Gujarat State Disaster Managment Authority, Gandhinagar V. The ACIT.,Gandhinagar Circle, Gandhinagar

ITA 3214/AHD/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9328 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-07-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 12-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: M G PATEL
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3214/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:16.7.09 DRAFTED:17.7.09 GUJARAT STATE DISASTER MANAGEMENT AUTHORITY, 6 TH FLOOR, BLOCK NO.11, UDYOG BHAVAN, SECTOR 11, GANDHINAGAR- 382017 PAN NO.AAALG0094J V/S . THE ASST. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, GANDHINAGAR (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.G.PATEL RESPONDENT BY:- SMT. NEETA SHAH, SR.DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-GANDHINAGAR IN APPEAL NO. CIT( A)/GNR/298/2007-08 DATED 30-06-2008. THE ASSESSMENT WAS FRAMED BY THE ASST. COMMISSIONER OF INCOME-TAX, GANDHINAGAR CIRCLE, GANDHINAGAR U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 17-12-2007 FOR THE ASSESSMENT YEAR 2005-06. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST O N THE FUNDS PROVIDED BY THE GOVERNMENT OF GUJARAT AND HOLDING THE SAME AS ASSES SABLE AS INCOME OF THE ASSESSEE. FOR THIS, THE ASSESSEE HAS RAISED THE FOL LOWING TWO GROUNDS :- 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON THE FACTS BY HOLDING THAT INTEREST OF RS.6,82,92,887/- ON THE FU NDS PROVIDED BY THE GOVERNMENT OF GUJARAT, WHICH HAS BEEN SHOWN BY THE APPELLANT AS PAYABLE TO THE GOVERNMENT, IS ASSESSABLE AS INCOME OF THE APPE LLANT. ITA NO.3214 /AHD/2008 A.Y. 2005-06 GSDMA V. ACIT, GNR CIR,GNR PAGE 2 2. THE LEARNED ASSESSING OFFICER HAS ALSO ERRED IN LAW AND ON THE FACTS IN REJECTING THE CLAIM BY THE APPELLANT GSDMA THAT IT IS FUNCTIONING FOR AND ON BEHALF OF THE GOVERNMENT OF GUJARAT AND, THEREFORE, ONLY THE FUNDS MADE AVAILABLE TO THE APPELLANT GSDMA FOR ASSIGNED PROJE CT ARE TO BE UTILIZED BY THE APPELLANT GSDMA AND AS SUCH ANY INTEREST ON INV ESTMENT OF SURPLUS FUNDS TILL THEIR UTILIZATION, IS NOT IN NATURE PF I NCOME IN THE HANDS OF THE APPELLANT GSDMA AND CANNOT BE CONSIDERED OR TREATED AS INCOME OF THE APPELLANT GSDMA. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE IN ASSESSEES OWN CASE IN ITA NO.949/AHD/2009 DATED 05-06-2009 FOR THE ASSESSMENT YEAR 2006- 07, WHEREIN EXACTLY ON SIMILAR FACTS, THE TRIBUNAL HAS DELETED THE ADDITION BY GIVING FOLLOWING FINDING:- 7.WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IT IS DIFFICULT TO AGREE WITH THE DEPARTMENTAL AUTHORITIES THAT THE GRANTS C ONSTITUTE THE ASSESSEES INCOME UNDER SECTION 12 OF THE ACT AS VOLUNTARY CON TRIBUTION. THE GRANTS ARE MADE BY THE STATE GOVERNMENT OUT OF FUNDS RECEIVED FROM THE WORLD BANK, ASIAN DEVELOPMENT BANK, GOVERNMENT OF INDIA, UNDP A S ALSO FROM OTHER CENTRAL AND STATE GOVERNMENT AGENCIES. IT IS NOT IN DISPUTE THAT THESE GRANTS WERE PROVIDED TO THE ASSESSEE WITH