ADIT(E)-1, Hyderabad V. Sports Authority of Andhra Pradesh, Hyderabad

ITA 1296/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1392 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Opportunity of being heard; Capital receipt
• Section: 12AA; 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NOS. 1296, 1297 & 1298/HYD/2011 ASSESSMENT YEARS : 2004-05, 2005-06 & 2006-07 ASST. DIRECTOR OF INCOME-TAX(E)-I, APPELLANT HYDERABAD VS. SPORTS AUTHORITY OF ANDHRA PRADESH, RESPONDEN T HYDERABAD. (PAN ABLFS1228G) APPELLANT BY : SHRI D. SUDHAKAR RAO RESPONDENT BY : SHRI MOHD. AFZAL DATE OF HEARING : 31/12/2012 DATE OF PRONOUNCEMENT : 04/01/ 2013 ORDER PER B.R. BASKARAN, A.M.: THESE THREE APPEALS, FILED AT THE INSTANCE OF THE REVENUE, ARE DIRECTED AGAINST THE COMMON ORDER DATED 29-04-2 011 PASSED BY LEARNED CIT(A), GUNTUR AND THEY RELATE T O THE ASSESSMENT YEARS 2004-05, 2005-06 AND 206-07. SINC E IDENTICAL ISSUES ARE URGED IN THESE APPEALS, WHICH ARE ALSO BASED ON IDENTICAL SET OF FACTS, THEY WERE HEARD TO GETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2 ITA NOS. 1296, 1297 & 1298/HYD/11 SPORTS AUTHORITY OF ANDHRA PRADESH 2. FOLLOWING TWO ISSUES ARE URGED IN THESE APPEALS: - (A) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN H OLDING THAT THE GRANT-IN-AID RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND HENCE NOT EXIGIBLE TO TAX. (B) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DE LETING THE ADHOC DISALLOWANCE OF EXPENSES MADE BY THE ASSESSING OFFICER FOR NON-AVAILABILITY OF PROPER VO UCHERS. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ESTABLISHED UNDER THE SPORT S AUTHORITY OF ANDHRA PRADESH ACT, 1988 BY THE GOVERNMENT OF AN DHRA PRADESH. IT WAS INCORPORATED FOR THE PURPOSE OF DE VELOPMENT OF INFRASTRUCTURE FACILITIES WHICH ARE ESSENTIAL FO R PROMOTION OF SPORTS ACTIVITIES. THE ASSESSEE ENJOYED EXEMPTION U/S 10(23) OF THE ACT UPTO THE ASSESSMENT YEAR 2002-03. SINCE THE SAID SECTION WAS OMITTED BY THE FINANCE ACT, 202 W.E.F. 1.4.2003, THE ASSESSEE COULD NOT CLAIM EXEMPTION UNDER THAT S ECTION FOR THE SUBSEQUENT YEARS. IT MOVED AN APPLICATION BEFO RE THE LEARNED CIT SEEKING REGISTRATION U/S 12AA OF THE AC T, BUT THE COMMISSIONER OF INCOME TAX GRANTED REGISTRATION WIT H EFFECT FROM 1.4.2007, I.E. WITH EFFECT FROM THE ASSESSMENT YEAR 2007- 08. HENCE THE ASSESSING OFFICER ISSUED NOTICES U/S 148 OF THE ACT ASKING THE ASSESSEE TO FILE RETURNS OF INCOME F OR ASSESSMENT YEARS 2004-05 TO 2006-07, AS THE ASSESSE E DID NOT QUALIFY FOR EXEMPTION UNDER ANY OF THE SECTIONS OF THE ACT IN THOSE YEARS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS REC EIVED FUNDS BY WAY OF GRANT IN AID FROM BOTH STATE GOVERNMENT AND 3 ITA NOS. 1296, 1297 & 1298/HYD/11 SPORTS AUTHORITY OF ANDHRA PRADESH CENTRAL GOVERNMENT FOR CARRYING OUR VARIOUS ACTIVIT IES. THOUGH IN THE BODY OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE GRANTS-IN-AID RECEIVED BY THE ASS ESSEE ARE NOT TAKEN FOR COMPUTING THE TAXABLE INCOME OF THE A SSESSEE, YET HE ASSESSED THE SAID GRANTS-IN-AID AS THE INCOM E OF THE ASSESSEE. THE ASSESSING OFFICER ALSO DISALLOWED A PORTION OF THE EXPENDITURE ON ESTIMATED BASIS CALCULATED @ 30% OF THE EXPENDITURE CLAIM FOR WANT OF PROPER VOUCHERS AND U TILIZATION CERTIFICATES. 5. THE ASSESSEE CARRIED THE MATTERS IN APPEAL F ILED BEFORE THE LEARNED CIT(A). DURING THE APPELLATE PROCEEDI NGS, THE LEARNED CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THOUGH, THE ASSESSING OFFICER SUBMITTED H ER REPORT, VIDE HER LETTER DATED 05-01-2010, YET SHE DID NOT O FFER ANY COMMENT WITH REGARD TO THE CONTRADICTION IN THE ASS ESSMENT ORDER ABOUT THE TAXABILITY OF GRANT IN AID. THE LE ARNED CIT(A), BY PLACING RELIANCE ON THE FOLLOWING CASE LAW, HELD THAT THE GRANTS-IN-AID RECEIVED BY THE ASSESSEE ARE CAPITAL RECEIPTS. (A) SAHNEY STEELS AND PRESS WORKS LTD (1997)(228 I TR 253)(SC) (B) ITO VS. MADHYA PRADESH RAJYA SAHAKARI BANK (1982)(14 TTJ 575)(JAB). WITH REGARD TO THE DISALLOWANCE OF EXPENDITURE ON A DHOC BASIS, THE LEARNED CIT(A) OBSERVED THAT THE SAID EXPENSES HAVE BEEN INCURRED BY HIGH RANKING GOVERNMENT OFFICIALS AND HENCE IT CANNOT BE ASSUMED THAT THE FUNDS HAVE NOT BEEN T OTALLY SPENT, PARTICULARLY IN VIEW OF THE FACT THAT THE GO VERNMENT MACHINERY IS HAVING INBUILT CHECKS AND CONTROLS. A CCORDINGLY, 4 ITA NOS. 1296, 1297 & 1298/HYD/11 SPORTS AUTHORITY OF ANDHRA PRADESH THE LEARNED CIT(A) DELETED THE SAID DISALLOWANCE A LSO IN ALL THE THREE YEARS. AGGRIEVED BY THE ORDERS PASSED BY LEARNED CIT(A), THE REVENUE HAS FILED THESE APPEALS BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. WITH REGARD TO THE GRANTS-IN-AID, THE LE ARNED CIT(A) HAS SPECIFICALLY POINTED OUT THE CONTRADICTION IN T HE ASSESSMENT ORDERS, VIZ., AT ONE STAGE, THE ASSESSING OFFICER H AS SPECIFICALLY OBSERVED THAT THE GRANTS-IN-AID ARE NOT TAKEN FOR C OMPUTING THE TAXABLE INCOME OF THE ASSESSEE, BY ACCEPTING TH E CLAIM OF THE ASSESSEE THAT THE GRANTS-IN-AID RECEIVED FROM T HE GOVERNMENT OF ANDHRA PRADESH DO NOT PARTAKE THE CHA RACTER OF INCOME IN THE HANDS OF THE ASSESSEE. HOWEVER, WHIL E COMPUTING THE TOTAL INCOME, THE ASSESSING OFFICER H AS PROCEEDED TO COMPUTE THE INCOME FROM THE STAGE OF EXCESS OF INCOME OVER EXPENDITURE DECLARED BY THE ASSESSEE. ACCORDING TO THE ASSESSEE, THE EXCESS OF INCOME OVER EXPENDI TURE HAS BEEN ARRIVED AT AFTER INCLUDING THE GRANTS IN AID. HOWEVER, WE COULD NOT VERIFY THE SAID CLAIM IN THE ABSENCE OF T HE INCOME AND EXPENDITURE ACCOUNT. 