAX. FURTHER THE ENTIRE INCOME EARN ED FROM RENDERING SERVICES HAS BEEN HELD TO BE EXEMPT AT THE THRESHOLD ITSELF AND, THEREFORE, THERE IS NO REQUIR EMENT OF RESORTING TO COMPUTATIONAL PROVISION RELATING TO IN COME UNDER THE HEAD BUSINESS AND PROVISION STIPULATED UN DER SECTIONS 28 TO 44 OF THE INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF REPAIR OF GODOWNS/BOUNDARY WALLS/ROADS OF RS.1,15,18,370/- IS DELETED AND THE GROUND RAISED BY THE ASSESSEE IS AL LOWED. 44. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 452/CHD/2010 45. THE FACTS IN THIS CASE SLIGHTLY DIFFER FROM TH AT IN THE APPEALS DEALT WITH HEREINABOVE, AS IN THE PRESE NT CASE THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION UNDER SE CTION 10(20) OF THE ACT BUT WAS ELIGIBLE TO CLAIM EXEMPTI ON UNDER SECTIONS11 AND 12 OF THE INCOME TAX ACT,1961. THE ASSESSING OFFICER DENIED THE ASSESSEE EXEMPTION UND ER SECTIONS 11 AND 12 OF THE ACT AND FURTHER MADE DISALLOWANCE OF CONTRIBUTION MADE TO PENSION FUND ESTABLISHMENT AND PENSION FUND WORK ESTABLISHMENT. IN FIRST APPEAL, THE LD. CIT (APPEALS) ALLOWED THE ASS ESSEES 23 CLAIM OF EXEMPTION OF ITS INCOME UNDER SECTIONS 11 AND 12 OF THE ACT BUT UPHELD THE DISALLOWANCE MADE ON ACCO UNT OF CONTRIBUTION TO PENSION FUND FOR THE REASON THAT TH E SAME WERE UNAPPROVED. 46. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GRO UNDS : 2. THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING ADDITION OF RS.18800000 BEING CONTRIBUTION TO PENSION FUND ESTABLISHMENT AND R S. 9500000 TO PENSION FUND WORK ESTABLISHMENT WITHOUT CONSIDERING THE FACTS OF THE CASE CORRECTLY. IT IS PRAYED THAT THE ADDITION OF RS. 18800000 BEIN G CONTRIBUTION TO PENSION FUND ESTABLISHMENT AND RS.9500000 TO PENSIO N FUND WORK ESTABLISHMENT MAY BE ORDERED TO BE DELETED. 3. THAT THE CIT (A), HAS ERRED BOTH ON FACTS AND LA W IN CONFIRMING ADDITION OF RS.19635 BEING CONTRIBUTI ON TO PROVIDENT FUND ESTABLISHMENT AND RS.95991 TO PROVIDENT FUND WORK ESTABLISHMENT WITHOUT CONSIDERI NG THE FACTS OF THE CASE CORRECTLY. IT IS PRAYED THAT THE ADDITION BEING CONTRIBUTION T O PENSION FUND ESTABLISHMENT AND TO PENSION FUND WORK ESTABLISHMEN T MAY BE ORDERED TO BE DELETED. 47. DURING THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE DISALLOWAN CE MADE WAS UNWARRANTED SINCE THE PENSION AND GRATUITY TRUST OF THE ASSESSEE WAS RECOGNIZED W.E.F. 27.3.20 03 AND, THEREFORE, ALL PAYMENTS MADE WERE ELIGIBLE FOR DEDU CTION UNDER SECTION 36 OF THE ACT FOR ASSESSMENT YEAR 200 3-04. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON DECISI ON OF 24 THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BITONI LAMPS LTD. VS. CIT, 178 ITR 421 IN THIS REGA RD. 48. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT (APPEALS) AND STATED THAT THE FUND WAS UNAPPROVED AND, THEREFORE, THE DISALLOWANCE HAD BEE N RIGHTLY MADE UNDER SECTION 36 OF THE ACT. 49. HAVING HEARD THE CONTENTIONS OF BOTH THE PARTI ES WE FIND THAT IT IS NOT DENIED THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT. THE LD. CIT (APPEALS) HAS UPHELD THE EXEMPTION CLAIMED BY THE ASSESSEE AND IT WAS STATED AT THE BAR THAT NO APPE AL AGAINST THE ORDER OF THE LD. CIT (APPEALS) HAS BEEN FILED BY THE REVENUE. THEREFORE, THE ORDER OF THE LD. CI T (APPEALS) HAS ATTAINED FINALITY ON THE ISSUE. THUS FOR ALL INTENTS AND PURPOSES THE ASSESSEES INCOME IS EXEMPT UNDER SECTIONS 11 AND 12 OF THE ACT. HAVING SAID S O, WE FIND THAT THE DISALLOWANCE MADE ON ACCOUNT OF CONTRIBUTION OF UNAPPROVED PENSION AND GRATUITY FUN DS, RELATE TO THE COMPUTATIONAL PROVISIONS OF THE INCOM E ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION MORE SPECIFICALLY UNDER SECTION 36 OF T HE ACT. SINCE THE INCOME OF THE ASSESSEE HAS BEEN HELD TO B E EXEMPT UNDER SECTIONS 11 AND 12 OF THE ACT AT THE THRESHOLD ITSELF, WE HOLD THAT THERE IS NO OCCASION TO APPLY THE COMPUTATIONAL PROVISION PROVIDED UNDER CHAPTER IV OF THE ACT RUNNING FROM SECTIONS 28 TO 44 , IN COMP UTING THE INCOME SINCE THE SAME IS ATTRACTED ONLY IF TH E INCOME 25 IS BROUGHT TO TAX UNDER THE HEAD INCOME FROM BUSIN ESS AND PROFESSION. EVEN THE CBDT VIDE ITS CIRCULAR NO.5P(LXX-6) DATED 19.6.1968 HAS STATED THAT THE WO RD INCOME FOR THE PURPOSE OF CLAIMING EXEMPTION UNDE R SECTIONS 11 AND 12 OF THE ACT SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. IN VIEW OF THE ABOVE WE HOLD THA T IN THE PRESENT CASE, THE ASSESSEE BEING ENTITLED TO EX EMPTION UNDER SECTION11 AND 12 OF THE ACT, NO DISALLOWANCE ON ACCOUNT OF CONTRIBUTION TO UNAPPROVED PENSION AND GRATUITY FUNDS CAN BE MADE AND THE ADDITION MADE ON ACCOUNT OF THE SAME IS, THEREFORE, DIRECTED TO BE D ELETED. ALL THE GROUNDS RAISED BY THE ASSESSEE ARE, THEREFO RE, ALLOWED AND THE APPEAL OF THE ASSESSEE STANDS ALLOW ED. ITA NOS.1245 & 1246/CHD/2012 50. BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (APPE ALS), PANCHKULA UPHOLDING THE LEVY OF PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2001-02 AN D 2002-03. 51. BRIEFLY STATED, PENALTY IN BOTH THE YEARS WAS LEVIED ON THE ADDITIONS MADE BY THE ASSESSING OFFIC ER AND UPHELD BY THE LD. CIT (APPEALS) IN FIRST APPEAL. F OR THE ASSESSMENT YEAR 2001-02 THE PENALTY WAS LEVIED ON T HE FOLLOWING ADDITIONS UPHELD BY THE LD. CIT (APPEALS) : 26 I. MISCELLANEOUS INCOME :- A INTEREST ON DEPOSIT WORK RS. 5,78,64,016/- B SALE OF TENDER FORM RS.2,62,4724 C ENLISTMENT FEE OF CONTRACTORS RS. 22,61,550/- D OTHER MISC INCOME INCLUDED IN SUSPENSE ACCOUNT RS. 17,79,295/- 6,45,25,986/- II. CONTRIBUTION TO PENSION FUND 16200000/- TOTAL 8,07,25,986/- 52. THE ASSESSING OFFICER HELD THAT THE ASSESSEE H AD FURNISHED INACCURATE PARTICULARS TO THE EXTENT OF T HE ABOVE AND LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADE D ON THE SAME AMOUNTING TO RS.2,83,34,821/-. 53. SIMILARLY FOR ASSESSMENT YEAR 2002-03 PENALTY WAS LEVIED ON THE FOLLOWING ADDITIONS MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT (APPEALS) : I. MISCELLANEOUS INCOME :- A INTEREST ON DEPOSIT WORK RS.0000170/- B SALE OF TENDER FORM RS.1591918 C ENLISTMENT FEE OF CONTRACTORS RS.1191750/- D OTHER MISC INCOME INCLUDED IN SUSPENSE ACCOUNT RS.110478/- RS.1,28,94,316/- II. CONTRIBUTION TO PENSION FUND RS.2,35,00,000/- III. CONTRIBUTION TO KISSAN MELA RS.15,00,000/- IV REPAIR TO GODOWN/BOUNDARY WALLS/ROADS RS.1,15,18,370/- TOTAL RS.4,94,02,686/- 54. IN ASSESSMENT YEAR 2002-03, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD FURNISHED IN ACC URATE PARTICULARS OF INCOME TO THE ABOVE EXTENT AND, THER EFORE, LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED ON T EH 27 SAME AMOUNTING TO RS.1,63,02,887/-. 55. THE LD. CIT (APPEALS) VIDE HIS CONSOLIDATED ORDER PASSED ON 17.9.2012 UPHELD THE LEVY OF PENALT Y. 56. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED BOTH THE ABOVE APPEALS BEFORE US. 57. WE FIND NO REASON TO UPHOLD THE PENALTY LEVIED SINCE THE ADDITIONS MADE HAVE BEEN DELETED IN THE QUANTUM PROCEEDINGS BEFORE US IN THE ORDER PASSED I N ITA NO.47/CHD/2009 AND ITA NO.1104/CHD/2008 ABOVE. SINCE THE VERY BASIS FOR THE LEVY OF PENALTY HAS BE EN DELETED THERE CAN BE NO OCCASION TO LEVY PENALTY UN DER SECTION 271(1)(C) AT ALL. 58. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER O F THE CIT(A) AND DELETE THE PENALTY LEVIED UNDER SECT ION 271(1)(C) OF THE ACT. 59. IN EFFECT BOTH THE APPEALS OF THE ASSESSEE STAN D ALLOWED. 59. IN THE RESULT; 1) THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1103/CHD/2008 IS ALLOWED. 2) THE APPEALS FILED BY THE ASSESSEE IN ITA NO.47/CHD/2009 & ITA NO.1104/CHD/2008, ARE PARTLY ALLOWED. 28 3) THE APPEALS FILED BY THE ASSESSEE IN ITA NO.452/CHD/2010 IS ALLOWED. 4) THE APPEALS FILED BY THE ASSESSEE IN ITA NOS.1 245 & 1246/CHD/2012 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST DECEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH