DIRECTOR OF INCOME TAX (EXEMPTION) vs. GUJARAT STATE COUNCIL FOR BLOOD TRANSFUSION

Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) dated 12/04/2013 in ITA No. 134/Ahd/2013 for the Assessment Year 2009-10, the revenue has preferred the present Tax Appeal with the following proposed question of law; “Whether the appellate tribunal has substantially erred in law in deleting the disallowance of Rs.7,68,96,000/- made by the Assessing Officer and confirmed by the CIT(A)?”

The facts leading to the present Tax Appeal in a nutshell are as under;

The assessee, who has been incorporated by the Government of Gujarat, as a nodal agency to regulate blood transfusion in the State of Gujarat and who is managing the funds relating thereto by securing grants from the State Government and distributing the same to various Red Cross Branches in the State of Gujarat, filed the return of income for the Assessment Year 2009-10 declaring the total income of ‘NIL’. The case of the assessee was processed under Section 143(1) of the Income Tax Act. It was selected for scrutiny as per the scrutiny guidelines and notice under Section 143(2) of the Income Tax Act was issued. It was observed during the assessment proceedings that the assessee had exercised the option of explanation 2 of Section 11(1) of the Income Tax Act regarding income of Rs.7,68,96,000/-, which as such the assessee received by way of grant from the State of Gujarat. The explanation of the assessee was sought, which was furnished by the assessee. The Assessing Officer was not satisfied with the explanation and, therefore, the Assessing Officer observed that the assessee is mandatorily required to exercise the option under Section 11(1) explanation 2 before the Assessing Officer before the due date of filing of return of income regarding the amount (income) worth Rs.7,68,96,000/- for which assessee has claimed option of Section 11(1) explanation 2 in the return of income and the assessee has failed to furnish the said option in writing as required by law. The Assessing Officer held that the assessee was not entitled to claim income worth Rs.7,68,96,000/- as deemed application under Section 11(1) explanation 2 of the Income Tax Act and consequently directed to make the addition of Rs.7,68,96,000/- in the total income of the assessee for the year in question.

Being aggrieved and dissatisfied with the order passed by the Assessing Officer directing to make the addition of Rs.7,68,96,000/- and disallowing the claim of the assessee made under Section 11(1) explanation 2 of the Income Tax Act, the assessee preferred appeal before the CIT(A) and the CIT(A) dismissed the appeal confirming the addition made by the Assessing Officer.

Being aggrieved and dissatisfied with the order passed by the CIT(A) confirming the addition made by the Assessing Officer, the assessee preferred appeal before the ITAT and by impugned judgment and order the ITAT has allowed the appeal and deleted the additions made by the Assessing Officer observing that Rs.7,68,96,000/-, which was received by the assessee by way of grant from the State Government, cannot be said to be an income. Being aggrieved and dissatisfied with the impugned judgment and order, the revenue has preferred the present Tax Appeal to consider the aforesaid proposed substantial question of law.

Shri Manish Bhatt, learned Counsel appearing on behalf of the revenue has made only one submission that the ground on which the ITAT allowed the appeal preferred by the assessee i.e. whether the grant received by the assessee can be treated as income or not was neither before the Assessing Officer nor before the CIT(A) and, therefore, the ITAT has materially erred in allowing the appeal on altogether a different ground, which was neither before the Assessing Officer nor before the CIT(A).

Heard Shri Manish Bhatt, learned Counsel appearing on behalf of the revenue. It is true that the question before the Assessing Officer was the option exercised by the assessee under explanation 2 of Section 11 of the Income Tax Act regarding the income of Rs.7,68,96,000/- and there was no question raised before the Assessing Officer as well as the CIT(A) whether the amount received by the assessee by way of grant from the State Government can be said to be income or not. However, considering the fact that during the relevant year the assessee received the amount of Rs.534.06 lakhs as grant from the State Government on the last date of the relevant accounting year i.e. 31/03/2009 and the grant amounted to Rs.534.06 lakhs was distributed to various blood banks c/o the Chief District Medical Officers of various Districts Management Authority in Tax Appeal No. 80/2010 ITAT has rightly held that the amount received by the assessee by way of grant from the Government of Gujarat cannot be said to be an income and, therefore, the ITAT has rightly deleted the addition made by the Assessing Officer. In the facts and circumstances of the case and the facts narrated hereinabove, when the amount received by the assessee by way of grant from the State Government cannot be said to be an income and consequently the additions made by the Assessing Officer is deleted, we are of the view that the impugned judgment and order passed by the ITAT is not required to be interfered with.

Under the circumstances and in the peculiar facts and circumstances of the case, no question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Siji