TMI Blog2013 (11) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... s comprehending not only those items which said section declared that these shall include but also such items which said section declares that these 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer to examine the veracity of such claim and to verify whether such expenses are liable to be deducted from the gross receipts as per the provisions of I.T.Act, 1961. 3. Ld. CIT(A)-II has erred in law and on facts by allowing all expenses even while the assessee furnished no evidence supporting any such claim." 3. In the cross-appeals filed by the assessee for the grounds of the assessee are also identical in 2007-08 and 2008-09 assessment years. Accordingly for ready- reference, the grounds from ITA No.-5604/Del/2011 are being reproduced :- "1. That the order has been passed by the Ld. C.I.T (A) without considering the whole facts circumstances of the case materials on record. 2. That on the whole facts circumstances of the case, the Ld. C.I.T.(A) is not justified correct in upholding the validity of the assessment made u/s 143(3) against the appellant in the status of 'Artificial Juridical Person' (AJP), rejecting ground no. 3 4 of the 'Grounds of Appeal'. 3. That on the whole facts circumstances of the case, the Ld. C.I.T.(A) is not justified correct in upholding validity of the notice issued u/s 148 in the case. 4. That the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not accepted by the AO. For ready-reference, we reproduced the explanation on facts from pages 4 of the assessment order:- "Regarding the objects and activities, " it is submitted that we have been constituted to carry out the sugar cane development programmes/schemes of the state govt. in the area which is assigned to us by the cane commissioner of the state on no profit no loss basis. This development programme includes construction of road culvert to work for betterment of sugar cane produce etc in the assigned area. For payments for carrying out the said development programmes, we receive grant from the govt. and also cess as commission from the sugar mills where the cane growers supply their sugar cane. All these amounts received are meant only for expenditure on the development programme and if in a particular year it is not spent fully, the balance is spent on the same programme in the next year/years and it is not passed on or disturbed to any person/persons and in case the Parishad is wind up, the total surplus amount reverts back to the govt. We can't use these founds according to out own sweet will or desire or for own purpose. For the funds received we act just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue that the assessee was an organ of the state as such immune of Article 289 of the Constitution was also decided against the assessee by a detailed finding in pare 3.4. The same is reproduced here under :- "3.4. Ground no.12 pertains to denying liability of tax on the basis of operation of Article 289(1) of the Indian Constitution. Here, it may be mentioned that Article 289 deals with "exemption of property and income of a State from Union taxation". It is a settled principle that taxing statutes are subservient to the Indian Constitution. Through the Finance Act, 2002, a change was brought about in the provisions of Sec.10(20) of the Act by defining the term "local authority" to mean only four kinds of entities. This was a departure from the past where a number of entities were being treated as "local authority" on the basis of principles laid down by the Apex Court in the case of Union of India vs. R.C.Jain 1981 (2) SCR 854 (also reported in SCC 308). It is also seen that in the case of Adityapur Industrial Area Development Authority vs. Union of India reported in 283 ITR 97 (SC), the said authority had claimed exemption from taxation under Article 289(1). In this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment folder. The gist of the objections are as under :- i) The reasons recorded quantify the income escaping the assessment whereas the reasons communicated do not do so. ii) The recorded reasons mentioned the basis for income escaping assessment whereas the reasons communicated do not contain any specifics but only generalities. iii) It is alleged that the reasons recorded were done so after issue of notice u/s 148 since the reasons are apparently on an independent sheet of paper. iv) The exact reasons recorded could have been communicated rather than an interpretation of the same. 4.1. These contentions have been considered. The fact remains that reasons have been recorded and the same have been communication to the appellant, even though there may be minor differences in the hand written reasons recorded as placed in the assessment folder and the reasons communicated to the appellant. It is seen that such alleged discrepancies do not take anything away from the substance of the matter and the fact that the reasons have not only been recorded but that they have also been communication to the appellant implies that proper procedure was followed by the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditures made. It is seen that the ld. AO has not discussed anywhere in the body of the assessment order as to why the gross receipts have been brought to tax. However, before considering the issue whether the appellant's receipts are taxable or not or if they are, then what would be the taxable amount, we may examine the legal issues surrounding this matter. 6.1. The law, as it stood till FY 2002-03, mandated that any "local authority" would be exempt u/s 10(20) of the Act. From 01.04.2003 an Explanation was inserted which defined "local authority" as implying only Panchayats, Municipality, Municipal Committee (also District Board) and Cantonment Board. This confined the benefit of Sec. 10(20) of the Act to the above mentioned four categories of entities only. This had the effect of throwing out a large number of entities (like the present appellant) out of the umbrella of exemption. This amendment also implied that apart from the four categories specified therein no other entity could claim exemption, even if the statutes bringing them into existence specifically referred to them as "local authority". There are a plethora of rulings concerning entities which suddenly found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In the above two cases, the activities of the concerned organizations are somewhat similar to the present case and for them the two benches of Hon'ble ITAT have directed registration u/s 12A of the Act. Since in this case no such shelter is available, the taxability of receipts cannot be denied. 6.3 The ld. AR has relied on a number of case laws from time to time which have been considered with respect to various grounds of appeals. However, the ld. AR has specifically emphasized the judgement in the case of Ganna Vikas Parishad, Saharanpur (ITA Nos. 2812 to 2815/Del/2005) which pertains to a finding given that penalty u/s 271B of the Act is not exigible since the assessee is not carrying on a business or profession. As is obvious, this case only illustrates the fact that the receipts of the appellant, being identical to the facts of this case, cannot be considered to be business or professional receipts. However, the point to be emphasized is that it cannot be inferred that the receipts are not taxable under other heads of income. 6.4 It is also seen that the ld. AR has taken pains to point out the statutory provisions [viz. The UP Sugarcane (Regulation of Supply and Purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered for taxation. Accordingly, the ld. AO is directed to allow the expenses as per the accounts maintained by the appellant and bring to tax only the surplus remaining thereafter. Thus, these grounds are treated as partly allowed." 8.4. Ld. Sr. DR inviting attention to the impugned order submitted that the directions of the CIT(A) may kindly be modified to hold that only allowable expenses may be allowed and not all expenses as the AO has not considered them. 9. Considering the written submissions filed before the Bench, it was seen that on behalf of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount of said contribution paid in the name of commission for any other purpose or to distribute it or any part of it to anybody as profit/income. It has 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 nor 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 authority that the assessee has utilized the commission amount for any other purpose similarly the "surplus" not spend is fully covered by the order of the Delhi Bench in N.S.Committee, Village-Thanabhawan, Tehsil-Shamli, Dist.- Muzaffarnagar order copy filed. 10. In the light of the written submissions advanced by the assessee qua the departmental ground and grounds of the assessee wherein submissions on behalf of the revenue have already been addressed in the earlier part of this order. We are of the view that ground nos.-1,2 3 in the appeals of the assessee deserves to be dismissed as the same have not been addressed in the written submissions and it is presumed that the assessee has nothing to say. The findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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-1 2 of the Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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