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Facts
The assessee, Assam Infrastructure Financing Authority, a government-created society for infrastructure development, received grant-in-aid from the Govt. of Assam. For AY 2015-16, it did not file a return of income, and a subsequent assessment order determined its total income based on bank interest and short-term capital gains, which the assessee claimed as exempt.
Held
The Tribunal held that the interest income earned on unutilized government grants and short-term capital gains arising from mere switching of mutual fund schemes should not be taxed. This decision was based on the principle of consistency, as similar claims were accepted by the Assessing Officer in subsequent assessment years.
Key Issues
Whether interest earned on unutilized grant-in-aid and short-term capital gains are taxable income when the funds were received as grants for infrastructure development and the same claims were accepted in subsequent years.
Sections Cited
250, 139, 148A(d), 148, 143(2), 142(1), 147, 144B
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Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: Shri Sonjoy Sarma & Shri Sanjay Awasthi
Assessment Year: 2015-16 Assam Infrastructure Financing Authority……......………………....Appellant 3rd Floor, Block F, Finance Department, Govt. of Assam, Assam Sachivalaya, Assam – 781006. [PAN: AACAA9405E] vs. DCIT, Circle-2(Exemption), Kolkata......................................…..…..... Respondent Appearances by: Shri Ramesh Goeka, AR, appeared on behalf of the appellant. Shri S. Datta, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : April 17, 2025 Date of pronouncing the order : April 22, 2025 आदेश / ORDER
Per Sonjoy Sarma, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 31.03.2024 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
Brief facts of the case are that the assessee is a society and is registered under Indian Societies Act, 1860 vide certificate dated 19.12.2009. The society was incorporated with cabinet approval of Govt. of Assam vide notification no.BW-10/2008/73 dated 06.10.2009. The society is registered u/s 12A of the Act vide order for provisional registration is Form 10AC issued by Income Tax Department on 06.04.2022 from the period from A.Y 2022-23 to A.Y 2024-25. As per the Memorandum of Association, the assessee was created for implementation of major infrastructure projects in the State of Assam.
Assessment Year: 2015-16 Assam Infrastructure Financing Authority For the assessment year 2015-16, the assessee had not filed its return of income u/s 139 of the Act. Subsequently, order u/s 148A(d) of the Act was issued on 31.03.2022 followed by notice issued u/s 148 of the Act on 31.03.2022. In compliance to notice u/s 148 of the Act, the assessee filed its return of income on 29.04.2022 declaring total income as Nil by claiming a refund of Rs.9,29,95,166/-. The case of the assessee was later on transferred under Faceless Assessment Scheme followed by notices issued u/s 143(2) and 142(1) of the Act. In compliance to the notices, the assessee filed reply from time to time before the Assessing Officer and in response to the same, the final show-cause notice was issued on 16.02.2023. According to that, the assessee submitted that during the relevant year, it had not received any fund from the Govt. of Assam and its only income comprised bank interest and miscellaneous income amounting to Rs.121,24,15,419/- and no expenditure has been incurred thus excess of income over expenditure was Rs.121,24,15,419/- for the year under consideration. The assessee claimed that the said interest as exempt and not taxable in the hands of the assessee. However, the Assessing Officer was not satisfied with the claim made by the assessee and treated the interest income earned of Rs.121,24,15,419/- as revenue receipt and taxable income of the assessee. Furthermore, during the assessment proceedings, the Assessing Officer noticed that the assessee had invested Rs.100 crores in SBI liquid mutual funds during the year and there was a switch from one scheme to another scheme of mutual funds resulting in a short-term capital gain of Rs.2,00,58,863/- which was reported in the return of income and this amount was also added to the income of the assessee. Accordingly, the Assessing Officer passed the assessment order dated 06.03.2023 by determining total income at Rs.123,24,74,282/-.
Assessment Year: 2015-16 Assam Infrastructure Financing Authority 3. Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A) which was consequently dismissed by the ld. CIT(A) by confirming the action of the Assessing Officer. Hence, the assessee has come in appeal before us.
The ld. AR, before this Tribunal, has raised various grounds of appeal, however, the sum and substance was the challenging of the addition made by the Assessing Officer towards bank interest income of Rs.121,24,15,419/- and short-term capital gains of Rs.2,00,58,863/- by rejecting the claim of the assessee. At the time of hearing, the ld. AR submitted that the main issue is whether the interest earned on unutilised grant-in-aid received from Govt. of Assam perked in fixed deposit and liquid mutual fund is taxable. The ld. AR stated that the funds were grants-in-aid received from the Government which are meant for infrastructure development and an interest thereon should be retained the character of the corpus or specific funds. The income was incidental and utilized for achieving the objective of the trust/society and following the principles of consistency and real income theory should applied. He stated that in the subsequent assessment years i.e. A.Y 2017-18 and A.Y 2020-21, assessments were completed u/s 147 r.w.s. 144B of the Act and the Assessing Officer accepted the same claim of the assessee and no such addition has been made. In this regard, the ld. AR submitted the copies of those orders both dated 25.02.2025 before the Bench in order to substantiate his contention. He also stated that the department cannot take contrary stand for earlier years when the same issue has been accepted in subsequent years.
On the other hand, the ld. DR fairly conceded the factual position regarding the subsequent years but stated that this assessment year is an independent unit and findings of one year cannot bind another. However, the ld. DR could not bring any distinguishing facts before the 3
We, after hearing the rival contentions and perusing the materials on record, find that the assessee is a government created society with specific objectives for infrastructural development and received grant from the Govt. of Assam and the society was made for carrying out specific purpose. During the assessment year, in question, the income earned i.e. interest from temporary parking of such unutilized funds and short-term capital gains arises from a mere switch between schemes in liquid and mutual funds of the same corpus. In the present case, it is importantly noted that in the assessee’s own case for the assessment years 2017-18 and 2020-21, the Assessing Officer accepted the assessee’s claim of exemption and was not made any addition on this count. Hence, two different views cannot be taken in respect of same issue when the material fact are identical and no any discrepancies have pointed out. It is settled law that the violation of principle of consistency is not sustainable in law. We place reliance on the decision of the Hon'ble Supreme Court in the case of Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC), wherein it was held that ‘though the doctrine of res judicata does not apply to Income Tax proceedings, it would not be appropriate to allow the position to be changed in a subsequent year, where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order for the said years’. We further note that in the present case, the interest income earned on unutilised govt. grant perked temporarily does not constitute taxable income in the hands of the assessee and the short-term capital gains arose out of a claim from mere credit investment is not allowable to be taxed independently especially in the light of consistently acceptance in the subsequent Assessment Year: 2015-16 Assam Infrastructure Financing Authority years. Besides that, the assessee in the subsequent years transferred such amount to the Govt. of Assam vide challan no.04/1673 dated 06.04.2018, therefore, the view taken by the authorities below was not correct. In view of the above observation, we hold that the additions made by the Assessing Officer and confirmed by the ld. CIT(A) are not sustainable in law and also on facts. Accordingly, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the addition made towards interest income and short-term capital gains.
In terms of the above, the appeal of the assessee is allowed. Kolkata, the 22nd April, 2025.