The ACIT,Anand Circle, Anand V. Kaira Dist.Co.Op.Milk Producers Union Ltd., Anand

ITA 2953/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0532 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 15-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 12-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Capital receipt; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 147; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI S.S. GODARA, JM, & SHRI MANISH BORAD , AM. ITA NO. 2953/AHD/2013 ASST. YEAR: 2006-07 ACIT, ANAND CIRCLE, ANAND VS. KAIRA DIST. CO-OP. MILK PRODUCERSUNION LTD., AMUL DAIRY ROAD, ANAND. APPELLANT RESPONDENT PAN AAACK 9062D APPELLANT BY SHRI PRASOON KABRA, SR. DR RESPONDENT BY SHRI SANJAY R. SHAH., AR DATE OF HEARING: 15/9/2016 DATE OF PRONOUNCEMENT: 19/9/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY REVENUE FOR ASST. YEAR 2006-07 IS D IRECTED AGAINST THE ORDER OF CIT(A)-IV, BARODA, DATED 3.9.2 013 VIDE APPEAL NO.CAB/IV-A-274/2011-12. ASSESSMENT U/S 143(3) R.W. S. 147 OF THE IT ACT, 1961 (IN SHORT THE ACT) WAS FRAMED BY ACIT, ANAND CIRCLE, ANAND, ON 7.10.2011. REVENUE HAS RAISED FOLLOWING G ROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,28,21,000/- ON ACCOUN T OF GRANT RECEIVED UNDER SAMPOORNA GRAMIN SWAROJGAR YOGNA (SGSY) FROM GOVERN MENT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSES STARTED ITS COMMERCIAL ACTIVITIES MUCH ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 2 BEFORE THE RECEIPT OF THE AFORESAID GRANT, HENCE TH E SAME OUGHT TO BE TREATED AS REVENUE RECEIPT AS PER EXPLANATION 10 OF SECTION 43 OF THE ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ISSUES RAISED IN THE AFORESAID GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE BEING A CO- OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROCES SING MILK AND MANUFACTURING OF MILK PRODUCTS AND CATTLE FEED. ORI GINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS FINALIZED ON 15/12/ 2008 ASSESSING THE TOTAL INCOME AT RS.NIL AFTER SETTING OFF OF UNABSOR BED DEPRECIATION TO THE EXTENT OF RS.5,42,28,647/- FOR ASST, YEAR 1999- 2000 AND RS.7,55,82,192/- + RS.64,74,228/- FOR ASST. YEAR 20 00-01. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT AND NOTICE U/S 148 OF THE ACT WAS ISSUED AFTER RECORDIN G THE REASONS. DURING THE COURSE OF REASSESSMENT PROCEEDINGS ON VE RIFICATION OF THE CASE RECORD, IT WAS FOUND BY LD. ASSESSING OFFICER THAT THE ASSESSEE CO-OPERATIVE SOCIETY RECEIVED GOVERNMENT GRANT OF R S.728.12 LACS UNDER SAMPOORNA GRAMIN SWAROJGAR YOGANA (SGSY) SCHE ME OF THE GOVERNMENT. ASSESSEE PLACED NECESSARY SUBMISSIONS A LONG WITH EVIDENCES IN THE RE-ASSESSMENT PROCEEDINGS TO JUSTI FY THAT THE IMPUGNED GRANT OF RS.728.12 LACS WAS THE CAPITAL RE CEIPT. HOWEVER, LD. ASSESSING OFFICER WAS NOT CONVINCED AND COMPLET ED THE RE- ASSESSMENT BY TREATING THE AMOUNT OF RS.7,28,12,000 /- AS REVENUE RECEIPT AS THE ASSESSEE HAS ALREADY STARTED ITS COM MERCIAL ACTIVITIES. ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 3 ACCORDINGLY THE GRANT UNDER SGSY AT RS.7,28,12,000/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A). THE IMPUGNED AMOUNT OF RS.7,28,12,000/- WAS DELETED BY LD. CIT(A) BY PLACING RELIANCE ON THE DECISION OF HON. PUNJAB & H ARYANA HIGH COURT IN THE CASE OF CIT VS. THE PUNJAB STATE E-GOV ERNANCE SOCIETY IN INCOME TAX APPEAL NO.75 OF 2011 DATED 21 APRIL, 2011 AND ALSO OBSERVING THE FACT THAT THE IMPUGNED AMOUNT WAS REC EIVED ON THE BASIS OF MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN THE ASSESSEE, DISTRICT RURAL DEVELOPMENT AGENCY, NADIAD (DRDA) AND COMMISSIONER, RURAL DEVELOPMENT, GOVERNMENT OF GUJA RAT, GANDHINAGAR AND THE FUNDS RECEIVED WERE FOR SPECIFI C PURPOSES. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 6. LD. AR REFERRED TO SUBMISSIONS MADE BEFORE LD. C IT(A) AND STATED AS FOLLOWS :- . THE LEARNED AO ERRED IN NOT APPRECIATING THE FACT T HAI GRANT RECEIVED WAS NOT TO BE UTILIZED FOR CREATING THE ASSETS FOR THE APPE LLANT AND ALSO WAS NOT TO BE USED FOR THE BUSINESS PURPOSE OF THE APPELLANT AND THAT APPE LLANT HAS NOT CLAIMED ANY DEPRECIATION ON ASSETS CREATED OUT OF THE GRANT. IT IS SUBMITTED THAT IT BE SO HELD NOW. THE LEARNED AO ALSO ERRED IN NOT APPRECIATING THE FACT THAT BENEFITS ACCRUED DUE TO IMPLEMENTATION OF SCHEME DO NOT REMAIN WITH THE APPELLANT IN SPITE OF SUCH FACTS BEING BROUGHT TO THE NOTICE OF THE LEARNED AO AND FURTHER THAT ON THE CONTRARY APPELLANT HAD TO CONTRIBUTE TO THE PROJECT IN FORM OF TECHNICAL SERVICES AS WELL AS MONETARY CONTRIBUTION IN ADDITION TO PENALTY OF 5% IF PROJECT WOULD NOT BE IMPLEMENTED IN TIME. THE LEARNED AO FAILED TO APPRE CIATE THAT PURPOSE OF SCHEME ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 4 WAS TO PROVIDE EQUIPMENT TO SGSY FAMILIES AND TO IM PROVE UPON THE SOCIO ECONOMY STATUS AND COMMUNITY DEVELOPMENT OF VILLAGES,' FIRST OF ALL IT IS PERTINENT TO NOTE THAT QUESTION WHETHER IT IS CAPITAL RECEIPT OR REVENUE RECEIPT DOESNOT ARISE AT ALL FOR CONSIDERAT ION WHEN THE AMOUNT IS RECEIVED BY THE APPELLANT ON BEHALF OF THIRD PERSON VIZ. CENTRAL GOVT. FOR CARRY ING OUT THE PARTICULAR PROJECT. IT IS NOT AT ALL INCOME OF THE APPELLANT. IN THIS REGARD, COPY OF MOU EXECUTED BETWEEN DISTRICT RURAL DEVELOPMENT AGE NCY, NADIAD, THE APPELLANT AND COMMISSIONER, RURAL DEVELOPMENT, GOVERNMENT OF GUJARAT, GANDHINAGAR IS ATTACHED HEREWITH,(PAGE NO. 62-67) YOUR HONOUR CAN OBSERVE FROM IT THAT ROLE OF THE APPELLANT IS ONLY FACILITATOR OF THE PROJECT. GRANT RECEIVED SPECIFICALLY FOR THE PROJECT HAVE BEEN UTILISED FOR THE OBJECTS OF THE PROJECT A S MENTIONED IN THE MOU AND NOT FOR THE PURPOSE OF THE NORMAL ACTIVITIES OF THE APPELLA NT. HENCE, GRANT RECEIVED IS NEITHER THE CAPITAL NOR REVENUE INCOME OF THE APPELLANT BUT RECEIVED FOR IMPLEMENTATION OF SGSY PROJECT. THE DETAILS OF PROJECT ARE GIVEN HERE UNDER: (A) SGSY PROJECT GRANT KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LT D. POPULARLY KNOWN AS AMUL DAIRY, ANAND (ASSESSEE) IS ENGAGED IN THE ANIMAL HU SBANDRY AND DAIRYING ACTIVITIES TO IMPROVE UPON THE SOCIOECONOMIC STATUS AND COMMUN ITY DEVELOPMENT OF VILLAGES.IN ORDER TO ENSURE THAT MILCH CATTLE BECOM E FULL TIME INCOME GENERATION ACTIVITY FOR SGSY FAMILIES AND THEY ARE PROVIDED SU PPORT OF INTERNATIONAL STANDARD BY EXPERT ORGANISATIONS, DISTRICT RURAL DEVELOPMENT AG ENCY (DRDA) NADIAD AND THE ASSESSEE HAVE JOINTLY DEVELOPED A SPECIAL PROJECT C ALLED 'IMPROVING SOCIO-ECONOMIC CONDITIONS FOR BPL FAMILIES OF KHEDA DISTRICT THROU GH DAIRY AND ANIMAL HUSBANDRY ACTIVITIES. (B) MAIN OBJECTS OF THE PROJECT ARE: (1)TO INDUCT 15000 HIGH QUALITY MILCH ANIMALS IN 75 00 BPL HOUSEHOLDS FROM TWO TALUKAS OF THE KHEDA DISTRICT AND ARRANGE GOOD CATT LE SHED FOR EACH OF THESE FAMILIES (2) TO PROVIDE ROUND THE YEAR ASSURED INCO ME THROUGH DAIRYING TO IDENTIFY BPL FAMILIES. (3) TO CREATE AVENUES FOR SELF EMPLOYMENT (4) SKILL UP GRADATION OF WOMEN AND YOUTH THROUGH T RAINING (5)TO IMPROVE THE INCOME LEVEL AND OVERALL SOCIOECO NOMIC STATUS OF INDIVIDUAL FAMILIES AND VILLAGE. MINISTRY OF RURAL DEVELOPMENT, GOVERNMENT OF INDI A HAS AGREED TO FINANCIALLY SUPPORT THIS PROJECT VIDE THEIR ORDER NO, 24015/136 /2003-SGSY-I (SPECIAL PROJECT) DATED 30 TH JANUARY 2004. ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 5 (C) ROLE OF THE APPELLANT IS (1)TO SELECT THE POTENTIAL BPL BENEFICIARIES FROM T HE VILLAGES (2) ACT AS FACILITATOR FOR THIS PROJECT STARTING FR OM IMPLEMENTATION, MONITORING ITS PROGRESS AND TAKE APPROPRIATE MID COURSE CONTROL/RE VIEW MEASURES. (3)MAINTAIN A SPECIAL BANK ACCOUNT FOR THE SAME AND ALSO ARRANGE AUDIT OF THE SAME FROM REGISTERED CA FIRM. AH THE FUNDS MEANT FOR TH E PROJECT WILL BE TRANSFERRED TO THIS ACCOUNT. ANY INTEREST ACCRUING IN THIS ACCOUNT WILL BELONG TO THE PROJECT. (4)ACT AS GUARANTOR FOR THE BANK LOAN. (5)PROVIDE REQUIRED TECHNICAL KNOW HOW FOR THIS PRO JECT. (D) COMPENSATION: IN ORDER TO GUARANTEE SUCCESS OF THIS PROJECT AND M EET THE SCHEDULES FINALISED IN THE ANNUAL ACTION PLANS , DRDA WILL PAY AN INCEN TIVE OF 2% OF THE PROJECT COST TO AMUL AT THE END OF THE PROJECT PERIOD IF AL L THE ACTIVITIES ARE COMPLETED WITHIN THE TIME PERIOD MENTIONED IN THE ACTION PLAN . HOWEVER IN CASE ANY CRITICAL ACTIVITY IS DELAYED BEYOND 60 DAYS, AMUL W ILL PAY A PENALTY @ 5% OF THE COST OF THAT ACTIVITY. IN THE REASON RECORDED BY THE AO, HE HAS MENTIONED THAT 'INCOME OF RS. 728.12 LACS HAS ESCAPED THE ASSESSMENT FOR A.Y, 200 6-07'. IN THIS REGARD IT IS SUBMITTED THAT AMOUNT OF RS. 728.12 IS NOT INCOME O F THE APPELLANT. THE APPELLANT HAD RECEIVED THE AMOUNT OF RS. 728.12 FOR INFRASTRU CTURE DEVELOPMENT FOR IMPLEMENTATION OF SG5Y PROJECT ON