TaxTMI 
TaxTMI 
2016 (11) TMI 526
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.... appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the issues raised in the aforesaid Grounds be set aside and that of the Assessing Officer be restored. 2. Briefly stated facts of the case are that assessee being a Cooperative Society engaged in the business of processing milk and manufacturing of milk products and cattle feed. Original assessment order u/s 143(3) of the Act was finalized on 15/12/2008 assessing the total income at Rs.NIL after setting off of unabsorbed depreciation to the extent of Rs. 5,42,28,647/- for Asst, Year 1999-2000 and Rs. 7,55,82,192/- + Rs. 64,74,228/- for Asst. Year 2000-01. Subsequently the assessment was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued after recording the reasons. During the course of reassessment proceedings on verification of the case record, it was found by ld. Assessing Officer that the assessee co-operative society received government grant of Rs. 728.12 lacs under Sampoorna Gramin Swarojgar Yogana (SGSY) scheme of the Government. Assessee placed necessary submissions along with evidences in the re-assessmen....
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....carrying out the particular project. It is not at all income of the appellant. In this regard, Copy of MOU executed between District Rural Development Agency, Nadiad, the appellant and Commissioner, Rural development, Government of Gujarat, Gandhinagar is attached herewith,(Page no. 62-67) Your Honour can observe from it that role of the appellant is only facilitator of the project. Grant received specifically for the project have been utilised for the objects of the project as mentioned in the MOU and not for the purpose of the normal activities of the appellant. Hence, grant received is neither the capital nor revenue income of the appellant but received for implementation of SGSY project. The details of Project are given hereunder: (a) SGSY PROJECT GRANT Kaira District Co-operative Milk Producers Union Ltd. popularly known as Amul Dairy, Anand (Assessee) is engaged in the Animal Husbandry and dairying activities to improve upon the socioeconomic status and community development of villages.In order to ensure that milch cattle become full time income generation activity for SGSY families and they are provided support of international standard by expert organisations, District....
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....lopment Agency (enclosed herewith) the appellant had to contribute some funds in addition to all technical services. (Para "cost of the project"' in MOU referred above). Appellant also have to pay 5% of penalty over and above the contribution made, if would not get completed in time. Therefore, question of income of the appellant does not arise by any stretch of imagination. . When alleged amount is not the income of the appellant at all, issue of escapement of income should not arise. The AO has alleged that the appellant started commercial activities much before the receipt of the aforesaid grant. Therefore, grant received by the appellant should have been treated as revenue in view of the provisions of the Act and judicial pronouncements in the cases of Sahney Steel and Press works Ltd, vs CIT 94 Taxman 368 (SC) and Kesoram Industries & Cotton Mills Ltd. vs CIT 191 ITR 518 (Cal). In this regard, appellant submits that the AO has relied on the two aforesaid decisions, facts of which are different than the facts of the present case. In case of Sahney Steel (supra) funds were made available to the assessee to assist it in carrying on its trade or business. Further that the ....
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....e observe that assessee being a co-operative society entered into Memoranum of Understanding in respect of the special project for "Improving the Socio economic condition of BPL families of Kheda district through Dairying and Animal Husbandry Activities". This agreement was entered into on 11th September, 2004 between the District Rural Development Agency, Nadiad, Kaira District cooperative Milk Producers Union, Anand and the Commissioner, Rural Development, Government of Gujarat, Gandhinagar to achieve following objectives:- a) To induct 15,000 high quality milch animals in 7,500 8PL households from two talukas of the Kheda district and to arrange good quality cattle shed for each of these families; ,. '; , b) To ensure availability of proper fodder, door step artificial insemination services, mobile diagnostic lab and skill up-gradation training in cattle-, management to beneficiaries; and c) In order to retain the quality of milk up to the international standards, to commission bulk chilling units and SS milk cans. Further this project mainly has following components: a) Induction of animal to the 8PL families - this component w/f| require subsidies from SGSY resources a....
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....justed towards future installment of the grant." 13. From a perusal of the above, it is evident that the interest earned by the assessee on unspent grants does not accrue in the hands of the assessee as a beneficial owner. The same is to be adjusted against the future installments of the grant payable to the assessee. This factual matrix is not negated and therefore we find no error in the approach of the Commissioner of Income-Tax (A) in holding that the stated interest income is not assessable in the hands of the assessee. The Hon'ble Karnataka High Court, in somewhat similar circumstances, in the case of CIT Vs. Karnataka Urban Infrastructure Development & Finance Corporation, 284 ITR 582 (Kar) held as under:- "Held, that there was no profit motive as the entire fund entrusted and the interest accrued on the deposits in the bank, though in the name of the assessee, had to be applied only for the purpose of welfare of the nation as provided in the guidelines. The whole of the funds belonged to the State Exchequer and the assessee had to channelise them to the objects of the centrally sponsored scheme of infrastructural development for the mega city of Bangalore. The entire ....
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....cessfully completed. However, this condition will not apply to the assets procured by the BPL families. Accordingly, the appellant has not claimed the expenses made on the project including depreciation on the assets purchased out of the said project grant in computation of its income. The grant as well as the interest accrued on this cannot be used for the purposes of normal activities of the appellant who is actually acting as a facilitator in the project. In such circumstances the decision of Hon'ble Punjab & Haryana High Court in the case of The Punjab State EGovernance Society (supra) is squarely applicable to the present case. The court has clearly held that grants and aid received from the government for a specific purpose cannot be treated as voluntary contribution or as taxable income of the society. It has also been held that interest received by the assessee on the amount of grant deposited in the bank was also in the nature of grant itself. 3.1.4. Besides, in the MOU it has been provided that the appellant will get incentive of 2% of the project cost after completion of the project. Thus, such incentive will be other than the grant and aid received by the appellant....