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TMI Blog2023 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... as installments of Central Financial Assistance (CFA) from the Ministry of Tourism were to be deposited in saving accounts or fixed deposits in banks and as a result a substantial amount accrues as interest on deposits made out of CFA. It was also directed to ensure utilization of earned interest on deposits for the execution and completion of concerned projects without deviation to any other head of expenditure. In case there is no scope to utilize the amount of interest for execution of the concerned project, such amount may be returned to the Ministry of Tourism. Thus, the income never reached the Assessee and was diverted at source by an overriding title. The law is well settled by a long catena of cases to the effect that in event of there being a diversion of income by overriding title, question of income being assessed in the hands of Assessee does not and cannot arise. Reference in this regard may be made to the case of Shri Sitaldas Tirathdas, Bombay [ 1960 (11) TMI 17 - SUPREME COURT] . Thus it is clear that the Assessee never becomes the owner of money and as such the addition made by the AO was not sustainable in both the assessment years. CIT (A) as well as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as the income earned during the A.Y. 2014-15 and added to the total income. Thus, the income of the Respondent was assessed at Rs.6,09,23,950/-; whereas in T.A. No. 22 of 2019, the final assessment order was passed on 31.01.2015 whereby the interest amount earned on the fixed deposits by the Respondent Assesse amounting to Rs.3,23,99,958/- was taken as the income earned during the A.Y. 2012-13 and added to the total income. Thus, the income of the Respondent was assessed at Rs.4,26,48,908/- u/s 143 (3) of the I.T. Act, 1961. Being aggrieved by the two assessment orders, the Assesse preferred two separate appeals being Appeal No. CIT (A) 163/Ranchi/Oth/14-15 against the assessment order dated 31.01.2015 and Appeal No. CIT (A) Ranchi/10490/2016-17 against the assessment order dated 13.12.2016 and the CIT (Appeals) allowed the respective appeals of the Assesse and disallowed the addition made by the Assessing Officer for both the assessment years. The Revenue being aggrieved by the two orders dated 12.04.2016 and 06.02.2018 passed by the CIT (Appeals), disallowing the addition made by the AO; preferred two separate appeals before the learned Income Tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Even the investment in term deposit was made on behalf of the Government in view of the memorandum dated 16.12.2006 and as a matter of fact, the Assesse never became the owner of the money, as such there was no question of any income by the Assesse on the interest earned by it and thus, the question of tax does not arise. He further submits that there are concurrent findings of two forums not only for these two years but also for previous years and as such both the appeals should be dismissed. 7. Having heard learned counsel for the parties and after going through the impugned orders and other relevant documents it appears that the Assesse is a Jharkhand State Government undertaking incorporated with the object to promote tourism in the State to create, operate and maintain infrastructure for tourism on behalf of the Central and State Government. The funds from Central/State Government were disbursed to the Assesse for making payment in accordance with the guidelines of the Government for approved projects and are liable to refund the unutilized funds as and when government makes requisition for the same. Thus, the funds always remained the property of the Government and As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the assessee does not arise. As a matter of fact the profit stands diverted to the purchaser in terms of and in accordance with the agreement dated 24-7-1962 read with the supplemental agreement dated 2- 11-1962 and the date of actual transfer of the factory in question which, in fact, had taken place on 30-9-1964 does not alter the situation. The income stands diverted by an overriding title as a matter of fact even before the accrual. 13. The concept of diversion of income by an overriding title has been very lucidly explained by this Court in CIT v. Sitaldas Tirathdas [(1961) 41 ITR 367: AIR 1961 SC 728] in the manner following: In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat before a person could be assessed under Section 10, it must be shown that it was he who carried on the business, profession or vocation and in the case of a business, it was open to any person to put another person in charge thereof although ostensibly such person appeared to be carrying on the business, in reality the business was that of the person who owned it and under Section 10 of the Act such owner of the business would be the assessee. It was observed in that case that (at p. 206): If a business carried on by A is transferred to B as from a certain point of time, B alone can be assessed to tax in respect of the period subsequent to the change of the ownership. A and B may agree that any profits or loss of the business as from a date anterior to that of the change of ownership will be on B's account. In such a case, A will have to account to B for the income and profits of the business covered by the period of the agreement and A may be held to have carried on the business as B's agent from the agreed date. 16. Similar is the view expressed by the Bombay High Court in the case of CIT v. M.D. Kanoria [(1982) 137 ITR 137 (Bom)]. 17. The law thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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