Is AO justified in deleting addition on account of corpus fund without routing the income through the profit and loss account?

This tribunal appeal concerns whether the Assessing Officer (AO) was justified in deleting an addition of over £146 million related to a corpus fund. The AO had argued that income from this fund should have been routed through the profit and loss account and treated as diverted income. However, the tribunal noted that this issue was covered by a previous decision in the assessee's own case for the 2009-10 assessment year.

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘A’, NEW DELHI

Before Sh. Amit Shukla, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
(Through Video Conferencing)
 ITA No. 1622/Del/2018 : Asstt. Year : 2013-14

JCIT,
Special Range-1,
New Delhi
(APPELLANT) 

Vs 

Agriculture Insurance Company of
India Ltd., 13th Floor, Ambardeep,
14, K.G. Marg, Connaught Place,
New Delhi-110001
(RESPONDENT)
PAN No. AAECA2874P

Assessee by : None
Revenue by : Sh. Satpal Gulati, CIT DR

Date of Hearing: 12.07.2021 
Date of Pronouncement: 12.07.2021

 ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the revenue against the order of ld. CIT(A)-32 , New Delhi dated 26 .10.2017.

2. Following grounds have been raised by the revenue:

“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs.14 ,60,88,000/- on account of corpus fund without routing the income through the profit and loss account. The ld. CIT(A) was not justified in not treating the same as diversion of income.

2. On the facts and in the circumstances of the case , the ld. CIT(A) has erred in deleting the addition of Rs.2 ,41,82 ,570/- made by the AO on account of disallowances u/s 14A r .w .r . 8D of the Income Tax Rules.”

3. Ground No . 1 relates to corpus fund raised by the revenue stands covered by the decision of the Tribunal in assessee’s own case for assessment year 2009-10 in ITA No .366/Del/2018 vide order dated 17.03.2021.

4. We have perused the material available on the record. In the present case, it is noticed that an identical issue having similar facts was a subject matter of the assessee’s appeal in ITA No .366/Del/2018, the relevant findings have been given in para 5 & 6 which read as under:

“5 . We find that this Tribunal in assessee’s own case have noted the following facts and have decided the issue in favour o f the assessee in the following manner:-

10 . A fter discussing certain other judicial decisions , the ld . CIT(A) observed that the income received from inves tments and credited to the corpus fund has been credited as per the direc tions o f the Government o f India and such income was earned out o f the amount received from the Central Government and State Government in the corpus fund for speci fied purposes by the Government o f India. Accordingly, he deleted the addition o f Rs. 8,62,47 ,181/- .

11 . Be fore us, the ld . DR vehemently stated that the appellant’s activities in respec t o f inves tments out o f corpus fund vis a vis o ther inves tments are same for which common expenses have been debited in the Pro fit and Loss Account . Further , the assessee has utilized the corpus funds, ownership/ right to use , vests with the assessee. The ld. DR further stated that the ld . CIT(A) has simply re ferred to the submissions o f the assessee and has deleted the additions without any speaking order . There fore, the matter should be res tored to the file o f the ld . CIT(A) for fresh adjudication.

12 . Per contra, the ld . counsel for the assessee reiterated what has been s tated be fore the lower authorities. In  support , the ld . counsel for the assessee submitted the letter from Government o f India , Ministry o f Agriculture, Department Agriculture and Co-operation , which reads as under:

To know more in details find the attachment file