M/s Cheif Administrator Haryana Rural Development Auuthority, Chandigarh V. DCIT, Panchkula

ITA 742/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73416 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: ROHIT JAIN
• Keywords: Diversion of income; Cost of acquisition
• Section: 12A; 12AA; 263; 12; 10; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.742/CHD/2012 ASSESSMENT YEAR : 2008-09 THE CHIEF ADMINISTRATOR, VS THE DY. COMMISSIONER OF HARYANA RURAL DEVELOPMENT AUTHORITY, INCOME TAX, PLOT NO. 3, PANCHKULA CIRCLE, SECTOR 28-A, PANCHKULA. CHANDIGARH. PAN : AAALC-0475D (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI AJAY VOHRA & ROHIT JAIN RESPONDENT BY : SMT.JYOTI KUMARI DATE OF HEARING : 04.12.2013 DATE OF PRONOUNCEMENT : 22.01.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS) PANCHKULA DATED 14.05.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE INCOME- TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE IMPUGNED ORDER IS BAD IN LAW AND CONTRA RY TO THE FACTS OF THE CASE, THE COMMISSIONER OF INCOME TAX, PANCHKULA HAS NOT APPRECIATED THE FACTS AND LAW IN THE CORRECT MANNER AND IN ACCORDANCE WITH THE STATUTE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT PANCHKULA GRAVELY ERRED IN TREATING GRANT RECEIVED FROM HARYANA GOVERNMENT OF RS. 25,10,00,000 ON 29.03.2008 AS INC OME OF THE APPELLANT. 2 3 . THE LD. CIT PANCHKULA ALSO ERRED IN IGNORIN G THE FACT THAT THE GRANT PROVIDED BY THE STATE GOVERNMENT IS NOT A VOLUNTARY CONTRIBUTION BUT IS IN RESPECT OF AMOUNT FOR WHICH THE APPELLATE IS A NODA L AGENCY AND THE SAME IS PROVIDED UNDER THE PLAN BUDGET OF THE STATE GOVERNM ENT. 4. THE LD. CIT PANCHKULA FURTHER ERRED IN IGNORING THE FACT THAT THE APPELLATE IS ACTING AS NODAL AGENCY FOR DISBURSEMEN T OF THESE FUNDS TO THE DISTRICT COLLECTORS OF THE STATE OF HARYANA FOR PRO MOTION OF REGULATED DEVELOPMENT OF RURAL AREAS AND TO PROVIDE BASIC AME NITIES, SANITATION, HYGIENE, RESIDENTIAL AND HOUSING FACILITIES TO VILL AGERS IN AND AROUND VILLAGES. 5. THAT THE CIT (A) FURTHER GRAVELY ERRED IN INITIATIN G PENALTY PROCEEDINGS U/S 271(L)(C) OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FURNISHED RETURN OF INCOME ON 30.9.2008 DECLARING TOTAL INCOM E AT NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE W AS ASKED TO EXPLAIN THE NATURE OF ACTIVITIES CARRIED ON BY IT A ND ALSO TO FILE COPY OF REGISTRATION CERTIFICATE ISSUED UNDER SECTION 12AA OF THE ACT. IN THE REPLY IT WAS POINTED OUT BY THE LEARNED A.R. FOR TH E ASSESSEE THAT THE SOCIETY WAS ESTABLISHED BY THE STATE GOVERNMENT UND ER THE PROVISIONS OF HARYANA PANCHAYATI RAJ ACT, 1961 VIDE NOTIFICATI ON DATED 29.10.20907 TO PROMOTE AND SECURE REGULATED DEVELOP MENT AND TO PROVIDE BASIC AMENITIES, SANITATION, HYGIENE, RESID ENTIAL AND HOUSING FACILITIES IN AND AROUND VILLAGES. THE FUNCTIONS OF THE ASSESSEE SOCIETY WERE PROVIDED UNDER SECTION 230 OF THE HARY ANA PANCHAYATI RAJ ACT. THE ASSESSEE ALSO POINTED OUT TO THE ASSE SSING OFFICER THAT THOUGH THE ASSESSEE HAD FILED AN APPLICATION FOR RE GISTRATION UNDER SECTION 12A OF THE ACT ON 30.9.2008 BUT THE SAME WA S PENDING FOR DISPOSAL. VIDE PARA 2.3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT NO APPLICATION WAS FILED BY THE ASSESSEE FOR GRANT OF REGISTRATION WITH THE COMMISSIONER OF INCO ME TAX, PANCHKULA WITHIN THE PRESCRIBED PERIOD AND HENCE THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIONS 11 AND 12 OF THE ACT. THE STATUS OF THE ASSESSEE WAS TREATED AS AOP. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED GRANT OF RS.25.10 CRORES ON 2 9.3.2008 FROM THE 3 HARYANA GOVERNMENT WHICH AS PER THE ASSESSING OFFIC ER HAD TO BE UTILIZED BEFORE 31.3.2008. THE ASSESSEE IN REPLY P OINTED OUT THAT THE SAID AMOUNT WAS SPENT IN THE SUBSEQUENT YEARS AS PE R THE OBJECTIVES OF THE AUTHORITY. THE ASSESSING OFFICER VIDE PARA 3.1 OF THE ASSESSMENT ORDER NOTED THAT THE ASSESSEE HAD NOT FURNISHED THE YEAR WISE BREAK-UP IN WHICH THE AMOUNT WAS ENTERED. HENCE AS THE ASSE SSEE WAS NOT ENTITLED TO THE EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT AND HAD NOT UTILIZED 85% OF ITS INCOME TOWARDS THE OBJECTS FOR WHICH IT WAS CREATED, DEDUCTION CLAIMED BY THE ASSESSEE AT RS.25 .10 CRORES WAS NOT ALLOWED TO THE ASSESSEE. 4. THE CIT (APPEALS) NOTED THAT THE ASSESSEE HAD BE EN GRANTED REGISTRATION UNDER SECTION 12AA(1)(B) OF THE ACT RE TROSPECTIVELY W.E.F. 1.4.2008 I.E. ASSESSMENT YEAR 2008-09 AND AS ON DAT E THERE WAS NO LAPSE REGARDING REGISTRATION UNDER SECTION 12AA OF THE ACT. THE SECOND PLEA OF THE ASSESSEE BEFORE THE CIT (APPEALS ) WAS THAT THE GRANTS-IN-AID RECEIVED FROM THE GOVERNMENT WERE NOT INCOME OF THE ASSESSEE BUT A FINANCIAL ASSISTANCE PROVIDED UNDER THE PLAN BUDGET OF STATE GOVERNMENT. THE SAID PLEA OF THE ASSESSEE WA S NOT ACCEPTED BY THE CIT (APPEALS) FOR THE FOLLOWING REASONS: I) THE AMOUNT RECEIVED IS SHOWN AS GRANTS-IN-AID I N RECEIPT AND EXPENDITURE ACCOUNT FILED BY THE APPELLANT WITH RETURN OF INCOME. II) SANCTION ORDER OF HARYANA GOVT. DATED 27.03.200 8 SHOWS THAT THERE IS NO CONDITION AS TO REFUND OF THE UNSP ENT AMOUNT TO THE GOVT. AS IN CASE OF OTHER UNSPENT FUN DS IN GOVT. III) THE APPELLANT HAS NOT REFUNDED SURRENDERED THE UNUTILIZED AMOUNT DURING THE YEAR. THIS FACT IS ADMITTED BY T HE APPELLANT VIDE SUBMISSION DATED 09.12.2010 BEFORE T HE AO. IV) IF THE UNUTILIZED AMOUNT IS NOT REFUNDED TO THE GOVT. IT AUTOMATICALLY BECOMES INCOME OF THE APPELLANT. 4 V) NO APPROVAL WHATSOEVER WAS TAKEN TO CARRY FORWARD/ACCUMULATE THE AMOUNT. 5. IN VIEW THEREOF, THE GRANTS-IN-AID WAS TREATED A S INCOME OF THE ASSESSEE AS THE ASSESSEE HAD FAILED TO APPLY 85% OF ITS INCOME TOWARDS ITS OBJECTS. THE ASSESSEE WAS REQUIRED TO SPECIFY BY NOTICE IN WRITING TO THE ASSESSING OFFICER THE PURPOSE FOR ACCUMULATI ON IN ACCORDANCE WITH PROVISIONS OF SECTION 11(2) OF THE ACT. THE C IT (APPEALS) THUS HELD AS UNDER: THE APPELLANT HAS FAILED TO SPECIFY, BY NOTICE IN WRITING GIVEN TO THE OFFICE IN THE PRESCRIBED MANNER AND THE PURP OSE FOR WHICH THE INCOME IS BEING ACCUMULATED/SET APART AND THE P ERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED/SET APART. T HEREFORE CONDITIONS OF SECTION 11(2) ARE NOT COMPLIED WITH. 6. IN THEREOF, THE INCOME OF THE ASSESSEE WAS DEEME D TO BE THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE SAME CEASED TO BE SO ACCUMULATED I.E. FOR ASSESSMENT YEAR 2008- 09. 7. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINT ED OUT THAT THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE TAXATION OF GRANT RECEIVED OF RS.25.10 CRORES. THE LEARNED A .R. FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE SOCIETY WAS CREATED U NDER THE HARYANA PANCHAYATI RAJ ACT, 2007 ON 29.10.2007. THE ASSESS EE FILED AN APPLICATION UNDER SECTION 12A OF THE ACT ON 30.9.20 08 AND REGISTRATION UNDER SECTION 12A OF THE ACT WAS GRANTED VIDE ORDER PASSED UNDER SECTION 12AA(1)(B) OF THE ACT ON 2.9.2011 W.E.F. 1. 4.2010. HOWEVER, THIS ORDER WAS RECTIFIED UNDER SECTION 154 OF THE A CT VIDE ORDER DATED 1.3.2012 AND THE SAID REGISTRATION WAS GRANTED W.E. F. 1.4.2008. IN VIEW THEREOF, FOR THE RELEVANT ASSESSMENT YEAR 2008 -09 NO REGISTRATION WAS GRANTED UNDER THE ACT TO THE ASSESSEE AND NO DE DUCTION HAS BEEN CLAIMED UNDER SECTION 11 OF THE ACT. OUR ATTENTION WAS FURTHER DRAWN 5 TO THE GAZETTE NOTIFICATION UNDER WHICH AMENDMENT A CT, 2007 WAS PASSED AND BY REFERENCE TO VARIOUS PROVISIONS IT WA S POINTED OUT THAT AN INDEPENDENT AUTHORITY WAS SET UP TO CHANNELISE T HE SCHEMES OF THE STATE GOVERNMENT. REFERENCE WAS MADE TO SECTIONS 2 19, 220(1) OF THE HARYANA PANCHAYATI RAJ ACT WITH REGARD TO ESTABLISH MENT AND SECTION 229 OF HARYANA PANCHAYATI RAJ ACT, 2007 I.E. THE OB JECTS OF THE SOCIETY. FURTHER REFERENCE WAS MADE TO SECTIONS 23 3 TO 237, 252(1), 253 AND 260 UNDER WHICH IT IS CATEGORICALLY PROVIDE D THAT ALL THE FUNDS BELONG TO THE GOVERNMENT. THE LEARNED A.R. FOR THE ASSESSEE FURTHER STATED THAT THE AUTHORITY WAS CONSTITUTED BY THE GO VERNMENT TO GOVERN AND IMPLEMENT THE SPECIFIED ACTS AND THE RECEIPTS A ND PAYMENTS WHICH WERE UNSPENT DURING THE YEAR WERE TO BE CARRIED FOR WARD IN THE BALANCE SHEET. OUR ATTENTION WAS DRAWN TO THE LETTER ISSUE D BY THE FINANCIAL COMMISSIONER, PRINCIPAL SECRETARY TO GOVERNMENT OF HARYANA DEVELOPMENT AND PANCHAYATI DEPARTMENT, CHANDIGARH D ATED 26.9.2008 UNDER WHICH IT IS PROVIDED THAT THE GRANTS ARE TO B E UTILIZED FOR SPECIFIC SCHEMES. FURTHER OUR ATTENTION WAS DRAWN TO THE ENGLISH VERSION OF THE LETTER DATED 20.11.2008 PLACED AT PA GE 35 AND 36 OF THE PAPER BOOK UNDER WHICH IT WAS SPECIFIED THAT AVAILA BLE FUNDS OF RS.50 CRORES COULD BE SPENT ON PROVIDING INFRASTRUCTURAL FACILITIES UNDER MAHATMA GANDHI GRAMIN BASTI YOJNA. IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT AN AMOUNT OF RS. 25 CRORES WAS INITIALLY GRANTED TO THE ASSESSEE AND FURTHER ADDIT IONAL GRANT OF RS.25 CRORES WAS MADE IN THE NEXT YEAR AS IS APPARENT FRO M THE RECEIPTS AND PAYMENTS REFLECTED AT PAGES 38 AND 39 OF THE PAPER BOOK. DURING THE SUCCEEDING YEAR AN AMOUNT OF RS.10 CRORES WAS SPENT ON THE SCHEME. IN THE YEAR ENDING MARCH, 2010 THE GRANTS-IN-AID WA S RS.69.66 CRORES AND THE ASSESSEE SPENT RS.79.17 CRORES. THE LEARNE D A.R. FOR THE ASSESSEE POINTED OUT THE ISSUE ARISING IN THE PRESE NT APPEAL IS WHETHER 6 THE GRANTS-IN-AID WAS INCOME IN THE HANDS OF THE AS SESSEE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE PU NJAB & HARYANA HIGH COURT IN CASE OF CIT PANCHKULA VS. STATE URBAN DEVELOPMENT SOCIETY IN ITA NO.210 OF 2011 (DATE OF DECISION 19. 10.2011) FOR THE PROPOSITION THAT GRANTS-IN-AID WERE NOT INCOME OF T HE ASSESSEE. 8. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ASSESSEE IS A BODY CORPORATE HAVING SEPARATE IDENTITY AND WHATE VER GRANTS WERE BEING RECEIVED BY IT, WERE TO BE APPLIED FOR ITS OB JECTS AND HENCE THE SAID GRANTS WERE ITS RECEIPTS AND UNLESS THERE WAS DIVERSION OF INCOME, THE SAID RECEIPTS WERE TAXABLE. RELIANCE WAS PLACE D DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ADITYAPUR INDU STRIAL AREA DEVELOPMENT AUTHORITY VS. UNION OF INDIA AND OTHERS [283 ITR 97 (SC)]. 9. THE LEARNED A.R. FOR THE ASSESSEE IN THE REJOIND ER POINTED OUT THAT THE JUDGMENT HAS TO BE SEEN IN ITS CONTEXT. T HE SAID JUDGMENT TALKS OF INCOME-TAX SOCIETY AND DOES NOT DECIDE THE ISSUE THAT THE GRANTS BECOME INCOME. IT WAS FURTHER POINTED OUT B Y THE LEARNED A.R. FOR THE ASSESSEE THAT THE SAID JUDGMENT TALKS OF AP PLICATION TO DEDUCT TAX. HOWEVER, THE CASE OF THE ASSESSEE WAS THE ASS ESSEE BEING LOCAL AUTHORITY OR STATE AND HENCE EXEMPT FROM TAX. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE SOCIETY BEFORE US WAS ESTABLISHED AND CONS TITUTED IN EXERCISE OF POWERS CONFERRED BY SECTION 220(1) OF HARYANA PA NCHAYATI RAJ ACT, 1994 VIDE NOTIFICATION DATED 29.10.2007. FURTHER I N EXERCISE OF THE POWERS CONFERRED UNDER SECTION 220(3) OF THE ACT, T HE GOVERNOR OF HARYANA APPOINTED THE FOLLOWING MEMBERS OF THE AUTH ORITY : 7 OFFICIAL MEMBERS (I) CHIEF MINISTER, HARYANA ..CHAIRMAN (II) MINISTER INCHARGE OF DEVELOPMENT AND ..VIC E CHAIRMAN PANCHAYATS DEPARTMENT (III) FINANCIAL COMMISSIONER AND PRINCIPAL SECRETA RY, ..MEMBER TO GOVERNMENT HARYANA, FINANCE DEPARTMENT (IV) FINANCIAL COMMISSIONER AND PRINCIPAL SECRETAR Y TO ..MEMBER GOVERNMENT, HARYANA, DEVELOPMENT AND PANCHAYATS DEPARTMENT (V) FINANCIAL COMMISSIONER AND PRINCIPAL SECRETARY TO ..MEMBER GOVERNMENT, HARYANA, PUBLIC WORKS (BUILDING AND ROADS) DEPARTMENT (VI) FINANCIAL COMMISSIONER AND PRINCIPAL SECRETAR Y TO ..MEMBER GOVERNMENT,HARYANA, TOWN AND COUNTRY PLANNING DEPARTMENT (VII) FINANCIAL COMMISSIONER AND PRINCIPAL SECRETA RY ..MEMBER TO GOVERNMENT, HARYANA, PUBLIC HEALTH DEPAR TMENT (VIII) DIRECTOR, DEVELOPMENT AND PANCHAYATS ..MEM BER DEPARTMENT, HARYANA, CHANDIGARH ..MEMBER SECRETARY-CUM- CHIEF ADMINISTRATOR, HARYANA RURAL DEVELOPMENT AUTHORITY NON-OFFICIAL MEMBERS (IX) SHRI RAJ SINGH DAHIYA, HOUSE NUMBER 3, ..MEMBER SURYA VIHAR, OPPOSITE SECTOR 4, GURGAON (X) SHRI DEEP CHAND PHULIA, 622, NEW DIWAN NAGAR, ..ME MBER NEAR GOVERNMENT HIGH SCHOOL, KAMAL CAMP. PAN IPAT (XI) SHRI BHOM PAL SINGH, ADVOCATE, 'ASHIRWAD , VILLAGE ..MEMBER & POST OFFICE KAIMALGARH, JHAJJAR THE HEADQUARTER OF THE AUTHORITY SHALL BE AT CHANDI GARH. URVASHI GULATI FINANCIAL COMMISSIONER AND PRINCIPAL SECRETARY TO GOVERNMENT, HARYANA DEVELOPMENT AND PANCHAYATS DEPARTMENT 11. THE COPY OF THE NOTIFICATION IS PLACED AT PAGE 25 OF THE PAPER BOOK. THE HARYANA PANCHAYATI RAJ (AMENDMENT)ACT, 2 007 AMENDED HARYANA PANCHAYATI RAJ ACT, 1994 VIDE NOTIFICATION DATED 9.4.2007 AND COPY OF THE SAME IS PLACED AT PAGES 1 TO 24 OF THE PAPER BOOK. UNDER THE SAID AMENDMENT ACT IT IS PROVIDED THAT UNDER SE CTION 220(1) OF THE 8 ACT, THE GOVERNMENT BY NOTIFICATION SHALL ESTABLISH AND CONSTITUTE FOR THE PURPOSES OF THIS CHAPTER AN AUTHORITY TO BE KNO WN AS THE HARYANA RURAL DEVELOPMENT AUTHORITY. THE SAID AUTHORITY S HALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL. UNDER SECTION 229 OF THE AMENDMENT ACT THE OBJECTS OF THE AUTHORITY ARE PROVIDED, WHICH ARE AS UNDER: 229. THE OBJECTS OF THE AUTHORITY SHALL BE TO PROMO TE AND SECURE REGULATED DEVELOPMENT OF THE RURAL AREA AND DEVELOP MENT ZO0NE IN AN AROUND VILLAGES INCLUDING LAL DORA AND TO PROVIDE AMENITIES, SANITATION AND HYGIENE IN RURAL AREAS AND ALSO TO PROVIDE RESIDENTIAL AND HOUSING FACILIT IES PARTICULARLY FOR WEAKER SECTION. 12. FURTHER THE DUTIES AND FUNCTIONS OF THE AUTHORI TY ARE ENLISTED UNDER SECTION 230 OF THE AMENDMENT ACT, WHICH READS AS UNDER : (A) IDENTIFICATION OF RURAL AREA FOR DECLARATION OF DE VELOPMENT ZONE. (B) PREPARATION OF DEVELOPMENT PLANS FOR REGULATION OF THE DEVELOPMENT ZONE. (C) PROVIDING REGULATED GROWTH IN AND AROUND VILLAGES. (D) PROVIDING AMENITIES, SANITATION AND PROPER HYGIENE IN RURAL AREAS. (E) DEVELOPMENT OF RESIDENTIAL AND HOUSING FACILITIES I N VILLAGES PARTICULARLY FOR WEAKER SECTIONS BY ACQUIS ITION AND DEVELOPMENT OF LAND. (F) PROVIDING FINANCIAL AND TECHNICAL SUPPORT TO THE PA NCHAYATI RAJ INSTITUTIONS FOR (HE DEVELOPMENT OF RURAL AREA AND DEVELOPMENT ZONE IN AND AROUND VILLAGES. (G) DISTRIBUTIONS OF HOUSE SITES IN THE DEVELOPMENT ZON E AND MAINTENANCE OF RECORD THEREOF. (H) MAINTENANCE OF BUILDINGS UNDER ITS CONTROL OR TRANS FERRED TO IT BY THE GOVERNMENT OR ANY PUBLIC AUTHORITY. (I) MAINTENANCE OF GENERAL SANITATION. (J) CLEANING OF PUBLIC ROADS, DRAINS AND OTHER PUBLIC P LACES. (K) MAINTENANCE OF COMMUNITY ASSETS OR ANY OTHER DUTIES AND FUNCTIONS AS THE GOVERNMENT MAY DIRECT. 13. THE FUNDS OF THE AUTHORITY ARE REGULATED BY SEC TION 233 OF THE AMENDMENT, ACT WHICH ARE AS UNDER : (A) ALL MONEYS RECEIVED BY THE AUTHORITY FROM THE GOVER NMENT AND THE CENTRAL GOVERNMENT BY WAY OF GRANTS, LOANS, ADVANCES OR OTHERWISE; (B) ALL MONEY BORROWED BY THE AUTHORITY, FROM SOURCES O THER 9 THAN THE GOVERNMENT, BY WAY OF LOANS OR DEBENTURES; (C) ALL FEES AND FINES RECEIVED BY THE AUTHORITY; | (D) AIL FEES, FINES AND REMITTANCE CHARGED BY ANY OTHER AUTHORITY FOR RURAL DEVELOPMENT; (E) ALL MONEYS RECEIVED BY THE AUTHORITY FROM THE DISPO SAL OF LANDS, BUILDINGS AND OTHER PROPERTIES, MOVABLE AND IMMOVABLE; (F) ALL MONEYS RECEIVED BY THE AUTHORITY BY WAY OF RENT S AND PROFITS OR IN ANY OTHER MANNER OR FROM ANY OTHER SO URCE. (2) THE FUND SHALL BE APPLIED TOWARDS MEETING (A) EXPENDITURE INCURRED IN THE ADMINISTRATION O F THIS CHAPTER; (B) COST OF ACQUISITION OF LAND FOR PURPOSES OF THI S CHAPTER; (C) EXPENDITURE FOR DEVELOPMENT OF LAND; (D) EXPENDITURE FOR SUCH OTHER PURPOSES AS THE GOVE RNMENT MAY DIRECT OR PERMIT. (3) THE AUTHORITY SHALL KEEP ITS FUND IN ANY SCHEDULED BANK. (4) THE AUTHORITY MAY INVEST ANY PORTION OF I TS FUNDS IN SUCH SECURITIES OR IN SUCH OTHER MANNER AS MAY BE PRESCRIBED. (5) THE INCOME RESULTING FROM INVESTMENTS MEN TIONED IN SUB-SECTION (4) AND PROCEEDS OF THE SALE OF THE SAME SHALL BE CREDITED TO THE FUND OF THE AUTHORITY. 14. UNDER SECTION 237 OF THE AMENDMENT ACT, THE AUT HORITY IS TO MAINTAIN PROPER ACCOUNTS AND ALSO PREPARE AN ANNUAL STATEMENT OF ACCOUNTS INCLUDING THE BALANCE SHEET IN SUCH FORM, AS MAY BE PRESCRIBED. THE SAID ACCOUNTS SHALL BE SUBJECT TO AUDIT ANNUALLY AND THE AUDITED ACCOUNTS WERE TO BE FORWARDED TO THE GO VERNMENT ANNUALLY. 15. UNDER PART-G OF THE SAID AMENDMENT ACT, IT IS P ROVIDED THAT THE SAID AUTHORITY WOULD BE CONTROLLED BY THE GOVERNMEN T AND PANCHAYATI RAJ INSTITUTIONS. UNDER SUB-SECTION (1) OF SECTION 252 OF THE AMENDMENT ACT IT IS PROVIDED THAT THE AUTHORITY SHA LL CARRY OUT SUCH DIRECTIONS AS MAY BE ISSUED TO IT FROM TIME TO TIME BY THE GOVERNMENT FOR THE EFFICIENT ADMINISTRATION OF THIS CHAPTER. SUB-SECTION (3) OF SECTION 252 OF THE AMENDMENT ACT PROVIDES THAT THE GOVERNMENT MAY DEPUTE ANY OFFICER TO INSPECT AND EXAMINE THE OFFIC E OF THE AUTHORITY OR ITS DEVELOPMENT WORKS AND TO REPORT THEREON. UN DER SECTION 253 OF 10 THE AMENDMENT ACT THE AUTHORITY IS DUTY BOUND TO FU RNISH TO THE GOVERNMENT SUCH REPORTS, RETURNS, RECORD AND OTHER INFORMATION AS THE GOVERNMENT MAY REQUIRE FROM TIME TO TIME. 16. THE AUTHORITY CONSTITUTED BY THE GOVERNMENT CAN BE DISSOLVED AND THE POWER OF DISSOLUTION ARE WITH THE STATE GOV ERNMENT AS PROVIDED UNDER SECTION 260 OF THE AMENDMENT ACT, WH ICH READS AS UNDER: 260. (1) WHERE THE GOVERNMENT IS SATISFIED THAT THE PURPOSES FOR WHICH THE AUTHORITY IS CONSTITUTED UNDER THIS CHAPTER HAV E BEEN SUBSTANTIALLY ACHIEVED SO AS TO RENDER THE CONTINUED EXISTENCE OF THE AUTHORITY IN THE OPINION OF THE GOVERNMENT UNNECESSARY, THE GOVERN MENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, DECLARE THAT THE AUTHORITY SHALL BE DISSOLVED WITH EFFECT FROM SUCH DATE AS MAY BE SPEC IFIED IN THE NOTIFICATION; AND THE AUTHORITY SHALL BE DEEMED TO BE DISSOLVED A CCORDINGLY. (2) FROM THE DATE SPECIFIED UNDER SUB-SECTION (1 ) - (A) ALL PROPERTIES, FUNDS AND DUES WHICH ARE VESTED IN, OR REALIZABLE BY THE AUTHORITY, SHALL VEST IN, OR BE R EALIZABLE BY THE GOVERNMENT; (B). ALL LIABILITIES WHICH ARE ENFORCEABLE AGAINST THE AUTHORITY SHALL BE ENFORCEABLE AGAINST THE GOVERNMENT; AND FOR THE PUR POSE OF CARRYING OUT ANY DEVELOPMENT WHICH HAS NOT BEEN FULLY CARRIED OU T BY THE AUTHORITY AND FOR THE PURPOSE OF REALIZING PROPERTIES, FUNDS AND DUES REFERRED TO IN CLAUSE (A), THE FUNCTIONS OF THE AUTHORITY SHALL BE DISCHARGED BY THE GOVERNMENT. 17. AFTER THE DISSOLUTION OF THE AUTHORITY IT IS CL EARLY PROVIDED UNDER SECTION 260(2)(A), THAT ALL PROPERTIES, FUNDS AND D UES WHICH ARE VESTED IN OR ARE REALIZABLE BY THE AUTHORITY, SHALL VEST O R BE REALIZABLE BY THE GOVERNMENT. IT IS FURTHER PROVIDED UNDER SUB-CLAUS E (B) THAT ALL LIABILITIES WHICH ARE ENFORCEABLE AGAINST THE AUTHO RITY SHALL BE ENFORCEABLE AGAINST THE GOVERNMENT AND FOR THE PURP OSE OF REALIZING PROPERTY OR CARRYING OUT THE INCOMPLETE DEVELOPMENT WORK, FUNDS AND DUES AND THE FUNCTIONS OF THE AUTHORITY SHALL BE DI SCHARGED BY THE GOVERNMENT. 18. UNDER SECTION SUB-SECTION 262 OF THE AMENDMENT ACT THE GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZE TTE, MAKE RULES FOR CARRYING OUT THE PURPOSES OF THIS CHAPTER. FURTHER UNDER SECTION 264 11 OF THE AMENDMENT ACT THE POWER IS VESTED WITH THE G OVERNMENT TO MAKE GRANTS, ADVANCES AND LOANS TO THE AUTHORITY, W HICH READS AS UNDER: THE GOVERNMENT MAY MAKE SUCH GRANTS, ADVANCES AND LOANS TO THE AUTHORITY, AS THE GOVERNMENT MAY DEEM NECESSARY , FOR THE PERFORMANCE OF THE FUNCTIONS UNDER THIS CHAPTER AND ALL GRANTS, LOANS AND ADVANCES SO MADE SHALL BE ON SUCH TERMS A ND CONDITIONS, AS THE GOVERNMENT MAY DETERMINE. 19. THE READING OF THE ABOVE SAID PROVISION OF THE HARYANA PANCHAYATI RAJ AMENDMENT ACT REFLECTS THAT THE ASSE SSEE AUTHORITY WAS CONSTITUTED BY THE GOVERNMENT IN ORDER TO GOVERN AN D IMPLEMENT SPECIFIED ACTS WHICH WERE ENTRUSTED TO IT AND FOR T HE PURPOSE OF CARRYING ON THE SAID ACTIVITIES THE GRANTS, ADVANCE S AND LOANS WERE MADE BY THE GOVERNMENT TO THE CONSTITUTED AUTHORITY I.E. THE ASSESSEE BEFORE US. 20. AS PER THE ORDER DATED 27.3.2008, THE FINANCIAL COMMISSIONER & PRINCIPAL SECRETARY TO GOVERNMENT OF HARYANA, DEVEL OPMENT & PANCHAYATS DEPARTMENT RELEASED FUNDS UNDER THE SCHE ME TO HARYANA RURAL DEVELOPMENT AUTHORITY (HRDA ) DURING THE YEAR 2007-08 TOTALING RS.2510.00 LACS. THE SAID FUNDS WERE SAN CTIONED AND RELEASED TO THE ASSESSEE UNDER THE SCHEME AS PER TH E RULES AND GUIDELINES OF HRDA. THE AMOUNT WAS TO BE DRAWN AND HANDED OVER TO THE CHIEF ADMINISTRATOR, WHO IN TURN WOULD DEPOSIT THE SAME IN THE BANK ACCOUNT OF THE AUTHORITY IN ANY OF THE NATIONA LIZED BANK, WHICH IN TURN WAS TO BE OPERATED BY THE CHIEF ADMINISTRATOR, HRDA (I.E. THE ASSESSEE) AND ACCOUNTS OFFICER, HRDFA BOARD. IN TH E SAID COMMUNICATION IT IS FURTHER STATED THAT THE EXPENDI TURE INVOLVED WOULD BE DEBITED TO THE MAJOR HEAD 2515-OTHER RURAL DEVEL OPMENT PROGRAMME (PLAN) 51-102 COMMUNITY DEVELOPMENT 90- SCHEME 12 ASSISTANCE OF HARYANA RURAL DEVELOPMENT AUTHORITY-0 9 GIA FOR THE YEAR 2007-08. THE COPY OF THE SAID COMMUNICATION I S PLACED AT PAGE 27 OF THE PAPER BOOK. THE ASSESSEE IN THE RECEIPTS AND PAYMENTS ACCOUNT FOR THE YEAR ENDING 31.3.2008 REFLECTED THE GRANTS-IN-AID OF RS.25.10 CRORES AND ALSO DECLARED THAT THE SAID AMO UNT WAS UNSPENT AS ON THE CLOSE OF THE YEAR AND WAS CARRIED FORWARD TO THE BALANCE SHEET. COPY OF THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31.3.2008 ARE PLACED AT PAGES 30 AND 31 OF THE PAPER BOOK. THEREAFTER ANOTHER COMMUNICATION WAS ISSUED BY THE ASSESSEE VIDE LETTER DATED 26.9.2008, WHICH IS PLACED AT PAG E 33 OF THE PAPER BOOK ALONGWITH ITS ENGLISH TRANSLATION AT PAGE 34 O F THE PAPER BOOK. UNDER THE SAID COMMUNICATION DATED 26.9.2008 THE AU THORITY WAS DIRECTED TO PROVIDE INFRASTRUCTURAL FACILITIES AMON G 100 SQ. YARD RESIDENTIAL PLOTS ALLOTTED UNDER MAHATMA GANDHI GRA MIN BASTI YOJANA TO THE SC AND BPL FAMILIES FROM 2.10.2008. UNDER T HE SAID COMMUNICATION, IT IS PROVIDED THAT ONE OF THE OBJEC TS OF THE ASSESSEE WAS TO PROVIDE INFRASTRUCTURE IN DIFFERENT BASTIS A ND THE GOVERNMENT HAD DECIDED THAT THE AUTHORITY WITH THE AVAILABLE B UDGET RESOURCES WOULD DEVELOP INFRASTRUCTURAL FACILITIES IN THE SAI D BASTIS. THE ASSESSEE WAS THUS DIRECTED TO PROVIDE INFRASTRUCTUR AL FACILITIES LIKE PAVEMENT OF STREET, WATER SUPPLY LINE, DRAINS AND E LECTRIFICATION ETC. FURTHER VIDE COMMUNICATION DATED 20.11.2008 FROM TH E DIRECTOR, PANCHAYATS HARYANA, CHANDIGARH TO THE CHIEF ADMINIS TRATOR OF THE ASSESSEE AUTHORITY, IT WAS PROVIDED THAT THE GOVERN MENT HAD DECIDED THAT THE AVAILABLE FUNDS OF RS.50 CRORES WITH THE A SSESSEE COULD BE SPENT ON THE INFRASTRUCTURAL FACILITIES UNDER THE M AHATMA GANDHI GRAMIN BASTI YOJANA. COPY OF THE SAID COMMUNICATIO N IN HINDI IS PLACED AT PAGE 35 OF THE PAPER BOOK ALONGWITH ENGLI SH TRANSLATION AT PAGE 36 OF THE PAPER BOOK. THE ASSESSEE THEREAFTER FOR THE YEAR 13 ENDING 31.3.2009 AS PER THE RECEIPTS AND PAYMENTS A CCOUNT HAD SHOWN FURTHER GRANTS-IN-AID OF RS.25.10 CRORES OUT OF WHI CH RS.10 CRORES WAS SPENT ON THE DEVELOPMENT OF THE SCHEME AND BALANCE OF RS.17.46 CRORES ALONGWITH BALANCE OF RS.25.10 CRORES TOTALIN G RS.42.56 WERE CARRIED FORWARD TO THE SUCCEEDING YEAR. COPIES OF THE BALANCE SHEET AND RECEIPTS AND PAYMENTS ACCOUNT ARE PLACED AT PAG ES 38 AND 39 OF THE PAPER BOOK. FURTHER DURING THE YEAR ENDING 31. 3.2010 THE ASSESSEE RECEIVED GRANTS OF RS.69.66 CRORES AND OUT OF THE T OTAL FUNDS ALLOCATED, RS.79.17 CRORES WERE SPENT ON THE DEVELOPMENT OF SC HEME AND THE BALANCE OF RS.34.83 CRORES WAS CARRIED FORWARD TO T HE SUCCEEDING YEAR. THE BALANCE SHEET OF RECEIPTS AND PAYMENTS ACCOUNT FOR THE YEAR ENDING 31.3.2010 ARE PLACED AT PAGES 41 AND 42 OF T HE PAPER BOOK. 21. THE ASSESSEE HAD FILED AN APPLICATION FOR REGIS TRATION UNDER SECTION 12A OF THE ACT. THE COMMISSIONER OF INCOME TAX VIDE ORDER DATED 2.9.2011 UNDER SECTION 12AA(1)(B) OF THE ACT HAD GRANTED REGISTRATION TO THE ASSESSEE W.E.F. 1.4.2010. HOWE VER, THE ASSESSEE MOVED AN APPLICATION FOR RECTIFICATION UNDER SECTIO N 154 OF THE ACT AND AFTER EXAMINING THE FACTS AND RECORDS OF THE CA SE, THE COMMISSIONER OF INCOME TAX PASSED ORDER UNDER SECTI ON 154 OF THE ACT DATED 1.3.2012 GRANTING REGISTRATION UNDER SECT ION 12AA(1)(B) OF THE ACT W.E.F. 1.4.2008. THE YEAR UNDER APPEAL BEF ORE US IS ASSESSMENT YEAR 2008-09 I.E. THE FINANCIAL YEAR 200 7-08 AND DURING THE SAID YEAR, THE ASSESSEE WERE NOT REGISTERED AS A CH ARITABLE TRUST BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 12A OF THE ACT. CONSEQUENTLY, THE TAXABILITY OF THE RECEIPTS IN THE HANDS OF THE ASSESSEE WERE TO BE ESTABLISHED; WHETHER THE SAME A RE TAXABLE IN THE HANDS OF THE ASSESSEE OR NOT. THE CASE OF THE ASSE SSEE BEFORE US IS THAT THE SAID RECEIPTS WERE GRANTS RECEIVED BY THE ASSESSEE FOR THE 14 SPECIFIC PURPOSE OF CARRYING ON THE ACTIVITIES ENTR USTED TO IT AND COULD NOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESS EE. THE CASE OF THE REVENUE IS TO THE CONTRARY THAT UNLESS THERE WAS DI VERSION OF THE SAID INCOME, THE RECEIPTS WERE TAXABLE IN THE HANDS OF THE ASSESSEE. 22. THE PERUSAL OF THE PROVISIONS OF HARYANA PANCHA YATI RAJ AMENDMENT ACT REFLECTS THAT THE ASSESSEE CORPORATIO N WAS INCORPORATED BY THE STATE GOVERNMENT FOR THE PURPOS E AND OBJECTS AND THE AUTHORITY SO CONSTITUTED WERE TO PROMOTE AND TO SECURE DEVELOPMENT OF THE RURAL AREA AS PER THE SCHEMES FO RMULATED BY THE GOVERNMENT. THE DUTIES AND FUNCTIONS OF THE AUTHOR ITY SO CONSTITUTED WERE REGULATED BY THE HARYANA PANCHAYATI RAJ AMENDM ENT ACT, 2007, AS REFERRED TO BY US IN THE PARAS HEREINABOVE. THE ASSESSEE AUTHORITY RECEIVES THE FUNDS FROM THE GOVERNMENT AND THE CENT RAL GOVERNMENT, AS THE CASE MAY BE, BY WAY OF GRANTS, LOANS, ADVANC ES OR OTHERWISE. FURTHER UNDER THE SAID ACT, IT IS PROVIDED THAT THE FUNDS ARE TO BE KEPT IN A SCHEDULED BANK OR IN SUCH SECURITIES AND THE INCOME RESULTING FROM SUCH INVESTMENTS AND PROCEEDS OF SALE OF SECUR ITIES ARE IN TURN TO BE CREDITED TO THE FUNDS OF THE AUTHORITY ITSELF. IT IS CATEGORICALLY PROVIDED UNDER SECTION 252 OF THE HARYANA PANCHAYAT I RAJ AMENDMENT ACT, THAT THE AUTHORITY IS TO CARRY OUT SUCH DIRECT IONS AS MAY BE ISSUED BY THE GOVERNMENT FROM TIME TO TIME AND FURTHER UND ER SECTION 253 OF THE HARYANA PANCHAYATI RAJ AMENDMENT ACT, IT IS PRO VIDED THAT THE ASSESSEE HAD TO FURNISH REPORTS, RETURNS, RECORDS A ND OTHER INFORMATION TO THE GOVERNMENT FROM TIME TO TIME AND AS CALLED F OR. FURTHER THE ASSESSEE AUTHORITY CAN BE DISSOLVED BY THE STATE GO VERNMENT AS PER THE PROVISIONS OF SECTION 263 OF THE HARYANA PANCHAYATI RAJ AMENDMENT ACT AND AFTER THE DISSOLUTION, THE PROPERTIES, FUND S, DUES, ETC., WHICH ARE VESTED IN OR ARE REALIZABLE BY THE AUTHORITY, I N TURN SHALL VEST OR BE 15 REALIZABLE BY THE GOVERNMENT. IT IS FURTHER PROVID ED THAT THE INCOMPLETE DEVELOPMENT WORK WOULD BE CARRIED ON BY THE GOVERNMENT. UNDER SECTION 264 OF THE HARYANA PANCHAYATI RAJ AME NDMENT ACT, THE GOVERNMENT IS TO MAKE GRANTS, ADVANCES AND LOANS TO THE AUTHORITY FOR THE PURPOSE OF THE FUNCTIONS, AS MAY BE PRESCRIBED BY THE GOVERNMENT. 23. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHER E THE AUTHORITY HAD BEEN CONSTITUTED BY THE GOVERNMENT FOR THE SPEC IFIC PURPOSES OF CARRYING ON THE ACTIVITIES OF THE GOVERNMENT AND WH ERE THE GRANTS AND ADVANCES OR LOANS ARE DISBURSED BY THE GOVERNMENT T O THE ASSESSEE, THE SAID GRANTS, ADVANCES CANNOT NOT BE HELD TO THE INC OME OF THE ASSESSEE AS THE SAID GRANTS/ADVANCES ARE RELEASED TO THE ASS ESSEE FOR THE SPECIFIC PURPOSES FOR CARRYING ON THE DEVELOPMENT W ORK. IN THE FACTS OF THE PRESENT CASE THE GOVERNMENT OF HARYANA HAD G IVEN A GRANT OF RS.25.10 CRORES DURING THE FINANCIAL YEAR 2007-08 F OR THE SPECIFIC PURPOSES OF UTILIZING THE SAME IN PROVIDING INFRAST RUCTURAL FACILITIES TO THE ALLOTTEES OF RESIDENTIAL PLOTS UNDER MAHATMA G ANDHI GRAMIN BASTI YOJANA. THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION HAD RECEIVED RS.25.10 CRORES ON 28.3.2008, WHICH COULD NOT BE UTILIZED FOR THE SPECIFIC PURPOSES BEFORE THE END OF THE YEAR, W HICH IN TURN WAS UTILIZED IN THE SUCCEEDING YEARS FOR THE SAID SPECI FIC PURPOSES. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE WAS ACTING ON THE DIRECTIVES OF THE GOVERNMENT OF HARYANA IN I MPLEMENTING THE SCHEME OF THE GOVERNMENT OF HARYANA, THE GRANTS SO RECEIVED BY THE ASSESSEE WERE NOT THE INCOME OF THE ASSESSEE AND DO NOT FORM THE CORPUS OF THE ASSESSEE. SUCH GRANTS ARE NOT DONAT IONS OR VOLUNTARY CONTRIBUTION UNDER SECTION 12 OF THE ACT AND THUS T HE SAME SHOULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE FOR THE REL EVANT ASSESSMENT YEAR. THE ASSESSEE HAD SHOWN THE SAID AMOUNTS AS R ECEIPTS IN THE 16 RECEIPTS AND EXPENDITURE ACCOUNT BUT THE SAME IN NO MANNER CAN BE HELD TO BE THE INCOME OF THE ASSESSEE AND WERE NOT ASSESSABLE IN THE HANDS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT Y EAR, AS NO PART OF THE SAID GRANTS HAD BEEN UTILIZED FOR THE SPECIFIC PURPOSES FOR WHICH IT WAS GRANTED, BEFORE THE CLOSE OF THE YEAR. 24. WE FIND THAT SIMILAR ISSUE OF ASSESSABILITY OF GRANTS AROSE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT PANCHKULA VS. STATE URBAN DEVELOPMENT SOCIETY IN ITA NO.210 O F 2011 (DATE OF DECISION 19.10.2011) WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER: THE TRIBUNAL HELD THAT THE SOCIETY IS ACTING AS A NODAL AGENCY RECEIVING GRANT FROM GOVERNMENT OF INDIA AND STATE GOVERNMENTS AND DISTRIBUTES TO DISTRICT AUTHORITIES FOR IMPLEMENTATION OF VARIOUS SCHEMES OF GOVERNMENT OF INDIAN AND SUPERVISING THE EXECUTION OF SCHEMES. IT HAS NO DIS CRETION TO UTILIZE THE AMOUNT AS PER OWN REQUIREMENTS. IT ALSO FOUND THAT IN CASE OF NON UTILIZATION AT THE CLOSE OF THE SCHEME, THE FUNDS ARE TO BE REFUNDED ALONG WITH INTEREST TO THE GOVERNMEN T OF INDIA AND STATE GOVERNMENTS. THE GRANTS RECEIVED BY THE A SSESSEE DO NOT BELONG TO THE ASSESSEE-SOCIETY. THE GRANTS DO N OT FORM CORPUS OF THE ASSEESEE NOR IT IS INCOME OF THE ASSE SSEE UNDER SECTION 11 OF THE ACT. SUCH GRANTS ARE NOT THE DONA TIONS OR VOLUNTARY CONTRIBUTIONS UNDER SECTION 12 OF THE ACT . THUS, THE GRANTS RECEIVED BY THE ASSESSEE SHOULD NOT BE CONSIDERED E ITHER AS INCOME OR FOR ASCERTAINING THE AMOUNT EXPANDED O R AMOUNT TO BE ACCUMULATED. PROVISIONS OF SECTION 11 AND 12 OF THE ACT ARE NOT APPLICABLE FOR GRANTS RECEIVED BY THE ASSESSEE UNDER THE SCHEMES IT FURTHER HELD THAT THE ASSESSEE IS STATUT ORILY REQUIRED TO FILE ITS INTENTION OF EXPANDING THE ACCUMULATED FUNDS IN FUTURE BY WAY OF FORM NO. 10. THE ARGUMENT THAT THE ASSESSEE HAS SHOWN THE ENTIRE AMOUNT AS ITS INCOME IN THE PROFIT AND LOSS ACCOUNT AS NOT DETERMINATIVE OF NATURE AS THE MERE ENTRIES IN THE BOOKS OF ACCOUNT DO NOT DECIDE THE NATURE OF RECEIPT AND ITS TAXABILITY. THE TRIBUNAL ALSO HELD THAT EVEN IF THE AMOUNT IS N OT DISBURSED DUE TO IMPOSITION OF MODEL CODE OF CONDUCT BY THE E LECTION COMMISSION, THE SURPLUS AT THE END OF THE YEAR CANN OT BE INCLUDED AS INCOME UNDER SECTIONS 11 AND 12 OF THE ACT. IF THE GRANT IS NOT INCLUDABLE AS INCOME THE SURPLUS AT TH E END OF THE YEAR REMAINING UNSPENT IS NOT OF ANY RELEVANCE. IN RESPECT OF THE BANK INTEREST, THE TRIBUNAL FOUND THAT THE ASSESSEE HAS TO KEEP FUNDS IN SEPARATE ACCOUNTS AND SUCH INTEREST IS TRE ATED AS PART OF THE GRANTS UNDER RESPECTIVE SCHEMES TO WHICH SAID F UNDS RELATE. HENCE, WITH THE SAID FINDINGS, THE ORDERS OF THE AS SESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) WAS SET AS IDE. 17 LEARNED COUNSEL FOR THE APPELLANT VEHEMENTLY ARGUED THAT THE SOCIETY ITSELF HAS REFLECTED THE GRANTS RECEIVE D FROM CENTRAL AND STATE GOVERNMENTS AS INCOME. THEREFORE, IT IS N OT OPEN TO THE ASSESSEE TO TAKE A STAND THAT SUCH GRANTS ARE N OT THE INCOME. THE SAID ASPECT HAS BEEN CONSIDERED BY THE TRIBUNAL , WHEREIN, IT HAS BEEN HELD THAT REFLECTION IN THE PROFIT AND LOS S ACCOUNT TOWARDS THE INCOME IS NOT DETERMINATIVE. THE ENTRIE S IN THE BOOKS OF ACCOUNT DO NOT DECIDE THE NATURE OF RECEIP TS. SINCE, THE GRANTS HAVE BEEN RECEIVED BY THE ASSESSEE FOR DISBU RSEMENT AND KEEPING IN VIEW THE FACT THAT THE SAME CANNOT BE UT ILIZED FOR ANY OTHER PURPOSE SUCH AS DISTRIBUTION FOR THE POVERTY IN FURTHERANCE TO THE OBJECT OF THE SCHEMES, IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. AS PER THE FINDING OF FACT RECORDED B Y THE TRIBUNAL, NO SUBSTANTIAL QUESTION OF JAW ARISES IN THE PRESEN T PETITION. DISMISSED. 25. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO TH E FACTS OF THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF CIT PANCHKULA VS. STATE URBAN DEVELOPMENT SOCIETY (SUPR A) AND FOLLOWING THE SAME PARITY OF REASONING, THE GRANT OF RS.25.10 CRORES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS NOT THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. IN VIEW THEREOF, THE SAID GRANT WAS RECEIVED BY THE ASSESSEE FOR THE PUR POSE OF DISBURSEMENT FOR THE PROMOTION OF THE SCHEMES OF GO VERNMENT OF HARYANA AND WAS NOT ITS INCOME AS THE ASSESSEE WAS ACTING AS A NODAL AGENCY FOR THE DISBURSEMENT OF THE GRANTS ONLY. AC CORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.25.10 CRORES IN THE HANDS OF THE ASSESSEE. THE GROUNDS OF APPEA L RAISED BY THE ASSESSEE ARE THUS ALLOWED. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND JANUARY, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH