DCIT vs. M/s.Tourism Corporation of Gujarat Ltd.

Parties Involved

Facts Summary

The assessee, M/s Tourism Corporation of Gujarat Ltd. (TCGL), engaged in the promotion and development of tourism in Gujarat, was initially assessed under section 143(3) of the Income Tax Act, 1961. The Assessing Officer (AO) observed that the statutory auditors highlighted that the company consistently recognizes 15% of the grants received from the Government of Gujarat as income for administrative overheads. However, for the assessment year in question, the amount paid to District Collectors and other implementing agencies (Rs.13,39,91,645/-) was not considered while calculating the grant utilization, leading to an understatement of income by Rs.2,00,98,747/-. The assessee argued that these funds were merely passed through and did not constitute TCGL's income. The assessee cited judgments such as, Shoorji Vallabhdas (1962) 46 ITR 144 (SC) to assert that notional or hypothetical income cannot be taxed unless it meets the test of real income. The AO issued a notice under section 142(1) asking the assessee to show-cause why Rs.2,00,98,747/- should not be added to the total income. The assessee preferred an appeal before the Commissioner of Income-Tax (Appeals), who partly allowed the appeal of the assessee. The Revenue is in appeal before the Income Tax Appellate Tribunal against the order of the CIT(A).…

Legal Issues

• 1. Whether the Commissioner of Income-Tax (Appeals) has erred in law and on facts in deleting the addition made on account of 15% grants utilized as income of assessee as per GOG resolution dated 27.05. 1998 which the assessee offered in the previous years.
• 2. It is prayed that the order of the Commissioner of Income-tax (Appeals) may be set aside and that of the Assessing Officer be restored.

Judgment Outcome

Decided in favour of Partly Assessee / Partly Revenue.

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