ITO, Chandigarh V. M/s State Urban Development Authority, Chandigarh

ITA 488/CHANDI/2011

• Counselvise Citation: 48821514 RSA 2011
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: ANIL KUMAR KALIA
• Keywords: Charitable institution
• Section: 10; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.488/CHD/2011 (ASSESSMENT YEAR : 2006-07) THE INCOME TAX OFFICER, VS. M/S STATE URBAN DEVEL OPMENT AUTHORITY, WARD 2 (3), SCO 8-9, SECTOR 17-B, CHANDIGARH. CHANDIGARH. PAN: AAALS0207J (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.JAISHREE SHARMA, DR RESPONDENT BY : SHRI ANIL KUMAR KALIA DATE OF HEARING : 05.03.2012 DATE OF PRONOUNCEMENT : 26.03.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 31.12.2010 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS U NDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.22,12,471/- ON ACCOUNT OF BANK INTEREST EARNED ON THE FUNDS DEPOSITED IN THE BANKS WHICH WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10(23BBA) OF THE INCOME TAX ACT, 19651 WITHOUT APPRECIATING THE FACT THAT ACTIVITIES OF THE ASSESSEE DOES NOT FALL UNDER THE AMBIT OF SECTION 10(23BBA) OF THE INCOME TAX ACT. 3. THE ONLY ISSUE RAISED BY THE REVENUE IN THE PRES ENT APPEAL IS AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF BANK INTEREST EARNED TOTALING RS.22,12,471/-. 2 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE, WHICH IS LOCAL AUTHORIT Y CONSTITUTED BY THE GOVERNMENT OF PUNJAB UNDER NOTIFICATION DATED 18.2. 1991 FOR IMPLEMENTING THE SCHEME SWARAN JAYANTI SHAHARI ROZG AR YOJNA (SJSRY), WHICH RECEIVED FUNDS FROM THE GOVERNMENT OF INDIA A ND GOVERNMENT OF PUNJAB, WHICH IN TURN WERE DISBURSED FOR UTILIZATIO N TO THE MUNICIPALITIES. THE AMOUNT WHICH WAS LEFT UN-SPENT WAS PARKED IN THE BANKS AS FDRS AND INTEREST INCOME WAS EARNED. THE SAID INTEREST INCOME WAS CLAIMED AS EXEMPT UNDER SECTION 10(23BBA) OF TH E ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AMOUNT R ECEIVED BY THE ASSESSEE COULD NOT BE TERMED AS ENDOWMENT AND SECTI ON 10(23BBA) APPLIES TO A BODY WHICH PROVIDES FOR ADMINISTRATION OF ENDOWMENT FOR RELIGIOUS OR CHARITABLE PURPOSES. AS IN THE INSTAN T CASE THE FUNDS WERE BEING DISBURSED BY THE ASSESSEE TO THE MUNICIPALITI ES, WHICH WERE NEITHER RELIGIOUS NOR CHARITABLE ORGANIZATIONS, THE INCOME EARNED ON DEPOSITS FROM SURPLUS/UNUTILIZED AMOUNT WAS HELD TO BE TAXAB LE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, ADDITION OF RS.22,12,47 1/- WAS MADE IN THE PRESENT CASE. 5. THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSES SEE IN VIEW OF THE STATUTORY PROVISIONS OF SECTION 10(23BBA) OF THE AC T UNDER WHICH THE INCOME OF THE BODIES OR AUTHORITIES WHICH WERE SET UP BY OR UNDER ANY CENTRAL, STATE OR PROVINCIAL ACT IS EXEMPT. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 7. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS A LOCAL BODY CONSTITUTED BY THE PRESID ENT OF INDIA UNDER THE NOTIFICATION IN THE OFFICIAL GAZETTE DATED 18 TH FEBRUARY, 1991. THE ASSESSEE WAS THE IMPLEMENTING AGENCY FOR PUNJAB FOR IMPLEMENTING THE SCHEMES FOR THE BENEFIT OF URBAN POOR THROUGH URBAN LOCAL BODIES I.E. MUNICIPAL CORPORATION, NACS IN THE STATE. THE ASSE SSEE DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 WAS ENGAGED IN IMPLEMENTING SWAYARNA JAYANTI ROZGAR YOJANA, A S CHEME WHICH AIMS AT IMPROVING LIVING STANDARDS OF THE URBAN POOR. T HE ASSESSEE WAS RECEIVING FUNDS FROM UNION GOVERNMENT AND STATE GOV ERNMENT AND WAS DISBURSING THE SAME TO VARIOUS MUNICIPALITIES IN AC CORDANCE WITH THE GUIDELINES OF THE SCHEME. THE ASSESSEE WAS NOT ENG AGED IN ANY OTHER ACTIVITY AND WAS NOT GENERATING ANY REVENUE AND ACC ORDINGLY NOT DRAWING ANY INCOME AND EXPENDITURE/PROFIT & LOSS ACCOUNT. THE OPERATIONAL EXPENSES OF THE ASSESSEE WERE BEING MET OUT OF THE FUNDS (5%) PORTION BEING ALLOCATED AGAINST THE SCHEMES. THE ASSESSEE WAS THE CUSTODIAN OF THE FUNDS RECEIVED FROM CENTRAL AND STATE GOVERNMEN TS AND WAS HOLDING THE FUNDS PENDING DISBURSEMENT IN SAVING BANK ACCOU NTS WITH BANKS IN ACCORDANCE WITH THE DIRECTIONS OF THE CENTRAL/STATE GOVERNMENT. THE INTEREST EARNED ON THE SAID FUNDS DEPOSITED IN THE BANK ACCOUNTS, AS CLAIMED BY THE ASSESSEE WAS THE INCOME OF CENTRAL/S TATE GOVERNMENTS, TO WHOM THE FUNDS BELONGED, WHICH IN TURN WERE PARKED IN FIXED DEPOSITS WITH BANKS. NO PART OF THE SAID INTEREST INCOME AR OSE TO THE ASSESSEE. DURING THE YEAR THE TOTAL INTEREST INCOME OF RS.22, 12,471/- WAS CREDITED TO THE FIELD INTEREST ACCOUNT AND REFLECTED AS LIAB ILITY IN THE BALANCE SHEET. THE UTILIZATION OF SAID INTEREST WAS ALSO A S PER THE DIRECTIONS OF CENTRAL/STATE GOVERNMENT. THE GOVERNMENT OF INDIA VIDE NOTIFICATION DATED 17.3.1999 HAD ISSUED GUIDELINES FOR THE UTILI ZATION OF INTEREST EARNED ON THE AMOUNTS DEPOSITED OUT OF FUNDS RELEAS ED UNDER SJSRY 4 SCHEME. AS PER THE SAID NOTIFICATION, THE INTEREST EARNED ON SUCH DEPOSITS WAS TO BE DISTRIBUTED BETWEEN ALL THE COMP ONENTS OF THE SCHEME ON PRO RATA BASIS. 