JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court:
Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in holding the amount of Rs. 2,75,000 received by the assessee was not its income and should have been deleted?
2. The reference relates to the assessment year 1983-84.
3. Briefly stated the facts giving rise to the present reference are as follows.
4. The respondent assessee is a co-operative society and had a number of branches and carried on sale and purchase of various commodities. During the assessment year, the assessee, co-operative society received a sum of Rs. 2,75,000 from the Government of Uttar Pradesh for disbursement to its bhandars to meet the expenses of the salary of certain employees of those bhandars, which otherwise were not viable units. The respondent-assessee, accordingly, distributed the various amounts to its bhandars in compliance with the U.P. Government order. The Assessing Officer, however, treated the receipt of the amount as an income, which on appeal preferred by the assessee, the Commissioner of Income-tax (Appeals) has held that it was not an income of the assessee but only receipt of an amount for distribution to certain bhandars. According to the instructions of the State Government, the order of the Commissioner of Income-tax (Appeals) was. upheld by the Tribunal in the appeal preferred by the Revenue.
5. We have heard Shri A.N. Mahajan, learned standing counsel for the Revenue, and Shri Krishna Agrawal, learned Counsel appearing for the respondent-assessee.
6. Learned standing counsel submitted that the Assessing Officer had rightly treated the amount in question to be a subsidy receipt of the assessee from the U.P. Government and, in fact, during the year in question, it had deposited the amount in the bank and had earned interest thereon, which clearly shows that it was a receipt on the hands of the assessee without any string being attached to it.
7. We regret our inability to accept the submissions made by learned standing counsel, we find that the Tribunal in its order had recorded as follows:
We have considered the submission of the parties and have gone through the orders of the authorities below along with the copy of the Govt. order dated April 15, 1981, and a copy of the Extraordinary Gazette dated May 26, 1979. The Commissioner of Income-tax deleted the disallowance in para. 12.2. observing as under:
12.2. I have carefully considered these submissions and find them to be quite justified, The appellant has filed a copy of the CO. issued by the Joint Secretary, U.P. Admn. No. 2000/12/1/189, 90 wherein a sum of Rs. 2,75,000 had been placed at the disposal of the appellant for disbursement to various bhandars to meet the salary bills of the managers and secretaries. The appellant has also placed on my record instructions issued to the bank for disbursement of certain amounts to various bhandars spread over the State of U.P. Since the appellant was actually acting as per one instructions of the Government for the disbursement of amounts to the bhandars, the amount in question was not a subsidy in the sense that it was not given to the appellant by way of incentive or meeting any expenditure of its own. It was only an agency for the disbursement of the Government funds to the bhandars. On the facts of the case, it is held that the amount received from the State Government did not constitute income of the appellant and the Income-tax Officer was not justified in assessing it.
After, taking into account the facts, circumstances of the case and the entire material placed before us, we are of the opinion that the State Government has appointed the assessee as the disbursing agency for a sum of Rs. 2,75,000 vide G.O. order dated April 15, 1981, as referred to above to Kendriya Upbhokta Bhandar and as such the assessee was only the disbursing agency and the Income-tax Officer was not at all justified in holding that a sum of Rs. 2,75,000 was the income of the assessee. The Commissioner of Income-tax (Appeals) is accordingly justified in holding that the sum of Rs. 2,75,000 had been placed at the disposal of the assessee for disbursement of, the various bhandars to meet the salary bills of the managers and secretaries. Therefore, it was not the income of the assessee and it was incorrectly added by the Income-tax Officer towards the income of the assessee. We, therefore, uphold the finding of the learned Commissioner of Income-tax (Appeals) on this issue.
8. From a perusal of the aforesaid findings, we are of the considered opinion that the amount in question was given by the State Government for specific purpose. It did not partake of the nature of income of the respondent-assessee. Even if it is to be treated as an income, it would not be liable to be taxed as it is stated that there was diversion of the income by way of overriding title on the said amount by way of a condition to distribute it as the salary to the employees of the bhandars.
9. In this view of the matter, we do not find any error in the order of the Tribunal and the Tribunal was justified that the amount of Rs. 2,75,000 was not the income of the assessee. We, accordingly, answer the question referred to us in the affirmative, that is, in favour of the assessee and against the Revenue.
10. There shall be no order as to costs.