RAJASTHAN HORTICULTURE AND NURSERY SOCIETY, JAIPUR V. INCOME TAX OFFICER, WARD-6-2, JAIPUR

ITA 518/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6381 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 12-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M.L. BORAD

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 518/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2015-16 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY, 3 RD FLOOR, PANTH KRISHI BHAWAN, C-SCHEME, JAIPUR. CUKE VS. THE ITO, WARD-6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABTR 1450 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI M.L. BORAD (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING :18/07/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 29/07/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 28.01.2019 OF THE LD. CIT (A)-2, JAIPUR FOR THE ASS ESSMENT YEAR 2015- 16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,02,32,549/- MADE BY THE AO IN THE ASSESSMENT ORDER BY TREATING THE INCOME FROM INTEREST ON UNUTILIZED GRA NTS RECEIVED BY ASSESSEE FROM CENTRAL/STATE GOVERNMENT AND MISCELLA NEOUS ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 2 INCOME AS INCOME NOT EXEMPT FROM INCOME TAX UNDER T HE I.T. ACT, 1961, WHICH CONFIRMATION OF THE ADDITION OF RS . 1,02,32,549/- BY THE LEARNED CIT(A) IS MOST ARBITRARY, UNJUST AND NOT MAINTAINABLE IN LAW AND IN THE ALTERNATIVE HIGHLY E XCESSIVE W.R.T. FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATE D THAT THE APPELLANT ASSESSEE IS A NODAL AGENCY OF GOVERNMENT AND INTEREST ARISING TO IT FROM UNUTILIZED FUNDS IS AGAIN UTILIZ ED FOR IMPLEMENTING THE APPELLANT SOCIETYS OBJECTS WHICH ARE TO SUPPORT THE ACTIVITIES FOR PROMOTION OF AGRICULTURE/HORTICU LTURE BY PROVIDING BEST QUALITY AND HYBRID TYPES OF PLANTS T O FARMERS AFTER DEVELOPMENT AND RESEARCH ON THE SAME AND ACCORDINGL Y THE LEARNED CIT(A) SHOULD HAVE HELD THE INTEREST EARNED BY THE ASSESSEE OUT OF THE GRANTS RECEIVED FROM THE CENTRA L/STATE GOVERNMENT FOR THE PURPOSES OF CARRYING ON HORTICUL TURE AND AGRICULTURAL ACTIVITIES AS INCOME EXEMPT FROM INCOM E TAX AND CONSEQUENTLY THE LEARNED CIT(A) SHOULD NOT HAVE CON FIRMED THE ADDITION OF RS. 1,02,32,549/- MADE BY THE AO AS IN COME FROM OTHER SOURCES. 3. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AM END OR SUBSTITUTE ONE OR MORE GROUNDS OF APPEAL AS AND WHE N NECESSARY. 2. THE ONLY ARISE IN THIS APPEAL OF THE ASSESSEE IS WHETHER THE INTEREST INCOME EARNED BY THE ASSESSEE FROM THE FDR IS ASSESSABLE TO TAX IN THE HAND OF THE ASSESSEE. THE ASSESSEE IS A SOCIETY CONSTITUTED BY GOVERNMENT OF RAJASTHAN VIDE ORDER DATED 24.01.2 006 IT WAS ALSO REGISTERED UNDER THE SOCIETY REGISTRATION ACT VIDE CERTIFICATE DATED 14.02.2006. THE ASSESSEE SOCIETY WAS CONSTITUTED FO R SUPPORTING THE ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 3 ACTIVITY OF AGRICULTURE AND HORTICULTURE FOR PROVID ING BEST QUALITY AND HYBRID TYPES OF SAPLINGS AND SEEDLINGS TO FARMERS A FTER DEVELOPMENT AND RESEARCH ON THE SAME AT NURSERIES OF THE ASSESSEE. THE ASSESSEE RECEIVES GRANT FROM THE GOVERNMENT AND IS WORKING A S NODAL AGENCY OF THE GOVERNMENT TO SUPPORT THE ACTIVITIES OF PROMOTI ON OF AGRICULTURE AND HORTICULTURE IN THE STATE. THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 16.12.2015 DECLARING TO TAL INCOME OF RS. NIL. IN THE SCRUTINY ASSESSMENT THE AO NOTED THAT T HE ASSESSEE HAS CREDITED VARIOUS AMOUNT IN THE PROFIT AND LOSS ACCO UNT WHICH INCLUDE INTEREST ON FDRS, INTEREST INCOME AND MISC. INCOME ETC. AFTER DEDUCTING VARIOUS EXPENDITURE THE NET PROFIT WAS DETERMINED O F RS. 2,01,10,247/- AND THE SAID INCOME WAS CLAIMED ON ACCOUNT OF AGRIC ULTURE INCOME. THE AO OBSERVED THAT THE ABOVE SAID INCOME IS NOT RELAT ABLE TO ANY AGRICULTURE ACTIVITY FOR WHICH EXEMPTION IS PROVIDE D. THE AO ACCORDINGLY, ISSUED SHOW CAUSE NOTICE TO THE ASSESS EE AS TO WHY THE SAID INCOME IS NOT ASSESSED TO TAX. IN RESPONSE THE RETO THE ASSESSEE SUBMITTED THAT THE ASSESSEE RECEIVED GRANT FROM THE CENTRAL AND STATE GOVERNMENT FOR VARIOUS PROJECTS AND THE GRANT USED FOR THE PROJECT OF THE SOCIETY. IT WAS FURTHER SUBMITTED THAT THE GRAN T AMOUNT AND REMAINING AMOUNT AFTER PROJECT WORK AND INTEREST IS USED FOR THE OBJECTS ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 4 OF THE ASSESSEE. EVEN OTHERWISE THE REMAINING AMOUN TS RETURN BACK TO THE CENTRAL AND STATE GOVERNMENT. THE OBJECT TO INV EST IN FDR IS TO PROTECT THE GRANT AMOUNT FROM CENTRAL AND STATE GOV ERNMENT. THE AO DID NOT ACCEPT THE REPLY AND EXPLANATION OF THE ASS ESSEE AND ASSESSED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES BY DISALLOWING THE CLAIM OF AGRICULTURE INCOME EXEMPT FROM TAX. THE AS SESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COUL D NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE INTEREST INCOME IN QUESTION IS NOT TAXABLE IN THE H AND OF THE ASSESSEE BECAUE THE SAME IS NOT THE INCOME OF THE ASSESSEE BUT HAS TO BE RETURNED TO CENTRAL OR STATE GOVERNMENT OR HAS TO B E ADJUSTED AGAINST FUTURE GRANT TO BE GIVEN BY THE CENTRAL OR STATE GO VERNMENT. IN SUPPORT OF HIS CONTENTION, HE HAS REFERRED TO THE INSTRUCTI ON NO. 20-12/2007 DATED 11.08.2009 ISSUED BY THE DEPARTMENT OF AGRICU LTURE AND COOPERATION OF HORTICULTURE DIVISION GOVERNMENT OF INDIA MINISTRY OF AGRICULTURE AND SUBMITTED THAT THE INTEREST EARNED ON THE CENTRAL SHARE AND OTHER UNSPENT FUNDS AVAILABLE AS ON 1 ST APRIL OF PREVIOUS FINANCIAL YEAR WILL ADDED TO THE RESPECTIVE SCHEME FUND AS TH E CASE MAY BE AND THE INTEREST AMOUNT WILL BE ADJUSTED ACCORDINGLY FO R THE FUTURE RELEASE OF INSTALLMENT. THE LD. AR HAS THUS SUBMITTED THAT THE SAID INTEREST ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 5 BELONGS TO THE GOVERNMENT FUNDS AND WILL BE ADJUSTE D FOR THE FUTURE INSTALLMENT OF THE GOVERNMENT AID THEREFORE, THE SA ME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. IN SUPPORT OF HI S CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE 284 ITR 582 AND SUBMITTED THAT THE HONBLE HIGH COURT WHILE CONSIDERING AN IDENTICAL I SSUE HELD THAT THE INTEREST ACCRUED ON BANK DEPOSITS CANNOT BE TREATED AS AN INCOME OF THE ASSESSEE AS THE INTEREST IS EARNED OUT OF THE M ONEY GIVEN BY THE GOVERNMENT OF INDIA FOR THE PURPOSE OF IMPLEMENTATI ON OF THE SCHEME. THE LD. AR HAS THEN RELIED UPON THE DECISION OF BAN GALORE BENCHES OF THE TRIBUNAL DATED 20.04.2016 IN CASE OF KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD VS. DDIT(E) IN ITA NO. 661/BANG/2 014 & 822/BANG/2014. IN THE VIEW OF THE DECISION REFERRED TO THE ABOVE THE LD. AR HAS CONTENDED THAT THE ADDITION OF INTEREST INCOME MADE BY THE AO IS NOT SUSTAINABLE AND LIABLE TO BE DELETED. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE EXEMPTION ON ACCOUNT OF AGRICULTURE INCOME WHERE AS THE INTEREST EARNED BY THE ASSESSEE CANNOT BE TREAT ED AS AGRICULTURE INCOME. THE LD. DR HAS FURTHER CONTENDED THAT THE A SSESSEE HAS NOT POINTED OUT THAT THIS PLEA WAS RAISED BEFORE THE A UTHORITIES BELOW THAT ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 6 THE INTEREST INCOME RECEIVED BY THE ASSESSEE IS IN RESPECT OF THE GOVERNMENT AID AMOUNT DEPOSITED IN THE BANK. BUT NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE ABOUT THE INTEREST I NCOME WHETHER THE SAME IS EARNED FROM AND AID AMOUNT DEPOSITED IN THE BANK OR IT IS EARNED ON THE RECEIPT OF THE ASSESSEE FROM ITS ACTI VITY. THUS, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS TAKEN ALTOGETHE R NEW PLEA BEFORE THIS TRIBUNAL WHICH REQUIRES TO BE VERIFIED ON THE FACTUAL ASPECT. HE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO NOTED FROM THE PROFIT AN D LOSS ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAS CREDITED VARIOUS INCOMES AS UNDER:- (I) INTEREST INCOME ON FDR RS. 31,80,229.33/- (II) MISC. INCOME RS. 12,780/- (III) INTEREST INCOME RS. 68,75,182.65/- (IV) LAST YEAR INTEREST INCOME RS. 99,257/- (V) AUCTION FORM UNUSUAL MATERIAL RS. 65,100/- TOTAL RS. 1,02,32,548.98/- THE AO FURTHER NOTED THAT AFTER DEBITING THE EXPENS ES THE NET PROFIT HAS BEEN DETERMINED AT RS. 2,01,10,247.67/- WHICH W AS CLAIMED AS ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 7 EXEMPTION ON ACCOUNT OF AGRICULTURE INCOME. WE FURT HER NOTE THAT THE ASSESSEE HAS TAKEN A STAND BEFORE THE AO AS WELL AS THE LD. CIT(A) THAT THE INCOME EARNED BY THE ASSESSEE ON ACCOUNT OF INT EREST RECEIVED ON FDR IS AGRICULTURE INCOME. THUS NO PLEA WAS RAISED EITHER BEFORE THE AO OR BEFORE THE LD. CIT(A) THAT THE INTEREST EARNED B Y THE ASSESSEE IS ON THE AMOUNT RECEIVED FROM THE GOVERNMENT BEING AID G IVEN BY THE GOVERNMENT. THEREFORE, THE ASSESSEE HAS NOT AGITATE D THE CLAIM OF AGRICULTURE INCOME BEFORE US BUT A NEW PLEA HAS BEE N TAKEN BEFORE US THAT THE INTEREST EARNED BY THE ASSESSEE IS NOT THE INCOME OF THE ASSESSEE BUT IT BELONGS TO THE GOVERNMENT BEING PAR T OF THE AID AND LIABLE TO BE ADJUSTED AGAINST THE FUTURE INSTALLMEN T OF AID GIVEN BY THE GOVERNMENT. SINCE, THIS PLEA WAS NOT RAISED BEFORE THE AUTHORITIES BELOW AND IT REQUIRES VERIFICATION OF THE FACT WHET HER IT IS RECEIVED ON THE AMOUNT OF AID DEPOSITED WITH THE BANK WHICH HAS NOT BEEN SPENT BY THE ASSESSEE OR INTEREST WAS EARNED ON SOME OTHER R ECEIVED OF THE ASSESSEE ON ACCOUNT OF ITS ACTIVITY THEREFORE, WE S ET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR VERIFICATIO N AND AFRESH ADJUDICATION AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 518/JP/2019 RAJASTHAN HORTICULTURE AND NURSERY SOCIETY VS ITO 8 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/07/2019 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/07/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT M/S RAJASTHAN HORTICULTURE AND NURSE RY SOCIETY, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-6(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 518/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR