Income Tax Appellate Tribunal - Lucknow
Cane Development Council, Gonda vs Department Of Income Tax on 29 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI. P. K. BANSAL, ACCOUNTANT MEMBER
AND SHRI ABY T VARKEY, JUDICIAL MEMBER
ITA No.362/LKW/2016
Assessment Year:2012-13
Income Tax Officer v. Cane Development Council
Gonda Balrampur
TAN/PAN:AAALK0802E
(Appellant) (Respondent)
Appellant by: Shri Amit Nigam, D.R.
Respondent by: None
Date of hearing: 26 07 2016
Date of pronouncement: 29 07 2016
ORDER
PER ABY T VARKEY, J.M:
This appeal is preferred by the Revenue against the order of the ld. CIT(A), Faizabad dated 9.3.2016 for the assessment year 2012-
13.
2. The grounds raised by the Revenue are reproduced hereunder:-
1. The Ld. CIT(A), Faizabad has erred in law and on facts in treating the assessee as a co-operative society even when it has no certificate of registration as a co-operative society from the Competent Authority.
2. The Ld. CTT(A), Faizabad has erred in law and on facts by allowing claim of the assessee for deduction u/s 80P(2) of the I.T. Act (Act) without appreciating the fact that under the provisions of Sec. 80P(2)(a)(iii) only the profit & gains of business attributable to the activities of the assessee is allowable as ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 2 deduction and as per Sec. 14F of the Act the commission income is assessable as per provisions of Sec. 56(1) of the Act under the head 'Income from other Sources' for which the benefit of Sec.
80P(2) is not allowable to the assessee.
3. The Ld. CIT(A), Faizabad has erred in law and facts by deleting the addition of Rs. 61,39,260/- taking the same as deductible u/s 8OP of the I.T. Act ignoring the fact that the assessee is neither a co-operative society as defined u/s 2(19) of I.T. Act, 1961 nor supported by section 5 of U.P. Sugar Cane (Registration of Supply & Purchases) Act, 1953 hence, the same was not allowable to the assessee.
4. The Ld. CIT(A), Faizabad has erred in law and facts by deleting the interest income earned from the investments of the surplus fund taking the same as deductible u/s 8OP of the I.T. Act ignoring the fact that the interest is earned from the commercial banks (third party) and principle of mutuality is not applicable in the case hence, the interest earned would be income of the assessee in view of Sec. 2(24) of the I.T. Act & in view of the judgement of the Hon'ble Supreme Court in the case of Totgars Co-operative sale society Ltd. In (2010) 322 ITR 283(SC) & Judgement of the Hon'ble Delhi High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd.
3. The ld. D.R. placed reliance upon the order of the Assessing Officer and also submitted that identical claims made by similar assessee's have been sent back by the Tribunal to the Assessing Officer to re-examine the claims of the assessee in the light of the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra).
4. None appeared on behalf of the assessee. However, on a perusal of record, we find that the issue involved in this appeal is ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 3 squarely covered by the order of this Bench of the Tribunal in the case of ITO, Gonda vs. Cane Development Council, Balrampur in ITA No.360 & 361/LKW/2016 for the assessment years 2011-12 and 2012-13 wherein the Lucknow Bench of the Tribunal has set aside the orders of the ld. CIT(A) and restored the matter to the file of the Assessing Officer for deciding the matter afresh. The relevant portion of the order of the Tribunal dated 28.7.2016 is reproduced hereunder:-
5. We have heard both the parties and perused the record. We have also perused the order of the Tribunal in similar case wherein identical issue was examined by the Tribunal, in which the Tribunal has restored the matter to the file of the Assessing Officer to re-examine the claim of the assessee in the light of the observations made therein. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:-
"2. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that undisputedly an identical issue was examined by the Tribunal in the assessee's own case in assessment year 2009-10, in which the Tribunal has restored the matter to the file of the Assessing Officer. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:-
"9. Having carefully examined the orders of the Lower authorities and judgments filed before us in the light of rival submissions, we are of the considered view that since the above Grants or receipts are received by the assessee either from the government or any other agency for a particular purpose and assessee has no independent right over it, it would not partake the character of income u/s 2 (24) of the Act. Though, this argument was not raised by the assessee before the lower authorities and the assessee had been claiming deduction u/s 80P (2) of the Act or exemption u/s 11 of the Act, but the ground or argument raised before us is plausible and legal. Therefore, it require the proper adjudication.
10. In the aforesaid order of the Tribunal, it has been held that the grant in aid or any other receipt which ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 4 were not product of normal business activity of the assessee, it could not be termed as revenue receipt, so as to form part of the total income.
11. In the case of ITO Vs Cane Development Council (supra), the similar issue was raised on similar facts and finding force in the contention of the assessee, the Tribunal has restored the matter to the Assessing Officer to examine the claim of the assessee in light of these submissions. The relevant portion of the order of the Tribunal is extracted as under :-
"9. Considering the written submissions filed before the bench, it was seen that on behalf the assessee it has been canvassed that the assessee company has been established by an order dated 06.04.1989 passed by the Cane Commissioner of U.P. in exercise of Powers u/s 5 of the U.P. Sugar Cane (Regulation of Supply and Purchases) Act 1953 r/w rule 8 of the U.P. Sugar cane (Regulation of Supply and Purchases) Rules 1954. On division of the U.P. State and formation of Uttrakhand State later on, these Act and Rules have been adopted by the Uttrakhand State also as it. The functioning and activities of the assessee are stated to be governed by the provisions made under this Act and Rules. It has also been submitted that as per section 6 of the said Act, the functions of the assesseee are that it carries out only the development activities in the area assigned to it by the Cane Commissioner of the State. It was also submitted in the written submissions that there is no provision under the said-Act/Rule authorizing the appellant to do any business activity with profit motive or to earn any income/profit and the appellant carries out the development activities as specified under aforesaid Act on no profit no loss basis. The appellant is merely a fund management body without any right of absolute ownership over the funds placed at its disposal. It is further mentioned here that the said roads, culverts, etc. are constructed by the appellant on the land belonging to the govt. and constructions made by the appellant there on also belongs to the govt. as absolute owner and not to the appellant or anybody else. The funds received by the asseessee are either by way of (a) voluntary grant ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 5 from the Central or state Govt. or (b) contribution in the name of commission from the sugar mills, as provided u/s 8 of the aforesaid Act. As per rule 49 of the aforesaid rules, this contribution amount in the name of commission is worked out the Sugar Mill with reference to the amount of purchase of the sugar cane by it from the cane growers are the Cane Grover's Cooperative Society. Addressing the amount the commission, it is stated that it is worked out and paid by the Sugar Mill to the appellant, is not sold/supplied by the appellant to the sugar mill nor any service is rendered by the appellant to the Sugar Mill paying amount in the name of commission to the appellant as there is no provision under the aforesaid Act and Rule for it, hence the amount paid by the Sugar Mill to the appellant thought is in the name of commission but, in fact, it is just a contribution amount. Referring to the mandatory provision made under rule 49A, the entire amount of said commission, which is, in fact, just a contribution amount, is required to be utilized on specific purpose of construction of road etc. and other development activities are assigned to the appellant and not otherwise. It is further submitted that there is no provision under aforesaid Act/Rules made there under authorizing the appellant to utilized the said amount of said contribution paid in the name of commission for any purpose or to distribute it or any part of it to anybody as profit/income. It is also been submitted that in the present case the assessee has neither distributed the said contribution amount received in the name of commission to anybody not utilized it for any purpose other than that for which it has been paid to the appellant. It has also stated that there is no finding by any lower authorities that the assessee has utilized the commission amount for any purpose similarly the "surplus" not spend is fully covered be the order of the Delhi bench in N.S. Committee, Village -Thanabhawan, Tehsil - Shamil, Distt.- Muzaffarnagar order copy filed.
10. In the light of written submissions advanced by the assessee qua the departmental grounds and grounds of the assessee wherein submission on behalf of the revenue have already been addressed in ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 6 the earlier part of this order. We are the view that ground no. 1, 2 & 3 in the appeals of the assessee deserves to be dismissed as the same have not been addressed in the written submission and it is presumed that the assessee has nothing to say. The finding of the CIT(A) reproduced in the earlier part of this order as such are confirmed. Qua the grounds 4, 5 & 6 of the assessee and departmental grounds 1 & 2, the findings arrived at in para 6.6, the same is modified and the issue is restored to the file of the AO with the direction to address the specific provisions to the extent that the AO shall look into the specific Rules and Sections which the assessee wants the canvass in support its claim for the said purpose, assessee has relied on the order of Co ordinate Bench in ITA No.154/Del/2008 in the case of CIT Vs N.S. Committee, Village - Thanabhawan, Tehsil - Shamli, Distt. -Muzaffarnagar wherein the departmental grounds agitating the issue of Anshdan and Nirman Yogna Fund has taken a view in para 6 which reads as under :-
"We have heard the Ld. DR and gone through facts on the case indisputably, the Ansh Dan and fund for Nirman Yojna, where given to the assessee by the State Government & Sugar factories for specific projects of the road construction and as pointed out by the Ld.CIT(A) this funds have been spend also for those specific project. There is nothing to suggest that the assessee is carrying on any business activities, generating income. Accordingly, the ld. CIT(A) concluded that there was no surplus with the assessee and therefore, there was no question of any taxable income. Admittedly, the grant- in-aid in question is a financial aid or subsidy given by the State Government of UP and Sugar factories for the specific purpose of construction of roads. In section 2 (24) of the Act, it is declared that "income includes"
various items which are enumerated therein in clauses
(i) to (xv). In the said section 2(24), such a grant-in-aid has not been specifically included as an income or a revenue receipt. Therefore, considering the use for the work "include" in section 2(24), the word "income shall be construed as comprehending not only those items which said section declared that these shall include but also such items which said section declares that these ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 7 shall include but also such items as it signified according to its natural import. Since section 2(24) has not declared that such a grant-in-aid shall be included in the income the word "revenue" shall be construed as comprehending what it signified according to its natural import. In relation to a business undertaking, the word "revenue" connotes incomings of the undertaking which are products of the normal working of the undertaking. The giving of financial aid or subsidy to the aforesaid committee, which admittedly is not carrying on any business, is at the discretion of the Government or Sugar Factors. Thus, the grant-in-aid in question was not a product of the normal business activities of the assessee committee, assessed by the AO as a local authority. Therefore, such a grant-in-aid could not be termed as a revenue receipt so as to form part of the total income. As already pointed out, the ld CIT(A) concluded that the aforesaid funds received by the assessee from State Government and Sugar factories have been spend only for those specific projects and there was no surplus with the assessee. Since the Revenue have not placed before us any material, controverting these findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter, there is no basis to interfere with his findings. Consequently, ground No. 1 to 3 in the appeal is dismissed." Accordingly the AO shall decide the issue in accordance with law qua ground no-4, 5 & 6 of the assessee and ground no-w & 2 of the Revenue in line with the order of the Co-ordinate Bench. Needless to say that the assessee shall be affording a reasonable opportunity of being heard."
12. In the case of CIT Vs U.P. Upbhokta Sahkarisangh Ltd. (Supra), the Hon'ble Allahabad High Court has held that where the amount was given by the State Government for specific purpose, it did not partake of the nature of the income of assessee. Even if it was treated as an income, it would not be liable to tax as it was stated that there was diversion of the income by way of overriding titles on the said amount by the way of condition.
13. In the case of DIT Vs. Society for Development Alternatives in ITA Nos.12 of 2012 and 18 of 2012, the Hon'ble High Court of Delhi has also dealt with similar ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 8 issue and has held that where assessee received grants for specific purposes from the government, non government and foreign institution etc. and these grants were to be spent as per terms& conditions of the project grant and the amount remained unspent at the end of the year, got spilled over to the next year, it was not an income of the assessee.
14. Similar is the position in the instant case as the assessee has no independent right to use the grant in a manner in which it likes. It has to be utilized for a particular purpose in terms of grants. Since these arguments are raised first time before the Tribunal, we are of the view that this aspect should be examined by the Assessing Officer while Assessing the income of the assessee. Accordingly, we set aside the order of the CIT(A) & restore the matter to the file of the Assessing Officer with the direction to the reexamine the claim of the assessee in the light of the new argument.
15. In the result, appeal of the assessee is allowed for statistical purpose."
3. Since the Tribunal, on identical issue, has restored the matter to the file of the Assessing Officer in the immediately preceding year, we find no justification to take a contrary view in this appeal and we accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer to re-examine the claim of the assessee in the light of the arguments raised by the assessee in terms indicated in the aforesaid order of the Tribunal.
4. In the result, appeal of the assessee is allowed for statistical purposes."
6. Since the Tribunal in the case of the similar assessee for assessment year 2009-10 and 2010-11 has restored the matter to the file of the Assessing Officer to re-examine the claim of the assessee in the light of the arguments it made before the Tribunal, likewise we would like the Assessing Officer to re- examine the claim of the assessee and examine the same along with the grounds that the Revenue has raised in this appeal vis-à- vis the argument of the assessee that it has no independent right ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 9 to use the grant in a manner in which it likes and it has to be utilized for a particular purpose in terms of grants taking into consideration the jurisdictional High Court order in CIT Vs U.P. Upbhokta Sahkarisangh Ltd. (Supra) and the Hon'ble Delhi High Court in DIT Vs. Society for Development Alternatives (supra) and the order of the Tribunal (supra). We are of the view that since the Tribunal has restored the matter in identical cases relating to assessment years 2009-10 and 2010-11 on similar issues, to the file of the Assessing Officer, respectfully following the same, we set aside the orders of the ld. CIT(A) for the impugned assessment years and restore the matter to the file of the Assessing Officer to re-examine the claim of the assessee. While doing so the Revenue's grounds/contention also need to be addressed while adjudicating the claim of the assessee.
7. In the result, both the appeals of the Revenue are allowed for statistical purposes."
5. Respectfully following the order of the Tribunal dated 28.7.2016, we set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer to re-examine the claim of the assessee and address the grounds raised by Revenue before us while de-novo assessment is carried out against the assessee.
8. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 29.7.2016.
Sd/- Sd/-
[P. K. BANSAL] [ABY T VARKEY]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: 29th July, 2016
JJ:2807
ITA No.360 & 361/LKW/2016, A.Y. 2011-12 & 2012-13 10
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar