9911796707
TMI Blog2010 (7) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the Learned CIT(A) is right in holding that amount which was been allocated to the District but could not be actually disbursed due to imposition of model code of conduct due to declaration of election is to treated as amount applied towards the charitable objects of the assessee. 4. The assessee in its Cross objection has raised the following grounds: 1. The Learned CIT(A) Panchkula has erred by upholding the gross amount received from Central and State Governments for the purpose of disbursement of District Authorities and Various Authorities of State Government as Income of Society. 2. The Learned CIT(A) Panchkula has erred by upholding that interest on surplus amount kept in Bank in accordance with instructions which is part of grant in aid and to be disbursed along with the amount received from Central and State Government as Income of the Society. 3. The Learned CIT(A) Panchkula has erred by declining the Revised Form No.10 submitted during the course of assessment proceedings as per circular No. 273 dated 3.6.1980 issued by CBDT. 6. The brief facts of the case are that assessee society is formed by the Government of Haryana as per the regulations of Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er distributed nor allocated nor spent as it was not allowed by the Finance Department, Haryana Government as it would violate the Model Code of Conduct. The assessee had shown the AOE money received as its income for the year and expenditure was debited against the same, but it was not utilized in entirety. Out of the scheme money received the assessee is spending a part of the scheme money on administrative and office expenses. Accordingly, the assessee furnished a declaration in Form No.10 under Rule 17 of Income Tax Rules that a sum of ₹ 51,25,966/- was the accumulated income to be utilized for charitable purposes in future. 8. The Assessing Officer was of the view that provisions of sections 11 / 12 of Income Tax Act were applicable to scheme money. The Assessing Officer on the basis of the balance sheet and the profit and loss account noted that during the year under consideration, the assessee had received and disbursed / utilized the under mentioned funds under the two schemes respectively. SJSRY Scheme Opening Balance of Last Year Rs. 4,28,20,000/- Money received during the year Rs. 7,57,96,000/- Interest Income earned during the year on SJSY funds ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of ₹ 9,00,80,992/- was held as taxable in the hands of the assessee. The plea of the assessee that the scheme money received from Govt. of India is not voluntary contribution and / or donation as envisaged under section 11/12 of the Act was rejected by the Assessing Officer as the assessee had booked all the scheme money received as its income for the year and the same was reflected in the income and expenditure account. Further, the assessee had shown it as expenditure in profit and loss account for the year under consideration but the assessee had not sanctioned and not allocated the distribution of the scheme money remaining unutilized with it. The plea of the violation of Model Code of Conduct was also rejected by Assessing Officer. Further, the assessee had shown interest income earned at ₹ 12,12,600/- in the account of SJSRY and ₹ 7,96,332/- in the account of NSDP. The said interest income was held as taxable by the Assessing Officer and it was also held that the same would not qualify for exemption as it is income of the charitable institution, nor a trust. The CIT(A) upheld the order of Assessing Officer in treating the entire receipts under the schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication dated 26th Sept, 2008 issued by the Ministry of Housing, Govt. of India in connection with the grants under S.J.S.R.Y scheme where it has been stipulated that the grant is subject to the conditions that the funds if not utilized for the purpose for which it was given, have to be refunded along with interest to the authorities. The learned AR thus submitted that the various amounts received by the assessee are not to be included as income of the assessee. Reliance was placed on ITO Vs. Punjab Sports Council (ITA No. 904/Chandi/2006 - Assessment Year 2003-04). Similarly, the interest earned by the assessee on the funds parked in FDRs with banks became part of the scheme and the same had to be expanded as per the scheme. Reliance was placed in CIT Vs. Karnataka Urban Infrastructure Development and Finance Corporation [284 ITR 582 (Karnataka)] and Gujarat Municipal Finance Board Vs. DCIT [221 ITR 317 (Guj.)), that such interest is not the income of assessee. Our attention was drawn to the scheme formulated by the Govt. of India placed at pages 5 to 23 of the assessee's paper book. 12. The learned DR placed reliance on the orders of the Assessing Officer and CIT(A) and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the poor and any such other scheme as may be started subsequently by the Government of India or Haryana Government. iii) To maintain liaison with District Urban Development Agencies, Faridabad Complex Administration and Housing Board, Haryana in implementation of Nehru Rozgar Yogana and Urban Basic Services for the Poor or such schemes as may be started subsequently by the Government of India or Haryana Government of the benefit of Urban Poor. iv) To involve the Urban Local Bodies in the identification of beneficiaries of the Nehru Rozgar Yogana, maintaining with regard the selection of projects, allotment of sites etc. though District Urban Development Agencies. v) To monitor the implementation of the scheme under Nehru Rozgar Yogana / Urban Basic Services for the Poor and such other schemes as the Government body of the Society may, from time to time, direct of such schemes as may be started subsequently by the Government of India or Haryana Government for the benefit of Urban Poor. To achieve above said objects, the assessee may - i) Seek and receive grants, loans and such other sums of money as the Central / State Government may sanction from time to time. ii) Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount is to be disbursed to the distributing agencies by the assessee. The assessee is only allowed to retain fixed percentage for administrative and other expenses (AOE) - 5% and information and education component (IEC) - 2%, in order to meet its administrative and other expenses. The unspent amount out of the AOE and IEC components after meeting expenses is to be accumulated and spent. During the year under consideration, the assessee as per the Assessing Officer had shown the utilization of the amount under the respective schemes as under:- SJSRY Scheme Amount utilized under SJSRY Scheme in the relevant year Amount disbursed in the relevant year Rs.5,00,48,000/- Administrative and O.E. ₹ 76,39,000/- Total ₹ 5,76,87,000/- NSDP Scheme Amount Utilized under NSDP in the relevant year Amount disbursed in the relevant year ₹ 3,44,10,000/- Administrative and O.E. ₹ 3,27,000/- Total Rs.3,47,37,000/- 17. The assessee had not utilized the entire AOE & IEC funds during the year and in respect of the balance amount available, Form No.10 for utilization in future, was submitted along with return of income. 18. Further, the amount to be utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponents of the scheme on pro-rate basis and expenditure out of such interest money indicated accordingly." 22. The Govt. of India Vide communication dated 3rd May 2000 bearing No. K-14012/4/97-UPA/NRY further clarified that though there is no separate clarification for A&OE & IEC under SJSRY scheme, the States can utilize the funds for A&OE within the prescribed limits. In other words the expenditure on A&OE, IEC, etc. should be subsumed in the funds released for the specified components of SJSRY. Vide Govt. order No. G 24011/6/2005-UPA-1 dated 11th July 2005, allocation of Central funds for the year 2005-06 were made under the SJSRY scheme. The clarification in guidelines for the utilization of the grant in said SJSRY scheme were issued by the Govt. of India on 29.3.2006 vide G.O. No.G-24011/8/2005-UPA-I, which provided as under:- "2. The above grant is subject to the following conditions namely:- (i) Utilize the grant in accordance with the approved guidelines for the implementation of the Scheme. (ii) Provide the State share in the sharing pattering of 75.25 between the Central Government and the State Government. (iii) Distribute / allocate in any of the components / sub c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Secretary, Govt. of Haryana, Urban Development Department and the copy of Instructions issued by Finance Deptt., Haryana to ensure non violation of Model Code of Conduct." . 26. The Assessing Officer vide letter dated 6.11.2007 requisitioned the assessee as under:- "1. You have shown total scheme money received during the financial year 2004-05 relevant Assessment Year 2005-06 at ₹ 18,04,96,000/-. Out of this the amount utilized by you during the financial year 2004-05 relevant to Assessment Year 2005-06 has been stated at ₹ 13,09,37,000/- ) please refer to your submission dated 6.11.2007. You have also received interest sat ₹ 20,08,992/- for the Assessment Year 2005-06 and the amount of interest carried forwarded form P.Y. is at ₹ 1,00,70,928/-. The amount of unutilized grant carried forwarded form P.Y. at ₹ 8,10,71,000/-. Please refer to your written submission field on 6.11.2007 where you have also claimed ₹ 1,04,70,000/- as being utilized. ……. 2. You have shown interest income of ₹ 1,00,70,928/- carried forwarded from P.Y. as ₹ 20,08,992/-. As interest received for the Assessment Year 2005-06, which you have st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the succeeding year. In case of their non utilization at the close of the scheme, the funds are to be refunded alongwith interest to the Government of India / State Government. Such grants received by the assessee for further disbursement to district authorities do not belong to the assessee society. The grants do not form corpus of the assessee nor it is income of the assessee under section 11 of the Act. The said grants are not donations or voluntary contributions u/s 12 of the Act, which are received without any conditions and can be utilized in any manner. The assessee in present set up is the trustee of the grants given by the Government of India / State government under the various schemes floated for the State of Haryana, which is in the nature of Special Fund entrusted to the assessee for further disbursement to District authorities. Accordingly, the grants received by the assessee are not to be considered either as income or for ascertaining the amount expanded or the amount to be accumulated. The provisions of section 11 and 12 of the Act are not applicable to the grants received by the assessee under the SJSRY scheme or NSDP scheme. In view of the same, the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution within the meaning of section 12 of the Act, hence could not be included in the total income of the assessee society. 35. In CIT Vs. Kerala Hand Development Corporation Ltd (232 ITD 575)(Ker.), it was held the subsidy granted by Government, which covers the supervision charges and overhead expenses of the corporation cannot be treated as a trade receipt and it does not partake character of a revenue receipt. 36. The case of the Revenue is that the assessee had shown the grants received during the year as its income of the year and hence its treatment is to be considered. We find no merit in the stand of the Revenue in view of the ratio laid down by the Hon'ble Suprme Court in Kedar Nath Jute Manufacturing Company Ltd Vs. CIT [82 ITR 363 (SC)] wherein it has been held 'whether the assessee is entitled to a particular deduction or not will depend on the provision of the law relating thereto and not on the view which the assessee might take of his right nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter'. The assessee had shown the entire amount as its income and also claimed the amounts to be disbursed as its exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce non-applied grants received under the two schemes. However, as the receipts on account of A&OE and I.E.C. are held to be income u/s 11 of the Act in the hands of the assessee, in case of its non-application towards the objects, the assessee is to furnish its intention of expanding the same in future by way of Form No.10 under Rule 17 of I.T. Rules. The assessee in the present case has furnished on record Form No.10 in respect of the balance non-applied grants along with the return of income and in view thereof, such income is not includible in the hands of the assessee for the year under consideration. The Ground No.3 raised by the assessee in its cross objection is thus allowed as indicated hereinabove. 39. The Ground No.1 raised by the Revenue and the Ground No.2 raised in the cross objection by the assessee are against the treatment of interest income as income from property held under Trust and claim of exemption u/s 11 of the Act. The assessee as per the directions of the Central & state Government is to keep the funds in separate accounts with bank and interest earned on such deposits was treated as part of the grants under the respective schemes to which the said funds r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
