AI Drafter 
TaxTMI 
TaxTMI 
2010 (7) TMI 1007
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....? 2. Whether on the facts and circumstances 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 forme....
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....heme money received under NSDP Scheme during the year was neither 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 Rs. 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....
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....laimed u/s 11 & 12 of the Act as the assessee had not utilized its income for its purposes and no declaration under Form 10 was given. Income of Rs. 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 Rs. 12,12,600/- in the account of SJSRY and Rs. 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 charitab....
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....rant is to be utilized in accordance with the approved guidelines for the implementation of the scheme. The learned AR further relied upon the 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 ....
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.... Board, Haryana / Chief Administrator, Faridabad Complex Administration, Faridabad, various schemes of Nehru Rozgar Yogna and the Scheme of Urban Basic Services 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 o....
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.... Opening Balance of Last Year Rs.3,82,51,000/- Amount received in the year Rs. 10,47,000/- Interest earned on NSDP funds Rs. 7,96,332/- 16. Out of the above said funds received by the assessee, the 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. Rs. 76,39,000/- Total Rs. 5,76,87,000/- NSDP Scheme Amount Utilized under NSDP in the relevant year ....
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....ormal interest at admissible rate from time to time, as per instructions of Reserve Bank of India. 2. ................ 3. The matter has been considered in this ministry and it has been decided that the total interest earned on such deposits in the Saving Bank Accounts under Swaran Jayanti Shahari Rozgar Yozana (SJSRY) will be distributed between all the components 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 provide....
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....cy receiving Grants from GOI and State Govt. and distributing the same to various District authorities for implementation of various Govt. of India schemes and supervising the execution of the schemes but has no discretion to utilize the amount as per own requirements. You are hereby requested to kindly take note of the same. We shall be very thankful to you. We are enclosing the allocation order approved by the then Commissioner & 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 Rs. 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 Rs. 13,09,37,000/- ) please refer to your submission dated 6.11.2007. You have also received interest sat Rs. 20,08,992/- for the Assessment Year 2005-06 and the amount of interest carried forwarded form P.Y. is at Rs. 1,00,....
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.... time to time. The second role of the assessee is to supervise the execution of funds for the schemes and furnish the utilization certificates for the grants released. The assessee society has no discretion to utilize the grants received from Government of India and State Government as per own requirements except the amount earmarked for meeting its expenditure under A&OE and IEC. The unspent grants allocated by the Government of India / State Government at the close of the year are to be treated as opening grants under the respective schemes at the start of 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....
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....152 (Hyd.)] held as under:- "Tied-up amounts need not, therefore, be treated as amounts which are required to be considered for assessment, for ascertaining the amount expended or the amount to be accumulated. Any non-refundable credit balance in the personal account of BW will be treated as income in the year in which such non-refundable balance was ascertained." 34. In Trustees of Shri Kot Hindu Shree Mander Vs. CIT [209 ITR 396(Bom], it was held that subscription amount received by the assessee trust from members by way of membership fee, was not voluntary contribution 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 o....
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....oss objection by Ground No.1 has raised the issue in respect of the grants received from the Central and State Government for the disbursement to District authorities as not being its income. In line with our discussion in the paras hereinabove, we allow the Ground No.1 raised by the assessee in its cross objection. The said grants are not to be included as income of the society u/s 11 & 12 of the Act and consequently, the assessee is not to apply or accumulate the said grants for its objects and hence, no requirement of furnishing the revised Form No.10 in respect of the balance 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....