BEHALF OF DISTRIC T RURAL DEVELOPMENT AGENCY. ON THE CONTRARY AS PER MOU BETWEEN APPELLANT AND DISTR ICT RURAL DEVELOPMENT AGENCY (ENCLOSED HEREWITH) THE APPELLANT HAD TO CONTRIBUTE SOME FUNDS IN ADDITION TO ALL TECHNICAL SERVICES. (PARA 'COST OF THE PROJECT'' IN MOU REFERRED ABOVE). APPELLANT ALSO HAVE TO PAY 5% OF PENALTY OVER AND ABOVE THE C ONTRIBUTION MADE, IF WOULD NOT GET COMPLETED IN TIME. THEREFORE, QUESTION OF INCOM E OF THE APPELLANT DOES NOT ARISE BY ANY STRETCH OF IMAGINATION. . WHEN ALLEGED AMOUN T IS NOT THE INCOME OF THE APPELLANT AT ALL, ISSUE OF ESCAPEMENT OF INCOME SHO ULD NOT ARISE. THE AO HAS ALLEGED THAT THE APPELLANT STARTED COMME RCIAL ACTIVITIES MUCH BEFORE THE RECEIPT OF THE AFORESAID GRANT. THEREFOR E, GRANT RECEIVED BY THE APPELLANT SHOULD HAVE BEEN TREATED AS REVENUE IN VIEW OF THE PROVISIONS OF THE ACT AND JUDICIAL PRONOUNCEMENTS IN THE CASES OF SAHNEY STEEL AND PRE SS WORKS LTD, VS CIT 94 TAXMAN 368 (SC) AND KESORAM INDUSTRIES & COTTON MIL LS LTD. VS CIT 191 ITR 518 (CAL). IN THIS REGARD, APPELLANT SUBMITS THAT THE AO HAS R ELIED ON THE TWO AFORESAID DECISIONS, FACTS OF WHICH ARE DIFFERENT THAN THE FA CTS OF THE PRESENT CASE. IN CASE OF SAHNEY STEEL (SUPRA) FUNDS WERE MADE AVAILABLE TO T HE ASSESSEE TO ASSIST IT IN CARRYING ON ITS TRADE OR BUSINESS. FURTHER THAT THE PAYMENTS WERE NOTHING BUT ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 6 SUPPLEMENTARY TRADE RECEIPTS AND THE ASSESSEE WAS F REE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED AND WAS NOT OBLIGED T O SPEND THE MONEY FOR PARTICULAR PURPOSE. IN PRESENT CASE, THE FUNDS WERE NOT GIVEN TO APPELLANT FOR FREE USE IN ITS BUSINESS OR TO ASSIST IT IN CARRYING ON ITS TRADE O R BUSINESS BUT FOR THE PURPOSE OF USE IT IN PARTICULAR PROJECT. HENCE THIS CASE WOULD NOT APPLY TO THE APPELLANT FROM ANY ANGLE. THE DECISION OF KESORAM INDUSTRIES (SUPRA) I S BASED ON THE DECISION OF SAHNEY STEEL (SUPRA) HENCE IT WOULD ALSO NOT APPLY TO PRESENT CASE. A/ON CLAIMING OF DEPRECIATION ON THE ASSETS PURCHASED OU T OF THE SAID PROJECT GRANT, THE ROLE OF APPELLANT AS FACILITATOR IN THE PROJECT AND UTILIZATION OF THE GRANT FOR THE OBJECT OF THE PROJECT AND NOT FOR THE PURPOSE O F THE NORMAL ACTIVITIES OF THE APPELLANT ARE CONCLUSIVE FACTORS FOR DECIDING THAT GRANT IS NOT INCOME OF APPELLANT. WHEN THERE IS NO INCOME OF APPELLANT AT ALL QUESTIO N WHETHER IT IS REVENUE RECEIPT OR CAPITAL RECEIPT DOES NOT ARISE. A COPY OF THE CA CERTIFICATE IN RESPECT OF UTILIZA TION OF THE GRANT WAS ENCLOSED WHICH SHOWS THAT GRANT RECEIVED HAS BEEN UTILIZED F OR THE PURPOSE OF IMPLEMENTATION OF SGSY PROJECT.(PAGE NO.68-69) IN THIS REGARD, THE APPELLANT RELIES ON FOLLOWING DECISIONS: DECISION-OF PUNJABI HARYANA HIGH COURT IN C ASE OF CIT V THE PUNJAB STATE E- GOVERNANCE SOCIETY IN WHICH IT IS HELD THAT 'GRANTS-TN-AID RECEIVED FROM THE GOVERNMENT FOR SPE CIFIC CANNOT BE TREATED AS VOLUNTARY CONTRIBUTION OR AS TAXABLE INCOME OF THE SOCIETY. IN M/S. PUNJAB ENERGY DEVELOPMENT AGENCY IT WAS HELD THAT INTEREST RECEIVED BY THE ASSESSEE ON AMOUNT OF GRANT DEPOSITED IN THE BANK W AS ALSO IN THE NATURE OF GRANT ITSELF.' THE COPY OF DECISION IS ATTACHED HEREWITH (PAGE NO. 188 TO 192 ). FACTS OF THE ABOVE DECISION ARE MORE OR LESS SIMILAR TO THE FACT S OF THE PRESENT CASE. ' 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE DECISION. THE SOLITA RY GRIEVANCE OF THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) DELE TING THE ADDITION OF RS.7,28,12,000/- ON ACCOUNT OF GRANT OF SGSY FROM T HE GOVERNMENT. REVENUE IS ALSO AGGRIEVED THAT LD. CIT(A) HAS NOT A PPRECIATED THE FACT THAT ASSESSEE STARTED ITS COMMERCIAL ACTIVITIE S MUCH BEFORE THE RECEIPT OF AFORESAID GRANT AND HENCE THE SUM NEED T O BE TREATED AS REVENUE EXPENDITURE. ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 7 8. WE OBSERVE THAT ASSESSEE BEING A CO-OPERATIVE SO CIETY ENTERED INTO MEMORANUM OF UNDERSTANDING IN RESPECT OF THE S PECIAL PROJECT FOR IMPROVING THE SOCIO ECONOMIC CONDITION OF BPL FAMILIES OF KHEDA DISTRICT THROUGH DAIRYING AND ANIMAL HUSBANDR Y ACTIVITIES . THIS AGREEMENT WAS ENTERED INTO ON 11 TH SEPTEMBER, 2004 BETWEEN THE DISTRICT RURAL DEVELOPMENT AGENCY, NADIAD, KAIR A DISTRICT CO- OPERATIVE MILK PRODUCERS UNION, ANAND AND THE COMMI SSIONER, RURAL DEVELOPMENT, GOVERNMENT OF GUJARAT, GANDHINAGAR TO ACHIEVE FOLLOWING OBJECTIVES:- A) TO INDUCT 15,000 HIGH QUALITY MILCH ANIMALS IN 7 ,500 8PL HOUSEHOLDS FROM TWO TALUKAS OF THE KHEDA DISTRICT AND TO ARRANGE GOOD Q UALITY CATTLE SHED FOR EACH OF THESE FAMILIES; ,. '; , B) TO ENSURE AVAILABILITY OF PROPER FODDER, DOOR ST EP ARTIFICIAL INSEMINATION SERVICES, MOBILE DIAGNOSTIC LAB AND SKILL UP-GRADATION TRAINI NG IN CATTLE-, MANAGEMENT TO BENEFICIARIES; AND C) IN ORDER TO RETAIN THE QUALITY OF MILK UP TO THE INTERNATIONAL STANDARDS, TO COMMISSION BULK CHILLING UNITS AND SS MILK CANS. FURTHER THIS PROJECT MAINLY HAS FOLLOWING COMPONENT S: A) INDUCTION OF ANIMAL TO THE 8PL FAMILIES - THIS C OMPONENT W/F| REQUIRE SUBSIDIES FROM SGSY RESOURCES AS PER THE NORMAL PATTERN OF TH E SCHEME; B) VACCINATION, HEALTH CARE AND DEWORMING SERVICES TO THE CATTLE C) RAISING GREEN FODDER & PROVIDING BETTER SEED VER ITIES FOR FODDER AT THE INDIVIDUAL AND COMMUNITY LEVELS; D) CREATION OF DRINKING WATER FACILITIES BY DIGGING BORE WELLS TO SUPPLY DRINKING WATER TO LIVE-STOCKS OF BPL FAMILIES; ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 8 E) ESTABLISHING MOBILE VETERINARY LAB FOR SPOT TREATMENT AND-PROVIDE DOOR STEP ARTIFICIAL INSEMINATION; AND F) BULK CHILLING FACILITIES AND PROVISION OF SS CANS F OR MILK COLLECTION. FURTHER MINISTRY OF RURAL DEVELOPMENT, GOVERNMENT O F INDIA HAS AGREED TO FINANCIALLY SUPPORT THIS PROJECT VIDE THE IR ORDER NO.24015/136/2003-SGSY-1 (SPECIAL PROJECT) DATED 30 TH JANUARY, 2004 COPY OF THIS LETTER WILL FORM PART OF THE MOU. 9. WE FURTHER OBSERVE THAT WORK UNDER THIS PROJECT IS BEING CARRIED OUT REGULARLY AND THE ASSESSEE WAS REQUIRED TO MAIN TAIN A SEPARATE BANK ACCOUNT TO RECEIVE THE IMPUGNED GRANT AND ALL THE OUTFLOWS FROM THIS ACCOUNT ARE TO BE IN CONFORMITY WITH THE MOU A ND THESE FUNDS ARE TO BE SPECIFICALLY USED FOR THE ATTAINMENT OF OBJEC TS AS REFERRED IN THE MOU. FURTHER WE OBSERVE THAT SIMILAR TYPE OF ISSUE CAME UP BEFORE HON. PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. THE PUNJAB STATE E-GOVERNANCE SOCIETY (SUPRA) DEALING WITH THE SPECIFIED TYPE OF GRANT WHETHER TO BE TREATED AS REVENUE RECEIPT OR C APITAL RECEIPT. WHILE ADJUDICATING THIS ISSUE HON. HIGH COURT HELD AS BELOW :- '12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. THE FACTUAL MATRIX ON THIS ISSUE LIES IN A NARROW COMPASS. THE ASSESSEE HAS EARNED INTEREST INCOME ON FIXED DEPOSITS PLACED IN THE BAN KS. THE FDRS WERE PLACED OUT OF THE UNSPENT BALANCE OF GRANTS RECEIVE D FROM THE GOVERNMENT FOR A SPECIFIC PURPOSE. THE INTEREST INCOME SO EARN ED HAS BEEN TAXED BY THE ASSESSING OFFICER ASSESSABLE IN THE HANDS OF THE AS SESSEE AS 'INCOME FROM OTHER SOURCES'. IN THIS CONNECTION, THE COMMISSIONE R OF INCOME-TAX (A) IN PARA 10 OF HIS ORDER, HAS REPRODUCED CLAUSE (XII) O F THE TERMS & CONDITIONS GOVERNING THE GRANT-IN-AID, WHICH READS AS UNDER:- 'THE GRANTEE INSTITUTION SHOULD MAINTAIN SEPARATE A UDITED ACCOUNT FOR THE PROJECT. IF IT IS FOUND EXPEDIENT TO *** KEEP A PAR T OR WHOLE OF THE GRANT IN A BANK ACCOUNT EARNING INTEREST, THE INTEREST, THUS E ARNED SHOULD BE REPORTED ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 9 TO THIS DEPARTMENT. THE INTEREST SO EARNED WILL BE TREATED AS A CREDIT TO THE GRANTEE TO BE ADJUSTED TOWARDS FUTURE INSTALLMENT O F THE GRANT.' 13. FROM A PERUSAL OF THE ABOVE, IT IS EVIDENT THAT THE INTEREST EARNED BY THE ASSESSEE ON UNSPENT GRANTS DOES NOT ACCRUE IN THE H ANDS OF THE ASSESSEE AS A BENEFICIAL OWNER. THE SAME IS TO BE ADJUSTED AGAI NST THE FUTURE INSTALLMENTS OF THE GRANT PAYABLE TO THE ASSESSEE. THIS FACTUAL MATRIX IS NOT NEGATED AND THEREFORE WE FIND NO ERROR IN THE APPRO ACH OF THE COMMISSIONER OF INCOME-TAX (A) IN HOLDING THAT THE STATED INTEREST INCOME IS NOT ASSESSABLE IN THE HANDS OF THE ASSESS EE. THE HON'BLE KARNATAKA HIGH COURT, IN SOMEWHAT SIMILAR CIRCUMSTA NCES, IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT & FINANCE CORPORATION, 284 ITR 582 (KAR) HELD AS UNDER:- 'HELD, THAT THERE WAS NO PROFIT MOTIVE AS THE ENTIR E FUND ENTRUSTED AND THE INTEREST ACCRUED ON THE DEPOSITS IN THE BANK, THOUG H IN THE NAME OF THE ASSESSEE, HAD TO BE APPLIED ONLY FOR THE PURPOSE OF WELFARE OF THE NATION AS PROVIDED IN THE GUIDELINES. THE WHOLE OF THE FUNDS BELONGED TO THE STATE EXCHEQUER AND THE ASSESSEE HAD TO CHANNELISE THEM T O THE OBJECTS OF THE CENTRALLY SPONSORED SCHEME OF INFRASTRUCTURAL DEVEL OPMENT FOR THE MEGA CITY OF BANGALORE. THE ENTIRE MONEY WAS RECEIVED FO R A PUBLIC PURPOSE AND THE END SCHEME WAS *** IMPLEMENTED IN ACCORDANCE WI TH THE GUIDELINES OF THE CENTRAL GOVERNMENT. THEREFORE, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE THE INTEREST ACCRUED ON THE BANK DEPOSITS COULD NOT BE TREATED AS INCOME.' 3. WE HAVE HEARD LEARNED COUNSEL FOR THE APPELLANT. 4. IT IS NOT DISPUTED THAT IDENTICAL ISSUES HAVE AL READY BEEN DEALT WITH BY THIS COURT VIDE ORDER DATED 12.12.2008 IN ITA NO.190 OF 2008 COMMISSIONER OF INCOME TAX, CHANDIGARH-II VS. M/S PUNJAB STATE SPOR TS COUNCIL, CHANDIGARH AND ORDER DATED 31.7.2009 IN ITA NO.666 OF 2008 COMMISSI ONER OF INCOME TAX, CHANDIGARH-II VS. M/S PUNJAB ENERGY DEVELOPMENT AGE NCY. IN M/S PUNJAB STATE SPORTS COUNCIL, CHANDIGARH IT WAS HELD THAT GRANTS- IN-AID RECEIVED FROM THE GOVERNMENT FOR SPECIFIC PURPOSE CANNOT BE TREATED A S VOLUNTARY CONTRIBUTION OR AS TAXABLE INCOME OF THE SOCIETY. IN M/S PUNJAB ENE RGY DEVELOPMENT AGENCY IT WAS HELD THAT INTEREST RECEIVED BY THE ASSESSEE ON THE AMOUNT OF GRANT DEPOSITED IN THE BANK WAS ALSO IN THE NATURE OF GRANT ITSELF. 5. IN VIEW OF THE ABOVE, THE VIEW TAKEN BY THE TRIB UNAL IS CONSISTENT WITH THE VIEW ALREADY TAKEN BY THIS COURT. NO SUBSTANTIAL QUESTIO N OF LAW ARISES. THE APPEAL IS DISMISSED. ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 10 10. WE FURTHER OBSERVE THAT LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION BY NOT TREATING THE GRANT AS REVENUE RECEI VED BY OBSERVING AS UNDER :- 3.2.3. I HAVE CONSIDERED THE ORDER OF THE AO AS WE LL AS THE / SUBMISSION OF THE AR. FROM THE DETAILS SUBMITTED BY THE APPELL ANT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE APPELLATE PROCEE DINGS, AND FROM THE COPY OF .MOU BETWEEN THE APPELLANT, DISTRICT RURAL DEVELOPMENT AGENCY, NADIAD (DRDA) AND COMMISSIONER, RURAL DEVELOPMENT, GOVERNMENT OF GUJARAT, GANDHINAGAR, IT IS SEEN THAT THE APPELLANT HAS RECEIVED THIS FUNDS FOR THE SPECIFIC PURPOSES. AS PER THE MOU, THE APPE LLANT IS REQUIRED TO MAINTAIN A SPECIAL BANK ACCOUNT FOR THIS PURPOSE AN D ALSO ARRANGE AUDIT OF THE SAME FROM THE REGISTERED CA FIRM. ALL THE FUNDS MADE FOR THE PROJECT HAS TO BE TRANSFERRED TO THIS ACCOUNT. IT HAS ALSO BEEN PROVIDED THAT ANY INTEREST ACCRUED IN THIS ACCOUNT WILL BELONG TO THE PROJECT. THE MOU ALSO PROVIDES THAT THE ASSETS PROCURED UNDER THE PROJECT WILL BELONG TO THE DRDA TILL THE COMPLETION OF THE PROJECT. SUCH PROJE CT ASSETS WILL BE TRANSFERRED TO ANY AGENCY AS DECIDED BY AMUL ONCE P ROJECT IS SUCCESSFULLY COMPLETED. HOWEVER, THIS CONDITION WILL NOT APPLY T O THE ASSETS PROCURED BY THE BPL FAMILIES. ACCORDINGLY, THE APPELLANT HAS NOT CLAIMED THE EXPENSES MADE ON THE PROJECT INCLUDING DEPRECIATION ON THE ASSETS PURCHASED OUT OF THE SAID PROJECT GRANT IN COMPUTAT ION OF ITS INCOME. THE GRANT AS WELL AS THE INTEREST ACCRUED ON THIS CANNO T BE USED FOR THE PURPOSES OF NORMAL ACTIVITIES OF THE APPELLANT WHO IS ACTUALLY ACTING AS A FACILITATOR IN THE PROJECT. IN SUCH CIRCUMSTANCES T HE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE PUNJ AB STATE E- GOVERNANCE SOCIETY (SUPRA) IS SQUARELY APPLICABLE TO THE PRESENT CASE. THE COURT HAS CLEARLY HELD THAT GRANTS AND AID RECE IVED FROM THE GOVERNMENT FOR A SPECIFIC PURPOSE CANNOT BE TREATED AS VOLUNTARY CONTRIBUTION OR AS TAXABLE INCOME OF THE SOCIETY. I T HAS ALSO BEEN HELD THAT ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 11 INTEREST RECEIVED BY THE ASSESSEE ON THE AMOUNT OF GRANT DEPOSITED IN THE BANK WAS ALSO IN THE NATURE OF GRANT ITSELF. 3.1.4. BESIDES, IN THE MOU IT HAS BEEN PROVIDED THA T THE APPELLANT WILL GET INCENTIVE OF 2% OF THE PROJECT COST AFTER COMPLETIO N OF THE PROJECT. THUS, SUCH INCENTIVE WILL BE OTHER THAN THE GRANT AND AID RECEIVED BY THE APPELLANT FOR THE PROJECT AND WILL BE THE INCOME OF THE APPELLANT WHENEVER IT IS RECEIVED BY IT. IN THIS REGARD, ON SPECIFIC Q UERY, THE APPELLANT HAS SUBMITTED THAT THE SGSY PROJECT IS YET NOT COMPLETE D. THE STATEMENT REGARDING UTILIZATION OF FUNDS UP TO 31.03.2013 AND COPY OF CERTIFICATE OF COMPLIANCE AS ON THIS DATE RECEIVED FROM THE CORPOR ATION BANK HAS ALSO BEEN FURNISHED. HENCE, PRESENTLY, NO INCOME IS ACCR UED TO THE APPELLANT. AS A RESULT, THE ADDITION MADE BY THE AO IS DIRECTE D TO BE DELETED. 3.3. THE THIRD GROUND OF APPEAL IS THAT WITHOUT PREJUDICE TO ABOVE, ALL G RANT RECEIVED UNDER SGSY IS TREATED AS REVENUE RECEIPT T HE LEARNED AO OUGHT TO HAVE ALLOWED THE EXPENDITURE INCURRED TOWARDS PR OJECT AS REVENUE EXPENDITURE. 11. RESPECTFULLY FOLLOWING THE DECISION OF HON. PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. THE PUNJAB STATE E-GOVERNANCE SOCIETY (SUPRA); ALSO GOING THROUGH THE DETAILED FI NDING OF LD. CIT(A) AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E WE ARE OF THE VIEW THAT GRANT OF RS.7,28,12,000/- RECEIVED UNDER SGSY SCHEME FROM GOVERNMENT OF GUJARAT CANNOT BE TREATED AS REV ENUE RECEIPT OF THE ASSESSEE AS IT WAS RECEIVED SPECIFICALLY TOWARD S ATTAINMENT OF OBJECTIVES ENUMERATED IN THE MOU BETWEEN THE APPELL ANT, DISTRICT RURAL DEVELOPMENT AGENCY, NADIAD (DRDA) AND COMMISS IONER, ITA NO. 2953/AHD /2013 ASST. YEAR 2006-07 12 RURAL DEVELOPMENT, GOVERNMENT OF GUJARAT, GANDHINAG AR AND ASSESSEE HAD NO AUTHORITY TO USE THIS GRANT TOWARDS ITS NORMAL BUSINESS ACTIVITIES. THEREFORE, WE FIND NO REASON T O INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2016 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 19/9/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 16/09/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 19/09/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:2 0/9/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: