2014 (11) TMI 100 - AT - Income Tax

Diversion by overriding title in respect of infrastructure contribution untenable or not Held that - Following the decision in Mussoorie Dehradun Development Authority Versus Addl. CIT 2011 (12) TMI 375 - ITAT, Delhi AO found that assessee had claimed to be maintaining an infrastructure fund to which a fixed portion of its receipts is credited and out of which infrastructure related expenses are incurred assessee contended that the State Government has an overriding title on these receipts and, therefore, they do not form part of the total income of the assessee - assessee has source of income from more than 18 counts, out of that certain incomes are of miscellaneous income, rental income, interest income on FDRs - an authority was given to the assessee for collecting certain fees and charges in the process of its functioning - If the State Government had collected the fees and charges and then given the same to the assessee for doing its work, it would be the assessee s income - it does not make any material difference to the situation if the government has allowed the assessee to collect fees and charges directly instead of infusing the funds by it in the assessee - the assessee could retain the funds collected by it under this Act - its powers to collect the funds are already in existence u/s 20 of the Act - It has to credit the fees and charges collected by it to its own funds and which is to be applied towards fulfillment of assessee s object. The office memorandum specifically provides that 80 per cent of the amount from this account would be spent on capital expenditure and 20 per cent can be spent on revenue account - it reveals that assessee has source of income from more than 18 counts, out of that certain incomes are miscellaneous income, rental income, interest income on FDRs the infrastructure funds as a separate entity, independent of assessee is a fiction - It is not registered under s. 12A of the Act and claimed the benefit of exemption under ss. 11 and 12 of the Act thus, the order of the CIT(A) is upheld - Decided against the assessee.

Summary

Issues Involved:
1. Diversion of income by overriding title in respect of infrastructure fund contributions.
2. Admission of additional evidence.

Issue-wise Detailed Analysis:

1. Diversion of Income by Overriding Title in Respect of Infrastructure Fund Contributions:

The primary issue in this appeal was whether the infrastructure fund contributions collected by the assessee were subject to diversion of income by overriding title, thus not forming part of the assessee's total income. The assessee argued that the funds collected were under the overriding title of the State Government and hence, should not be included in its income.

The Tribunal noted that this issue had already been decided in favor of the Revenue in the assessee's own case for the assessment years 2006-07 and 2007-08. The Tribunal reiterated the findings from the earlier decision, emphasizing that the assessee was a body corporate established under the UP Urban, Planning and Development Act, 1973, with the power to collect fees and charges as part of its income. The Tribunal referred to the provisions of the Act, particularly sections 4, 7, 20, and 41, which outline the establishment, objectives, fund management, and State Government's control over the assessee.

The Tribunal examined the Office Memorandum dated 15.01.1998 issued by the UP Government, which directed that certain fees and charges collected by the assessee be deposited in a separate account for residential infrastructure development. The Tribunal concluded that this memorandum did not create an overriding title in favor of the State Government but merely regulated the application of income. The funds collected were part of the assessee's income and were to be used for fulfilling its objectives, with the Empowered Committee providing regulatory oversight.

The Tribunal also considered various judicial precedents on the concept of diversion of income by overriding title, including decisions from the Hon'ble Supreme Court and High Courts. The Tribunal found that the funds collected by the assessee were not diverted at the source but were applied to fulfill its statutory obligations, thus constituting application of income rather than diversion by overriding title.

2. Admission of Additional Evidence:

The assessee attempted to introduce an unsigned and unattested document as additional evidence, which was purportedly an opinion on the issue at hand. The Tribunal rejected this request, noting that the document was not authenticated, lacked proper signatures, and no formal application for its admission as additional evidence was filed as per Rule 29 of the ITAT Rules. Consequently, the Tribunal did not consider this document in its decision-making process.

Conclusion:

The Tribunal upheld the order of the CIT(A), concluding that the infrastructure fund contributions were part of the assessee's income and not subject to diversion by overriding title. The appeal of the assessee was dismissed, affirming the earlier decision in favor of the Revenue. The Tribunal also refused to admit the additional evidence presented by the assessee due to procedural deficiencies. The judgment was pronounced in the open court on 21st March 2014.