TMI Blog2017 (6) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the assessee. We considered that surplus earned on behalf of the Government for carrying out function of Public Distribution System as agent of Government is not taxable in the hand of the assessee. As elaborated in the order of the Ld.CIT(A) and considered that the Ld.CIT(A) is justified in deleting the addition made by the Assessing Officer by stating that surplus earned from functioning of PDS on behalf of Government cannot be taxed in the hand of the assessee. In view of the above stated facts and findings we uphold the order of the Ld.CIT(A). Deduction not found to be justified as the assessee failed to substantiate with relevant supporting evidence that the said amount was offered to tax in the earlier years - We have also gone through the paper book filed by the assessee and noticed that hand-written entry as per page no.126 was not sufficient to prove that such amount was offered to tax in the earlier year, therefore, we do not find any reason to interfere in the decision of the Ld.CIT(A) on this issue. - ITA.No.334/Ahd/2014 with C.O.186/Ahd/2014 - - - Dated:- 1-6-2017 - Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited of ₹ 15,99,01,084/- and not ₹ 67,16,76,274/- 4. Aggrieved against the decision of Assessing Officer the assessee filed n appeal before Ld.CIT(A). The Ld.CIT(A) allowed the appeal of assesee by observing as under: 5.4 I have carefully considered the assessment order, submission filed by appellant and remand report submitted by Assessing Officer. The undisputed facts of the present case as observed by Assessing Officer at para 3 of the assessment order are that appellant company was set up by Government of Gujarat (GoG) under the Companies Act 1956 vide its iovernment Resolution (GR) and has been set up for smoothening the Public Distribution System(PDS) like distribution of goods grains, edible oils etc among the poor people. On careful consideration of details submitted by appellant and from assessment order, it is observed that appellant is mainly carrying out two types of activities i.e. one activity being appellant manages the PDS and various public welfare schemes on behalf of the GoG and as per the instructions of the GoG with the motive of providing social and economic welfare and second activity being operating Petrol Pumps, Gas Agencies, Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these surplus fund will be treated as analogous to loan and the Gujarat state Civil Supplies Corporation will pay to the Government on funds so retained 12 %% interest per annum. Detailed term of this loan arrangement would be separately issued. Further, G.R. dated 06/07/1991 states as under: Government vide G.R. of even No. dated. 28.03.1985 read at (i) above had decided that the Public Distribution System Operation in respect of food-grains and eligible oils transferred to the Gujarat State Civil Supplies Corporation Limited should be carried out by said corporation from date of its incorporation, for and on behalf of the State Government and the resultant profit/loss arising in the transaction of the said items will be on Government Account..... ... 2. Government is further pleased to clarify that all direct expenses such as freight, gunny bags, labour charges, transport charges, packing expenses, guarantee charges, commission on sales relating to procurement of food grains and edible oils carried out on Government account shall be debited to Government Account subject to General supervision and instructions of the Government issued from time to time. As regards i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These prove beyond doubt that AO has passed the present order very hurriedly and without appreciating proper perspective of transactions and activities carried by appellant. On careful consideration of various activities carried out by appellant along with modus operandi as discussed herein above, it is observed that appellant estimates the procurement and distribution cost including transportation and logistics costs) and provides such estimates to the GOG and difference between the distribution price under the schemes mentioned above and the aggregate of purchase price and estimated procurement distribution cost (provided by the appellant) is reimbursed to the appellant as subsidy by the GOG. The subsidy reimbursed by the GOG is credited to segment related to GOG activities of the profit loss account maintained by appellant. In case the payment of subsidy by the GOG is higher than the difference between sales realization and purchase price and procurement of distribution cost there is surplus and surplus is not profit of the GOG as observed by the AO but it is excess subsidy received by the appellant on the distribution of various items under the PDS. Even for carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting has been accepted by Assessing Officer while passing the assessment orders u/s 143(3) of the Act for A.Y. 2005-06 to 2009-2010 hence AO was not justified in rejecting and making addition in current year when facts of present assessment years are identical with the facts of earlier assessment year. 5.7 Further, in A.Y. 2002-2003, appellant had distributed cement at the behest of the state government at the prices determined by the state government and similar addition made in case of appellant. While deciding the issue, the Hon'ble Ahmedabad I.T.A.T. vide its order dated jn I.T.A. No.l219/Ahd/2006 has held as under : We have considered the rival submissions. Under the scheme of the Act what is taxable 's the income accruing to the assessee and not all receipts. Therefore, unless the nature of receipt demonstrated that it was in the ncture of income accruing to the assessee, the same is not liable to tax. In the present case, the assessee was functioning at the behest of the State Government. Due to the earthquake in Gujarat, the cement was required to be distributed at a pre-determined price. Earlier the price was determined at ₹ 101 which was late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he distribution of various items under the PDS which is belonging to Government and payable to GOG along with interest after reducing commission earned by appellant.Considering the same, addition made by Assessing Officer for ₹ 67,16,76,274/- is deleted. As the main issue has been decided in favour of appellant, alternate claim made by appellant at Ground No. 3 has become infructuous and this does not require any further adjudication. 5. We have heard the rival contentions perused the material as per record. We have noticed that the assessee company was set up by the Government of Gujarat under the companies Act, 1956. The assessee company manage the public distribution system and other public welfare scheme on behalf of the Government of Gujarat. The Government of Gujarat has been providing handling commission as per the Government of Gujarat (GR) Government Resolution .We observed that the surplus which was earned by the assessee for the activities carried out on behalf of the Government of Gujarat belonged to the Government and payable to the Government along with interest after deducting of commission earned by the assessee. We further observed that the commission inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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