The DCITGNR Circle, Gandhinagar V. Gujarat Rural Industries Marketing Corporation Ltd., Gandhinagar

ITA 2597/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0814 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 2597/AHD/2013 (ASSESSMENT YEAR: 2010-11) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12, AHMEDABAD V/S GUJARAT RURAL INDUSTRIES MARKETING CORPORATION LTD. 5 TH FLOOR, BLOCK NO. 17, UDHYOG BHAVAN, SECTOR-11, GANDHINAGAR (APPELLANT) (RESPONDENT) PAN: AAACG7166N APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI TEJ SHAH, A.R. ( )/ ORDER DATE OF HEARING : 09 -08-20 16 DATE OF PRONOUNCEMENT : 11 -08-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF THE LD. CIT(A), GANDHINAGAR DATED 27.08.20 13 PERTAINING TO A.Y. 2010-11. ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 2 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF THE ADDITION MADE BY THE A.O. AMOUNTING TO RS. 2,37,15, 593/- ON ACCOUNT OF UNUTILIZED REVENUE GRANT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER GOODS AND FURNITURE. RETURN FOR THE YEAR WAS FILED ON 14.10.2010 SHOWING TOTAL INCOME OF RS. 1,68,12,210/-. SUBSEQUENTLY, THE RETURN WAS REVISED ON 21.10.2011 DECLARING TOTAL INCOME OF RS. 2,78,24,610/-. THE RE TURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY N OTICED WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. OBSERVED THAT REVENUE GRANTS OF RS. 30,48,70,511/- WERE RECEIVED FROM DIFFERENT AUTHORITIES, DURING THE YEAR UNDER C ONSIDERATION, AND GRANT OF RS. 28,11,54,918/- WAS UTILIZED DURING THE YEAR. THE ASSESSEE WAS ASKED TO FURNISH COPIES OF THE APPROVAL LETTERS SANCTIONING THESE GRANTS FROM EACH OF THE AUTHORITIES. 5. ASSESSEE FILED THE NECESSARY DETAILS EXPLAINING THA T THE AMOUNT OF RS. 30,48,70,511- WHICH FORMS PART OF THE TOTAL RECEIPT HAS NOT BEEN REFLECTED IN THE PROFIT AND LOSS ACCOUNT FOR DRAWIN G THE ACTUAL TOTAL INCOME. IT WAS FURTHER EXPLAINED THAT AN AMOUNT OF RS. 28,11,54,918/- HAS BEEN UTILIZED DURING THE YEAR. 6. THE ASSESSEE WAS ASKED TO EXPLAIN WHY BALANCE AMOUN T OF RS. 2,37,15,593/- SHOULD NOT BE ADDED TO THE TOTAL INCO ME AS UNUTILIZED REVENUE GRANTS. ASSESSEE FILED A DETAILED REPLY WHI CH WAS CONSIDERED BY THE A.O. THE A.O. OBSERVED THAT THE UNSPENT GRAN TS ARE TREATED AS ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 3 LIABILITIES BY THE ASSESSEE. DRAWING SUPPORT FROM T HE ACCOUNTING STANDARD-12, THE A.O. DISMISSED THE CLAIM OF THE AS SESSEE THAT THE UNSPENT OF GRANTS ARE TO BE RETURNED TO THE GOVERNM ENT. THE A.O. WAS OF THE FIRM BELIEF THAT REVENUE GRANT OF RS. 30,48, 70,511/- AND THE EXPENDITURE OF RS. 28,11,54,918/- SHOULD HAVE BEEN ROUTED THROUGH PROFIT AND LOSS ACCOUNT. 7. THE A.O. RE-FRAMED THE PROFIT AND LOSS ACCOUNT OF T HE ASSESSEE AND MADE AN ADDITION OF RS. 2,37,15,593/-. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CONTENDED THAT THE SURPLUS AMOUNT OF GRANTS RECEIVE D IS PARKED WITH GSFS IN THE FORM OF LIQUID ASSETS AND ALSO IN THE F ORM OF FIXED ASSETS. IT WAS EXPLAINED THAT THE ASSESSEE IS A GOVERNMENT CORPORATION ENGAGED TO PROMOTE AND ASSIST SOCIAL WELFARE SCHEM ES LAUNCHED BY GOVERNMENT AND IN PARTICULAR TO ASSIST MARKETING OF THE PRODUCTS OF RURAL INDUSTRIES OF GUJARAT & TO PROVIDE TECHNICAL AND MANAGERIAL ASSISTANCE TO RURAL ARTISANS OF VARIOUS DISTRICTS O F GUJARAT. IT WAS FURTHER EXPLAINED THAT THE ENTIRE SHARE CAPITAL OF CORPORATION IS HELD BY GOVERNMENT OF GUJARAT AND ITS NOMINEES. IT WAS FURT HER BROUGHT TO THE NOTICE OF THE FIRST APPELLATE AUTHORITY THAT THE DE CISIONS RELIED UPON BY THE A.O CANNOT BE APPLIED ON THE FACTS OF THE CASE. