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Facts
The assessee, a government-controlled company, received Infrastructure Development Income (IDI) or fees which it treated as advance grants for future expenditure, retaining unutilized amounts and interest earned on them. The Assessing Officer (AO) and CIT(A) treated these unutilized funds and interest as the assessee's income. Additionally, the AO levied a penalty under section 272A for alleged non-compliance with notices.
Held
The Tribunal held that the unutilized IDI/fees and the interest earned thereon were advances from the government for development projects and not taxable income under section 2(24)(xviii) or otherwise. It further ruled that the penalty under section 272A was unjustified as the assessee had submitted proof of compliance with the notices through the Income-tax Department's Portal.
Key Issues
1. Whether unutilized Infrastructure Development Income (IDI) and interest earned thereon by a government-controlled company constitute taxable income. 2. Whether a penalty for non-compliance with notices under section 272A is sustainable when the assessee claims to have complied.
Sections Cited
250, 234B, 234C, 234D, 270A, 2(24)(xviii), 272A, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Year : 2018-19 Gujarat Urban Development The Dy.CIT, बनाम/ Co.Ltd. Gandhinagar Circle v/s. Karmayogi Bhavan IT Office Block-1, Udhyog Bhavan B 1 Wing, Ground Floor Sector-11 Sector-10A Gandhinagar – 382 010 Gandhinagar – 382 010 "थायी लेखा सं./PAN: AABCG 1330 R (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri S.N. Soparkar, Sr. Advocate and Ms. Ukti Shah, ARs Revenue by : Shri Alpesh Parmar, CIT-DR and Shri Arvind R. Kumbhare Sr.DR सुनवाई की तारीख/Date of Hearing : 21/012026 घोषणा की तारीख /Date of Pronouncement: 28/01/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The captioned appeals have been preferred by the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] of even date 26/09/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2018- & 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19 2019. First, we take up the assessee’s appeal in for AY 2018-19.
– for AY 2018-19 2. The assessee, in this appeal, has taken the following grounds of appeal: Grounds of appeal
1. Ld. CIT (A) erred in law and on facts in confirming addition made by AO of Rs. 5, 43, 23, 140/- of Advance Grant for expenditure shown as long term liability in the Balance sheet as Infrastructure Development Fees.
2. Ld. CIT (A) erred in law and on facts confirming AO's view not considering GR dated 22.12.2015 & 16.01.2016 which directed the assessee to treat the entire Infrastructure Development Income(IDI) as advance grant for meeting its expenditure that is to be reconciled before the year end & if any balance left is to be returned to the Govt.
3. Ld. CIT (A) erred in law and on facts in confirming erroneous interpretation by AO of the Govt. circular that grants given by the Govt. of Gujarat to local bodies was to be offered by the assessee, a nodal agency for implementing projects of Govt. of Gujarat either as income (IDI) or to transfer unutilized funds to the Govt. account but not as Advance grant for expenditure.
4. Ld. CIT (A) erred in law and on facts not appreciating the fact that assessee, a nodal agency appointed for infrastructure development requirements of Govt. of Gujarat bound by government circular & instructions has treated Infrastructure Development Income (IDI) as a Balance Sheet item already shown in earlier two assessment years as per accepted accounting principles.
5. Ld. CIT (A) erred in law and on facts not adjudicating Ground # 11 raising contention that during the year under consideration advance grant account is credited by Rs. 33, 11, 690/- only being the interest received on the amount invested of respective grants whereas opening balance of Rs. 5, 10, 11 521/-related to earlier years is also treated as income by AO.
6. Levy of interest u/s 234B/234C & 234D of the Act is unjustified.
7. Initiation of penalty proceedings u/s 270A of the Act is unjustified.
The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
& 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19
The assessee, Gujarat Urban Development Co.Ltd., is a company run under the aegis of the Government. The assessee-company has been made a nodal agency for execution of development works pertaining to the local Government Department. The Government issues grants from time-to-time to assessee-company which the assessee-company is supposed to utilize for development works as per policy of the Government. Earlier the assessee was entitled to retain of the 2% of the expenditure as its fees to meet its day- to-day expenditure. However, thereafter, vide Resolution dated 31/03/2015 the said fees was reduced to 1%. Thereafter, the Government vide another Resolution dated 22/12/2015, resolved that the assessee-company would book its day-to-day expenditure as part of the expenditure incurred in the development works and no separate fees would be paid to the assessee- company. Thereafter, vide Resolution dated 16/01/2016, it was resolved that any amount collected as Infrastructure Development Charge “(IDI) “ referred to as ‘fees’ in the above discussed paras, will be considered as advance grant for expenditure from the Financial Year 2015-16. The assessee, accordingly, treated the amount which remained unutilized out of fees/IDI as an ‘advance’ towards expenditure from the Government. Though the assessee has treated the said fees (IDI) received in earlier years as advance from the Government in its books of accounts, but did not spend the said amount in future projects and kept it as advance for the year under consideration. The Assessing Officer (AO) noticed that the assessee instead of returning the said amount to the Government has retained with it on permanent basis and, therefore, treated the same as income of the assessee and made impugned addition of Rs.5,10,11,521/- and also of the interest income earned thereupon of Rs.33,11,690/-. The Ld. CIT(A) confirmed the addition so made by the AO.
& 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19
We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The assessee is a Government controlled company. It receives grants from the Government and is supposed to incur the same on development projects of the Government. The assessee as per the Government Resolution is not supposed to keep any amount which can fall in the definition of the income of the assessee-company. In this case, the assessee-company in its books of accounts, though in earlier years, has booked the IDI/fees received by it as its income, however, on account of subsequent Resolution dated 16/01/2016, it has treated the entire unutilized IDI/fees as ‘advance received from the Government’ to be utilized in future projects/expenditure. Here, the AO has pointed out some mistake/error on the part of the assessee in not utilizing the said advance on account of IDI/ fees in the future development projects, but keeping the said advance ‘as an advance’ on permanent basis, which in the view of the AO has become the income of the assessee.
4.1. After hearing the Ld. Representative of the parties, we are of the view that merely because the assessee-company has not expended the said advance/IDI fees received in earlier years, that cannot be treated as income of the assessee-company. The assessee-company is Government run Organization and it cannot treat any amounts received from Government as its income without a specific direction in this respect from the Government. Though, the assessee-company might have committed some breach of the Government Resolution in not spending the said advance in future projects, for which the Government is competent to take action against the concerned officers of the assessee-company, however, so far as treating of the said advance as its income is concerned, the same, in our view, is not justified. The & 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19 said advance remains an advance till the Government issues some directions that it will be an income of the assessee-company.
4.2. Moreover, the said fees was received by the assessee over the years before 16/01/2016 which was booked by the assessee as its income in those years and, therefore, merely because of the assessee has not returned the same after 16/01/2016 to the Government, the same cannot be treated as income for the year under consideration. This just can be treated as an opening balance out of the income earned in the past/earlier years, which cannot be taxed in the year under consideration.
4.3. So far as the interest earned on the said opening balance/advance out of IDI/fees is concerned, the Ld. Counsel for the assessee has brought our attention to the Government Resolution dated 22/12/2015, whereby, it has been resolved that even the interest accrued on such fees/advance will be treated as part of the scheme/project grant.
4.4. Therefore, neither the advance treated out of the IDI fees received by the assessee-company nor the interest accrued thereon can be treated as income of the assessee-company. However, we agree with the contention of the Ld.CIT(A) that the assessee-company was supposed either to expend the same on development projects or return it to the Government, that we leave to the competent authority to look into.
4.5. At this stage, the Ld. DR has pointed out to the provisions of section 2(24)(xviii) to submit that w.e.f. AY 2016-17 any assistance in the form of ‘subsidy’, or grant, or cash incentive, or duty draw back, or waiver, or concession or reimbursement by the Central or State Government will be & 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19 treated as income of the assessee. However, we find that the amount received by the assessee-company, though the same has been named as “grant”, but it is just an amount advanced to the assessee-company for execution of the Government projects as an agent/agency of the Government and the same cannot be treated as assistance in the shape of ‘subsidy’, or grant, or cash incentive, or duty draw back, or waiver, or concession or reimbursement by the Central or State Government, hence cannot be treated as income of the assessee. Therefore, in our view, the provisions of section 2(24)(xviii) are not attracted in this case to treat the ‘advance’ shown in the books of accounts out of the IDI received in past years as income of the assessee in the year under consideration. In view of this, the impugned additions made by the lower authorities are not sustainable and the same are ordered to be deleted.
In the result, assessee’s appeal in for AY 2018- 19 is hereby allowed.
– for AY 2018-19 6. The assessee, in this appeal, has taken the following grounds of appeal: Grounds of appeal
1. Ld. CIT (A) erred in law and on facts in confirming penalty of Rs. 50, 000/-levied by AO u/s 272A of the Act.
2. Ld. CIT (A) erred in law and on facts confirming action of AO holding assessee in default for non-compliance to notices issued u/s 143(2) & 142(1) of the Act not considering documentary evidence of responses to the notices submitted by the appellant during appellate proceedings.
3. Ld. CIT (A) erred in law and on facts in confirming erroneous order of AO by holding assessee negligent to its responsibilities to discharge its duties during the assessment proceedings completely ignoring the fact that replies to all notices are available on income tax portal for reference.”
& 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19
The assessee, in this appeal, has agitated the levy of penalty u/s.272A of the Act on account of non-compliance of the notices issued by the Assessing Officer (AO).
At the outset, the Ld. Counsel for the assessee has invited our attention to page Nos.8 to 13 of the paper-book to submit that the assessee had duly complied with the notices, by uploading its reply on the Income-tax Department’s Portal. However, perhaps, the same had escaped the attention of the AO. The Ld. Counsel has placed the copies of the screen-shorts from the ITD Portal in this respect
Considering the aforesaid explanation and factual aspects brought on record by the Ld. Counsel for the assessee, the impugned penalty is hereby ordered to be deleted. Hence, this appeal of the assessee is allowed.
In the result, both the appeals of the assessee stand allowed.
Order pronounced in the Open Court on 28/01/2026. (Annapurna Gupta ) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 28/01/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS & 2158/Ahd/2025 Gujarat Urban Development Co.Ltd. vs. DCIT Asst. Year : 2018-19