NEHRU YUVA KENDRA SNAGATHAN,NEW DELHI vs. DDIT (E), NEW DELHI

Briefly stated the facts of this case are: during the processing of return of income filed by the assessee for the Assessment Year 2006-07 u/s 143(1) of the Income Tax Act, 1961 (for short ‘the Act’), the case was subjected to scrutiny. Pursuant to the notice issued u/s 142(1) and 143(2) of the Act. . Shri Sanjeev Kachchal, CA & AR along with Shri Sanjay Mehra, Sr. Accounts Officer attended the proceedings filed the requisite documents, books of accounts etc. The assessee society got registered u/s 12A w.e.f. 01.04.2006 vide registration NO.S-17369 and as such was not registered for the Assessment Year 2006-07 and since then has been operating as an autonomous body of the Ministry of Youth Affairs and Sports, New Delhi.

It has been stated that the assessee society was established by the Government of India in 1972 with the objective of providing the non student rural youth with the opportunity to grow and to achieve national goal. In 1987, a suitable mechanism was envisaged to supervise, administer and monitor the program of 247 Nehru Yuva Kendra all over the country. Thereafter, the assessee has enlarged the functioning of Nehru Yuva Kendra in 500 districts in India. Assessee society was in existence since 1986 but filed the income tax return for the first time declaring surplus of income as per income and expenditure account at Rs.8,35,24,513/- and claimed exemption u/s 10 of the entire income but the assessee is not notified u/s 10 of the I. T. Act, 1961. 4. From the income and expenditure account, it is noted that the assessee received grants / subsidies at Rs.54,89,00,000/-, Fee & subscription at Rs.2,07,999/-, interest income Rs.3,96,84,558/- and other income at Rs.3,28,795/-. The total receipt received by the assessee is Rs.58,91,21,934/. Apart from this, assessee received funds which are directly credited to the balance sheet without being routed through the income & expenditure account, the details of which is as under: “i) Corpus / capital funds Rs.2,02,91,661/- ii) Earmarked Endowment Fund (Spl. Pro. MY AS) Rs.9,98,12,351/- iii) Earmarked Endowment fund (Sponsored Program) Rs.1,65,47,288 Rs.13,66,51,300/- 5. Since the assessee is not registered u/s 12A of the Act nor notified u/s 10(25C)(iv) therefore, the assessee cannot avail the benefit of exemption u/s 11 and as such an amount of Rs.13,66,51,300/- is directly credited to the balance sheet is to be taken as revenue receipt and credited to the income of the society. So, the income of the assessee is computed as under: Total Income of the society as declared Rs.58,91,21,934/- Add: Revenue receipts taken directly to Balance sheet as discussed above Rs.13,66,51,300/- Rs.72,57,73,234/- Less: Expenditure allowed as discussed above (-) 12,00,000/- Net taxable income Rs.72,45,73,234/- 6. The only source of receipt of income of the assessee is grants and subsidies, fee and subscription, trust income and other income and to earn these income, assessee has to incur substantial expenses. However, the expenses of Rs.1,00,000/- per month is allowed and the total taxable income of the assessee has been assessed at Rs.72,45,73,234/-.

The assessee has challenged the assessment order before Ld. CIT(A) who has partly allowed the same. Feeling aggrieved, the assessee has come up before the Tribunal buy way of filing the present appeal.

Ld. A.R. for the assessee contended inter alia that Ld. CIT(A) has grossly erred in not allowing deduction of capital expenditure of Rs.2,02,91,661/-, incurred for the purpose of institution registered u/s 12A/12AA; that Ld. CIT(A) has also grossly erred in not allowing deduction of Rs.3,96,84,758/- on account of interest income not belonging to the appellant; that the A.O. has not computed the income as per commercial principle; that when the funds lying in the corpus of assessee do not belong to him, no question arises to make the addition.

On the other hand Ld. D.R. contended that the amount of Rs.3,96,84,758/- claimed by the assessee in ground No.3 of appeal does not find mention in the A.O.’s as well as Ld. CIT(A)’s order; that since Ld. CIT(A) has not affirmed the order of A.O., the assessee has got no cause of action to file the appeal and prayed for dismissal of the same. 10. We have heard Ld. Authorized Representatives of the parties and gone through the documents relied upon in the light of the facts and circumstances of the case. 11. Ld. CIT(A) while deciding ground No.3 as to disallowing the expenses of Rs.50,55,97,421/- relied upon the judgement of Hon’ble Karnataka High Court in the case cited as CIT and Another Karnataka Urban Infra Structure development & Finance Corporation (2006) 284 ITR 582 (ktk) wherein it is categorically held that Ld. CIT(A) while deciding Ground No.3 of appeal on the issue of disallowance of Rs.50,55,97,421/- categorically held in para 6.1 of the impugned order that: “So it is the findings of the fact that records are being audited regularly and assessee has been granted 12AA. So, without pointing out any defect in account, making disallowance to the extent of Rs.50,55,97,421/- has no leg to stand. So action of A.O. is totally misconceived and the expenses claimed of Rs.50,55,97,421/- which is shown in the balance sheet deserves to be allowed. Ground No.3 of the appellant is decided in favour of the appellant.”

Similarly, while deciding grounds No.4, 5 and 6, Ld. CIT(A) primarily relied upon the judgement of Hon’ble Jurisdictional High Court in the case cited as CIT Vs Housing Urban Development Corporation Ltd. 2010-TIOL-274-Hon'ble High Court-DEL-IT wherein it is held by the Hon'ble High Court as under: “Income Tax Assessee is a canalizing agency for Govt. of India which enters into an agreement with a German agency for funding housing schemes for weaker sections-assessee as per the scheme loans out the funds to NGOs and other – earns interest- Revenue treats the same as taxable income – held, since the assessee never had the ownership of the funds and it was appointed only a canalizing agency, interest income cannot be taxed in its hands – Revenue’s appeal dismissed.”

In the light of undisputed fact that the entire funds in the hands of assessee were supplied by various ministries of Government of India which were subject to audit at two stages and the assessee only worked as Special Purpose Vehicle (SPV) of National interest, which has been created with no profit motive and is wholly funded by Government of India through Ministry of Youth Affairs and Sports and the fact that assessee is duly registered u/s 12A of the Societies Registration Act w.e.f. 17.12.1986 vide order dated 11.07.2011, Ld. CIT(A) has returned categorical findings in favour of the assessee qua grounds No.2 & 3. Ld. CIT(A) while returning findings on grounds No.4, 5 & 6 directed the A.O. to allow the claim of the appellant / assessee after verification. So we are of the considered opinion that the Bench need not to go into the merits of the case and the filing of appeal by the assessee itself is misconceived as the relief sought for by the assessee by filing appeal before Ld. CIT(A) has not been declined. In other words, the assessee has no cause of action to file the present appeal, consequently, the same is hereby dismissed being not maintainable. Order pronounced in the open court on 23rd Sep., 2015. 14.