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL AHMEDABA D BENCH IN THE CASE OF GUJARAT SAFAI KAMDAR VIKAS NIGAM AND ALSO O N THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F GUJARAT MUNICIPAL FINANCE BOARD 221 ITR 317 (GUJ.). 9. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) HELD AS UNDER:- ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 4 5.2 I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBM ISSIONS OF THE APPELLANT AS WELL AS ORDERS OF THE HONBLE ITAT, AHMEDABAD BENCH RELI ED ON BY THE APPELLANT. I FIND THAT IDENTICAL ISSUE HAD COME UP BEFORE MY PRE DECESSOR FOR A.Y. 2009-10, AND HE HAD GIVEN THE FOLLOWING FINDINGS: I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBMISS IONS OF THE APPELLANT AS WELL AS ORDER OF THE HONBLE ITAT, AHMEDABAD BENCH IN THE CASE OF GUJARAT SAFAI KAMDAR VIKAS NIGAM VS. ACIT, GANDHINA GAR CIRCLE, GANDHINAGAR (ITA NO. 3232/AHD/2008, ORDER DATED 17/ 04/2009, AND GUJARAT STATE DISASTER MANAGEMENT AUTHORITY VS. ACI T, GANDHINAGAR CIRCLE, GANDHINAGAR, ITA NO. 949/AHD/2009,ORDER DAT ED 05/06/2006. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE AB OVE REFERRED TWO JUDGMENTS OF HON'BLE ITAT, AHMEDABAD. IT HAS TO BE NOTED THAT TH E ENTIRE FUNDS OF GRIMCO HAVE BEEN RECEIVED AS GRANTS FOR APPLICATION AS DES IRED BY THE GOVERNMENT AND NO OTHER PURPOSE. IT MAY BE PERTINENT HERE TO NOTE THAT IN CASE, THE SAID AMOUNT IS DIRECTED TO BE REFUNDED BY THE STATE GOVERNMENT, TH E APPELLANT HAS TO RETURN THE AMOUNT BACK TO THE GOVERNMENT AND THEREFORE RIGHTLY TREATED AS LIABILITY. OTHERWISE THE FUND IS RETAINED BY APPELLANT AS TRUS TEE FOR SPECIFIC APPLICATION. THE GRANTS RECEIVED ARE TO BE UTILIZED AS PER THE SPECI FIC GUIDELINES GIVEN BY THE GOVERNMENT AND THE APPELLANT HAS TO STRICTLY ADHERE TO THE GUIDELINES GIVEN AND CANNOT DEVIATE FROM IT. IT CANNOT UTILIZE OR HOLD T HE GRANT FOR ITS OWN USE OR ANY OTHER PURPOSE. AS FAR AS THE ISSUE OF PARKING WITH GSFS AND EARNING INTEREST THEREON IS CONCERNED, IT IS DIFFICULT TO POINT OUT WHAT IS THE PART OF INTEREST INCOME ATTRIBUTABLE TO THE UNUTILIZED GRANT AS PARKED FUND S ARE MIXED AND MAY INCLUDE - A ) SURPLUS OWN FUNDS INCLUDING CASH ACCRUALS (B) SUR PLUS WORKING CAPITAL FUNDS AND (C) GRANT AMOUNT PENDING UTILIZATION THEREOF FURTHER, EVEN IF IT CAN BE SAID THAT SOME INTEREST HAS BEEN EARNED BY PARKING THESE FUNDS FOR SOME TIME, IT CANNOT BE SAID THAT T HE APPELLANT HAD CONTROL OVER THE ENTIRE FUNDS OR CAN KEEP THEM UNUTILIZED FOR INDEFI NITE OR UNUSUALLY LONG PERIODS; PARTICULARLY SEEING TO THE FACT THAT IT IS A GOVERN MENT OWNED COMPANY AND SUBJECT ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 5 TO COMPLETE CONTROL OF THE STATE GOVERNMENT. THE FA CT IS THAT THE APPELLANT HAS UTILIZED THE FUNDS IN NEAR FUTURE. BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT IT CAN UTILIZE OR KEEP THE FUNDS ALLOTTED FOR SPECI FIC PURPOSES FOR ITS OWN USE. IT IS NOT THE CASE THAT THE FUNDS OR THE ASSETS OBTAINED FROM THEM, CAME TO BE OWNED BY THE APPELLANT. THE HON'BLE ITAT, AHMEDABAD, IN THE CASE OF GUJARAT SAFAI KAMDAR VIKAS NIGAM HAS HELD IN PARA. NO. 18.8 AS UN DER: 'IN VIEW OF THE ABOVE DISCUSSIONS, WE HOLD THAT THE AMOUNT OF RS.8.97 CRORES GRANT GIVEN UNDER 'THAKKAR BAPA REHABILITATI ON GRANT' IS NOT ANY INCOME IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE IS MERELY A NODAL AGENCY TO IMPLEMENT CERTAIN SOCIAL SCHEMES OF THE G OVERNMENT OF GUJARAT AND FOR SUCH SPECIFIC PURPOSES THE ASSESSEE IS ENTR USTED WITH SUCH AMOUNT. AS PER THE RESOLUTION DATED 9/12/2000 OF THE GOVERN MENT OF GUJARAT AND AS ALSO CLARIFICATORY LETTER DATED 17/3/2008 OF THE GOVERNMENT OF GUJARAT REFERRED TO ABOVE, IT IS CLEAR THAT THE NATURE OF T HE AMOUNT IS NOT A CONTRIBUTION OR REVENUE RECEIPT BUT IS ONLY A GRANT FOR IMPLEMENTATION OF A PARTICULAR SCHEME AS NODAL AGENCY. IT IS ALSO RELEV ANT TO STATE THAT THE UNSPENT AMOUNT OF SUCH GRANT REMAINS THE PROPERTY O F THE GOVERNMENT AND HAS TO BE RETURNED TO THE GOVERNMENT AS AND WHEN DE MANDS. THE DECISIONS RELIED UPON BY SHRI M.G. PATEL, LEARNED C OUNSEL FOR THE ASSESSEE ALSO SUPPORT THE VIEW TAKEN BY US. FURTHERMORE, TRE ATMENT OF SUCH GRANT AS LIABILITY OF THE ASSESSEE COMPANY HAS BEEN ACCEPTED BY THE STATUTORY AUDITORS OF THE ASSESSEE COMPANY AS WELL AS B Y THE COMPTROLLER & AUDITOR GENERAL OF INDIA IN THEIR AUDIT REPORTS. TH US, THERE WAS NO QUESTION OF ADDING THE AMOUNT TO THE INCOME OF THE ASSESSEE, WHO IS MERELY A NODAL AGENCY TO IMPLEMENT CERTAIN SOCIAL BENEFICI ARY SCHEMES OF THE GOVERNMENT. IN THAT VIEW OF THE MATTER WE HOLD THAT THE GRANT OF RS.8.97 CRORES RECEIVED FROM THE GOVERNMENT OF GUJARAT BY T HE ASSESSEE BE TREATED AS NOT INCLUDIBLE IN THE INCOME OF THE ASSE SSEE AND IS EXEMPT U/S.LL(L)(D) READ WITH SECTION 12(1) OF THE ACT. GR OUND NO.2 OF THE APPEAL IS ALLOWED.' ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 6 FURTHER, HON'BLE LTAT IN THE CASE OF GUJARAT STATE DISASTER MANAGEMENT AUTHORITY VS. ACIT, GANDHINAGAR CIRCLE, GANDHINAGAR , ITA NO. 949/AHD/2009 HAS ALSO TAKEN THE SAME VIEW. THE APPELLANT VIZ. GR IMCO IS ALSO ACTING AS A NODAL AGENCY/ FACILITATING AGENCY AT STATE LEVEL FO R IMPLEMENTATION OF THE GOVERNMENT OF GUJARAT SCHEMES, THE UNUTILIZED GRANT CANNOT BE CONSIDERED AS INCOME FOLLOWING THE JUDGMENT OF AHMEDABAD, ITAT, I N THE CASE OF GUJARAT SAFAI KAMDAR VIKAS NIGAM AND HON'BLE GUJARAT HIGH COURT I N THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD VS. DY. CIT 221 ITR 317 (GU J.) IN VIEW OF THE FACTS OF THE CASE, AND RESPEC TFULLY FOLLOWING THE ABOVE DECISIONS OF JURISDICTIONAL COURT OF LAW, IT IS HELD THAT THE A.O. IS NOT JUSTIFIED IN CONSIDERING THE UNSPENT GRANT OF 3,12,97,573/- AS THE INCOME O F THE APPELLANT COMPANY AS THE AMOUNT DOES NOT BELONG TO THE APPELLANT, AND THEREF ORE, THE ENTIRE ADDITION AS ABOVE IS DELETED. THESE GROUNDS OF APPEAL ARE THUS ALLOWED. IN VIEW OF THE ABOVE DECISIONS OF THE HONBLE ITAT, AHMEDABAD, I DO NOT AGREE WITH THE FINDINGS OF THE A.O. IN THE ASSESSMENT ORD ER AND THE ADDITION MADE OF RS. 2,37,15,593/- IS HEREBY DIRECTED TO BE DELETED. 10. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 11. THE LD. D.R. COULD NOT BRING ANY DISTINGUISHING DEC ISION IN FAVOUR OF THE REVENUE. WE FIND THAT THE FIRST APPELLATE AU THORITY HAS FOLLOWED THE DECISIONS OF HIS PREDECESSOR GIVEN IN ASSESSEE S OWN CASE FOR A.Y. 2009-10. THE LD. D.R. FAIRLY CONCEDED THAT THE REVE NUE HAS NOT PREFERRED ANY APPEAL AGAINST THE SAID ORDER AND THE LD. CIT(A) FOR A.Y. 2009-10. ITA NO. 2597 /AHD/2013 . A.Y. 2010-20 11 7 12. CONSIDERING THE FACTS IN TOTALITY, IN THE LIGHT OF THE EARLIER DECISION IN ASSESSEES OWN CASE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDING OF THE LD. CIT(A). 13. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 11 - 08- 201 6. SD/- SD/- (S.S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD