2015 (5) TMI 578 - AT - Income Tax

Income under section 2(24) - contribution in the form of commission received from Sugar Mills and co-operative cane growers society and Grants , received from State Government and Central Sugar Cane Committees for specified purposes being construction of road and other development works in the assigned area - Held 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 to use the grant in a manner in which it likes. It has to be utilized for a particular purpose in terms of grants, thus it would not partake the character of income u/s 2 (24) of the Act. 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 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 purposes.

Issues Involved:
1. Justification of confirming the addition of Rs. 9,43,620/- for the assessment year 2009-10 and Rs. 1,88,042/- for the assessment year 2008-09.
2. Admission of additional grounds by the assessee.
3. Nature of receipts under U.P. Sugar Cane (Regulation of Supply and Purchase) Act, 1953.
4. Treatment of contributions and grants as income under Section 2(24) of the Income Tax Act.
5. Applicability of judicial precedents and statutory provisions to the case.

Detailed Analysis:

1. Justification of Confirming the Addition:
The primary issue in these appeals was whether the ld. CIT(A) was justified in confirming the addition of Rs. 9,43,620/- for the assessment year 2009-10 and Rs. 1,88,042/- for the assessment year 2008-09. The assessee contended that these amounts should not be treated as income under Section 2(24) of the Income Tax Act.

2. Admission of Additional Grounds:
During the hearing, the counsel for the assessee moved an application to admit additional grounds, arguing that these grounds go to the root of the case. The additional grounds were admitted as they were legal in nature and required no further enquiry or investigation.

3. Nature of Receipts Under U.P. Sugar Cane (Regulation of Supply and Purchase) Act, 1953:
The assessee argued that the receipts were contributions in the form of commission and grants, which were to be utilized for specific purposes like construction of roads and other development works as mandated by the U.P. Sugar Cane (Regulation of Supply and Purchase) Act, 1953. The assessee claimed that these receipts should not be treated as income under Section 2(24) of the Income Tax Act because they were not for any business activity with a profit motive.

4. Treatment of Contributions and Grants as Income:
The Tribunal examined whether the contributions and grants received by the assessee could be treated as income under Section 2(24) of the Income Tax Act. It was argued that since these receipts were for specific purposes and the assessee had no independent right over them, they should not be considered as income. The Tribunal cited several judicial precedents, including the case of Cane Development Counsel, Nanpara, Bahraich, where similar issues were raised and the matter was restored to the Assessing Officer for re-examination.

5. Applicability of Judicial Precedents and Statutory Provisions:
The Tribunal referred to various judicial pronouncements and statutory provisions to support the assessee's claim. It cited the case of CIT Vs. U.P. Upbhokta Sahkari Sangh Limited, where the Hon'ble Allahabad High Court held that amounts given by the State Government for specific purposes did not partake the nature of income. The Tribunal also referred to judgments from the High Court of Delhi and other ITAT orders which supported the view that grants for specific purposes should not be treated as income.

Conclusion:
The Tribunal found that the arguments raised by the assessee were plausible and legal. It set aside the order of the ld. CIT(A) and restored the matter to the file of the Assessing Officer with a direction to re-examine the claim of the assessee in light of the new arguments. The appeals of the assessee were allowed for statistical purposes.

Order:
The appeals of the assessee were allowed for statistical purposes, and the matter was restored to the Assessing Officer for re-examination. The order was pronounced in the open court.

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