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2014 (1) TMI 1764
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.... of Rs. 25,10,00,000 on 29.03.2008 as income of the appellant. 3 . The Ld. CIT Panchkula also erred in ignoring the fact that the grant provided by the State Government is not a voluntary contribution but is in respect of amount for which the appellate is a nodal agency and the same is provided under the Plan Budget of the State Government. 4. The Ld. CIT Panchkula further erred in ignoring the fact that the appellate is acting as nodal agency for disbursement of these funds to the District Collectors of the State of Haryana for promotion of regulated development of rural areas and to provide basic amenities, sanitation, hygiene, residential and housing facilities to villagers in and around villages. 5. That the CIT (A) further gravely erred in initiating penalty proceedings u/s 271(l)(c) of the Income Tax Act. 3. The brief facts of the case are that the assessee had furnished return of income on 30.9.2008 declaring total income at nil. During the course of assessment proceedings the assessee was asked to explain the nature of activities carried on by it and also to file copy of registration certificate issued under section 12AA of the Act. In th....
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.... is shown as Grants-in-Aid in receipt and expenditure account filed by the appellant with return of income. ii) Sanction order of Haryana govt. Dated 27.03.2008 shows that there is no condition as to refund of the unspent amount to the Govt. as in case of other unspent funds in Govt. iii) The appellant has not refunded surrendered the unutilized amount during the year. This fact is admitted by the appellant vide submission dated 09.12.2010 before the AO. iv) If the unutilized amount is not refunded to the Govt. it automatically becomes income of the appellant. v) No approval whatsoever was taken to carry forward/accumulate the amount." 5. In view thereof, the grants-in-aid was treated as income of the assessee as the assessee had failed to apply 85% of its income towards its objects. The assessee was required to specify by notice in writing to the Assessing Officer the purpose for accumulation in accordance with provisions of section 11 (2) of the Act. The CIT (Appeals) thus held as under: "The appellant has failed to specify, by notice in writing given to the office in the prescribed manner and the purpose for which the income is bei....
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....urther our attention was drawn to the English version of the letter dated 20.11.2008 placed at page 35 and 36 of the Paper Book under which it was specified that available funds of Rs. 50 crores could be spent on providing infrastructural facilities under Mahatma Gandhi Gramin Basti Yojna. It was pointed out by the learned A.R. for the assessee that an amount of Rs. 25 crores was initially granted to the assessee and further additional grant of Rs. 25 crores was made in the next year as is apparent from the receipts and payments reflected at pages 38 and 39 of the Paper Book. During the succeeding year an amount of Rs. 10 crores was spent on the scheme. In the year ending March, 2010 the grants-in-aid was Rs. 69.66 crores and the assessee spent Rs. 79.17 crores. The learned A.R. for the assessee pointed out the issue arising in the present appeal is whether the grants-in-aid was income in the hands of the assessee. Reliance was placed on the ratio laid down by the Hon'ble Punjab & Haryana High Court in case of CIT Panchkula Vs. State Urban Development Society in ITA No.210 of 2011 (date of decision 19.10.2011) for the proposition that grants-in-aid were not income of the assess....
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....urya Vihar, Opposite Sector 4, Gurgaon Member .. (x) Shri Deep Chand Phulia, 622, New Diwan Nagar, Near Government High School, Kamal Camp. Panipat Member .. (xi) Shri Bhom Pal Singh, Advocate, 'Ashirwad', Village & Post Office Kaimalgarh, Jhajjar Member .. The Headquarter of the Authority shall be at Chandigarh. .. URVASHI GULATI Financial Commissioner and Principal Secretary to Government, Haryana Development and Panchayats Department 11. The copy of the notification is placed at page 25 of the Paper Book. The Haryana Panchayati Raj (Amendment)Act, 2007 amended Haryana Panchayati Raj Act, 1994 vide notification dated 9.4.2007 and copy of the same is placed at pages 1 to 24 of the Paper Book. Under the said Amendment Act it is provided that under section 220(1) of the Act, the Government by notification shall establish and constitute for the purposes of this Chapter an authority to be known as the 'Haryana Rural Development Authority'. The said authority shall be a body corporate having perpetual succession and a common seal. Under section 229 of the Amendment Act the objects of the authority ....
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....ed towards meeting- (a) expenditure incurred in the administration of this Chapter; (b) cost of acquisition of land for purposes of this Chapter; (c) expenditure for development of land; (d) expenditure for such other purposes as the Government may direct or permit. (3) The Authority shall keep its fund in any Scheduled Bank. (4) The Authority may invest any portion of its funds in such securities or in such other manner as may be prescribed. (5) The income resulting from investments mentioned in sub-section (4) and proceeds of the sale of the same shall be credited to the fund of the Authority. 14. Under section 237 of the Amendment Act, the authority is to maintain proper accounts and also prepare an annual statement of accounts including the Balance Sheet in such form, as may be prescribed. The said accounts shall be subject to audit annually and the audited accounts were to be forwarded to the Government annually. 15. Under part-G of the said Amendment Act, it is provided that the said authority would be controlled by the Government and Panchayati Raj Institutions. Under sub-section (1) of section 252 of the A....
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....of the authority shall be discharged by the Government. 18. Under section sub-section 262 of the Amendment Act the Government may by notification in the official gazette, make rules for carrying out the purposes of this Chapter. Further under section 264 of the Amendment Act the power is vested with the Government to make grants, advances and loans to the authority, which reads as under: "The Government may make such grants, advances and loans to the Authority, as the Government may deem necessary, for the performance of the functions under this Chapter and all grants, loans and advances so made shall be on such terms and conditions, as the Government may determine." 19. The reading of the above said provision of the Haryana Panchayati Raj Amendment Act reflects that the assessee authority was constituted by the Government in order to govern and implement specified acts which were entrusted to it and for the purpose of carrying on the said activities the grants, advances and loans were made by the Government to the constituted authority i.e. the assessee before us. 20. As per the order dated 27.3.2008, the Financial Commissioner & Principal Secretary to Government....
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....hat the available funds of Rs. 50 crores with the assessee could be spent on the infrastructural facilities under the Mahatma Gandhi Gramin Basti Yojana. Copy of the said communication in Hindi is placed at page 35 of the Paper Book alongwith English translation at page 36 of the Paper Book. The assessee thereafter for the year ending 31.3.2009 as per the receipts and payments account had shown further grants-in-aid of Rs. 25.10 crores out of which Rs. 10 crores was spent on the development of the scheme and balance of Rs. 17.46 crores alongwith balance of Rs. 25.10 crores totaling Rs. 42.56 were carried forward to the succeeding year. Copies of the Balance Sheet and receipts and payments account are placed at pages 38 and 39 of the Paper Book. Further during the year ending 31.3.2010 the assessee received grants of Rs. 69.66 crores and out of the total funds allocated, Rs. 79.17 crores were spent on the development of scheme and the balance of Rs. 34.83 crores was carried forward to the succeeding year. The Balance Sheet of receipts and payments account for the year ending 31.3.2010 are placed at pages 41 and 42 of the Paper Book. 21. The assessee had filed an application for r....
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.... time and further under section 253 of the Haryana Panchayati Raj Amendment Act, it is provided that the assessee had to furnish reports, returns, records and other information to the Government from time to time and as called for. Further the assessee authority can be dissolved by the State Government as per the provisions of section 263 of the Haryana Panchayati Raj Amendment Act and after the dissolution, the properties, funds, dues, etc., which are vested in or are realizable by the authority, in turn shall vest or be realizable by the Government. It is further provided that the incomplete development work would be carried on by the Government. Under section 264 of the Haryana Panchayati Raj Amendment Act, the Government is to make grants, advances and loans to the authority for the purpose of the functions, as may be prescribed by the Government. 23. In the above said facts and circumstances, where the authority had been constituted by the Government for the specific purposes of carrying on the activities of the Government and where the grants and advances or loans are disbursed by the Government to the assessee, the said grants, advances cannot not be held to the inc....
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.... assessee do not belong to the assessee-Society. The grants do not form corpus of the asseesee nor it is income of the assessee under Section 11 of the Act. Such grants are not the donations or voluntary contributions under Section 12 of the Act. Thus, the grants received by the assessee should not be considered either as income or for ascertaining the amount expanded or amount to be accumulated. Provisions of Section 11 and 12 of the Act are not applicable for grants received by the assessee under the Schemes It further held that the assessee is statutorily required to file its intention of expanding the accumulated funds in future by way of Form No. 10. The argument that the assessee has shown the entire amount as its income in the profit and loss account as not determinative of nature as the mere entries in the books of account do not decide the nature of receipt and its taxability. The Tribunal also held that even if the amount is not disbursed due to imposition of model code of conduct by the Election Commission, the surplus at the end of the year cannot be included as income under Sections 11 and 12 of the Act. If the grant is not includable as income the surplus at the en....