Commissioner Of Income Tax, Chandigarh-Ii v. M/S Punjab State Sports Council, Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No.190 of 2008 Date of decision: 12.12.2008 Commissioner of Income Tax, Chandigarh-II -----Appellant Vs. M/s Punjab State Sports Council, Chandigarh --Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MR JUSTICE L.N.MITTAL Present: Ms. Urvashi Dhugga, Standing Counsle for therevenue.revenue. Adarsh Kumar Goel,J. 1. The revenue has preferred this appeal under section 260-A of the Income tax Act, 1961 (in short, ‘the Act’) against the order of the Income Tax AppellateTribunal,ChandigarhBench-BinITA No.904/Chandi/2006 dated 20.7.2007, proposing to raisefollowing substantial questions of law:- “i) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct inholding that the receipts of grants-in-aid by theassessee from Central/State Govt. are notvoluntary contributions for the purpose ofsection 11 read with section 12 of the IncomeTax Act and are thus, not required to be takeninto account as income of the assessee for thepurpose of ascertaining the amount expended orthe amount to be accumulated? ii) Whether on the facts and the circumstancesof the case, the Hon’ble ITAT was correct innot adjudicating on the addional grounds ofappeal raised by the department and not evenpassing a speaking order or rejecting the same? Iii) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct inholding that only interest reflected byfollowing cash system of accounting has to beconsidered as an income for the purposes of Sections 11,12 and 13 of the Act, whereas it isnot a voluntary contribution?” 2. The assessee is a charitable society for promotion of sports and is registered under section 12-Aof the Act. It receives grants from Central and StateGovernment for specific purposes for developing sportsand for meeting expenses of the society. The AssessingOfficer treated the grants to be income on the groundthat the assessee failed to give notice in Form No.10 inprescribed manner. The CIT(Appeals) upheld the claimof the assessee. On further appeal of the revenue beforethe Tribunal, it was held that on a combined reading ofSections 11 and 12, it appeared that contributionreceived by a trust set up for charitable or religiouspurposes is to be treated as income from property whichis exempt under section 11 of the Act. Accordingly, itwas held that the grants received for charitable purposeswere exempt from income tax. As regards income from interest, it was held that the same had to be consideredto be income from other sources and has to be taken intoaccount on the basis of cash system of accounting.Grants-in-aid received by the assessee for meetingexpenditure was to be treated as income of the society.The matter was directed to be decided afresh by theAssessing Officer. 3.In view of finding of the Tribunal, there is noreason to hold that grants-in-aid received from theCentral or State Government for specific purposes foradvancement of sports are not to be treated as voluntarycontributions or are to be treated as taxable income ofthe society. The method of accountancy is a question offact and the Tribunal has held that the assessee wasmaintaining cash system of accounting.4.With reference to proposed Question (ii), it isstated that certain additional grounds were raised. We donot find any reference of any such matter in the order ofthe Tribunal. In absence thereof, we cannot go into the question whether any additional ground was raised bythe revenue before the Tribunal. The revenue had anoption to apply to the Tribunal to deal with the saidmatter. 5.We are unable to hold that any substantialquestion of law arises.6.Dismissed. (Adarsh Kumar Goel)Judge December 12, 2008‘gs’ (L.N.Mittal)Judge