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IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
Sabina, Satyen Vaidya, JJ.
M/s H.P. Nursing Registration Council, Through Its Registrar - Appellant
Versus
Principal Commissioner of Income Tax – Respondent
Income Tax Appeal No.46 of 2016
Decided On : 25-05-2022
Income Tax Act, 1961 - Sections 11(i) (a) 143(3) , 2(24)(iia) , 12AA , 10 (23C) (iiiab) , 11, 12 and 13 - Himachal Pradesh Nursing Registration Council Act, 1977 - Appeal - Nursing services under human resources for health - Scheme of upgradation/strengthening of nursing services under human resources for health - grant-in-aid except - Appeal are that the appellant was released a sum of Rs. One Crore, for its upgradation/strengthening under scheme of upgradation/strengthening of nursing services under human resources for health, by Government India, for year vide communication - Amount so released was grant-in-aid provided by the Government - Assessee, in its Income Tax Return for assessment year declared nil income claiming exemption under Section 11(i) (a) of Income Tax Act, 1961 - Pursuance to scrutiny proceedings, Assessing Officer framed assessment under Section 143(3) of Act and a sum was assessed as income of assessee for relevant assessment year - Amount included unspent amount of grant-in-aid paid to the assessee by Government of India during financial year - Amount received by assessee through grant-in-aid was considered as income of the assessee under Section 2(24)(iia) of Act - Assessing Officer concluded that assessee was not entitled to any exemption as its registration under Section 12AA was effective - Amount given by the Government for a specified purpose and the government having control on its expenditure cannot be said to be income accrued to the assessee (Para 16).
Finding of the Court:
Importance of the judgment of this Court in Sahney Steel case lies in fact that it has discussed and analysed entire case law and it has laid down basic test to be applied in judging character of a subsidy - That test is that character of the receipt in hands of assessee has to be determined with respect to the purpose for which subsidy is given - One has to apply the purpose test - Point of time at which subsidy is paid is not relevant - Source is immaterial form of subsidy is immaterial - Main eligibility condition in scheme with which we are concerned in this case is that incentive must be utilized for repayment of loans taken by assessee to set up new units or for substantial expansion of existing units - On this aspect there is no dispute - Object of subsidy scheme was to enable the assessee to run business more profitably then receipt is on revenue account. On the other hand, if object of the assistance under subsidy scheme was to enable assessee to set up a new unit or to expand the existing unit then the receipt of subsidy was on capital account - Payment received by assessee under the scheme was not in course of a trade but was of a capital nature - Incentive conferred was in the nature of higher free sale sugar quota and allowance to collect excise duty even on the sale price of free sale sugar - Purpose obviously was to promote concerned business - Assessee received only one time grant with a specific purpose which nowhere suggested scope of profit generation or revenue for assessee, amount received by assessee by way of grant-in-aid thus could not be termed to be revenue receipt - Substantial questions of law No. (c) and (d) are accordingly decided in favour of assessee and against the revenue
Result: Appeal allowed
JUDGMENT :
Satyen Vaidya, J.
By way of instant appeal, challenge has been laid to order dated 20.01.2016 passed by the Income Tax Appellate Tribunal, Chandigarh, in Income Tax Appeal No. 875/CHD/2014, whereby the order of CIT (Appeals), Shimla, in Appeal No. IT/76/13-14/Sml. has been affirmed.
2. Brief facts giving rise to the instant appeal are that the appellant (for short “Assessee”) was released a sum of Rs. One Crore, for its upgradation/strengthening under scheme of upgradation/strengthening of nursing services under human resources for health, by the Government India, for the year 2008-2009 vide communication dated 18th March, 2009. The amount so released was grant-in-aid provided by the Government of India subject to following conditions: -
(ii) The funds may be deposited in a separate Bank Account opened for this purpose only. Further, interest earned on the grant should also be accounted for and utilized for the same scheme/purpose.
(iii) For speedy implementation of the scheme, the civil construction under the scheme may be got executed through the agencies approved by the State Govt.
(iv) The funds sanctioned will be utilized for the purpose for which it is sanctioned.
(v) This is one time assistance both for non-recurring and recurring expenditure for the entire XI plan period. The State Govt. will bear the recurring expenditure form XII plan onwards.
(vi) Quarterly Progress report may be sent to Mr. T. Dileep Kumar, Nursing Adviser, Ministry of Health & Family Welfare, Nirman Bhawan, New Delhi.
(vii) The expenditure should be incurred as per guidelines in the attached Annexure.”
3. The assessee, in its Income Tax Return for the assessment year 2010-2011 declared nil income claiming exemption under Section 11(i) (a) of Income Tax Act, 1961 (for short “the Act”). In pursuance to scrutiny proceedings, the Assessing Officer framed assessment under Section 143(3) of the Act and a sum of Rs.1,40,17,323/- was assessed as income of the assessee for the relevant assessment year. This amount included the unspent amount of the grant-in-aid paid to the assessee by the Government of India during the financial year 2008-2009. The amount received by the assessee through grant-in-aid was considered as income of the assessee under Section 2(24)(iia) of the Act. The Assessing Officer concluded that the assessee was not entitled to any exemption as its registration under Section 12AA was effective from 01.04.2010, relevant for assessment year 2011-2012 and the assessee also did not qualify to be entitled for exemption under Section 10 (23C) (iiiab) of the Act.
4. The assessee preferred an appeal before the CIT (Appeals), Shimla, but without success. Further appeal of the assessee to ITAT was also dismissed. Hence the instant appeal.
5. This court admitted the instant appeal for hearing on 04.10.2016 on following substantial questions of law :-
(b) Whether the learned Income Tax Appellate Tribunal is right in law in holding that appellant was not entitled to the benefits of provisions of Sections 11, 12 and 13 as the appellant had been accorded registration under Section 12AA of the Income Tax Act, 1961 w.e.f. A.Y. 2011-12?
(c) Whether the learned Income Tax Appellate Tribunal is right in law in holding that the grant received was a voluntarily contr
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