TaxTMI 
TaxTMI 
2012 (9) TMI 436
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.... and Rs. 1,87,27,56,000/- (A.Y. 2007-08), made on account of grant received during the year. 3. The assessee Nigam was constituted under the Uttaranchal [U.P. Water Supply and Sewerage Act, 1975 (Adoption and Modification)] Order, 2002. It functions under the provisions of the U.P. Water Supply and Sewerage Act, 1975. It is engaged in developing infrastructure for water supply, sewerage, sewerage disposal, etc., in the State of Uttarakhand. It acts as the implementation agency of the Government for various water infrastructure projects. 4. The Assessing Officer observed that the assessee Nigam had received various grants from the Government during the year. The assessee stated before the Assessing Officer that these were capital grants fo....
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....ong in holding that the grants did not constitute income of the assessee. 9. The learned counsel of the assessee, on the other hand, has placed strong reliance on the impugned orders. It has been contended, as before the authorities below, that whereas part of the receipt of the assessee was treated by the Assessing Officer to be the assessee's income, no deduction for the corresponding expenditure incurred by the assessee was allowed; that the Ld. CIT (A) has correctly taken into consideration the complete factual as well as legal position while deciding in favour of the assessee; and that, therefore, there being no force therein, the appeals filed by the department be dismissed. 10. We have heard the parties and have perused the materia....
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....er error committed by the A.O. was that, while he treated the assessee's receipt (a part of it) as revenue in nature, he did not allow any deduction for the expenditure incurred wholly and exclusively for purposes of earning the same. This is against basic principles of accounting as well as provisions of law. As discussed above, the assessee's income has to be determined in a commercial manner. All the receipt corresponding to the work done by it during the previous year has to be accounted for as income; the expenditure incurred for the same has to be allowed as expenditure. It is understood that the assessee is working on a 'cost plus' method, i.e. the actual cost of the work done by it is paid to it by the Government; in addition, it is....
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....s, it is not necessary that the assessee's profits and gains from business (purely on account of its receipt and expenditure on account of the work done by it) would be nil, even though arithmetically the two figures are same. 1.10 The issue for determination is whether the A.O. was correct in treating an amount of Rs.85.68 crore as the assessee's income. In view of the foregoing discussion, it is held that the A.O. was correct in treating the amount as the assessee's revenue receipt but he was not correct in treating the same as its income. Since the assessee has claimed that corresponding amount was actually incurred as expenditure, wholly and exclusively for doing the work for which the amount in question was received and there is no ad....