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TMI Blog2014 (1) TMI 1764X X X X Extracts X X X X X X X X Extracts X X X X ..... in the succeeding years for the said specific purposes. In the totality of the facts and circumstances, where the assessee was acting on the directives of the Government of Haryana in implementing the scheme of the Government of Haryana, the grants so received by the assessee were not the income of the assessee and do not form the corpus of the assessee. Such grants are not donations or voluntary contribution under section 12 of the Act and thus the same should not be considered as income of the assessee for the relevant assessment year. The assessee had shown the said amounts as receipts in the receipts and expenditure account but the same in no manner can be held to be the income of the assessee and were not assessable in the hands of the assessee for the relevant assessment year, as no part of the said grants had been utilized for the specific purposes for which it was granted, before the close of the year. Thus the grant of ₹ 25.10 crores received by the assessee during the year under consideration is not the income of the assessee for the relevant assessment year. In view thereof, the said grant was received by the assessee for the purpose of disbursement for the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA of the Act. In the reply it was pointed out by the learned A.R. for the assessee that the society was established by the State Government under the provisions of Haryana Panchayati Raj Act, 1961 vide notification dated 29.10.20907 to promote and secure regulated development and to provide basic amenities, sanitation, hygiene, residential and housing facilities in and around villages. The functions of the assessee society were provided under section 230 of the Haryana Panchayati Raj Act. The assessee also pointed out to the Assessing Officer that though the assessee had filed an application for registration under section 12A of the Act on 30.9.2008 but the same was pending for disposal. Vide para 2.3 of the assessment order, the Assessing Officer observed that no application was filed by the assessee for grant of registration with the Commissioner of Income Tax, Panchkula within the prescribed period and hence the assessee was not eligible for deduction under sections 11 and 12 of the Act. The status of the assessee was treated as AOP. During the year under consideration the assessee had received grant of ₹ 25.10 crores on 29.3.2008 from the Haryana Government wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being accumulated/set apart and the period for which the income is to be accumulated/set apart. Therefore conditions of section 11(2) are not complied with. 6. In thereof, the income of the assessee was deemed to be the income of the assessee of the previous year in which the same ceased to be so accumulated i.e. for assessment year 2008-09. 7. The assessee is in appeal against the said order of CIT (Appeals). The learned A.R. for the assessee pointed out that the issue arising in the present appeal is in relation to the taxation of grant received of ₹ 25.10 crores. The learned A.R. for the assessee pointed out that the assessee society was created under the Haryana Panchayati Raj Act, 2007 on 29.10.2007. The assessee filed an application under section 12A of the Act on 30.9.2008 and registration under section 12A of the Act was granted vide order passed under section 12AA(1)(b) of the Act on 2.9.2011 w.e.f. 1.4.2010. However, this order was rectified under section 154 of the Act vide order dated 1.3.2012 and the said registration was granted w.e.f. 1.4.2008. In view thereof, for the relevant assessment year 2008-09 no registration was granted under the Act to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not income of the assessee. 8. The learned D.R. for the Revenue pointed out that the assessee is a body corporate having separate identity and whatever grants were being received by it, were to be applied for its objects and hence the said grants were its receipts and unless there was diversion of income, the said receipts were taxable. Reliance was placed decision of the Hon'ble Supreme Court in the case of Adityapur Industrial Area Development Authority Vs. Union of India And Others [283 ITR 97 (SC)]. 9. The learned A.R. for the assessee in the rejoinder pointed out that the judgment has to be seen in its context. The said judgment talks of income-tax society and does not decide the issue that the grants become income. It was further pointed out by the learned A.R. for the assessee that the said judgment talks of application to deduct tax. However, the case of the assessee was the assessee being local authority or state and hence exempt from tax. 10. We have heard the rival contentions and perused the record. The assessee society before us was established and constituted in exercise of powers conferred by section 220(1) of Haryana Panchayati Raj Act, 1994 vide noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 1 to 24 of the Paper Book. Under the said Amendment Act it is provided that under section 220(1) of the Act, the Government by notification shall establish and constitute for the purposes of this Chapter an authority to be known as the Haryana Rural Development Authority . The said authority shall be a body corporate having perpetual succession and a common seal. Under section 229 of the Amendment Act the objects of the authority are provided, which are as under: 229. The objects of the Authority shall be to promote and secure regulated development of the rural area and development zo0ne in an around villages including Lal Dora and to provide amenities, sanitation and hygiene in rural areas and also to provide residential and housing facilities particularly for weaker section. 12. Further the duties and functions of the authority are enlisted under section 230 of the Amendment Act, which reads as under : (a) Identification of rural area for declaration of development zone. (b) Preparation of development plans for regulation of the development zone. (c) Providing regulated growth in and around villages. (d) Providing amenities, sanitation and proper hygien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annually and the audited accounts were to be forwarded to the Government annually. 15. Under part-G of the said Amendment Act, it is provided that the said authority would be controlled by the Government and Panchayati Raj Institutions. Under sub-section (1) of section 252 of the Amendment Act it is provided that the authority shall carry out such directions as may be issued to it from time to time by the Government for the efficient administration of this Chapter. Sub-section (3) of section 252 of the Amendment Act provides that the Government may depute any officer to inspect and examine the office of the authority or its development works and to report thereon. Under section 253 of the Amendment Act the authority is duty bound to furnish to the Government such reports, returns, record and other information as the Government may require from time to time. 16. The authority constituted by the Government can be dissolved and the power of dissolution are with the State Government as provided under section 260 of the Amendment Act, which reads as under: 260. (1) Where the Government is satisfied that the purposes for which the Authority is constituted under this Chapter hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on the said activities the grants, advances and loans were made by the Government to the constituted authority i.e. the assessee before us. 20. As per the order dated 27.3.2008, the Financial Commissioner Principal Secretary to Government of Haryana, Development Panchayats Department released funds under the scheme to Haryana Rural Development Authority (HRDA ) during the year 2007-08 totaling ₹ 2510.00 lacs. The said funds were sanctioned and released to the assessee under the scheme as per the rules and guidelines of HRDA. The amount was to be drawn and handed over to the Chief Administrator, who in turn would deposit the same in the bank account of the authority in any of the nationalized bank, which in turn was to be operated by the Chief Administrator, HRDA (i.e. the assessee) and accounts officer, HRDFA Board. In the said communication it is further stated that the expenditure involved would be debited to the major head 2515-Other Rural Development Programme (Plan) 51-102 Community Development - 90-Scheme Assistance of Haryana Rural Development Authority-09 GIA for the year 2007-08. The copy of the said communication is placed at page 27 of the Paper Book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the development of scheme and the balance of ₹ 34.83 crores was carried forward to the succeeding year. The Balance Sheet of receipts and payments account for the year ending 31.3.2010 are placed at pages 41 and 42 of the Paper Book. 21. The assessee had filed an application for registration under section 12A of the Act. The Commissioner of Income Tax vide order dated 2.9.2011 under section 12AA(1)(b) of the Act had granted registration to the assessee w.e.f. 1.4.2010. However, the assessee moved an application for rectification under section 154 of the Act and after examining the facts and records of the case, the Commissioner of Income Tax passed order under section 154 of the Act dated 1.3.2012 granting registration under section 12AA(1)(b) of the Act w.e.f. 1.4.2008. The year under appeal before us is assessment year 2008-09 i.e. the financial year 2007-08 and during the said year, the assessee were not registered as a charitable trust by the Commissioner of Income Tax under section 12A of the Act. Consequently, the taxability of the receipts in the hands of the assessee were to be established; whether the same are taxable in the hands of the assessee or not. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, where the authority had been constituted by the Government for the specific purposes of carrying on the activities of the Government and where the grants and advances or loans are disbursed by the Government to the assessee, the said grants, advances cannot not be held to the income of the assessee as the said grants/advances are released to the assessee for the specific purposes for carrying on the development work. In the facts of the present case the Government of Haryana had given a grant of ₹ 25.10 crores during the financial year 2007-08 for the specific purposes of utilizing the same in providing infrastructural facilities to the allottees of residential plots under Mahatma Gandhi Gramin Basti Yojana. The assessee during the year under consideration had received ₹ 25.10 crores on 28.3.2008, which could not be utilized for the specific purposes before the end of the year, which in turn was utilized in the succeeding years for the said specific purposes. In the totality of the facts and circumstances, where the assessee was acting on the directives of the Government of Haryana in implementing the scheme of the Government of Haryana, the grants so received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that even if the amount is not disbursed due to imposition of model code of conduct by the Election Commission, the surplus at the end of the year cannot be included as income under Sections 11 and 12 of the Act. If the grant is not includable as income the surplus at the end of the year remaining unspent is not of any relevance. In respect of the Bank interest, the Tribunal found that the assessee has to keep funds in separate accounts and such interest is treated as part of the grants under respective Schemes to which said funds relate. Hence, with the said findings, the orders of the Assessing Officer and Commissioner of Income Tax (Appeals) was set aside. Learned counsel for the appellant vehemently argued that the Society itself has reflected the grants received from Central and State Governments as income. Therefore, it is not open to the assessee to take a stand that such grants are not the income. The said aspect has been considered by the Tribunal, wherein, it has been held that reflection in the profit and loss account towards the income is not determinative. The entries in the books of account do not decide the nature of receipts. Since, the grants have been receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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