2015 (1) TMI 1236 - AT - Income Tax

Grant from the Government - whether receipts of the assessee cannot be treated as income u/s 2 (24) - Held that - We are of the considered view that since the above Grants or receipts are received by the assessee either from the government or any other agency for a particular purpose and assessee has no independent right over it it would not partake the character of income u/s 2 (24) of the Act. Though this argument was not raised by the assessee before the lower authorities and the assessee had been claiming deduction u/s 80P (2) of the Act or exemption u/s 11 of the Act but the ground or argument raised before us is plausible and legal. In the instant case as the assessee has no independent right to use the grant in a manner in which it likes. It has to be utilized for a particular purpose in terms of grants. Since these arguments are raised first time before the Tribunal we are of the view that this aspect should be examined by the Assessing Officer while Assessing the income of the assessee. Accordingly we set aside the order of the CIT(A) & restore the matter to the file of the Assessing Officer with the direction to the reexamine the claim of the assessee in the light of the new argument. - Decided in favour of assessee for statistical purpose.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Nature of receipts (Government Grants and Commissions) under Section 2(24) of the Income Tax Act.
3. Applicability of deductions under Section 80P(2) and exemptions under Section 11 of the Income Tax Act.
4. Ad-hoc disallowance of 50% of expenses.
5. Excessiveness of additions upheld by CIT (A).

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed late by 56 days. The Tribunal condoned the delay after being convinced by the explanation provided by the assessee that the concerned officer was unavailable at the relevant time. The appeal was admitted for hearing.

2. Nature of Receipts under Section 2(24):
The core issue was whether the receipts from the Government and contributions in the form of commissions from sugar factories or cane growers' societies could be considered as income under Section 2(24) of the Income Tax Act. The Tribunal noted that the assessee, a Cane Development Council constituted under the U.P. Sugar Cane (Regulation of Supply and Purchase) Act, 1953, received funds specifically for developmental activities. The Tribunal held that since these grants or receipts were for specific purposes and the assessee had no independent right over them, they would not partake the character of income under Section 2(24) of the Act. This argument was deemed plausible and legal, requiring proper adjudication by the Assessing Officer.

3. Applicability of Deductions and Exemptions:
The assessee initially claimed deductions under Section 80P(2) and exemptions under Section 11 of the Income Tax Act, which were denied by the Assessing Officer and upheld by the CIT (A). However, the Tribunal found that the new argument regarding the nature of the receipts as non-income was valid and needed to be examined afresh by the Assessing Officer.

4. Ad-hoc Disallowance of 50% of Expenses:
The Tribunal did not specifically address the issue of the ad-hoc disallowance of 50% of expenses other than administrative expenses made by the CIT (A). This issue was implicitly included in the remand for re-examination by the Assessing Officer.

5. Excessiveness of Additions Upheld by CIT (A):
The Tribunal found that the CIT (A) had not properly appreciated the facts, rules, and regulations, and the principle of natural justice was not followed as sufficient opportunity was not provided to the assessee. The matter was remanded to the Assessing Officer for a fresh examination in light of the new arguments presented.

Conclusion:
The Tribunal set aside the order of the CIT (A) and restored the matter to the Assessing Officer to re-examine the claim of the assessee, particularly focusing on whether the receipts could be considered income under Section 2(24) of the Income Tax Act. The Assessing Officer was directed to consider the specific provisions and rules cited by the assessee and to afford a reasonable opportunity for the assessee to be heard. The appeal was allowed for statistical purposes.