DCIT, CIRCLE - 8(1), KOLKATA, KOLKATA vs. M/S. GREAT EASTERN HOTEL AUTHORITY, KOLKATA

ITA 773/KOL/2018Status: DisposedITAT Kolkata18 September 2020AY 2003-043 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a grant-in-aid received from the Government on revenue account should be considered as income. The CIT(A)'s view that it cannot be income simply because due process was followed was rejected.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 1,70,00,000/-. This amount was a grant-in-aid received by the assessee from the State Government for salary payments, which the Assessing Officer treated as revenue income.

What were the issues?

Whether a grant-in-aid received from the State Government for salary payments, treated as 'working capital contribution', constitutes taxable revenue income.

Which sections of the Income-tax Act were involved?

Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH ‘A’, KOLKATA

Before: Shri J. Sudhakar Reddy, Hon’ble & Shri S.S. Godara, Hon’ble]

Date of concluding the hearing : September 08, 2020 Date of pronouncing the order : September 18, 2020 ORDER SHRI J. SUDHAKAR REDDY, AM This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) – 8, Kolkata dated 12.02.2018 (CIT(A) for short) passed u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for A.Y. 2003-04.

None appeared on behalf of the assessee. There is no application for adjournment either. Under the circumstances, we dispose of this case, ex-parte on merit qua the assessee, after hearing the Ld. Departmental Representative.

M/s. Great Eastern Hotel Authority 3. Heard the Ld. Departmental Representative. The only ground that arises for the adjudication is as follows: “That in the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting the addition made by A.O. amounting to Rs. 1,70,00,000/- regarding grant-in-aid received by the assessee from the State Government against salary as ‘working capital contribution’ which should be treated as revenue income as per note no. 17 of the Notes on Accounts (Schedule No. 23) of Audited Accounts.”

This bench of the Tribunal in order dated 19.02.2020 in assessee’s own case on the very same issue has held as follows: “3. On ground no. 2, we find that the ld. CIT(A) has stated that, a grant-in- aid, made from the Government is towards working capital and hence cannot be considered income and brought to tax. We find that the Government of West Bengal has given grant-in-aid to the assessee company, as working capital contribution, for salary payments. We are of the view that this amount has been received on revenue account and hence rightly brought to tax by the ld. AO. The decision of the ld. CIT(A) on this issue at paragraphs 11.2.1 and 11.2.2 at page 7 of his order which is extracted for ready reference: ‘11.2.1 First and foremost, grant in aid from the State government – cannot be in the nature of ‘income’. It may be treated as a revenue receipt in the accounts, for accountancy sake – but, it is simply not income. 11.2.2 Grant-in-aid is aid from the State government following due process and voting by the Legislature for allocation of funds for specific purposes as per budgetary provisions and procedures of the Constitution of India.’ 4. The nature, character and purpose of the grant-in-aid has to be examined. When the amount is received from the Government either State or Centre on revenue account, it has to be considered as the income. Simply because due process was followed, a receipt cannot be characterized as revenue or capital. Hence this ground of the Revenue is allowed.

In the result, the appeal of the Revenue is allowed in part.”

M/s. Great Eastern Hotel Authority 5. Consistent with the view taken by us that the decision, we uphold the contention of the Revenue and allow this ground of the Revenue.

In the result, the appeal of the Revenue is allowed.

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