9. THE ISSUE ARISING IN THE PRESENT APPEAL IS THE A SSESSABILITY OF THE SAID INTEREST INCOME ARISING ON SURPLUS FUNDS PARKE D IN DEPOSITS/SAVING FUND ACCOUNTS. WE FIND SIMILAR ISSUE AROSE IN THE CASE OF STATE URBAN DEVELOPMENT SOCIETY, I.E. SOCIETY FORMED BY GOVERNM ENT OF HARYANA. IN THE RELEVANT YEAR, THE SAID SOCIETY WAS DISBURSING MONEY UNDER TWO SCHEMES I.E. SJSRY AND NSDP. THE QUESTION OF ASSES SABILITY OF BOTH THE GRANTS RECEIVED UNDER THE RESPECTIVE SCHEMES AND IN TEREST EARNED ON SURPLUS FUNDS NOT DISBURSED UNDER THE SCHEME AROSE BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 30.7.2010 IN ITA NO.1 7/CHD/2009 & C.O.NO.19/CHD/2009 HELD THAT THE SAID GRANTS DISBUR SED BY THE CENTRAL/STATE GOVERNMENT UNDER THE RESPECTIVE SCHEM ES WERE NOT THE INCOME OF THE SOCIETY. FURTHER IT WAS HELD THAT IN TEREST INCOME WAS ALSO NOT INCLUDIBLE AS INCOME IN THE HANDS OF SOCIETY. 10. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S STATE URBAN DEVELOPMENT SOCIETY IN ITA NO.210/CHD/2011 DATE OF DECISION 19.10.2011 HAS UPHELD THE ORDER OF THE TRIBUNAL AND HAS DISMISSED THE APPEAL FILED BY THE REVENUE. THE ASSESSEE HAS PLAC ED ON RECORD THE COPY OF THE AFORESAID ORDER OF THE HON'BLE PUNJAB & HARY ANA HIGH COURT. 11. IN THE FACTS OF THE PRESENT CASE BEFORE US THE ASSESSEE IS A STATUTORY BODY CARRYING ON SIMILAR WORK IN THE STATE OF PUNJA B UNDER THE SAME SCHEME OF SJSRY. THE REVENUE IS IN APPEAL BEFORE U S ON THE ISSUE OF ASSESSABILLITY OF INTEREST INCOME EARNED BY THE ASS ESSEE SOCIETY ON THE FUNDS DEPOSITED IN THE BANKS. THE SAID ISSUE IS SQ UARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS. M/S ST ATE URBAN 5 DEVELOPMENT SOCIETY (SUPRA). THE ASSESSEE IN THE P APER BOOK FILED ON RECORD HAS FURNISHED THE COPY OF NOTIFICATION ISSUE D BY THE CENTRAL GOVERNMENT FOR UTILIZATION OF INTEREST, PLACED AT P AGES 22 AND 23 OF THE PAPER BOOK. AS PER THE AFORESAID NOTIFICATION DATE D 17.3.1999, THE INTEREST EARNED ON THE AMOUNT DEPOSITED IN THE SAVI NG BANK ACCOUNT OUT OF FUNDS NOT UTILIZED UNDER SJSRY SCHEME, ARE TO BE DISTRIBUTED BETWEEN ALL THE COMPONENTS OF THE SCHEME ON PRO RATA BASIS AND THE EXPENDITURE OUT OF SUCH INTEREST INCOME IS TO BE APPLIED ACCORD INGLY. IN VIEW OF THE ABOVE SAID INSTRUCTIONS OF THE CENTRAL GOVERNMENT, THE ASSESSEE SOCIETY IS NOT THE RECIPIENT OF THE AFORESAID INCOME ARISIN G ON ACCOUNT OF INTEREST EARNED ON DEPOSITS WITH BANKS. FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS. M/S STATE URBAN DEVELOPMENT SOC IETY (SUPRA), WHICH WAS FORMED BY THE GOVERNMENT OF HARYANA, WE ARE IN AGREEMENT WITH THE ORDER OF THE CIT (APPEALS) IN THIS REGARD. 12. THE CIT (APPEALS) HAS FURTHER ALSO ADDRESSED TH E ISSUE OF APPLICABILITY OF PROVISIONS OF SECTION 10(23BBA) OF THE ACT AND THE FINDINGS OF THE CIT (APPEALS) VIDE PARA NOS.11 TO 1 3 ARE AS UNDER: 11. THUS, FROM THE ABOVE, IT IS CLEAR THE SAID EXPLANATION OF INTRODUCING THE STATUTORY PROVISION TO S.10(23BBA), IT WILL BE CLEAR THAT THE SAID EXEMPTION HAS BEEN INTRODUCED IN ORDER TO EXEMPT THE INCOME OF THE BODIES OR AUTHORITIES WHICH ARE SET UP BY OR UNDER ANY CENTRAL, STATE OR PROVINCIAL ACT AND WHICH ARE ENTRUSTED WITH THE ADMINISTRATION OF PUBLIC RELIGIOUS AND CHARITABLE TRUSTS WITHIN THEIR JURISDICTION. IT WAS MADE CLEA R THAT SINCE THE BODIES ARE NOT ENGAGED IN ANY COMMERCIAL ACTIVITY, IT WAS PROPOSED TO INSERT A NEW CL.(23BBA) TO S.10 IN ORDER TO GRANT EXEMPTION IN RESPECT OF INCOME ARISING TO ANY BODY OR AUTHORITY ESTABLISHED, CONSTITUTED OR APPOINTED UNDER ANY ENACTMENT. BUT SUCH EXEMPTION WOULD NOT APPLY TO THE INCOME OF SUCH TRUST, ENDOWMENT OR SOCIETY WHICH ARE OBVIOUSLY NOT CREATED UNDER ANY ENACTMENT. THEREFORE, UNDER CL. (23BBA) OF S.10 OF THE ACT EXEMPTION IS ONLY GRANTED TO THE BODIES WHICH ARE CREATED UNDER AN ACT PASSED BY THE STATE GOVERNMENT, 6 CENTRAL GOVERNMENT OR PROVINCIAL GOVERNMENT. BUT, SUCH EXEMPTION IS NOT EXTENDED TO ANY TRUST, ENDOWMENT OR THE SOCIETY WHICH IS CREATED BY PARTIES. 12. IT IS NOT IN DISPUTE THAT THE APPELLANT IS A LO CAL AUTHORITY CONSTITUTED BY THE PRESIDENT OF INDIA UNDER THE NOTIFICATION IN THE OFFICIAL GAZETTE DATE D 18 TH FEB 1991. FROM THE PERUSAL OF THE OBJECTIVES OF THE APPELLANT IS QUITE CLEAR THAT THE PROVISO TO S.10(23BBA) DOES NOT APPLY TO THE PETITIONER. THE INCOME EARNED DOES NOT BELONG TO THE APPELLANT. IT HAS TO BE APPLIED TO ALL THE COMPONENTS OF THE SCHEME OF ROZGAR YOJNA ON PRORATE BASIS. THE LETTER DATED 17.3.99 FROM GOVT. OF INDIA TO THE PRINCIPAL SECRETARY, DEPARTMENT OF LOCAL SELF GOVT. GOVT. OF PUNJAB IS VERY CLEAR ON THE ISSUE (COPY ENCLOSED). THE INTEREST EARNED CAN BY NO STRETCH OF IMAGINATION BE TERMED AS APPELLANTS INCOME. 13. THE SECTION CLEARLY PROVIDES THAT ANY INCOME IN ANY FORM EARNED BY THE ASSESSEE WHICH FALLS UNDER SECTION 10(23BBA) IS EXEMPT. THE AO ON THE ONE HAND ACCEPTED THAT THE ASSESSEE IS A LOCAL AUTHORITY CONSTITUTED BY THE GOVT. OF PUNJAB BUT ON THE OTHER HAND DENIED THE EXEMPTION AVAILABLE TO SUCH BODIES OR AUTHORITIES WITHOUT POINTING OUT ANY SPECIFIC REASON FOR ADDING BACK THE INTEREST INCOME. SECTION 10(23BBA) PROVIDES UNCONDITIONAL EXEMPTION TO THOSE ASSESSEES WHO FALL UNDER SECTION 10 OF THE INCOME TAX ACT, 1961. 13. WE ARE IN AGREEMENT WITH THE AFORESAID FINDINGS OF THE CIT (APPEALS) AND UPHOLDING THE SAME WE DISMISS THE GRO UND OF APPEAL RAISED BY THE REVENUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7