M/s H.P. Reproductive & Child Health Society, Shimla V. ACIT, Shimla

ITA 166/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5477 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S KEMWAL
• Section: 143(3); 12A; 12; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.166 & 167 /CHD/2011 (ASSESSMENT YEAR : 2006-07 & 2007-08) M/S H.P. REPRODUCTIVE & CHILD HEALTH SOCIETY, VS. THE A.C.I.T., C/O DIRECTOR NATIONAL RURAL HEALTH MISSION, CIR CLE, SHIMLA. PAN: AAATH3148J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.S.KEMWAL O R D E R PER SUSHMA CHOWLA, J.M, : BOTH THE APPEALS OF THE ASSESSEE ARE AGAINST THE C ONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 22.11. 2010 RELATING TO ASSESSMENT YEARS 2006-07 & 2007-08 AGAINST THE ORDE R PASSED U/S 143(3) OF THE INCOME-TAX ACT. 2. BOTH THE APPEALS OF THE ASSESSEE ON THE SAME ISS UE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE AGAINST T HE FRAMING OF ASSESSMENT UNDER SECTION 144 OF THE ACT IS NOT PRES SED BY THE ASSESSEE IN BOTH THE APPEALS AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 2 4. GROUND NO.2 AGAINST REJECTION OF BOOKS OF ACCOUN T UNDER SECTION 145(3) OF THE ACT IS ALSO NOT PRESSED BY THE ASSESS EE. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 5. GROUND NO.3 RAISED IN ASSESSMENT YEAR 2007-08 AG AINST THE ADDITION OF RS.85,13,221/- BEING TAXABLE AND NOT EL IGIBLE FOR EXEMPTION U/S 11 OF THE ACT, WAS ALSO NOT PRESSED AND HENCE T HE SAME IS DISMISSED. 6. THE ISSUE PRESSED BEFORE US IN BOTH THE APPEALS IS IN RESPECT OF GROUND NOS. 3 & 4 RAISED IN ASSESSMENT YEAR 2006-07 AND GROUND NOS.4 & 5 IN ASSESSMENT YEAR 2007-08. IDENTICAL GROUNDS OF APPEAL HAVE BEEN RAISED IN BOTH THE ASSESSMENT YEARS, WHICH READ AS UNDER : 3. THAT THE LD. COMMISSIONER OF INCOME-TAX(APPEALS ) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION OFRS.3,54,46,191/- TREATING THE SAME T O BE NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT IN UTTER DISREGARD OF THE EXPLANATION RENDERED WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) HAS FAILED TO CONSIDER THAT THE UNSPENT GRANT IN AI D IS TO BE REFUNDED TO THE GOVERNMENT AS AND WHEN THE ACTIVITY IS FINISHED AND AS SUCH UPHOLDING OF THE ADDITION IS ARBITRARY & UNJUSTIFIED. 7. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE SOCIETY IS AN AUTONOMOUS AND INDEPENDENT BODY ENGAGED IN IMPLE MENTATION REPRODUCTIVE AND CHILD HEALTH PROGRAMME AND OTHER F AMILY PLANNING/WELFARE PROGRAMMES IN THE STATE OF HIMACHA L PRADESH. THE ASSESSEE SOCIETY IS REGISTERED UNDER SECTION 12A OF THE INCOME-TAX ACT AND HAD CLAIMED THAT ITS INCOME OVER EXPENDITURE WA S OUTSIDE THE PURVIEW OF TAX BEING EXEMPT UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME OF THE ASSE SSEE WOULD BE EXEMPT 3 UNDER SECTION 11 OF THE ACT IN CASE THE CONDITIONS LAID DOWN UNDER THE SAID SECTION ARE FULFILLED. AS PER THE ASSESSING O FFICER, 85% OF THE TOTAL INCOME IS TO BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES AND AS THE ASSESSEE HAD FAILED TO APPLY THE SAME, THE BALANCE INCOME IS DEEMED TO BE THE INCOME OF THE ASSESSEE. THE ASSESSING OFFIC ER, HOWEVER, ALLOWED THE BENEFIT OF THE DECLARATION MADE BY THE ASSESSEE IN RESPECT OF INCOME SET APART FOR UTILIZATION IN THE SUBSEQUENT YEARS. IN ASSESSMENT YEAR 2006-07 ADDITION OF RS.3,54,46,191/- WAS MADE ON TH IS ACCOUNT AND IN ASSESSMENT YEAR 2007-08 ADDITION OF RS.12,45,01,025 /- WAS MADE. THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT TH E UNSPENT GRANT-IN-AID LYING UNUTILIZED AT THE END OF THE PERIOD IN WHICH THE ACTIVITY HAD TO BE CARRIED OUT, HAD TO BE REFUNDED TO GOVERNMENT OF IN DIA. 8. THE LEARNED A.R. FOR THE ASSESSEE ALSO POINTED O UT THAT IN THE FINANCIAL YEAR 2006-07 A SUM OF RS.1.62 LACS WAS RE FUNDED TO GOVERNMENT AS APPARENT FROM THE BALANCE SHEET OF TH E ASSESSEE COMPANY. THE CIT(A) NOTED THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF GRANT-IN- AID RECEIVED BY IT FOR SPECIFIC ACTIVITIES AND UNSP ENT FUNDS BEING REFUNDED TO THE GOVERNMENT OF INDIA, FURTHER OBSERV ED THAT THE ASSESSEE WAS NOT FREE EVEN TO DIVERT THE FUNDS FROM ONE HEAD TO THE OTHER. HOWEVER, AS THE ASSESSEE HAD FAILED TO PROVIDE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS PLEA OF REFUND OF SURPLU S TO GOVERNMENT OF INDIA IN ASSESSMENT YEAR 2006-07, THE CLAIM FOR ASS ESSMENT YEAR 2006-07 WAS REJECTED. IN RESPECT OF ASSESSMENT YEAR 2007- 08 AS THE ASSESSEE HAD FILED EVIDENCE OF REFUND OF RS.1.62 LACS TO GOVERNM ENT OF INDIA, THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE CREDIT FOR THE SAME AND THE BALANCE WAS CONFIRMED BY THE CIT(A). 9. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. LEA RNED A.R. FOR THE ASSESSEE POINTED OUT THAT AS PER THE COMMUNICATION ISSUED BY THE 4 MINISTRY OF HEALTH & FAMILY WELFARE, GOVERNMENT OF INDIA, THE FUNDS SANCTIONED TO THE ASSESSEE, IF NOT UTILIZED FOR THE PURPOSES FOR WHICH THE SAME WERE SANCTIONED, HAD TO BE REFUNDED TO THE GOV ERNMENT OF INDIA AND SUCH UNUTILIZED GRANT-IN-AID COULD NOT BE INCLU DED AS THE INCOME OF THE ASSESSEE. REFERENCE WAS MADE TO THE COMMUNICAT ION OF GOVERNMENT OF INDIA, MINISTRY OF HEALTH & FAMILY WELFARE, DATE D OCTOBER, 2008. IN THIS REGARD, OUR ATTENTION WAS DRAWN TO THE STATEME NT SHOWING RELEASING/UTILIZATION OF FUNDS AND UNSPENT BALANCE WHICH WERE TO BE REFUNDED RELATING TO THE FINANCIAL YEARS 2005-06 AN D 2006-07, AS TABULATED AT PAGE 4 OF THE PAPER BOOK BEING ANNEXUR E TO THE LETTER OF GOVERNMENT OF INDIA PLACED AT PAGE 3 OF THE PAPER B OOK. FURTHER RELIANCE WAS PLACED ON THE LETTER EVIDENCING REFUND OF RS.1.62 LACS PLACED AT PAGE 1 & 2 OF THE PAPER BOOK. THE LEARNE D A.R. FURTHER POINTED OUT THAT THE ISSUE IN THE PRESENT CASE STAN DS COVERED BY THE ORDER OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF M/S PUNJAB STATE SPORTS COUNCIL IN I.T.A.NO. 904/CHANDI/2006 DATED 2 0.7.2007, WHICH HAS BEEN APPROVED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN I.T.A.NO. 190 OF 2008 ORDER DATED 12.12.2008. THE LEARNED A. R. FURTHER POINTED OUT THAT THE AFORESAID ISSUE HAS BEEN APPLIED BY TH E TRIBUNAL IN THE CASE OF M/S PUNJAB E-GOVERNANCE SOCIETY IN I.T.A.NO. 681 /CHANDI/2009 ORDER DATED 4..8.2010. 10. THE LEARNED D.R. PLACING RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW POINTED OUT THAT THE ASSESSEE HAS FAILED TO E STABLISH THAT THE AFORESAID FUNDS WERE REMITTED BACK TO THE PARENT BO DY. THE LEARNED A.R. FAIRLY ADMITTED THAT THE MATTER MAY BE REMITTED BAC K TO THE ASSESSING OFFICER FOR VERIFICATION IN THIS REGARD. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE SOCIETY IS AN AUTONOMOUS AND INDEPENDENT B ODY ENGAGED IN 5 IMPLEMENTATION REPRODUCTIVE AND CHILD HEALTH PROGRA MME AND OTHER FAMILY PLANNING/WELFARE PROGRAMMES IN THE STATE OF HIMACHAL PRADESH. THE ASSESSEE SOCIETY IS REGISTERED UNDER SECTION 12 A OF THE INCOME-TAX ACT. THE ASSESSEE HAD CLAIMED THAT ITS INCOME WAS EXEMPT UNDER THE PROVISIONS OF SECTION 11 OF THE ACT. HOWEVER, THE ASSESSING OFFICER NOTED THAT THERE WAS SURPLUS IN BOTH THE YEARS UNDE R CONSIDERATION. THE PLEA OF THE ASSESSEE IN RESPECT OF UNSPENT GRANT-IN -AID WAS THAT THE SAME WAS TO BE RETURNED BACK TO THE GOVERNMENT OF INDIA IN THE CASE OF THE SAME HAS NOT BEEN UTILIZED BY IT IN THE DESIGNATED PROJECT AND SUCH UNSPENT GRAND-IN-AID WAS NOT RECEIPT OF THE ASSESSE E. THE CIT(A) HAS NOTED THE ABOVE-SAID FACT AND HAS ALSO FURTHER NOTE D THAT THE ASSESSEE WAS NOT FREE TO DIVERT THE FUNDS FROM ONE HEAD TO T HE OTHER. HOWEVER, THE CLAIM OF THE ASSESSEE WAS NOT ALLOWED IN THE AB SENCE OF THE EVIDENCE BEING FILED BY THE ASSESSEE FOR REMITTING THE UNUTI LIZED GRANT-IN-AID. 12. WE FIND THAT THE ISSUE IN THE PRESENT CASE IS C OVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S PUNJAB E-GOVERNA NCE SOCIETY(SUPRA), WHEREIN VIDE ORDER DATED 4.8.2010 THE TRIBUNAL HELD AS UNDER : 6. IN THE ABOVE BACKGROUND, WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SECTIONS 11 AND 12 OF THE ACT PROVID E FOR EXEMPTION IN RESPECT OF INCOME DERIVED FROM PROPERT Y HELD FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED FOR THE STATED PURPOSES. S ECTION 12 OF THE ACT PROVIDES THAT ANY VOLUNTARY CONTRIBUTION RECEIVED BY A TRUST OR INSTITUTION ESTABLISHED WHOLLY FOR CH ARITABLE OR RELIGIOUS PURPOSES SHALL, FOR THE PURPOSES OF SECTI ON 11, BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDE R TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF SECTIONS 11 TO 13 SHALL APPLY ACCORDI NGLY. FURTHER, SECTION 11(1)(A) PROVIDES THAT THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES SHALL BE EXEMPT TO THE EXTENT TO WHICH IT IS SO ACCUMULATED OR SET 6 APART, AS IS NOT IN EXCESS OF 15% OF THE INCOME FRO M SUCH PROPERTY. IN THIS CASE, THE ASSESSEE IS A SOCIETY ENGAGED IN THE DEVELOPMENT OF IMPLEMENTATION OF E-GOVERNANCE F OR ENSURING THE USE OF INFORMATION TECHNOLOGY FOR THE MASSES IN THE STATE OF PUNJAB. THE ASSESSEE RECEIVES CERT AIN GRANTS FROM THE GOVERNMENT WITH A STIPULATION THAT SUCH GR ANTS ARE TO BE UTILIZED/APPLIED ONLY TOWARDS THE STATED PURP OSES, WHICH ARE PRE-DECIDED BY THE DISBURSING AGENCY. TH E COMMISSIONER OF INCOME-TAX (A) HAS ALSO NOTED THAT UNSPENT AMOUNT OF SUCH GRANTS IS REQUIRED TO BE REFUNDED TO THE DISBURSING AGENCY. SUCH TYPE OF GRANTS HAVE NOT B EEN CONSIDERED BY THE ASSESSEE AS INCOME IN ITS INCOME & EXPENDITURE ACCOUNT BUT HAS BEEN SHOWN IN THE BALAN CE SHEET. THE OTHER TYPE OF GRANTS WHICH ARE RECEIVED BY THE ASSESSEE AS GENERAL GRANTS DO NOT CARRY ANY SUCH RESTRICTIONS AND THE SAME HAVE BEEN CREDITED BY THE ASSESSEE AS INCOME IN THE INCOME & EXPENDITURE ACCOUNT. THE ISSUE PRESENTLY IS AS TO WHETHER THE GRANTS RECEIVED BY T HE ASSESSEE FOR SPECIFIC PURPOSES CONSTITUTED INCOME WITHIN THE MEANING OF SECTIONS 11 AND 12 OF THE ACT. IT I S ALSO NOTICED THAT UN-DISBURSED/UN-SPENT AMOUNT OF TIED-U P GRANTS ARE SHOWN AS A LIABILITY IN THE BALANCE SHEET, WHER EAS THE UNSPENT AMOUNT OF THE GENERAL GRANTS REMAIN AS INCO ME WITH THE ASSESSEE. THE SPECIFIC TIED-UP GRANTS ARE NOT CREDITED IN THE INCOME & EXPENDITURE ACCOUNT AND ARE TAKEN DIRE CTLY INTO THE LIABILITY SIDE OF THE BALANCE SHEET OF THE ASSESSEE UNDER THE HEAD PROJECT FUND ACCOUNT WHEREBY THE ASSESSEE IS MAINTAINING SEPARATE ACCOUNT FOR EACH P ROJECT FOR WHICH THE GRANT IS RECEIVED. 7. IN SIMILAR CIRCUMSTANCES, IN THE CASE OF PUNJAB STATE SPORTS COUNCIL (SUPRA), TRIBUNAL HELD THAT TIED-UP GRANTS RECEIVED BY AN ASSESSEE FOR SPECIFIC PURPOSES WITH THE RIDER TO REFUND THE UNUTILIZED PORTION, WOULD NOT CONSTIT UTE INCOME WITHIN THE MEANING OF SECTIONS 11 AND 12 O F THE ACT. SUCH GRANTS ARE NOT REQUIRED TO BE TAKEN INTO CONSIDERATION AS INCOME OF THE ASSESSEE FOR THE PUR POSES OF ASCERTAINING THE AMOUNT APPLIED FOR CHARITABLE OR R ELIGIOUS 7 PURPOSES WITHIN THE MEANING OF SECTION 11(1)(A) OF THE ACT. IN CONTRAST, THE GRANTS WHICH ARE RECEIVED FOR GENE RAL PURPOSES CONSTITUTE INCOME FOR THE PURPOSES OF SE CTIONS 11 AND 12 OF THE ACT. THE AFORESAID DECISION OF TH E TRIBUNAL HAS BEEN FOLLOWED BY THE COMMISSIONER OF I NCOME- TAX (A) AND WE FIND NO JUSTIFICATION TO INTERFERE W ITH SUCH CONCLUSION DRAWN BY THE COMMISSIONER OF INCOME-TAX (A). NO DECISION TO THE CONTRARY HAS BEEN BROUGHT OUT BY THE LEARNED D.R. AND UNDER THE CIRCUMSTANCES, WE HEREBY AFFIRM THE CONCLUSION DRAWN BY THE COMMISSIONER OF INCOME- TAX (A). THE REVENUE ACCORDINGLY, FAILS ON THIS GROUN D. 13. THE ISSUE IN THE PRESENT APPEAL BEFORE US IS ID ENTICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN M/S PUNJAB E-GOVERNAN CE SOCIETY(SUPRA) AND FOLLOWING THE SAME WE ARE OF THE VIEW THAT THE GRANT-IN-AID RECEIVED BY THE ASSESSEE FOR SPECIFIC PURPOSE, IF UNSPENT AN D IS TO BE REFUNDED TO THE PARENT SOCIETY I.E. GOVERNMENT OF INDIA, IS NOT THE INCOME OF THE ASSESSEE. HOWEVER, THE MATTER IS RESTORED BACK TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE REFUND OF THE UNSPENT GRANT-IN- AID TO THE GOVERNMENT OF INDIA BY THE ASSESSEE ON T HE CLOSE OF THE PROJECT. IN CASE THE ASSESSEE IS ABLE TO PROVE WI TH EVIDENCE ITS CLAIM, NO ADDITION IS WARRANTED IN THE HANDS OF THE ASSESS EE. THE ASSESSING OFFICER SHALL DECIDE THE LIMITED ISSUE AFTER AFFORD ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUN DS OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD IN BOTH THE CAPTIONED Y EARS ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF APRIL, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH APRIL , 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR.