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

ITA 337/CHANDI/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6757 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR GULSHAN RAICIT
• Keywords: Charitable institution
• Section: 12A; 12; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.337/CHD/2013 (ASSESSMENT YEAR : 2006-07) M/S H.P. STATE REPRODUCTIVE VS. THE INCOME TAX OFFICER, & CHILD HEALTH SOCIETY, WARD-3, DIRECTORATE OF HEALTH SERVICES, SHIMLA. SDA COMPLEX, KUSUMPTI, SHIMLA. PAN: AAATH3148J ITA NOS.338/CHD/2013 (ASSESSMENT YEAR : 2007-08) M/S H.P. STATE REPRODUCTIVE VS. THE INCOME TAX OFFICER, & CHILD HEALTH SOCIETY, WARD-1, DIRECTORATE OF HEALTH SERVICES, SHIMLA. SDA COMPLEX, KUSUMPTI, SHIMLA. PAN: AAATH3148J AND ITA NOS.339/CHD/2013 (ASSESSMENT YEAR : 2007-08) M/S H.P. STATE REPRODUCTIVE VS. THE INCOME TAX OFFICER, & CHILD HEALTH SOCIETY, WARD-3, DIRECTORATE OF HEALTH SERVICES, SHIMLA. SDA COMPLEX, KUSUMPTI, SHIMLA. PAN: AAATH3148J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : DR.GULSHAN RAI,CIT DR DATE OF HEARING : 21.09.2017 DATE OF PRONOUNCEMENT : 09.10.2017 ORDER PER BENCH : ALL THE ABOVE THREE APPEALS HAVE BEEN PREFERRED BY SAME ASSESSEE AGAINST COMMON ORDER PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA (HEREI NAFTER REFERRED TO AS CIT(APPEALS)) DATED 09.01.2013 RELAT ING TO ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 . 2 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE ISSUE INVOLVED IN ALL THE THREE APPEALS WAS COM MON AND IDENTICAL BEING THE TREATMENT OF GRANT-IN-AID RECEI VED BY THE ASSESSEE FROM THE GOVERNMENT AS VOLUNTARY CONTRIBUT ION AND HENCE TAXABLE AS INCOME U/S 2(24) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE SO CIETY IS REGISTERED U/S 12A OF THE ACT AND IS ENGAGED IN THE IMPLEMENTATION OF REPRODUCTIVE AND CHILD HEALTH PROGRAMMES IN THE STATE OF HIMACHAL PRADESH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD RECEIVED GR ANTS AMOUNTING TO RS.18,44,69,673/- FROM THE GOVERNMENT DURING THE YEAR UNDER CONSIDERATION, OUT OF WHICH I T HAD INCURRED AN EXPENDITURE AMOUNTING TO RS.5,67,88,645 /-. THUS THE GRANT-IN-AID TO THE TUNE OF RS.12,76,81,02 8/- REMAINED UNUTILIZED. THE ASSESSING OFFICER HELD THA T THE GRANTS RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF VOLUNTARY CONTRIBUTION AND HENCE THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SEC. 2(24) R/W SE CTION 12 (1) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE INCOME OF THE ASSESSEE COULD BE EXEMPTED FROM T AX U/S 11 OF THE ACT PROVIDED THE CONDITIONS LAID DOWN THE REIN WERE FULFILLED BY THE ASSESSEE. AS PER THE PROVISIONS OF SECTION 11 OF THE ACT, THE ASSESSEE WAS REQUIRED TO EXPEND 85% OF ITS TOTAL INCOME FOR CHARITABLE PURPOSES WHICH CAME TO RS.15,67,99,222/-. BUT AGAINST THIS, THE ASSESSEE H AD SPENT 3 ONLY RS.5,67,88,645/-. THUS THERE WAS A SHORT FALL OF RS.10,00,10,577/- IN THE ASSESSEE'S SPENDING. THE A SSESSEE SUBMITTED FORM NO, 10 R/W RULE 17 OF THE INCOME TAX RULES TO THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS ON 10.12.2008 STATING THAT 35% OF THE I NCOME WAS BEING ACCUMULATED OR SET-APART FOR UTILIZATION IN SUBSEQUENT YEARS. THE ASSESSING OFFICER ACCEPTED E VEN THE SAID REQUEST OF THE ASSESSEE AND ALLOWED 35% OF THE INCOME TO BE ACCUMULATED. BUT EVEN AFTER THE EXERCISE OF T HIS OPTION BY THE ASSESSEE, THERE REMAINED A SHORT FALL OF RS.3,54,191/- IN THE ASSESSEE'S SPENDING. THEREFORE THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD F AILED TO APPLY THE CONTRIBUTIONS RECEIVED BY IT TO THE EXTEN T REQUIRED FOR CLAIMING EXEMPTION U/S 11. HENCE HE MADE AN ADD ITION OF RS.3,54,46,191/- TO THE TOTAL INCOME OF THE ASSE SSEE. THE ASSESSING OFFICER ALSO REJECTED THE BOOKS OF ACCOUN TS OF THE ASSESSEE BECAUSE IT WAS FOLLOWING THE MIXED SYSTEM OF ACCOUNTING WHICH HE HELD WAS NOT A PERMISSIBLE METH OD WITHIN THE MEANING OF SECTION 145(1) OF THE ACT. TH E ASSESSING OFFICER THEREAFTER FRAMED THE ASSESSMENT U/S 144 OF THE ACT. 4. THE APPEAL FOR THE A.Y. 2006-07 WAS ORIGINALLY DISMISSED BY THE CIT(A), SHIMLA FOR NON-PROSECUTION VIDE ORDER DATED 3.8.2009. THE ASSESSEE PREFERRED AN APP EAL AGAINST THE SAID ORDER OF THE CIT(A), SHIMLA BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE HON'BLE ITAT, CHANDIGARH BENCH 'A' VIDE THEIR ORDER DATED 22 ND JUNE, 2010 4 RESTORED BACK THE APPEAL TO THE FILE OF THE CIT(A), SHIMLA FOR FRESH ADJUDICATION ON MERITS. FURTHER, THE HON'BLE ITAT, CHANDIGARH BENCH THROUGH ANOTHER ORDER DATED 28.4.2 011 PASSED IN THE APPELLANT'S CASE FOR ASSESSMENT YEAR 2006-07 AND 2007-08 RESTORED THE CASES BACK TO THE ASSESSIN G OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE, A SSESSEE'S CLAIM WHETHER THE UNSPENT GRANT-IN-AID WAS REFUNDED BY THE ASSESSEE TO THE GOVT. OF INDIA. ACCORDINGLY THE ASS ESSING OFFICER PASSED ANOTHER ASSESSMENT ORDER IN THE ASSE SSEE'S CASE ON 27.12.2011 FOR THE ASSESSMENT YEAR 2006-07 GIVING HIS FINDINGS THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE UNUTILIZED GRANT-IN-AID WAS REFUNDED TO THE GOVT. O F INDIA. THEREFORE, THE A.O. ADDED BACK THE AMOUNT OF RS.3,54,46,191/- AGAIN TO THE TAXABLE INCOME OF THE ASSESSEE. THUS VIRTUALLY THE ORIGINAL ASSESSMENT OR DER AND THE FRESH ASSESSMENT ORDER FOR A.Y 2006-07 INVOLVED THE SAME ISSUE. 5. THE APPEALS AGAINST THE ORIGINAL ASSESSMENT ORDE R AND FRESH ASSESSMENT ORDER WERE DECIDED TOGETHER BY THE LD.CIT(APPEALS) ALONGWITH THE APPEALS FOR ASSESSMEN T YEARS 2007-08 AND 2008-09. 6. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE CONTEND ED THAT THE GRANT-IN-AID RECEIVED BY IT WERE ACTIVITY SPECIFIC AND UNSPENT BALANCE FOR A PARTICULAR FINANCIAL YEAR WERE CARRIED FORWARD TO THE NEXT FINANCIAL YEAR AND BECO ME PART OF THE NEXT YEAR PLAN. THE ASSESSEE CONTENDED THAT UNSPENT BALANCES DO NOT LAPSE AND NEITHER ARE THE SAME PHYS ICALLY 5 TRANSFERRED BACK TO THE GOVERNMENT OF INDIA AT THE END OF THE FINANCIAL YEAR SINCE NRHM WAS AN ONGOING PROGRA MME AND ACTIVITIES WERE BEING IMPLEMENTED EVEN ON THE L AST DAY OF THE FINANCIAL YEAR. THE ASSESSEE CONTENDED THAT UNUTILIZED AMOUNT WAS BEING TREATED AS PART OF THE OVERALL PLAN OF THE NEXT FINANCIAL YEAR AND WAS AKIN TO REF UNDING OF UNUTILIZED GRANTS TO GOVERNMENT OF INDIA. 7. THE LD.CIT(APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE HOLDING THAT THE GRANTS WERE CLEARLY IN TH E NATURE OF VOLUNTARY CONTRIBUTION FOR CHARITABLE PURPOSE AN D HENCE COVERED WITHIN THE DEFINITION OF INCOME AS PER THE PROVISIONS OF SECTION 2(24) OF THE ACT AND ARGUMENT OF THE ASSESSEE THAT GRANTS ARE ACTIVITY SPECIFIC AND REQU IRE TO BE CARRIED FORWARD AS PART OF THE NEXT YEAR GRANT-IN-A ID WAS HELD TO BE NOT ACCEPTABLE AS FAR AS TAXABILITY OF G RANT-IN-AID RECEIVED IN THE YEAR UNDER CONSIDERATION WAS CONCER NED. THE LD.CIT(APPEALS) HELD THAT UNSPENT GRANT-IN-AID DID NOT LOSE ITS CHARACTER AS INCOME IN THE HANDS OF THE AS SESSEE IN THE YEAR OF RECEIPT MERELY BECAUSE THE ASSESSEE IS UNDER AN OBLIGATION TO CARRY IT FORWARD IN ITS BOOKS OF ACCO UNT AND WAS ANSWERABLE TO THE GOVERNMENT FOR ITS PROPER UTI LIZATION TOWARDS THE AVOWED OBJECTIVES. THE LD.CIT(APPEALS) ALSO REJECTED ASSESSEES CONTENTION THAT THE GRANT-IN-AI D WAS ACTIVITY SPECIFIC STATING THAT THE GRANT WAS DISBUR SED BY THE GOVERNMENT ON THE BASIS OF ANNUAL PIP (PROGRAMME IMPLEMENTATION PLAN) WHICH WAS PREPARED BY THE ASSE SSEE AND APPROVED BY THE GOVERNMENT AND EVERY YEAR A NEW PIP 6 WAS PRESENTED AND GOVERNMENT RELEASED THE GRANT-IN- AID ON THE BASIS OF ITS APPROVAL OF THE SAME. THE LD. CIT( A) STATED THAT IT WAS NOT NECESSARY THAT THE ACTIVITIES OR PR OGRAMMES APPROVED IN ONE YEARS PIP WERE NECESSARILY REPLICA TED IN THE NEXT YEARS PIP. THE LD.CIT(APPEALS) THEREFORE HELD THAT THE UNSPENT PORTION OF THE GRANT-IN-AID WAS CARRIED FORWARD AS A COMPOSITE WHOLE AND DID NOT CARRY ANY ACTIVITY -WISE AND PROGRAMME-WISE DIVISION. THE RELEVANT FINDING OF THE LD.CIT(APPEALS) AT PARA 4 TO 4.2 OF HER ORDER IS AS UNDER: 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERE D W.R.T. THE FACTS OF THE CASE, THE RELEVANT PROVISIONS OF L AW AND THE RELATED DOCUMENTS. THERE IS NO DENYING THE FACT T HAT THE APPELLANT HAD RECEIVED GRANT-IN-AID TO THE TUNE OF RS.18,44,69,673/- FROM THE GOVERNMENT DURING THE YE AR UNDER CONSIDERATION. THE SAID GRANT-IN AID WAS RECEIVED