C I T vs. M/S PUNJAB STATE SPORTS COUNCIL

PDF · subscribers
ITA/190/2008HC Punjab & HaryanaPHHC01080158200812 December 2008Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE L.N. MITTAL5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that grants-in-aid received from the Central or State Government for specific purposes for the advancement of sports are not to be treated as taxable income. The court found no reason to differ from the Tribunal's view that such grants are not voluntary contributions for the purpose of Sections 11 and 12. Regarding the method of accounting, the court noted that it is a question of fact and the Tribunal had held that the assessee maintained a cash system of accounting. With respect to the additional grounds of appeal, the court stated that there was no reference to any such matter in the Tribunal's order, and therefore, it could not go into the question of whether additional grounds were raised. The court concluded that no substantial question of law arose from the ITAT's order.

What were the facts?

The assessee, M/s Punjab State Sports Council, is a charitable society registered under Section 12-A of the Income Tax Act, 1961, promoting sports. The revenue, Commissioner of Income Tax, Chandigarh-II, challenged the Income Tax Appellate Tribunal's (ITAT) order. The Assessing Officer treated grants-in-aid from the Central and State Governments as income, citing the assessee's failure to file Form No. 10. The CIT(Appeals) ruled in favor of the assessee. The ITAT held that grants received for charitable purposes are exempt under Section 11 of the Act. Regarding interest income, the ITAT held it should be considered income from other sources on a cash basis. However, it also stated that grants-in-aid received for meeting expenditure should be treated as income, remanding the matter to the Assessing Officer for fresh decision.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT correctly held that grants-in-aid from the Central/State Government are not voluntary contributions for the purpose of Section 11 read with Section 12 of the Income Tax Act, and thus not required to be accounted for when determining expenditure or accumulation? The revenue argued that these grants are not voluntary contributions. The assessee's contention is not recorded. 2. Whether, on the facts and circumstances, the ITAT correctly omitted to adjudicate on additional grounds of appeal raised by the department and failed to pass a speaking order or reject them? The revenue contended that the ITAT did not address their additional grounds. The assessee's contention is not recorded. 3. Whether, on the facts and circumstances, the ITAT correctly held that only interest reflected by the cash system of accounting should be considered income for Sections 11, 12, and 13 of the Act, and that such interest is not a voluntary contribution? The revenue argued that interest income should be considered. The assessee's contention is not recorded.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 12-A,Section 13,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 12.12.2008 Commissioner of Income Tax, Chandigarh-II -----Appellant Vs. M/s Punjab State Sports Council, Chandigarh --Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N.MITTAL Present: Ms. Urvashi Dhugga, Standing Counsle for the revenue. Adarsh Kumar Goel,J.

1.

The revenue has preferred this appeal under section 260-A of the Income tax Act, 1961 (in short, ‘the Act’) against the order of the Income Tax Appellate Tribunal,

Chandigarh

Bench-B

in ITA No.904/Chandi/2006 dated 20.7.2007, proposing to raise following substantial questions of law:- “i) Whether on the facts and 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 the purpose of section 11 read with section 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 correct in not adjudicating on the addional grounds of appeal raised by the department and not even passing a speaking order or rejecting the same? Iii) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct in holding that only interest reflected by following cash system of accounting has to be considered as an income for the purposes of Sections 11,12 and 13 of the Act, whereas it is not a voluntary contribution?”

2.

The assessee is a charitable society for promotion of sports and is registered under section 12-A of the Act. It receives grants from Central and State Government for specific purposes for developing sports and for meeting expenses of the society. The Assessing Officer treated the grants to be income on the ground that the assessee failed to give notice in Form No.10 in prescribed manner. The CIT(Appeals) upheld the claim of the assessee. On further appeal of the revenue before the Tribunal, it was held that on a combined reading of Sections 11 and 12, it appeared that contribution received by a trust set up for charitable or religious purposes is to be treated as income from property which is exempt under section 11 of the Act. Accordingly, it was held that the grants received for charitable purposes were exempt from income tax. As regards income from interest, it was held that the same had to be considered to be income from other sources and has to be taken into account on the basis of cash system of accounting. Grants-in-aid received by the assessee for meeting expenditure was to be treated as income of the society. The matter was directed to be decided afresh by the Assessing Officer.

3.

In view of finding of the Tribunal, there is no reason to hold that grants-in-aid received from the Central or State Government for specific purposes for advancement of sports are not to be treated as voluntary contributions or are to be treated as taxable income of the society. The method of accountancy is a question of fact and the Tribunal has held that the assessee was maintaining cash system of accounting.

4.

With reference to proposed Question (ii), it is stated that certain additional grounds were raised. We do not find any reference of any such matter in the order of the Tribunal. In absence thereof, we cannot go into the question whether any additional ground was raised by the revenue before the Tribunal. The revenue had an option to apply to the Tribunal to deal with the said matter.

5.

We are unable to hold that any substantial question of law arises.

6.

Dismissed. (Adarsh Kumar Goel) Judge

December 12, 2008 (L.N.Mittal) ‘gs’ Judge 5

More judgments on Section 11

All 7,190 judgments and leading authorities on Section 11 →

Recent GST High Court judgments

Search GST case law →