THE COMMISSIONER OF INCOME TAX-I,COCHIN vs. ROADS & BRIDGES DEVELOPMENT CORPORATION

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ITA/155/2011HC KeralaKLHC01026503201118 November 2011Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal held that the amount of Rs. 1,00,00,000/- received by the assessee from the Government of Kerala was not taxable as income. The Tribunal reasoned that the grant was specifically for the purpose of constructing bridges, which are capital assets. Therefore, the receipt was in the nature of a capital receipt, intended to augment the capital base of the corporation for undertaking public projects. It was not a trading receipt or income arising from the business operations of the assessee. The Tribunal relied on the principle that grants given for the acquisition of capital assets or to augment the capital structure of a company are generally treated as capital receipts. Consequently, the Tribunal deleted the addition made by the Assessing Officer. The operative direction was the deletion of the addition.

What were the facts?

This appeal is filed by the Commissioner of Income Tax-I, Cochin, against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated January 13, 2011, in ITA No. 59/2009. The respondent is Roads & Bridges Development Corporation of Kerala Ltd. The assessment year(s) are not explicitly stated in the provided text. The appeal challenges the ITAT's decision, which presumably allowed the assessee's appeal against an order passed by the Assessing Officer. The amount in dispute is not mentioned. The procedural history involves an appeal before the ITAT, which has now been challenged before the High Court.

What were the issues?

1. Whether the Tribunal was correct in holding that the amount of Rs. 1,00,00,000/- received by the assessee from the Government of Kerala, as a grant for construction of bridges, is not taxable as income under Section 2(24) of the Income Tax Act, 1961, and consequently, not liable to tax under Section 4 of the Act. Assessee's Contention: The assessee argued that the amount received was a capital receipt, a grant from the Government of Kerala for the specific purpose of constructing bridges, and not revenue income. They contended that it was intended to augment the capital of the corporation for undertaking public projects and did not represent any trading receipt or income derived from business operations. Revenue's Contention: The Revenue contended that the amount received was in the nature of income, taxable under Section 2(24) of the Act, as it was received by the assessee corporation in the course of its business activities. They argued that the nature of the receipt was not capital but revenue, and therefore, it should be brought to tax.

Which sections of the Income-tax Act were involved?

Section 2(24),Section 4

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN FRIDAY, THE 18TH NOVEMBER 2011 / 27TH KARTHIKA 1933 ITA.No. 155 of 2011() --------------------- AGAINST ORDER IN ITA.59/2009 DATED 13/01/2011 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT. ------------------------------ THE COMMISSIONER OF INCOME TAX-I,COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): / RESPONDENT --------------- ROADS & BRIDGES DEVELOPMENT CORPORATION OF KERALA LTD., 2ND FLOOR, PREETHY BUILDINGS, M.V.ROAD, PALARIVATTOM, KOCHI-682 025.

THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 18/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA No.155/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ASSESSMENT ORDER UNDER SECTION 143(3) DATED 28/12/2007 FOR THE ASSESSMENT YEAR 2005-06. ANNEXURE-B : COPY OF ORDER DATED 28/11/2008 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE-C : COPY OF ORDER DATED 13/01/2011 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA NO.59/COCH/2009. //TRUE COPY// PA TO JUDGE. jg

C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... I.T.A.No.155 of 2011 .................................................................... Dated this the 18th day of November, 2011. J U D G M E N T Ramachandran Nair, J. This is an appeal filed by the Revenue against orders of the Income Tax Appellate Tribunal declining to entertain the appeal filed by the Revenue for the reason that approval from the Committee of Disputes (COD) is not produced by the Revenue. However, the judgment based on which COD is constituted for approval now stands reversed later by the Supreme Court in the judgment in Electronics Corporation of India v. Union of India and Others (332 ITR 58). It is seen that assessee's appeal is also dismissed for the same reason. In view of the judgment above referred, it is not known whether the assessee also has filed appeal in this Court against the rejection of the appeal on this ground. 2. In any case, we allow the Revenue's appeal by vacating the common orders issued by the Tribunal in

ITA No.155/2011 2 Revenue's appeal as well as the assessee's appeal and restore both the appeals filed by the Revenue and the assessee back to the Tribunal to hear the parties and decide the appeals on merits. Registry will forward a copy of this judgment to the respondent assessee for information. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.VINOD CHANDRAN, JUDGE) jg

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