A SPECIFIC DIREC TION FOR UTILIZING THEM TOWARDS THE ASSIGNED PROJECTS DULY APPROVED AND SAN CTIONED BY THE CENTRAL AND STATE GOVERNMENTS FOR IMPLEMENTING THE GUJARAT EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECTS. IT HAS BEEN SO STAT ED IN THE CERTIFICATE DATED 24- 2-2009 ISSUED BY THE PRINCIPAL SECRETARY (ECONOMIC AFFAIRS). THE AVERMENT MADE IN THE CERTIFICATE HAS NOT BEEN ACCEPTED BY TH E CIT(A) ON THE GROUND THAT IT WAS PROMPTED BY THE DECISION OF THE AHMEDAB AD BENCH OF THE TRIBUNAL IN THE CASE OF GUJARAT COUNCIL OF SCIENCE CITY AND HAS BEEN GIVEN TO PROVIDE A LEGAL TWIST. THE CIT(A) HAS ALSO STATED THAT TH E CERTIFICATE IS NOT A CONTEMPORANEOUS DOCUMENT AND DOES NOT HAVE THE AUTH ORITY OF THE RESOLUTION OR ORDER OF THE GOVERNMENT. HOWEVER, THE STATEMEN T IN THE CERTIFICATE IS ONLY A RE-AFFIRMATION OF WHAT HAS BEEN STATED BY THE FIN ANCE DEPARTMENT OF THE GOVERNMENT OF GUJARAT IN THE LETTER DATED 31-12-200 4 WHICH HAVE ALREADY REFERRED TO. THIS LETTER SAYS THAT THE GRANTS GIV EN BY THE STATE GOVERNMENT ARE FOR IMPLEMENTING THE EARTHQUAKE RECONSTRUCTION AND REHABILITATION AND THE ASSESSEE WAS DIRECTED TO KEEP THEM IN A SEPARATE BA NK ACCOUNT. FURTHER, IT WAS CLEARLY STATED IN THIS LETTER THAT THE AMOUNT O F INTEREST EARNED BY THE ASSESSEE HAS TO BE DEPOSITED WITH THE STATE GOVERNM ENT IN THE CONSOLIDATED FUND ACCOUNT SINCE THE STATE GOVERNMENT HAS TO PAY INTEREST AT 12% TO THE WORLD BANK, ADB ETC. THE LETTER GOES ON TO SAY TH AT THE SUBJECT OF PAYING BACK THE INTEREST WAS DISCUSSED EVEN EARLIER DURING WHICH THE ASSESSEE WAS GIVEN A SIMILAR DIRECTION. IT IS ALSO POINTED OUT IN THE LETTER THAT THE AMOUNT REQUIRED FOR THE OFFICE EXPENSES OF THE ASSESSEE WA S SEPARATELY SANCTIONED BY THE STATE GOVERNMENT. THIS IS AN INDICATION THA T THE GRANTS GIVEN BY THE STATE GOVERNMENT CANNOT BE UTILIZED FOR INCURRING E XPENSES OF THE ASSESSEE. IF SUCH CONDITIONS HAVE BEEN IMPOSED WHILE MAKING T HE GRANTS AND THE GRANTS ITA NO.3214 /AHD/2008 A.Y. 2005-06 GSDMA V. ACIT, GNR CIR,GNR PAGE 3 ARE TO BE SPENT ONLY FOR ASSIGNED PROJECTS UNDER TH E REHABILITATION PROGRAMME, IT FOLLOWS THAT THE GRANTS CANNOT BE TREATED AS THE ASSESSEES INCOME. WE MAY REFER TO ORDER OF THE AHMEDABAD BENCH OF TRIBUN AL PASSED ON 17-4-2009 IN THE CASE OF GUJARAT SAFAI KAMDHAR VIKAS NIGAM, I N ITA NO.3232/AHD/2008 (A.Y.2005-2006) TO WHICH ONE OF US (THE AM) WAS PAR TY. IN THIS CASE, IT WAS HELD THAT GRANTS GIVEN BY THE STATE GOVERNMENT TO A NOTHER ENTITY WHICH WAS TO SPEND THE GRANTS ONLY FOR STATED PURPOSE, CANNOT BE CONSIDERED AS VOLUNTARY CONTRIBUTION AND ASSESSED UNDER SECTION 12 OF THE A CT AS INCOME OF THE RECIPIENT. IN THIS ORDER REFERENCE HAS BEEN MADE T O THE JUDGMENT OF THE KARNATAKA HIGH COURT IN CIT VS. KARNATAKA URBAN INF RASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION, 284 ITR 582 AND THAT OF TH E ALLAHABAD HIGH COURT IN CIT VS. UPBHOKATA SAHAKARI SANGH LTD., 288 ITR 106. THE TRIBUNAL HAS ALSO REFERRED TO THE JUDGMENT OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF GUJARAT MUNICIPAL BOARD (SUPRA) AND THE DELHI HIGH COURT IN CIT VS. DELHI STATE INDUSTRIAL DEVELOPMENT CORPORATION, 162 TAXMA N 275. THIS ORDER OF THE TRIBUNAL ALSO SUPPORTS THE ASSESSEE IN FULL IN ITS CONTENTION THAT THE GRANTS RECEIVED FROM THE STATE GOVERNMENT CANNOT BE CONSID ERED AND ASSESSED AS ITS INCOME. THE ASSESSEE MIGHT HAVE ERRONEOUSLY TR EATED THEM AS ITS INCOME IN THE ACCOUNTS BUT IF SUCH ENTRIES ARE INCONSISTEN T WITH THE FACTUAL AND LEGAL POSITION, THEY CANNOT BE GIVEN EFFECT TO OR CONSIDE RED TO BE CONCLUSIVE FOR ALL PURPOSES. IN ANY CASE AN ASSESSMENT CANNOT BE MADE ON THE BASIS OF SUCH ENTRIES WHICH DO NOT REFLECT THE PROPER FACTUAL OR LEGAL POSITION. SO FAR AS INTEREST IS CONCERNED BOTH THE LETTER DATED 31-12-2 004 WRITTEN BY THE FINANCE DEPARTMENT OF THE STATE GOVERNMENT AND THE CERTIFIC ATE DATED 24-2-2009 ISSUED BY THE PRINCIPAL SECRETARY (ECONOMIC AFFAIRS ) OF THE STATE GOVERNMENT CLEARLY SHOW THAT IT HAS TO BE REFUNDED TO THE STAT E GOVERNMENT. THE ENTRIES MADE BY THE ASSESSEE CREDITING THE ACCOUNT OF THE S TATE GOVERNMENT WITH THE AMOUNT OF INTEREST IS CONSISTENT WITH THE CLAIM MAD E BY THE STATE GOVERNMENT AND THE CONDITIONS SUBJECT TO WHICH THE GRANTS WERE GIVEN. THE ASSESSEE HAS THEREFORE RIGHTLY CREDITED THE STATE GOVERNMENT WIT H THE AMOUNT OF THE INTEREST. SINCE THE CONDITION THAT THE INTEREST SH OULD BE REFUNDED TO THE ASSESSEE FORMED PART OF THE GRANT ITSELF, THERE WAS AN INBUILT RESTRICTION ON THE ASSESSEES RIGHT TO ENJOY THE INTEREST INCOME. THE ASSESSEE COULD NOT HAVE TREATED THE INTEREST INCOME AS ITS OWN. RIGHT FROM THE INCEPTION SUCH INCOME BELONGED TO THE STATE GOVERNMENT. WE THEREFORE UPH OLD THE ASSESSEES CONTENTION AND HOLD THAT THE INTEREST INCOME WAS NO T ASSESSABLE IN THE ASSESSEES HANDS. RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION AND TAKING A CONSISTENT VIEW WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE OF THE ASS ESSEES APPEAL IS ALLOWED. 4. THE SECOND ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO THE ACCUMULATION AMOUNT NOT ALLOWED AS DEDUCTION U/S.11 (1) OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. THE LEARNED ASSESSING OFFICER HAS ALSO ERRED IN LAW AS WELL AS ON THE FACTS BY DISALLOWING THE CLAIM BY THE APPELLANT GSD MA IN RESPECT OF ACCUMULATION OF RS.86,52,97,060/- FOR DEDUCTION U/S .11(1) OF THE I.T. ACT, 1961 ITA NO.3214 /AHD/2008 A.Y. 2005-06 GSDMA V. ACIT, GNR CIR,GNR PAGE 4 AT 15% OF THE GROSS TOTAL INCOME ON THE GROUND THAT THE EXPENDITURE TOWARDS OBJECTS DURING THE YEAR BEING IN EXCESS OF GROSS IN COME SHOWN IN THE RETURN, NO SUCH DEDUCTION IS ALLOWABABLE. 5. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE HAS N OT PRESSED THIS ISSUE, AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31/08/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED :31/ 08/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-GNR 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD