9911796707
TMI Blog2010 (7) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) is right in holding that amount which was been allocated to the District but could not be actually disbursed due to imposition of model code of conduct due to declaration of election is to treated as amount applied towards the charitable objects of the assessee. 4. The assessee in its Cross objection has raised the following grounds: 1. The Learned CIT(A) Panchkula has erred by upholding the gross amount received from Central and State Governments for the purpose of disbursement of District Authorities and Various Authorities of State Government as Income of Society. 2. The Learned CIT(A) Panchkula has erred by upholding that interest on surplus amount kept in Bank in accordance with instructions which is part of grant in aid and to be disbursed along with the amount received from Central and State Government as Income of the Society. 3. The Learned CIT(A) Panchkula has erred by declining the Revised Form No.10 submitted during the course of assessment proceedings as per circular No. 273 dated 3.6.1980 issued by CBDT. 6. The brief facts of the case are that assessee society is formed by the Government of Haryana as per the regulations of Government of India fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or allocated nor spent as it was not allowed by the Finance Department, Haryana Government as it would violate the Model Code of Conduct. The assessee had shown the AOE money received as its income for the year and expenditure was debited against the same, but it was not utilized in entirety. Out of the scheme money received the assessee is spending a part of the scheme money on administrative and office expenses. Accordingly, the assessee furnished a declaration in Form No.10 under Rule 17 of Income Tax Rules that a sum of ₹ 51,25,966/- was the accumulated income to be utilized for charitable purposes in future. 8. The Assessing Officer was of the view that provisions of sections 11 / 12 of Income Tax Act were applicable to scheme money. The Assessing Officer on the basis of the balance sheet and the profit and loss account noted that during the year under consideration, the assessee had received and disbursed / utilized the under mentioned funds under the two schemes respectively. SJSRY Scheme Opening Balance of Last Year Rs. 4,28,20,000/- Money received during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he belated applications u/s 11(2) of the Act read with Rule 17 of I.T. Rules, can be admitted and an application was moved to the CIT, Panchkula for the admission of revised Form No.10. The said revised Form No.10 filed by the assessee was rejected as the aforesaid circular was held to be applicable only in those cases where there was delay in filing the original Form No.10. Accordingly, the Assessing Officer denied the exemption claimed u/s 11 12 of the Act as the assessee had not utilized its income for its purposes and no declaration under Form 10 was given. Income of ₹ 9,00,80,992/- was held as taxable in the hands of the assessee. The plea of the assessee that the scheme money received from Govt. of India is not voluntary contribution and / or donation as envisaged under section 11/12 of the Act was rejected by the Assessing Officer as the assessee had booked all the scheme money received as its income for the year and the same was reflected in the income and expenditure account. Further, the assessee had shown it as expenditure in profit and loss account for the year under consideration but the assessee had not sanctioned and not allocated the distribution of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that entries in the books of account were not decisive about the nature of income. Reliance was placed on Kedarnath Jute Mfg Co Ltd Vs. CIT [82 ITR 363 (SC)] and Mool Chand Mahesh Chand [115 ITR 1 (All). The learned AR filed on record the communication dated 29.3.2006 issued by Govt. of India for the sanction of release of grants in aid under S.J.S.R.Y scheme. In the said communication, it has been stipulated that the grant is to be utilized in accordance with the approved guidelines for the implementation of the scheme. The learned AR further relied upon the communication dated 26th Sept, 2008 issued by the Ministry of Housing, Govt. of India in connection with the grants under S.J.S.R.Y scheme where it has been stipulated that the grant is subject to the conditions that the funds if not utilized for the purpose for which it was given, have to be refunded along with interest to the authorities. The learned AR thus submitted that the various amounts received by the assessee are not to be included as income of the assessee. Reliance was placed on ITO Vs. Punjab Sports Council (ITA No. 904/Chandi/2006 Assessment Year 2003-04). Similarly, the interest earned by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is the state nodal agency for monitoring, coordinating and implementing the schemes for the urban poor in State of Haryana. It aims and objects are as under:- i) To identify the urban poor in Haryana State through Urban Local Bodies on the Principles laid down by Government of India for Nehru Rozgar Yogana. ii) To implement through Urban Local Bodies / District Urban Development Agencies / Chief Administrator, Housing Board, Haryana / Chief Administrator, Faridabad Complex Administration, Faridabad, various schemes of Nehru Rozgar Yogna and the Scheme of Urban Basic Services for the poor and any such other scheme as may be started subsequently by the Government of India or Haryana Government. iii) To maintain liaison with District Urban Development Agencies, Faridabad Complex Administration and Housing Board, Haryana in implementation of Nehru Rozgar Yogana and Urban Basic Services for the Poor or such schemes as may be started subsequently by the Government of India or Haryana Government of the benefit of Urban Poor. iv) To involve the Urban Local Bodies in the identification of beneficiaries of the Nehru Rozgar Yogana, maintaining with regard the selection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year. During the year under consideration, as per the Assessing Officer the assessee had received the following amounts under the two schemes respectively:- SJSRY Scheme Opening Balance of Last Year ₹ 4,28,20,000/- Money received during the year ₹ 7,57,96,000/- Interest Income earned during the year on SJSY funds ₹ 12,12,660/- Total Rs.11,98,28,660/- NSDP Scheme Opening Balance of Last Year Rs.3,82,51,000/- Amount received in the year ₹ 10,47,000/- Interest earned on NSDP funds ₹ 7,96,332/- 16. Out of the above said funds received by the assessee, the amount is to be disbursed to the distributing agencies by the assessee. The assessee is only allowed to retain fixed percentage for administrative and other expenses (AOE) - 5% and information and education component (IEC) - 2%, in order to meet its administrative and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions were issued by the Govt. of India vide D.O. No. K 11019/103/MIS/UPA/97 dated 11.9.1997 that unspent amounts under the old schemes on 30.11.1997 shall be treated as opening balance of the new scheme on 1.12.1997 and both the unspent Central allocation and entire unspent State share was to be treated as opening balance of SJSRY scheme and to be utilized for any components of SJSRY scheme except for A OE purposes. 21. The Government of India vide letter dated 17th March 1999 bearing No.IK-14011/6/99-UPA/USEP)/DWCUA gave the under mentioned directions. 1. As per the guidelines the funds released by the Central Government as well as the State Government / UT/ Administrations to the Urban Local Bodies for implementation of Swaran Jayanti Shahari Rozgar Yoajana (SJSRY) are required to be deposited in a Saving Bank Account and such deposits would earn the normal interest at admissible rate from time to time, as per instructions of Reserve Bank of India. 2. . 3. The matter has been considered in this ministry and it has been decided that the total interest earned on such deposits in the Saving Bank Accounts under Swaran Jayanti Shahari Rozgar Yozana (SJSRY) wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A OE 5% of GIA for (for sudesh) 0.00 15.70 15.70 Net Amount for allocation 732.90 298.40 1031.30 25. During the course of assessment proceedings, the assessee vide letter dated 30.8.2007 / 12.9.2007 explained as under:- The amount received from Government of India and Govt of Haryana is a liability of the Society and the Society is under obligation to disburse to District Authorities for the purpose of implementation of scheme. In the Society s case, the assessee has no discretion to utilize the amount received from Govt. of India and State Government, except disbursement to District Authorities in accordance with instructions given by Government of India and State Government from time to time and therefore, the amount received form Govt. of India and State Govt. in accordance with specified scheme should not be treated as receipt in the nature of income of the Society. In this case, the Society is merely acting as Nodal Agency receiving Grants from GOI and State Govt. and distributing the same to various District authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 152.66 1309.37 C. Regarding ₹ 1047.00 Lakh (Allocated but not disbursed due to Imposition of Model Code of Conduct by Election Commission of India in State of Haryana due to Elections in the State. SJSRY - - Nil NSDP 314.10 732.39 1047.00 Total (B) +(C) 1470.81 885.56 2356.37 D. Regarding ₹ 20.08 lakh (Interest money) SJSRY 12.13 - 12.13 NSDP 7.96 - 7.96 TOTAL 20.09 - 20.09 Regarding ₹ 810.71 lakh (Opening Balance) With District Pre Year amount but received in 2004-50 Unallocated with SUDESH Total SJSRY 94.87 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d entrusted to the assessee for further disbursement to District authorities. Accordingly, the grants received by the assessee are not to be considered either as income or for ascertaining the amount expanded or the amount to be accumulated. The provisions of section 11 and 12 of the Act are not applicable to the grants received by the assessee under the SJSRY scheme or NSDP scheme. In view of the same, the assessee is not obliged to file any certificate of utilization of accumulated funds by way of Form No.10. 30. However, the amount allocated under the A OE and IEC account earmarked to be utilized for meeting the administrative and other expenses of the assessee society is income of the financial year and provisions of section 11 of the Act are applicable. The assessee is to apply 85% of the income for such purposes and if there is shortfall in its application during the financial year, then the same as per the provisions of the Act maybe accumulated for expenditure in future as per the provisions of the Act. The assessee thus is statutorily required to file its intention of expanding the accumulated funds in future by way of Form No.10. 31. Now we may refer to the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC)] wherein it has been held whether the assessee is entitled to a particular deduction or not will depend on the provision of the law relating thereto and not on the view which the assessee might take of his right nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter . The assessee had shown the entire amount as its income and also claimed the amounts to be disbursed as its expenditure. Mere entries in the books of account do not decide the nature of receipts and its taxability under the Income Tax Act as held by the Apex Court and hence we dismiss this plea of the Revenue. 37. The second objection of Revenue was non-disbursement of funds under NSDP Scheme. As elaborately dealt by us in the paras hereinabove, the assessee is a nodal agency in receipt of grants from Government of India State Government and such grants are to be distributed to various district authorities and surplus remaining if any has to be surrendered to the Government of India / State government. We have referred to various notifications issued by the Government of India in connection with the SJSRY Scheme, in the paras hereinabove and the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue and the Ground No.2 raised in the cross objection by the assessee are against the treatment of interest income as income from property held under Trust and claim of exemption u/s 11 of the Act. The assessee as per the directions of the Central state Government is to keep the funds in separate accounts with bank and interest earned on such deposits was treated as part of the grants under the respective schemes to which the said funds relate. The instructions issued by the Central Govt. while formulating the scheme also provide that the interest earned on such deposits shall be accumulated as part of grants released under the scheme and in case of their non-utilization the same will form part of the opening scheme money of the succeeding year. The assessee had claimed such interest earned on bank deposits as exempt from the purview of section 11 of the Act. We find that the Hon'ble Karnataka High Court in CIT Vs. Karnataka Urban Infrastructure Development Finance Corporation, 284 ITR 582 (Kar) had held that interest income of a Governmental nodal agency set up for development activities on funds provided by Central Government but parked in banks for the period of non-uti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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