The Principal Commissioner of Income-tax-I, Chandigarh v. Punjab Police Housing Corporation Ltd
[Citation -2020-LL-0203-34]

Citation 2020-LL-0203-34
Appellant Name The Principal Commissioner of Income-tax-I, Chandigarh
Respondent Name Punjab Police Housing Corporation Ltd.
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 03/02/2020
Judgment View Judgment
Keyword Tags interest earned on deposits • revenue receipt • interest income • accrued interest
Bot Summary: The primary grounds which weighed with the Assessing Officer to hold otherwise were, firstly that the Assessee was not able to show that it had ever returned the interest to the Government; secondly no such stipulation was there in the notification releasing the funds; thirdly the Assessee was not a Company registered under Section 25 of the Companies Act, 1956; fourthly that even in the hands of the Government it would be a revenue receipt and fifthly that the accrual of this interest can not be taken to be a casual income. The Commissioner further found that certain buildings which were required by the Punjab Government like the Cyber Police Cell had to be constructed by the Assessee out of the interest income because the Government did not release any funds for those purposes. Before us the learned counsel for the appellant has vehemently argued that the absence of any instance where the interest income was ever returned to the Government and the absence of any stipulation to this effect in the letter releasing the various grants to the Assessee clearly show that the interest income belongs to the Assessee. Counsel for the appellant has relied upon a judgment passed by the Supreme Court in Commissioner of Income-Tax, Bombay City II Vs. Sitaldas Tirathdas, 1961 AIR 728 but that case is not applicable because in that case what the Supreme Court had decided that if the interest is spent by the Assessee as per his own desire it would constitute income whereas in the present case this is not so. The relevant portion is quoted below :- The assessee in the Paper Book filed on record has furnished the copy of notification issued by the Central Government for utilization of interest, placed at pages 22 POOJA SHARMA and 23 of the Paper Book. As per the afore said notification 2020.02.10 14:36 I attest to the accuracy and integrity of this document ITA No.326 of 2015 4 dated 17.3.1999, the interest earned on the amount deposited in the saving bank account out of funds not utilized under SJSRY scheme, are tobe distributed between all the components of the scheme on pro rata basis and the expenditure out of such interest income is to be applied accordingly. In view of the above said instructions of the Central Government, the assessee society is not the recipient of the aforesaid income arising on account of interest earned on deposits with banks.


ITA No.326 of 2015 (O&M) 1 202 IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.326 of 2015 (O&M) Date of decision : 03.02.2020 Principal Commissioner of Income Tax-I, Chandigarh. Appellant versus M/s Punjab Police Housing Corporation Ltd., SCO-171-172, Sector 8 C, Chandigarh. Respondent CORAM : HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR.JUSTICE AVNEESH JHINGAN Present :- Ms. Urvashi Dhugga, Advocate for appellant. Mr. Sanjay Bansal, Sr. Advocate with Mr. Amit Parsad, Advocate for respondents. AJAY TEWARI, J. (Oral) 1. This appeal has been filed against order of Commissioner Income Tax and Income Tax Appellate Tribunal setting aside order of Assessing Officer whereby Assessing Officer held that interest which had accrued to Assessee was liable to tax. 2. brief facts are that Assessee is regularly given grants by State of Punjab for various purposes including construction of houses for police officials. It so happens that in particular year grant remains un-utilized and money which is parked in bank earns interest. As per Assessing Officer this interest was exigible to tax whereas Commissioner and Tribunal held otherwise. basis for Tribunal's decision is that amount of interest which accrues on any money parked in bank would be deemed to be further grant for POOJA SHARMA 2020.02.10 14:36 I attest to accuracy and integrity of this document ITA No.326 of 2015 (O&M) 2 that particular purpose and can be used only for that purpose and in event that it can not be used for that purpose same has to be refunded back to Government. 3. primary grounds which weighed with Assessing Officer to hold otherwise were, firstly that Assessee was not able to show that it had ever returned interest to Government; secondly no such stipulation was there in notification releasing funds; thirdly Assessee was not Company registered under Section 25 of Companies Act, 1956; fourthly that even in hands of Government it would be revenue receipt and fifthly that accrual of this interest can not be taken to be casual income. 4. In our considered opinion, findings of Assessing Officer are conjectural. Instead of saying that interest income has been utilized by Assessee on its own free will, Assessing Officer has inverted law and has held that merely because Assessee has never refunded any amount of interest to Government it means it is its income. 5. On other hand Commissioner has found that certain funds are released to State of Punjab by Central Government and if those are un-utilized and interest accrues on them, amount of interest is deducted by Central Government while giving subsequent grant. Commissioner further found that certain buildings which were required by Punjab Government like Cyber Police Cell had to be constructed by Assessee out of interest income because Government did not release any funds for those purposes. Tribunal also upheld findings of Government. POOJA SHARMA 2020.02.10 14:36 I attest to accuracy and integrity of this document ITA No.326 of 2015 (O&M) 3 6. Before us learned counsel for appellant has vehemently argued that absence of any instance where interest income was ever returned to Government and absence of any stipulation to this effect in letter releasing various grants to Assessee clearly show that interest income belongs to Assessee. 7. Counsel for appellant has relied upon judgment passed by Supreme Court in Commissioner of Income-Tax, Bombay City II Vs. Sitaldas Tirathdas, 1961 AIR 728 but that case is not applicable because in that case what Supreme Court had decided that if interest is spent by Assessee as per his own desire it would constitute income whereas in present case this is not so. 8. argument that there is no such stipulation in letter releasing grant does not lead to automatic conclusion that interest is income of Assessee. It is not case of appellant that books of Assessee ever revealed diversion of any interest income. Had that been so something could have been said. other argument raised by counsel for appellant is that Tribunal wrongly invoked Section 10(23BBA) of Act and invocation of that Section completely blind-sided Tribunal into taking wrong decision. 9. It would be pertinent to note that there is dispute raised by counsel for appellant against finding recorded by Tribunal in para 11 of its order. relevant portion is quoted below :- assessee in Paper Book filed on record has furnished copy of notification issued by Central Government for utilization of interest, placed at pages 22 POOJA SHARMA and 23 of Paper Book. As per afore said notification 2020.02.10 14:36 I attest to accuracy and integrity of this document ITA No.326 of 2015 (O&M) 4 dated 17.3.1999, interest earned on amount deposited in saving bank account out of funds not utilized under SJSRY scheme, are tobe distributed between all components of scheme on pro rata basis and expenditure out of such interest income is to be applied accordingly. In view of above said instructions of Central Government, assessee society is not recipient of aforesaid income arising on account of interest earned on deposits with banks. 10. Learned senior counsel appearing for respondents has stated that Assessee never claimed any exemption under Section 10(23BBA) and in circumstances, only thing which can be held is that reference to Section 10(23BBA) by Tribunal was surplusage and was not required in view of basic finding of fact that income which accrued to Assessee from funds of Government which were released to it were not diverted by it and could not be diverted by to any other purpose and had to be used only for purposes which Government directed and in case funds were not used Government had right to recall them. 11. Questions of law raised by appellant does not arise. Consequently, appeal is dismissed. 12. Since main case has been dismissed, pending Misc. Application, if any, also stands disposed of. (AJAY TEWARI) JUDGE (AVNEESH JHINGAN) JUDGE 03.02.2020 pooja sharma-I Whether speaking/reasoned Yes/No POOJA SHARMA Whether Reportable : Yes/No 2020.02.10 14:36 I attest to accuracy and integrity of this document Principal Commissioner of Income-tax-I, Chandigarh v. Punjab Police Housing Corporation Ltd
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