INCOME TAX ACT, 1961

Section 45 Section 2(47)

Capital gains - Chargeability - Assessee received on account of Tripartite Agreement entered into by the assessee with Punjab Urban Development Authority and the Director Research and Medical Education, Punjab -

Assessee-society was established by Punjab Government and was registered under Registration of Societies Act. It was also registered as charitable society under section 12A. Assessee received Rs. 156 Crores on account of Tripartite Agreement entered into by assessee with Punjab Urban Development Authority and the Director, Research and Medical Education, Punjab. Assessee under terms of the agreement, purchased land from Punjab Agricultural University (PAU). Solitary issue involved was addition made of capital gain earned on alleged sale of land by the assessee, as per section 45 read with section 2(47), to extent remaining unutilized for charitable purposes under section 11(1A).Held: Role of assessee in Tripartite agreement, and supplementary agreements, was receiving funds arranged for by State government by getting its land sold through Punjab Urban Development Authority (PUDA). Amount remitted to assessee under agreement, was therefore, in the nature of grant received from the government. Assessee also provided a utilization certificate to effect before CIT(A),considering which he treated amount as applied for purposes of charity as per section 11. Revenue was neither able to controvert the afore stated facts nor pointed any infirmity in findings of CIT(A). Therefore, by any concept of taxation of income also, i.e., accrual or receipt,none of the amounts of funds due to or received by the assessee under Tripartite agreement was taxable in relevant year. Since amounts received under tripartite agreement as being in the nature of grants from government which did not accrue during relevant year and not capital gain earned by the assessee, it was not relevant to adjudicate issue raised in relation to taxability of unutilized capital gains under section 11 which capital gain was not received by the assessee at all.