FOR THE IMPLEMENTATION OF VARIOUS REPRODUCTIVE & CHILD HEAL TH PROGRAMMES, OTHER FAMILY PLANNING PROGRAMMES AND A/ SO FOR IMPLEMENTATION OF MANY OTHERS PROGRAMMES RELATED TO HEALTH IN THE STATE OF HIMACHAL PRADESH. THUS THE GRANT-IN-AI D WAS GIVEN BY THE GOVT. TO PROVIDE THE APPELLANT SOCIETY FROM THE GOVT. WITH SUFFICIENT FUNDS TO CARRY ON ITS CHARITABLE ACTIVIT Y. THE SAID GRANTS WERE RECEIVED BY THE APPELLANT SOCIETY FROM THE GOV T. WITHOUT ANY CONSIDERATION. THUS THE GRANTS WERE CLEARLY IN THE NATURE OF VOLUNTARY CONTRIBUTIONS FOR CHARITABLE PURPOSES. HE NCE THE SAME ARE COVERED WITHIN THE DEFINITION OF 'INCOME' AS PE R THE CLEAR PROVISIONS OF SECTION 2(24) 'OF THE ACT. 4.1 NOW THE QUESTION ARISES AS TO WHAT PART OF THE SAID VOLUNTARY CONTRIBUTIONS WAS REQUIRED TO BE TAXED BY THE A.O. IN THIS REGARD THE A.O. HAS RIGHTLY REFERRED TO THE PR OVISIONS OF SECTION 11 R/W SEC. 12(1) OF THE ACT. AS PER THE PR OVISIONS OF SECTION 11, THE ASSESSEE WAS UNDER AN OBLIGATION TO SPEND AT LEAST 85% OF THE TOTAL GRANT-IN-AID TOWARDS ITS OBJECTIVE S. BUT THE APPELLANT HAS 'CLEARLY FAILED TO DO SO. THE APPE LLANT ASKED FOR THE ACCUMULATION TO THE EXTENT OF ONLY 35% OF ITS T OTAL RECEIPTS THROUGH ITS APPLICATION MADE TO THE A.O. IN FORM NO . 10 R/W RULE 17 OF THE INCOME TAX RULES. THE A.O. HAS BEEN FAIR AND REASONABLE IN ACCEPTING THE SAID REQUEST OF THE APP ELLANT. BUT EVEN AFTER ALLOWING 35% ACCUMULATION TO THE APPELLA NT, THERE REMAINED A SHORT FALL OF RS.3,54,46,191/- OUT OF TH E 85% SPENDING WHICH WAS REQUIRED TO BE DONE. THE APPELLA NT HAS OFFERED NO DEFENSE IN THIS REGARD. ITS ONLY ARGUMENT IS THAT THE BALANCE GRANT-IN-AID DOES NOT CONSTITUTE ITS INCOME, A S THE SAME IS REQUIRED TO BE CARRIED FORWARD AS A PART OF THE NEXT YEAR'S GRANT-IN-AID. THE SAID ARGUMENT OF THE APPE LLANT, HOWEVER, IS NOT FOUND TO BE CARRYING ANY WEIGHT AS F AR AS THE TAXABILITY OF THE GRANT-IN-AID RECEIVED IN THE YEAR UN DER 7 CONSIDERATION IS CONCERNED. THE SAID ARGUMENT OF THE APPELLANT CAN HELP IT ONLY TO THE EXTENT THAT THE CARRIED FORW ARD GRANT-IN- AID SHOULD NOT BE ADDED AGAIN TOWARDS ITS RECEIPTS IN THE FOLLOWING YEAR. BUT THE UNSPENT GRANT-IN-AID DOES N OT LOSE ITS CHARACTER AS INCOME IN THE HANDS OF THE APPELLANT IN THE YEAR OF ITS RECEIPT MERELY BECAUSE THE APPELLANT IS UNDER AN OBLIGATION TO CARRY IT FORWARD IN ITS BOOKS OF ACCOUN TS AND IS ANSWERABLE TO THE GOVERNMENT FOR ITS PROPER UTILIZATI ON TOWARDS THE AVOWED OBJECTIVES. THERE IS ALSO NOTICE D AN INHERENT CONTRADICTION IN THE APPELLANT'S OWN STAND. IF THE APPELLANT COULD ASK FOR THE A.O.'S PERMISSION U/S 11( 2) OF THE ACT FOR ACCUMULATION OF ITS SURPLUS TO THE EXTENT OF 35%, WHAT PREVENTED IT FROM ASKING FOR THE ACCUMULATION O F A HIGHER AMOUNT? MOREOVER, IF THE APPELLANT WAS CONVINCE D ABOUT THE FACT THAT THE UNSPENT GRANT-IN-AID DID HO T CONSTITUTE ITS INCOME, WHY DID IT AT ALL OPT TO RESORT TO THE PROV ISIONS OF SECTION 11(2) OF THE ACT? 4.2 EVEN AFTER THE HON'BLE ITAT PROVIDED A FRESH OPPORTUNITY TO THE APPELLANT TO ESTABLISH BEFORE THE A.O. THAT IT HAD ACTUALLY REFUNDED THE UNSPENT GRANT-IN-AID TO THE GOVT. OF INDIA, THE APPELLANT HAS FAILED TO DO SO. INSTEAD TH E APPELLANT HAS TAKEN A FRESH ARGUMENT THAT THE GRANT -IN-AID RECEIVED BY IT IS ACTIVITY-SPECIFIC AND NOT YEAR-SPECIFIC. BUT EVEN THE SAID ARGUMENT IS ALSO NOT FOUND TO BE FACTUALLY CORREC T. THE FACT OF THE MATTER IS THAT THE GRANT-IN-AID IS DISB URSED BY THE GOVT. ON THE BASIS OF THE ANNUAL PIP (PROGRAMME IMPLEMENTATION PLAN) WHICH IS DULY PREPARED BY THE AP PELLANT SOCIETY AND APPROVED BY THE GOVERNMENT. EVERY YEAR A NEW PIP IS PRESENTED AND THE GOVERNMENT RELEASES THE GR ANT- IN-AID ON THE BASIS OF ITS APPROVAL OF THE SAME. IT IS NOT NECESSARY THAT THE ACTIVITIES OR THE PROGRAMMES APP ROVED IN ONE YEAR'S PIP ARE NECESSARILY REPLICATED IN THE NE XT YEAR'S PIP. NOR DO THE FUNDS ALLOTTED TO VARIOUS ACTIVITIES O R PROGRAMMES IN ONE YEAR'S PIP REMAIN YEARMARKED FOR THE SAME ACTIVITIES OR PROGRAMMES IN THE NEXT YEAR'S PIP IF THEY REMAIN UNSPENT IN THE YEAR OF THEIR ORIGINAL SANCTION . THE UNSPENT PORTION OF THE GRANT-IN-AID IS CARRIED FORW ARD AS A COMPOSITE WHOLE AND DOES NOT CARRY ANY ACTIVITY-WISE A ND PROGRAMME-WISE DIVISION. INSTEAD A FRESH ALLOCATION OF THE GRANT IS MADE BY THE GOVT. IN RESPECT OF VARIOUS ACTIVITIES/PROGRAMMES. THEREFORE, THERE IS NO MERIT I N THE APPELLANT'S ARGUMENT THAT THE SAME GRANT-IN-AID CONTINU ES FOR 5-6 YEARS FOR THE A SPECIFIC ACTIVITY AND, THEREFOR E, THE SAME CANNOT BE TREATED AS THE INCOME OF ONE SINGLE YEAR. AS ALREADY MENTIONED, THE GRANT-IN-AID IS PURELY AN AN NUAL PHENOMENON AND LOSES ITS IDENTITY AT THE CLOSE OF T HE FINANCIAL YEAR. IT IS ALSO PERTINENT TO NOTE THAT THE S URPLUS FUNDS DEPOSITED BY THE APPELLANT IN THE BANK ACCOUNT S ON WHICH IT HAD EARNED INTEREST INCOME. 8. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US RAISING FOLLOWING GROUNDS: 8 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACT IN UPHOLDING THE ADDITION OF RS.3,54,45,191/- TREATING THE SAME TO BE NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT IN UTTER DISREGARD OF THE EXPLANATION RENDERED WHICH IS ARBI TRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN TREATING THE UNSPENT GRANT-IN-AID TO BE THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX AS PER SECTION 2(24) OF THE ACT W HICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE GRANT IN AID RECEIVED IS ACTIVITY SPECIFIC WHICH MAY CONTINU E FOR YEARS TOGETHER AND IS TO BE REFUNDED ON COMPLETION OF THE PROJECT AND AS SUCH THE ORDER PASSED IS ILLEGAL, AR BITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER SECTION 234-A, 234-B & 234-C OF THE ACT WHICH IS NO T CHARGEABLE IN THE FACTS OF THE CASE. 5. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW A ND FACTS OF THE CASE AND IS, THUS, UNTENABLE. 9. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES AND STATED THAT THE GRANT-IN-AID COULD NOT BE TREATED AS INCOME OF THE ASSESSEE SINCE IT WAS A CTIVITY SPECIFIC AND THE UNSPENT AMOUNT WAS TO BE CARRIED F ORWARD FOR UTILIZATION IN THE SUCCEEDING YEARS. THE LD. C OUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DECISI ONS OF THE I.T.A.T. IN SUPPORT OF ITS CONTENTION: 1) ITO VS. PUNJAB E GOVERNANCE SOCIETY ITA NO.681/CHANDI/2009 DT 04-08-10 2) ITO VS. PUNJAB STATE SPORTS COUNCIL ITA NO.904/CHANDI/2006 DT.20-07-07 10. THE LD. COUNSEL FOR ASSESSEE FURTHER POINTED OU T THAT BOTH THE ABOVE ORDERS HAVE BEEN AFFIRMED BY THE HON 'BLE PUNJAB & HARYANA HIGH COURT DISMISSING REVENUES AP PEAL FILED AGAINST THE SAME AS UNDER: 9 1) CIT VS. PUNJAB E GOVERNANCE SOCIETY ITA NO.75/2011 DATED 21.4.2011 2) CIT VS. PUNJAB STATE SPORTS COUNCIL ITA NO.190/2008 DATED 12.12.2008 11. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(APPEALS). 12. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES AND ALSO GONE THROUGH THE ORDERS PLACED BEFORE US. ON PERUSAL OF THE ORDERS FILED BEFORE US, WE FIND THAT THE PRO POSITION WHICH HAS BEEN LAID DOWN VIS--VIS GRANT-IN-AID REC EIVED FROM THE GOVERNMENT IS THAT GRANTS IN AID RECEIVED FOR SPECIFIC PURPOSES CANNOT BE TREATED AS VOLUNTARY CONTRIBUTION OR TAXABLE INCOME OF THE SOCIETY. THE ITAT CHANDIGARH BENCH IN THE CASE OF PUNJAB E- GOVERNANC E SOCIETY (SUPRA) HELD THAT THE TIED-UP GRANTS RECEIV ED BY THE ASSESSEE FOR SPECIFIC PURPOSES WITH THE RIDER TO RE FUND UNUTILIZED PORTION WOULD NOT CONSTITUTE THE INCOME WITHIN THE MEANING OF SECTIONS 11 AND 12 OF THE ACT. THE I.T.A.T. FURTHER DEALT WITH THE ISSUE OF TAXABILITY OF INTER EST EARNED ON FDRS CREATED FROM THE UNSPENT AMOUNT OF GRANTS AVAILABLE AND ON PERUSING THE TERMS AND CONDITIONS GOVERNING THE GRANT-IN-AID HELD THAT THE INTEREST E ARNED ON UNSPENT GRANTS DID NOT ACCRUE IN THE HANDS OF THE A SSESSEE AS A BENEFICIAL OWNER BUT WAS REQUIRED TO BE ADJUST ED AGAINST FUTURE INSTALLMENTS OF THE GRANTS PAYABLE T O THE ASSESSEE. FOLLOWING THE DECISION OF THE HON'BLE KAR NATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT & FINANCIAL CORPORATION, 284 ITR 582 (KAR), THE I.T.A.T. HELD THAT THE SAID INTE REST WAS 10 NOT ALSO TAXABLE IN THE HANDS OF THE ASSESSEE AS IN COME. THE SAID JUDGMENT OF THE I.T.A.T. WAS UPHELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT VIDE ITS ORDER DATED 21.4.2011. THE HON'BLE HIGH COURT DISMISSED REVENU ES APPEAL FOLLOWING ITS OWN DECISION IN THE CASE OF CI T VS. M/S PUNJAB STATE SPORTS COUNCIL (SUPRA) AND CIT VS. M/S PUNJAB ENERGY DEVELOPMENT AGENCY. THE RELEVANT FIN DING OF THE HON'BLE HIGH COURT AT PARA 4 OF ITS ORDER IS AS UNDER: 4. IT IS NOT DISPUTED THAT IDENTICAL ISSUES HAVE ALRE ADY BEEN DEALT WITH BY THIS COURT VIDE ORDER DATED 12.12.200 8 IN ITA NO.190 OF 2008 COMMISSIONER OF INCOME TAX, CHANDIGARH-LL VS. M/S PUNJAB STATE SPORTS COUNCIL, CHANDIGARH AND ORDER DATED 31.7.2009 IN ITA NO.666 OF 2008 COMMISSIONER OF INCOME TAX, CHANDIGARH-LL VS. M/S PUNJAB ENERGY DEVELOPMENT AGENCY. IN M/S PUNJAB STATE SPORTS COUNCIL, CHANDIGARH IT WAS HELD THAT GRANTS- IN-AID RECEIVED FROM THE GOVERNMENT FOR SPECIFIC PU RPOSE CANNOT BE TREATED AS VOLUNTARY CONTRIBUTION OR AS T AXABLE INCOME OF THE SOCIETY. IN M/S PUNJAB ENERGY DEVELOPMENT AGENCY IT WAS HELD THAT INTEREST RECEIVED BY THE ASSESSEE ON THE AMOUNT OF GRANT DEPOSITED IN THE BANK WAS ALSO I N THE NATURE OF GRANT ITSELF. 13. THE SAID PROPOSITIONS, WE FIND, HAVE BEEN REITE RATED BY THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S PUNJAB STATE SPORTS COUNCIL (SUPRA) WHICH HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT ALSO IN ITS ORDER DATED 12.12.2008 (SUPRA). 14. THE PROPOSITION OF LAW, THEREFORE, WHICH EMERGE S IS THAT THE GRANTS-IN-AID RECEIVED FOR SPECIFIC ACTIVI TIES AND WHICH COULD THUS BE TERMED AS TIED-UP GRANTS-IN-AID , AND THE UNUTILIZED PART OF WHICH IS TO BE ADJUSTED AGAI NST FUTURE GRANTS RECEIVED, CANNOT BE TREATED AS VOLUNTARY CON TRIBUTION OR TAXABLE INCOME OF THE ASSESSEE SOCIETY AND INTER EST RECEIVED ON THE AMOUNT OF GRANT DEPOSITED IN THE BA NK WITH 11 THE RIDER THAT THE INTEREST IS ALSO TO BE ADJUSTED TOWARDS FUTURE INSTALLMENT OF GRANT OR IS TO BE UTILIZED FO R THE PURPOSE OF THE GRANT IS ALSO NOT TO BE TREATED AS T AXABLE INCOME OF THE SOCIETY. 15. IN THE PRESENT CASE WE FIND THAT THE FACTS RELA TING TO THE GRANTS IN AID RECEIVED BY THE ASSESSEE HAVE NOT BEEN CLEARLY BROUGHT ON RECORD. THE ASSESSEE, WE FIND, HAS ONLY PLEADED THAT THE GRANT-IN-AID AS ALSO INTEREST EARN ED ON THE SAME WAS TIED-UP, WITHOUT SUBSTANTIATING THE SAME W ITH ANY DOCUMENT. THE LD.CIT(APPEALS) ALSO, WE FIND, HAS W ITHOUT REFERRING TO ANY DOCUMENT HELD THE GRANT-IN-AID TO BE NOT RELEVANT TO ANY SPECIFIC ACTIVITY. IN VIEW OF THE SAME AND FURTHER IN VIEW OF THE JUDICIAL PRECEDENCE ON THE I SSUE , WE CONSIDER IT NECESSARY TO RESTORE THIS ISSUE BACK TO THE ASSESSING OFFICER TO EXAMINE THE FACTS RELATING TO THE GRANTS IN AID RECEIVED AND THEREAFTER DECIDE THE IS SUE IN ACCORDANCE WITH LAW. 16. IN VIEW OF THE ABOVE, ALL THE ABOVE THREE APPEAL S OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 9 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH