Excise & Taxation Technical Service Agencies, Patiala V. ITO, Patiala

ITA 967/CHANDI/2011

• Counselvise Citation: 96721514 RSA 2011
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: VINEET KRISHAN
• Section: 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 NOS. 967 & 968/CHD/2011 (ASSESSMENT YEARS : 2005-06 & 2006-07) EXCISE & TAXATION TECHNICAL VS. THE INCOME TAX OFFICER, SERVICE AGENCIES, 3 RD FLOOR, WARD 1, CHOTI BARADARI PATIALA. PATIALA. PAN: AAAJE0412G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 11.09.2012 DATE OF PRONOUNCEMENT : 26.09.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINS T THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PATIALA DATED 28.7.2011 RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE AS UNDER: 1. THAT THE ORDER DATED 28.07.11 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA IS BAD IN LAW AND ON FACTS OF THE CASE. 2. THAT THE LD.CIT(A) GRAVELY ERRED IN CONFIRMING ADDITION OF RS.73,71,416/- (RS.54,47,415/- IN ITA NO.968/CHD/2011) MADE BY ASSESSING OFFICER TREATING BANK INTEREST OF RS.73,71,416/- (RS.54,47,415/- IN ITA NO.968/CHD/2011) AS INCOME OF THE ASSESSEE IGNORING THE FACT THAT 2 INTEREST WAS RECEIVED IN THE CAPACITY OF NODAL AGENCY AND FORMED INTEGRAL PART OF PUNJAB GOVT. SPECIFIC GRANT FUNDS MEANT FOR IMPLEMENTATION OF SPECIFIC PROJECT AND ANY UNUTILIZED AMOUNT ON THE COMPLETION OF PROJECT IS RETURNABLE TO STATE EXCHEQUER. 3. IN THESE TWO APPEALS FILED BY THE ASSESSEE COMMO N ISSUE HAS BEEN RAISED IN RELATION TO THE TREATMENT OF BANK INTERES T RECEIVED BY THE ASSESSEE ON THE UNUTILIZED AMOUNTS PLACED IN BANK F DRS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS A NODAL AGENCY CREATED BY PUNJAB GOVERNMENT TO PROVIDE TECHNICAL S ERVICES TO THE EXCISE GOVERNMENT. THE ASSESSEE RECEIVED AID FROM T HE PUNJAB GOVERNMENT AGAINST WHICH THE EXCESS OF INCOME OVER EXPENDITURE WAS CLAIMED AS EXEMPT BY THE ASSESSEE. THE ASSESSING O FFICER IN THE FIRST ROUND OF PROCEEDINGS TREATED THE SAME AS INCOME OF THE ASSESSEE WHICH WAS CONFIRMED BY THE CIT (APPEALS). THE TRIBUNAL I N ITA NOS.279 & 674/CHD/2009 RELATING TO ASSESSMENT YEARS 2005-06 A ND 2006-07 VIDE ORDER DATED 26.3.2010 ADJUDICATED UPON THE ISSUE AN D THE MATTER WAS RESTORED BACK TO THE ASSESSING OFFICER WITH DIRECTI ONS. THE SECOND ASPECT OF THE ISSUE CONSIDERED BY THE TRIBUNAL WAS INTEREST INCOME EARNED ON BANK DEPOSITS BY THE ASSESSEE. THE ASSES SEE HAD PARKED SURPLUS FUNDS TILL THEIR UTILIZATION IN THE SCHEME OF GOVERNMENT, IN DEPOSITS WITH BANK AND THE INTEREST EARNED ON THE S AID DEPOSITS WAS CLAIMED TO BE THE INCOME OF THE PUNJAB GOVERNMENT, AS THE SAME HAD TO BE UTILIZED FOR THE IMPLEMENTATION OF THE SCHEME FO R WHICH THE ASSESSEE SOCIETY WAS FORMULATED. THE TRIBUNAL FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN CIT VS. KARNATA KA URBAN INFRASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION REPORTED IN 284 ITR 582 (KARN) HELD THAT SUCH INTEREST WAS NOT TAXABLE. HOWEVER, THE MATTER 3 WAS AGAIN REMITTED BACK TO THE FILE OF THE ASSESSIN G OFFICER TO DECIDE THE SAME IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER IN THE SECOND ROUND OF PROCEEDINGS HELD THE ASSESSEE TO BE AN AOP AND T AXABLE ENTITY UNDER THE INCOME TAX ACT. FURTHER THE ASSESSING OFFICER FOLLOWING THE ORDER OF THE TRIBUNAL HELD THAT THE GRANTS GIVEN BY THE G OVERNMENT OF PUNJAB FOR IMPLEMENTATION OF SPECIFIC PROJECT COULD NOT BE TREATED AS INCOME OF THE ASSESSEE. HOWEVER, THE INTEREST RECEIVED ON TH E SURPLUS FUNDS PARKED IN THE BANKS AMOUNTING TO RS.73,71,416/- IN ASSESSM ENT YEAR 2005-06 AND RS.54,47,415/- IN ASSESSMENT YEAR 2006-07 WAS INCLU DED AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES . THE CIT (APPEALS) RELIED UPON SERIES OF DECISIONS TO HOLD THAT THE NA TURE OF INTEREST INCOME RECEIVED BY THE ASSESSEE WAS TO BE ASSESSED AS INCO ME FROM OTHER SOURCES. THE ASSESSEE IS IN APPEAL AGAINST THE SAM E. 5. THE LEARNED A.R. FOR THE ASSESSEE STRESSED THAT THE SAID INCOME IS NOT CHARGEABLE IN THE HANDS OF THE ASSESSEE AS THE INTEREST RECEIVED ON THE SAID SURPLUS FUNDS WHICH WERE NOT UTILIZED IS T O BE TREATED AS PART OF THE GRANT ISSUED BY THE GOVERNMENT OF PUNJAB AS IS APPARENT FROM THE COMMUNICATION OF THE GOVERNMENT OF PUNJAB PLACED AT PAGE 18 OF THE PAPER BOOK. THE LEARNED A.R. FOR THE ASSESSEE FURT HER POINTED OUT THAT THE ACCRUAL OF THE INCOME WAS NOT IN HIS HANDS BUT IN THE HANDS OF GOVERNMENT OF PUNJAB. 6. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT (APPEALS) AND POINTED OUT THAT THE ENTIRE E XERCISE CARRIED ON BY THE ASSESSEE WAS TO CHANNELISE THE FUNDS FROM THE S TATE GOVERNMENT TO PROVIDE SECTOR. THE LEARNED D.R. FOR THE REVENUE F URTHER POINTED OUT THAT THE FACTS OF THE PRESENT CASE WERE AT VARIANCE WITH THE FACTS OF THE HON'BLE KARNATAKA HIGH COURT IN KARNATAKA URBAN INF RASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION (SUPRA). 4 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSING OFFICER IN THE PRESENT ASSESSMENT ORDER H AD HELD THAT THE GRANTS RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF PUNJAB WERE FOR THE IMPLEMENTATION OF SPECIFIC PROJECT AND SUCH GRA NTS I.E. INCOME OVER EXPENDITURE COULD NOT BE TREATED AS INCOME OF THE A SSESSEE. THE ASSESSEE IN THE PRESENT CASE WAS A NODAL AGENCY WHICH WAS CR EATED UNDER THE ACT BY THE GOVERNMENT OF PUNJAB AND FUNDS WERE RELEASED TO THE ASSESSEE TO UTILIZE THE SAME AS PER THE GUIDELINES ISSUED IN IM PLEMENTATION OF THE PROJECT. THE ASSESSEE WAS GOVERNED BY THE PUNJAB F INANCIAL RULES AND THE GRANTS WERE TO BE SPENT UPON THE OBJECT FOR WHI CH IT WAS CREATED. WHERE ANY PORTION OF THE GRANT WAS NOT ULTIMATELY S PENT UPON THE OBJECTS FOR WHICH IT WAS CREATED, THE SAME HAD TO BE SURREN DERED TO THE GOVERNMENT. 8. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SPENT PART OF THE GRANTS RECEIVED BY IT FOR THE SPECIFIC PROJECT AND THE BALANCE WAS KEPT IN VARIOUS BANKS FOR THE UN-UTILIZED PERIOD. THE INTEREST EARNED ON SUCH DEPOSITS WITH BANKS WAS REFLECTED AS PART OF T HE GRANTS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE FOR THE YEAR ENDING 31.3.2006 HAD REFLECTED THE GOVERNMENT GRANTS UNDER THE CORPUS FUND AT RS.6.38 CRORES, WHICH IS REFLECTED I N THE BALANCE SHEET FILED AT PAGE 2 OF THE PAPER BOOK. THE BREAK UP OF GOVERNMENT GRANT AS PER SCHEDULE-A IS PLACED AT PAGE 3 OF THE PAPER BOO K IN WHICH IN ADDITION TO THE GRANT RECEIVED OF RS.16.69 CRORES A ND THE INTEREST ON FDRS RS.73.71 LACS AND THE UTILIZATION DURING THE Y EAR WAS RS.1.27 CRORES AND THE BALANCE OF RS.4.65 CRORES AND GOVERN MENT GRANT FOR VAT OF RS.1.73 CRORES, TOTALING RS.6.38 CRORES WAS SHOW N IN CORPUS FUND. THE ASSESSEE HAS ALSO PLACED ON RECORD A COMMUNICAT ION FROM THE GOVERNMENT OF PUNJAB UNDER WHICH IT WAS DIRECTED TH AT THE GRANTS 5 RECEIVED BY THE ASSESSEE WERE TO BE UTILIZED FOR TH E PURPOSE FOR WHICH IT WAS MEANT THAT TOO WITHIN THE SPECIFIED PERIOD. IT WAS FURTHER CLARIFIED THAT THE INTEREST EARNED ON THESE GRANTS SHOULD BE UTILIZED FOR THE PURPOSE FOR WHICH IT WAS GIVEN AND THE BALANCE UN-SPENT MON EY WAS TO BE RETURNED TO THE GOVERNMENT. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE GRANTS BEING UTILIZED FOR THE SPECIFIED PROJECT OF THE GOVERNMENT OF PUNJAB HAD BEEN HELD TO BE NOT THE INCOME OF THE ASSESSEE, SIMILARLY THE INTEREST EARNED ON THE UNUT ILIZED AMOUNTS PARKED IN THE BANKS IS IN THE NATURE OF THE GRANTS AND FOR M PART OF THE CORPUS FUND, WHICH IS NOT TO BE INCLUDED AS INCOME OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO EXC LUDE THE SAID INTEREST INCOME IN THE HANDS OF THE ASSESSEE. WE PLACE RELI ANCE ON THE RATIO LAID DOWN IN KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION (SUPRA) AND FOLLOWING THE SAME WE ALLOW THE CLAIM OF THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE IN BOTH THE APPEALS BEING IDENTICAL ARE ALLOWED. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH SEPTEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6