The Pr. Commissioner Of Income Tax-2, Nagpur v. Nagpur Improvement Trust, Nagpur

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAYNAGPUR BENCH AT NAGPUR INCOME TAX APPEAL NO.15/2016 The Pr. Commissioner of Income Tax-2, Nagpur...Versus...Nagpur Improvement Trust, Nagpur - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Office Notes, Office Memoranda of Coram, Court's or Judge's ordersappearances, Court's orders of directionsand Registrar's orders - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Shri Bhushan Mohta, Advocate for appellant S/Shri L.S. & K.P. Dewani, Advocates for respondent CORAM : SMT. VASANTI A. NAIK AND V.M. DESHPANDE, JJ.DATE: 21.04.2016 By this Income Tax Appeal, the appellant –Department has challenged the order of the Income Tax AppellateTribunal, Nagpur Bench, Nagpur dated 24.9.2015 dismissing theappeal filed by the Department and upholding the order of theCIT (Appeals). The respondent – Nagpur Improvement Trust, theassessee is a Trust, constituted under the Nagpur ImprovementTrust Act, 1936 for the development of the Nagpur City. There was an arrangement with the State Governmentand the respondent – assessee that the stamp duty collected bythe Collector, Nagpur from the registration of sale of property, theassessee shall be given a percentage of the stamp duty socollected, so that the fund so received, could be utilized by the assessee for the development of the City of Nagpur. TheAssessment Officer had found that the assessee had shown anamount of Rs.6,87,99,082/- as an amount receivable towardsstamp duty contribution for the relevant assessment year i.e.2006-07. Since the respondent – assessee was maintainingmercantile system of accounting for the year under considerationand since according to the Assessment Officer, the stamp dutycontribution had accrued to the assessee for the relevant year, theAssessment Officer taxed the said amount in the hands of theassessee. The order was challenged before the CIT (Appeals) bythe respondent – assessee and the CIT (Appeals) by relying on thedecision in the case of Godhra Electricity Company Limited,reported in 225 ITR 746 (SC) held that the fund receivable fromthe stamp duty collection from the State was not in the nature ofreal income in the hands of the assessee. The CIT (Appeals)therefore held that the said amount was not taxable in the handsof the assessee. Being aggrieved by the said deletion, the RevenueDepartment filed an appeal before the Income Tax AppellateTribunal. The Income Tax Appellate Tribunal, by the impugnedorder, dated 24.9.2015 dismissed the appeal filed by theDepartment and upheld the order of the CIT (Appeals). The orderof the Income Tax Appellate Tribunal is challenged in this appeal. On hearing the learned Counsel for the parties, itappears that the CIT (Appeals) as well as the Income TaxAppellate Tribunal have recorded a clear finding of fact that theState Government was not disbursing the stamp duty fund to theassessee for past more than two decades and a huge amount of On hearing the learned Counsel for the parties, itappears that the CIT (Appeals) as well as the Income TaxAppellate Tribunal have recorded a clear finding of fact that theState Government was not disbursing the stamp duty fund to theassessee for past more than two decades and a huge amount of rupees 28.44 crores was due and payable by the StateGovernment. Both the Authorities have concurrently recorded afinding of fact that as the State Government was not disbursingthe amount that it had agreed to disburse to the assessee to beutilized for the development of Nagpur City, the income was onlyhypothetical and the same was never received by the respondent –assessee at any point of time during the past two decades. TheIncome Tax Appellate Tribunal as well as the CIT (Appeals)therefore held by placing reliance on the judgment of the Hon'bleSupreme Court in the case of Godhra Electricity CompanyLimited (Supra), and specially paragraph no.9 thereof that thequestion whether there was a real accrual of income to theassessee could be considered by taking the probability orimprobability of realization, in a realistic manner. Though therewas an agreement that the percentage of stamp duty collected bythe Collector, Nagpur from registration of sale of property wouldbe paid to the respondent – assessee, the respondent – assesseehad not realized the amount that was so payable during therelevant assessment year and even for the past several assessmentyears and hence, by relying on the judgment of the Hon'bleSupreme Court in the case of Godhra Electricity CompanyLimited (Supra), the Tribunal held that the fund receivable out ofthe stamp duty collected by the State Government was not in thenature of real income in the hands of the assessee. Apart from thejudgment of the Hon'ble Supreme Court in the case of GodhraElectricity Company Limited (Supra) the learned Counsel for theassessee had rightly referred to the judgment rendered at thePrincipal Seat, dated 11.6.2014 in Income Tax Appeal No.221/2012, where the mercantile system of accounting wasfollowed and it was held that it was permissible for the assesseeto disclose or show that the interest would have been brought tothe profit and loss account, provided it was actually realized. Itwas held in the said decision that if recovery of some of the loansadvanced by the Bank is considered doubtful, then even theinterest on the loans advanced may not be realized and hence, theassessment of income could not have been made in respect of theamounts that could not have been realized. In respect of the allocation of the funds by the StateGovernment to the assessee towards Huj House Construction,Dalit Vasti Sudhar Yojana fund, National Slum Development fundetc., the Tribunal and the CIT (Appeals) held that the amountsreceived by the assessee were not in the nature of revenuereceipts in the hands of the assessee as it was clear from theGovernment notifications that the assessee was the implementingagency of the State Government for the various developmentprojects and was answerable to the State Government in respectof utilization of the funds. It was held that the amount received bythe assessee was not the income of the assessee as it was acting asan agent of the Government and was required to utilize the fundsas per Government directions and submit the utilizationcertificates with vouchers. Since the findings recorded by the CIT (Appeals) andthe Income Tax Appellate Tribunal are based on an appreciationof the material on record, specially the fact that the part of thestamp duty amount was never realized by the respondent –assessee, no substantial question of law would arise for 2104itl15.16.odt determination of this appeal. In the circumstances of the case, we dismiss theIncome Tax Appeal with no order as to costs. JUDGEJUDGE Wadkar