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2022 (5) TMI 1415 - HC - Income TaxExemption u/s 11 - whether the grant-in-aid received by the assessee was capital receipt or revenue receipt? - HELD THAT:- The assessee was under obligation to deposit the amount in a separate bank account and interest earned thereon was also liable to be accounted for and utilized for the same scheme/purpose. The funds could not be utilized for any other purpose. The grant-in-aid was one time assistance. Thus, there is no doubt that the assessee could not have spent the amount received by it through the grant-in-aid except for the purpose specified in the aforesaid communication. A sum of Rs.77 lacs was towards non-recurring expenditure, which as per the details noticed above, cannot be said to be receipt in the nature of revenue. Similarly, remaining amount of Rs.23 lacs was also towards the capital receipt. There is nothing on record to suggest that the assessee is a profit earning organization or has been constituted as a profit making venture. The matter can be viewed from another angle. The term income as defined in Section 2(24) is inclusive of various heads mentioned therein. Prior to amending Act 20 of 2015, there was nothing specific in Section 2(24) of the Act which would include grant-in-aid by the Central or the State Government called by whatever name. It was only by way of said amendment, made effective from 01.04.2016 that such monetary release by State or Central Government has been incorporated as income by way of Section 2(24) (xviii). Even in this clause exemption has been carved out in respect of subsidy or grant by Central Government for the purpose of corpus of a trust or institution established by the Central Government or State Government, as the case may be. This clearly illustrates the legislative intent that prior to 01.04.2016, the type of grant as is the subject matter of instant lis was not specifically included as income. The latter inclusion of such provision will not have retrospective application. Even by way of aforesaid amendment, exemption is available to the institutions like the assessee, as noticed above. In Kalpna Palace vs. Commissioner of Income Tax[2004 (8) TMI 65 - ALLAHABAD HIGH COURT] examined the fall out of the grant in aid and incentives etc., provided by the government. It was held that grant-in-aid received by assessee, in that case, was capital receipt. The grant -in-aid, in that case, was provided by the State Government for construction of permanent Cinema Halls during a specified period. The Court after analysing the facts found that since the grant-in-aid was only for specific purpose of construction of Cinema Halls in the rural areas, it could not be termed as revenue receipt. Applying the purpose test to the facts of that case, it was held that the payment received by assessee under the scheme was not in the course of a trade but was of a capital nature. In Ponni Sugars case [2008 (9) TMI 14 - SUPREME COURT] the 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. The purpose obviously was to promote the concerned business. ITAT has definitely not considered the matter in the above noted context. The fact that the assessee received only one time grant with a specific purpose which nowhere suggested scope of profit generation or revenue for the assessee, the amount received by the 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 the assessee and against the revenue.
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