ITO, WARD-1, Wardha V. M/S. MAHATMA GANDHI INSTITUTE FOR RURAL INDUSTRIALISATION, Wardha

ITA 28/NAG/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4514 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AGNES P THOMAS
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Opportunity of being heard
• Section: 12A

Judgement Text

1 ITA NO. 28/NAG/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO.28/NAG/2015. ASSESSMENT YEAR : 2008 - 09. THE INCOME - TAX OFFICER, M/S MAHATMA GANDHI INSTITUTE WARD - 1, WARDHA. VS. OF RURAL INDUSTRILISZATION, WARDHA. PAN AACTM3142R. APPELLANT. RESPONDENT. APPELLANT BY : SMT. AGNES P. THOMAS. RESPONDENT BY : SHRI C.J. THAKAR & SHRI S.C. THAKAR. DATE OF HEARING : 19 - 09 - 2016 DATE OF PRONOUNCEMENT : 2 2 ND SEPT., 2016 O R D E R THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 28 - 12 - 201 4 AND PERTAINS TO ASSESSMENT YEAR 2008 - 09. THE GROUND OF APPEAL READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.48,86,270/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GRANT WHICH REMAINED UNSPENT ON ITS OBJECTS. 2. IN THIS CASE THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF RS.48,86,270/ - APPEARING IN THE BALANCE SHEET AS UNSPENT AMOUNT SHOULD NOT BE TREATED AS SURPLUS LIABLE TO TAX. THE ASSESSEE RESPONDED AS UNDER : THE AMOUNT RECEIVED FROM GOVT. IS SINCE IN TERMS OF SPECIFIC BUDGET AND UNSPENT AMOUNT IS LIABLE TO BE REFUNDED AND HENCE THE INSTITUTE DOES NOT ACQUIRE ANY RIGHT INTEREST ON TITLE IN SUCH GRANT AND ACCORDINGLY THE SAME CANNOT BE CONSIDERED AS AND INCOME SO AS TO BRING WITHIN THE 2 ITA NO. 28/NAG/2015. PREVIEW OF INCOME TAX . THE RELEVANT TEXT OF GFR IS ENCLOSED HEREWITH FROM WHICH IT IS EVIDENT THAT THE GOVERNMENT GRANT CANNOT BE C ONSIDERED AS INCOME. EVEN INTEREST EARNED ON SUCH GRANT IS CONSIDERED AS A PART OF GRANTS. THE ASSESSEE ALSO SUBMITTED COPIES OF CORRESPONDENCE RELATING TO SANCTION, RELEASE AND SPECIFIC PURPOSE OF GRANT. HOWEVER, THE AO WAS NOT SATISFIED. HE HELD AS UNDE R : 3.1 I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE AND THE DOCUMENTS FILED DURING THE ASSESSMENT PROCEEDINGS. IT IS WORTHWHILE TO MENTION HERE THAT THE ASSESSEE - TRUST HAS BEEN ACCORDED APPROVAL U/S 12A OF THE I.T. ACT, 1961 W.E.F. ASSESSMENT YEAR 20 10 - 11. THUS, IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE - TRUST IS UNREGISTERED UNDER THE INCOME TAX ACT. FURTHER, AS PER THE PROVISIONS OF THE I.T. ACT, 1961, THE UNREGISTERED TRUST ARE REQUIRED TO UTILIZE THE ENTIRE RECEIPTS IN THE YEAR OF RECEIPT ITSEL F AND ARE NOT ALLOWED TO CARRY FORWARD THE UNSPENT AMOUNT IN SUBSEQUENT YEARS. 3.2 FURTHER, THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT IF REMAINED UNSPENT IS LIABLE TO BE REFUNDED OR REAPPROPRIATED AS PER THE DIRECTIONS IS ALSO MISPLACED AND OF NO RELE VANCE TO THE CURRENT CASE AS UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961, THE AMOUNTS RECEIVED HAS TO BE UTILIZED IN THE YEAR OF RECEIPT ITSELF AND THE PROVISIONS W.R.T. EXTENTION OF TIME FOR ITS UTILIZATION ARE GOVERNED BY THE EXPLANATION 2 TO SECTI ON 11(1) WHICH ARE AGAIN NOT APPLICABLE TO UNREGISTERED TRUSTS. THUS AS PER THE PROVISION OF THE INCOME TAX ACT, 1961, ANY AMOUNT UNSPENT IS LIABLE TO TAX IRRESPECTIVE OF WHETHER THE GRANTING AUTHORITY HAS OR HAS NOT EXTENDED THE TIME FOR ITS APPLICATION. 3.3 THE CLAIM OF THE ASSESSEE, THAT THE UNSPENT AMOUNT IF ANY IS TO BE REFUNDED AND ACCORDINGLY SHOWN AS LIABILITY ALSO CANNOT BE THE BASIS OF ANY RELIEF. WHAT IS RELEVANT HERE IS THAT THE ASSESSEE HAS RECEIVED SUMS FOR UTILIZATION AS PER THE DIRECTIONS OF THE PAYER. THE CONDITION THAT THE UNSPENT AMOUNT NIS TO BE REFUNDED IS MERELY FOR PREVENTING ANY MISUSE AND/OR UTILIZATION OF THE FUNDS FOR ANY OTHER UNDIRECTED PURPOSE. THE SAID RIDER DOES NOT GIVE THE GRANTS THE CHARACTER OF A LIABILITY. 3.4 IT IS SEE N FROM THE RECORD THAT THE ASSESSEE - TRUST HAS DURING THE YEAR RECEIVED A GRANT OF RS.50,00,000/ - , OUT OF WHICH ONLY AN AMOUNT OF RS.1,13,730/ - HAS BEEN UTILIZED. THE BALANCE OF RS.48,86,270/ - HAS NOT BEEN UTILIZED AND HENCE TREATED AS SURPLUS LIABLE TO TAX IN THE LIGHT OF 3 ITA NO. 28/NAG/2015. ABOVE FINDINGS. THEREFORE AN AMOUNT OF RS.48,86,270/ - IS TREATED AS INCOME OF THE ASSESSEE - TRUST AND ASSESSED ACCORDINGLY. 3. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE INTER ALIA CONTENDED THAT THE ASSESSEE NEVER RECEIVED THE AMOUNT. T HE AMOUNT WAS LYING IN THE BANK ACCOUNT OF KVIC. LEARNED CIT(APPEALS) ACCEPTED THIS CONTENTION. HOWEVER, THEREAFTER HE HELD AS UNDER : 6.2 NOW, HAVING ESTABLISHED THE FACT IN THE FOREGOING PARA THAT THE AMOUNT IN QUESTION NEVER VESTED WITH THE APPELLANT I N THE FINANCIAL YEAR 2007 - 08 RELEVANT TO THE AY 2008 - 0 9, A QUESTION DOES ARISE THAT IF THE AMOUNT WAS NOT VESTED WITH THE APPELLANT SOCIETY IN THE RELEVANT FINANCIAL YEAR 2007 - 08, MIN THAT CASE HOW THE SOCIETY COULD SPEND PART OF AMOUNT TO THE TUNE OF RS.1 ,13,730/ - IS A MUTE QUESTION, WHICH REQUIRES TO BE ANSWERED. 6.3 THE APPELLANT IN HIS SUBMISSIONS HAS VERY CONVENIENTLY STATED THAT THE ALLEGED SUM OF RS.48,86,270/ - [RS.50,00,000 ( - ) 1,13,730/ - ] WHICH NEVER WAS RECEIVED NOR WAS ACCRUED TO THE APPELLANT DURING THE YEAR RELEVANT TO AY 2008 - 09, HAS BEEN ASSUMED AS INCOME OF THE APPELLANT WITHOUT ANY COGNIZABLE BASIS. 6.4 HAVING QUOTED THE ABOVE LINES OF VERSION OF THE AR OF THE APPELLANT SOCIETY, IT BECOMES QUITE MANIFEST THAT ONUS IS CAS T ON THE APPELLANT SOCIETY TO EXPLAIN AS TO HOW THE AMOUNT OF RS.1,13,730/ - HAS ACCRUED TO IT OUT OF TOTAL SUM OF RS. 50 LAKHS, WHICH ENTIRELY WAS LYING IN THE BANK ACCOUNT OF KVIC DURING THE RELEVANT FINANCIAL YEAR 2007 - 08. IN OTHER WORDS, HOW THE APPELLA NT SOCIETY COULD SPEND THE PART AMOUNT OF RS.1,13,730/ - OUT OF TOTAL SUM OF RS. 50 LAKHS WITHOUT ACTUAL RECEIPT OF THE SAME WHICH WAS STILL LYING WITH KVIC? FURTHER, ON WHAT BASIS THE APPELLANT HAS TAKEN THE SUM OF RS.48,86,270/ - IN ITS BALANCE SHEET AS ON 31.03.2008? 6.5 THE CONTENTION OF THE APPELLANT IN THIS REGARD IS THAT THOUGH THE AMOUNT OF RS.50 LAKHS WAS MEANT FOR EXPENDITURE BY THE APPELLANT ON THE OBJECTS OF THE APPELLANT M/S MGIRI , WARDHA, BUT THE SAID AMOUNT WAS NEVER RECEIVED BY THE APPELLANT P HYSICALLY IN HIS BANK ACCOUNT WHICH REMAINED LYING IN THE SB A/C OF THE KVIC , WARDHA. THE APPELLANT FURTHER ARGUES THAT EVEN THOUGH ASSUMING THAT THE APPELLANT WAS ENTITLED TO THE AMOUNT FOR EXPENDITURE ON ITS SPECIFIED OBJECTS DESPITE IT REMAINED DEPOSITE D IN THE SB A/C OF KVIC, WARDHA, IT CANNOT BE CONSTRUED TO BE THE INCOME OF THE APPELLANT IN VIEW OF THE FACT THAT AS PER RULES, WHATEVER GOVERNMENT GRANTS REMAINS UNSPENT, IS REQUIRED TO BE 4 ITA NO. 28/NAG/2015. SURRENDERED TO THE GOVERNMENT ACCOUNT AT THE END OF THE FINANCIA L YEAR. THUS, HAVING CONSIDERED THE CONTENTIONS OF THE APPELLANT, THE FACTS AND CIRCUMSTANCES AND THE MATERIAL ON RECORD, THE AMOUNT OF RS.48,86,270/ - WHICH REMAINED UNSPENT ON ITS OBJECTS CANNOT BE TREATED TO BE INCOME FOR THE PURPOSE OF TAXATION IN THE HANDS OF THE APPELLANT. THEREFORE, THE ADDITION MADE B Y THE AO IS DIRECTED TO BE DELETED. HENCE, THESE GROUNDS ARE ALLOWED. 4. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED D.R. RELIED UPON THE ORDER OF THE AO . SHE SUBMITTED THAT THE ASSESSEE HAS NOT GOT REGISTRATION IN THE CONCERNED ASSESSMENT YEAR. HENCE SHE SUBMITTED THAT THE ASSESSEE CANNOT CLAIM BENEFIT U/S 11(2) FOR THE PROVISIONS OF THE I.T. ACT REGARDING CARRY FORWARD OF UNSPENT GRANT. SHE FURTHER SUBMITTED THAT THE LEARNED CIT(APPEALS) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT WAS NEVER RECEIVED BY IT. THAT THIS CONTENTION WAS NOT BEFORE THE AO. FURTHER MORE, SHE SUBMITTED THAT LEARNED CIT(AP PEALS) HAS NOTED THAT WHEN THE AMOUNT WAS NOT RECEIVED BY THE ASSESSEE HOW A SUM OF RS.1,13,730/ - HAS BEEN SHOWN AS EXP ENDITURE . INSPITE OF THIS OBSERVATION IN PARA 6.4 OF THE APPELLATE ORDER, LEARNED CIT(APPEALS) IN THE END HAS GONE TO PA SS A CONTRADICTOR Y ORDER AND DIRECTED THE AO TO DELETE THE ADDITION. 6. PER CONTRA LEARNED COUNSEL OF THE ASSESSEE R ELI ED UPON THE ORDER OF THE LEARNED CIT(APPEALS) . HE SUBMITTED THAT THE MONEY IN FACT NEVER VESTED WITH THE ASSESSEE AS THE SAME WAS KEPT IN THE BANK ACCOUNT OF KVIC. THAT THIS FACT WAS EVIDENT FROM THE BALANCE SHEET SUBMITTED. LEARNED COUNSEL FURTHER REFERRED TO THE CASE LAW FOR THE PROPOSITION THAT UNSPENT GRANT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. 7. UPON CAREFUL CONSIDERATION I FIND THAT T HE ASSESSMENT ORDER NOWHERE RECORDS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAD NEVER RECEIVED THE SAID GRANT. FURTHER MORE IT IS ALSO EVIDENT THAT WHEN THE GRANT WAS NOT RECEIVED BY THE ASSESSEE HOW CAN THE ASSESSEE CLAIM EXPENDITURE OF RS.1,13,730/ - OUT OF 5 ITA NO. 28/NAG/2015. THE GRANT OF RS.50 LAKHS UNLESS IT HAD CONTROL OVER THE AMOUNT INVOLVED. LEARNED CIT(APPEALS) HAS HIMSELF NOTED THIS ASPECT IN PARA 6.4 OF THE ORDER BUT HAS NOT RECORDED ANY REPLY OF THE ASSESSEE OR ANY FINDING OF HIS OWN IN THIS REGARD. THE ISSUE IN THIS APPEAL FIRST REVOLVES AROUND FIRST PLANK OF THE ASSESSEE THAT THE AMOUNT WAS NEVER RECEIVED BY THE ASSESSEE OR WHEN IT HAD NO CONTROL OVER IT THEN HOW THE ASSESSEE HAS CLAIMED EXPENDITURE O UT OF IT OF A SUM OF RS.1,13,730/ - . SECONDLY, IT NEEDS TO BE EXAMINED AS TO WHAT WAS THE ACTUAL FA T E OF THE REMAINING AMOUNT OF RS.48,86,270/ - . WHETHER IT WAS ULTIMATELY REFUNDED OR UTILIZED HAS NOT BEEN EXAMINED NOR THE RELEVANT DETAILS ARE AVAILABLE ON RECORD. THIS FACT HAS ALSO TO BE KEPT IN MIND THAT THE ASSESSEE HAS NOT OBTAINED REGISTRATION UNDER I.T. ACT IN THE CURRENT ASSESSMENT YEAR. IN THESE CIRCUMSTANCES IN MY CONSIDERED OPINION THERE ARE LACUNA S IN THE ORDER OF LEARNED CIT(APPEALS). FURTHER MORE THE SUBMISSIONS OF THE ASSESSEE WHICH WERE BEFORE THE LEARNED CIT(APPEALS) WERE NOT BEFORE THE AO. IN THESE CIRCUMSTANCES, IN MY CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SERVED IF THE ISSUE IS REMITTED TO THE FILE OF THE AO. THE AO IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT THIS APPEAL BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF SEPT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 22 ND SEPT., 2016. 6 ITA NO. 28/NAG/2015. COPY FORWARDED TO : 1. M/S MAHATMA GANDHI INSTITUTE FOR RURAL INDUSTRILIZATION, WARDHA, DIST. WARDHA. 2. I.T.O., WARD - 1, WARDHA. 3. C.I.T. - I, NAGPUR. 4. CIT(APPEALS), - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.