TMI Blog2019 (4) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] The Revenue has pointed out that an amendment has been brought on Statute to section 40(a) by inserting clause (iib) disallowing amounts remitted to State Governments claimed as expenditure and the said amendment is effective from the impugned year only. Notwithstanding the same, since the Hon'ble High Court has held that the remaining 80% of the collection by the assessee was not in the nature of income at all we are bound by the same. Respectfully following the case of the assessee for preceding years therefore we hold that the entire amount collected by the assessee was not in the nature of its income. - decided in favour of assessee. - ITA No.58/Chd/2018, ITA No.100/Chd/2018 - - - Dated:- 28-2-2019 - Shri Sanjay Garg, Judicial Member And Smt. Annapurna Gupta, Accountant Member For the Assessee : Shri Vishal Mohan, Adv. For the Revenue : Smt.Chanderkanta, Sr. DR ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present are cross appeals preferred by the assessee and Revenue against the order dated 20.11.2017 of the Commissioner of Income Tax (Appeals), Shimla [hereinafter referred to as CIT(A)] passed u/s 250(6) of the Income Tax Act,1961( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 2013 w.e.f. 1.4.2014 wherein similar placed amounts appropriated by the State Governments were specifically held as not allowable as an eligible expenditure. The A.O. accordingly treated the amount of ₹ 89,98,634/- as the income of the assessee. Further, from the perusal of income and expenditure statement filed by the assessee it was noticed by the A. O. that an amount of ₹ 1,27,90,072/- had been deposited with the treasury which was debited to the Income and Expenditure statement as an expense. The A.O. disallowed the same by holding that the same was not related to business activity of the assessee. He held that the same was diversion/distribution of the income of the Society to the State Government. Accordingly, the deduction for the same was disallowed and added to the income of the assessee. 3. The matter was carried in appeal before the Ld.CIT(A) who held that the remission to the treasury by the assessee in line with clause 8.2 of the byelaws was not be treated as income of the assessee. However, 80% retained after remitting to the treasury was held to partake the character of the income. The Ld.CIT(A) followed his own decision in the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders was placed before us. Subsequently, after the conclusion of the hearing, copy of the order of the Hon'ble Jurisdictional High Court confirming the order of the Tribunal was placed before us. It was pointed out therefrom that the question framed before the Hon'ble High Court was whether 80% of the balance amount was to be treated as income of the assessee. Our attention was drawn to para 16 of the order of the Hon'ble High Court as under in this regard: 16. It is in this backdrop, coupled with a firm finding of fact to the effect that the surplus of income over expenditure of the respondentAssessee belongs to the State Government and has been duly deposited in the pubic Exchequer that the question which falls for determination is-whether 80% of the balance amount duly deposited by the respondent-Assessee in the Government Treasury, after deducting the expenses incurred by it, amounts to taxable income under the IT Act, 1961, more so when the respondent-Assessee is not registered under Section 12AA of the said Act? 7. It was pointed out that the Hon'ble High Court had answered the question of law in negative against the Revenue and in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssesses, also belonged to the State Government which was duly deposited in the Government Treasury. Hence, it does not partake the character of 'profit or gain earned by the respondent-Assessee. 32. The non-registration of the respondent-Assessee, under Section 12AA of the IT Act, 1961 is inconsequential, for an occasion to seek exemption from payment of tax on the income by a Trust or Institution serving the cause of general public utility would arise only when some actual income is derived. The respondent-Assessee though is a 'juristic person' but in the absence of any income having been earned by it through 'profits or gains' within the meaning of Section 2 (24) of the IT Act, 1961, the respondent-Assessee is indeed not obliged to seek exemption under Section 12AA of the IT Act, 1961, for it does not have any taxable income. 33. For the reasons afore-stated, the substantial question of law is answered in negative against the appellant-Revenue and in favour of respondent-Assessee. 8. The Ld. DR, on the other hand, relied upon the order of the CIT(A) pointing out that the addition drew strength from the amendment to section 40 wherein the sub cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes have arisen in respect of income-tax assessment of some State Government undertakings as to whether any sum paid by way of privilege fee, license fee, royalty, etc. levied or charged by the State Government exclusively on its undertakings are deductible or not for the purposes of computation of income of such undertakings. In some cases, orders have been issued to the effect that surplus arising to such undertakings shall vest with the State Government. As a result it has been claimed that such income by way of surplus is not subject to tax. It is a settled law that State Government undertakings are separate legal entities than the State and are liable to income-tax. 12.2 In order to protect the tax base of State Government undertakings vis-avis exclusive levy of fee, charge, etc. or appropriation of amount by the State Governments from its undertakings, section 40 of the Income-tax Act has been amended to provide that any amount paid by way of fee, charge, etc., which is levied exclusively on, or any amount appropriated, directly or indirectly, from a State Government undertaking, by the State Government, shall not be allowed as deduction for the purposes of computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly, these issues have already been decided by the I.T.A.T. in the earlier years in the case of the assessee holding that 20% of the amount received which was remitted directly to the State treasury was not the income of the assessee while relief of 80% of the amount was allowed to the extent the surplus remaining out of it was remitted to the State Government in the impugned year. Further the jurisdictional High Court has upheld the order of the ITAT in its order dated 07-12 2018. The Revenue has pointed out that an amendment has been brought on Statute to section 40(a) by inserting clause (iib) disallowing amounts remitted to State Governments claimed as expenditure and the said amendment is effective from the impugned year only. Notwithstanding the same, since the Hon'ble High Court vide its order passed in the case of the assessee itself, in ITA No.85 of 2018 alongwith connected matters, dated 07-12-2018, has held that the remaining 80% of the collection by the assessee was not in the nature of income at all we are bound by the same. Respectfully following the decision of the Hon'ble High Court and that of the ITAT in the case of the assessee for preceding years therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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