Income Tax Appeal No.588 of 2009 1
IN THE HIGH COURT FOR THE STATES OF PUNJAB AND
HARYANA AT CHANDIGARH.
Income Tax Appeal No.588 of 2009
Date of Decision:-1.12.2009
Commissioner of Income Tax-II-, Chandigarh ...Appellant
Versus
M/s Punjab Energy Development Agency, Chandigarh ...Respondent
CORAM: HON’BLE MR.JUSTICE SATISH KUMAR MITTAL
HON’BLE MR.JUSTICE MEHINDER SINGH SULLAR
Present: Ms.Urvashi Dhugga, Advocate for the appellant.
Satish Kumar Mittal J. (Oral):
The Department has filed the instant appeal under
section 260-A of the Income Tax Act, 1961 (hereinafter to be referred
as “the Act”) against the order dated 29.4.2009 passed by the
Income Tax Appellate Tribunal, Chandigarh Bench-A (hereinafter to
be referred as “the ITAT”), in ITA No.764/Chandi/2008 in case of the
assessee for the assessment year 2005-2006 by raising following
substantial questions of law:-
i. Whether on the facts and in the circumstances of the
case, the Hon’ble ITAT was correct in holding that the
receipts of grants-in-aid by the assessee from
Central/State Govt. are not voluntary contributions for
Income Tax Appeal No.588 of 2009 2the purpose of section 11 read with 12 of the Income
Tax Act and are thus, not required to be taken into
account as income of the assessee for the purpose of
ascertaining the amount expended or the amount to be
accumulated?
ii. Whether on the facts and the circumstances of the
case, the Hon’ble ITAT was right in holding interest
income to be exempt under section 11 of the Income
Tax Act, 1961?
In the aforesaid assessment year, the assessee received
grants to the tune of Rs.21,98,35,447/- from the Central and State
Governments and as per instructions, 85% out of the above said
amount which comes to Rs.18,68,60,130/- was required to be spent
but only an amount of Rs.13,02,12,366/- was spent leaving the
balance of Rs.5,23,55,740/-. During the course of arguments,
learned counsel for the appellant has stated that the ITAT has
wrongly mentioned in the order that the balance amount was
Rs.5,23,55,740/-. In fact, the balance amount comes to
Rs.5,66,47,764/- instead of Rs.5,23,55,740/- and the same should be
read as such. The Assessing Officer while invoking the provisions of
section 11 (1) read with section 12 (1) of the Act has held that since
the assessee has not spent 85% amount of above said grants
(i.e.Rs.18,68,60,130/-), therefore, the remaining amount of
Rs.5,66,47,764/- is liable to be assessed to tax as income of the
assessee. Assessing Officer also disallowed the interest income
earned on surplus funds by holding that the interest income cannot
be treated as income from voluntary contributions. Consequently, the
Income Tax Appeal No.588 of 2009 3
income of Rs.28,95,927/- was also held to be taxable.
The said order of the Assessing Officer was set aside in
appeal by the Commissioner of Income Tax (Appeals), Chandigarh
vide order dated 25.6.2008 while holding that these tied up grants
cannot be equated with the voluntary contributions and, therefore, it
would not be treated as the income of the assessee. While coming to
the said conclusion, the CIT(A) relies upon the decision of ITAT in
ITA No.904/Chandi/2006 dated 20.7.2007.
The second issue was also decided in favour of the
assessee while holding that the interest earned by the assessee on
the aforesaid surplus fund will be treated its income for the purpose
of sections 11, 12 and 13 of the Act. While deciding this issue, the
learned CIT(A) has again relied upon the aforesaid decision in ITA
No.904/Chandi/2006 dated 20.7.2007. Against the aforesaid decision
of the CIT(A), the Department filed the appeal, which was dismissed
by ITAT vide impugned order dated 29.4.2009. Against the said
order, the instant appeal has been filed.
Learned counsel for the appellant very fairly states that
both the aforesaid questions of law have already been answered by
this Court against the revenue. Question No.1 was answered against
the revenue by this Court in ITA No.190 of 2008 titled “Commissioner
of Income Tax, Chandigarh-II Vs. M/s Punjab State Sports Council,
SCO 116-117, Sector 34-A, Chandigarh”, which was arising from the
order of ITA No.904/Chandi/2006 dated 20.7.2007. The second
question has been decided against the revenue by this Court in ITA
No.666 of 2008 on 31.7.2009 in case of Commissioner of Income
Tax Chandigarh-II Vs. M/s Punjab Energy Development Agency, Plot
Income Tax Appeal No.588 of 2009 4
No.1-2, Sector 33-A, Chandigarh.
In view of the aforesaid factual position, we find no merit
in this appeal as both the questions of law have already been
decided against the revenue by this Court.
Dismissed.
(Satish Kumar Mittal)
Judge
(Mehinder Singh Sullar)
Judge
1.12.2009
AS