7. BE THAT AS IT MAY, IT IS A FACT THAT THE ASSE SSING OFFICER HAS NOT FOLLOWED HIS OWN DECISION TO TREAT THE GRA NT-IN-AID AS CAPITAL RECEIPT. IN THE REMAND REPORT FILED BEFORE THE FIRST APPELLATE AUTHORITY ALSO, THE ASSESSING OFFICER HAS FAILED TO OFFER ANY EXPLANATION ABOUT THE CONTRADICTORY STAND TAKEN BY HER. THE LEARNED D.R VEHEMENTLY ARGUED BEFORE US T HAT THE GRANT IN AID IS A REVENUE RECEIPT. HOWEVER, IN OUR VIEW, THE DEPARTMENTAL REPRESENTATIVE, BEING A REPRESENTATIVE OF THE 5 ITA NOS. 1296, 1297 & 1298/HYD/11 SPORTS AUTHORITY OF ANDHRA PRADESH ASSESSING OFFICER, COULD NOT IMPROVE THE CASE OF TH E ASSESSING OFFICER. IN THE ABSENCE OF ANY SATISFACTORY EXPLAN ATION OR EVEN AN EXPLANATION ABOUT THE CONTRADICTORY STAND TAKEN BY THE ASSESSING OFFICER, IN OUR OPINION, THE VIEW TAKEN B Y HER IN FAVOUR OF THE ASSESSEE SHOULD PREVAIL. IN ADDITION TO THE ABOVE, THE LEARNED CIT(A) HAS FOLLOWED TWO CASE LAW TO COME TO THE CONCLUSION THAT THE GRANT-IN-AID IN THE INST ANT CASE IS A CAPITAL RECEIPT. THE DEPARTMENT COULD NOT CONTROVE RT OR DISTINGUISH THOSE DECISIONS BEFORE US. UNDER THESE CIRCUMSTANCES, WE DO NOT HAVE ANY OTHER OPTION, BUT TO CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. 8. WITH REGARD TO THE DISALLOWANCE OF EXPENDITU RE ON AD-HOC BASIS @ 30%, WE NOTICE THAT THE ASSESSEE HAS FAILED TO FURNISH PROPER VOUCHERS AND UTILIZATION CERTIFICATES BEFORE THE ASSESSING OFFICER. THERE CANNOT BE ANY DOUBT THAT THE RESPONSIBILITY TO PROVE THE EXPENDITURE CLAIM, REST S UPON THE ASSESSEE. HOWEVER, WE ARE NOT ABLE TO AGREE WITH T HE VIEW OF THE LEARNED CIT(A) THAT THE EXPENDITURE SHOULD BE A LLOWED, SINCE IT WAS SPENT BY HIGH RANKING OFFICIALS. THER E IS NO SUCH RULE IN THE INCOME TAX PROCEEDINGS. DURING THE COU RSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE WOULD BE IN A POSITION TO PRODUCE UTIL IZATION CERTIFICATES AND RELEVANT VOUCHERS BEFORE THE ASSES SING OFFICER AND ACCORDINGLY SOUGHT AN OPPORTUNITY. THE LEARNED D.R ALSO DID NOT OBJECT TO THE SAID REQUEST MADE BY THE LEAR NED A.R. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LEARNED CI T(A) ON THIS ISSUE AND RESTORE THEM TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE EXPENDITURE CLAIM AFRE SH AND TAKE 6 ITA NOS. 1296, 1297 & 1298/HYD/11 SPORTS AUTHORITY OF ANDHRA PRADESH APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. T HE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 04/01/2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT ME MBER HYDERABAD, DATED: 4 TH JANUARY, 2013 COPY TO:- 1) ASST. DIRECTOR OF INCOME-TAX (E)-I, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500004. 2) SPORTS AUTHORITY OF ANDHRA PRADESH, L.B. STADIUM, HYDERABAD 3) THE CIT(A), GUNTUR 4) DIT(EXEMPTIONS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.