IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.190 of 2008 Date of decision: 12.12.2008 Commissioner of Income Tax, Chandigarh-II -----Appellant Vs. M/s Punjab State Sports Council, Chandigarh --Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N.MITTAL Present: Ms. Urvashi Dhugga, Standing Counsle for the revenue. Adarsh Kumar Goel,J. 1. The revenue has preferred this appeal under section 260-A of the Income tax Act, 1961 (in short, ‘the Act’) against the order of the Income Tax Appellate Tribunal, Chandigarh Bench-B in ITA ITA No.190 of 2008 No.904/Chandi/2006 dated 20.7.2007, proposing to raise following substantial questions of law:- “i) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct in holding that the receipts of grants-in-aid by the assessee from Central/State Govt. are not voluntary contributions for the purpose of section 11 read with section 12 of the Income Tax Act and are thus, not required to be taken into account as income of the assessee for the purpose of ascertaining the amount expended or the amount to be accumulated? ii) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct in not adjudicating on the addional grounds of appeal raised by the department and not even passing a speaking order or rejecting the same? Iii) Whether on the facts and the circumstances of the case, the Hon’ble ITAT was correct in holding that only interest reflected by following cash system of accounting has to be considered as an income for the purposes of 2 ITA No.190 of 2008 Sections 11,12 and 13 of the Act, whereas it is not a voluntary contribution?” 2. The assessee is a charitable society for promotion of sports and is registered under section 12-A of the Act. It receives grants from Central and State Government for specific purposes for developing sports and for meeting expenses of the society. The Assessing Officer treated the grants to be income on the ground that the assessee failed to give notice in Form No.10 in prescribed manner. The CIT(Appeals) upheld the claim of the assessee. On further appeal of the revenue before the Tribunal, it was held that on a combined reading of Sections 11 and 12, it appeared that contribution received by a trust set up for charitable or religious purposes is to be treated as income from property which is exempt under section 11 of the Act. Accordingly, it was held that the grants received for charitable purposes were exempt from income tax. As regards income from 3 ITA No.190 of 2008 interest, it was held that the same had to be considered to be income from other sources and has to be taken into account on the basis of cash system of accounting. Grants-in-aid received by the assessee for meeting expenditure was to be treated as income of the society. The matter was directed to be decided afresh by the Assessing Officer. 3. In view of finding of the Tribunal, there is no reason to hold that grants-in-aid received from the Central or State Government for specific purposes for advancement of sports are not to be treated as voluntary contributions or are to be treated as taxable income of the society. The method of accountancy is a question of fact and the Tribunal has held that the assessee was maintaining cash system of accounting. 4. With reference to proposed Question (ii), it is stated that certain additional grounds were raised. We do not find any reference of any such matter in the order of the Tribunal. In absence thereof, we cannot go into the 4 ITA No.190 of 2008 question whether any additional ground was raised by the revenue before the Tribunal. The revenue had an option to apply to the Tribunal to deal with the said matter. 5. We are unable to hold that any substantial question of law arises. 6. Dismissed. (Adarsh Kumar Goel) Judge December 12, 2008 (L.N.Mittal) ‘gs’ Judge 5