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2013 (6) TMI 682 - AT - Income TaxInvestment by the assessee-society - whether investment is not according to section 11(5) and had violated the provisions of section 13(1)(d)? - Held that:- The reasoning given by the Assessing Officer is not correct inasmuch as the advances given by the assessee towards implementation of its project have to be treated as application of income and not as an investment out of the grant received by the assessee. The word "applied" need not necessarily imply "spent". Even if an amount is irretrievably earmarked and allocated for the charitable or religious purpose or purposes, it may be said to have been "applied" to the said purposes. (CIT v. Radhaswami Satsang Sabha [1953 (10) TMI 36 - ALLAHABAD HIGH COURT]. Therefore, the Assessing Officer was wrong in observing that the application of funds by the assessee was not according to section 11(5) and the advance was not utilisation of the funds. Further, the Assessing Officer held that purchase of land at Silchar for ₹ 11,25,297 was in violation to section 11(5) as property purchased was in the name of Department of Heavy Industry and not in the name of the assessee. Considering the terms of the grant, this objection is not sustainable. Therefore, the purchase of land is also to be considered as application of income. Accordingly, there was no violation of section 11(5). Therefore, the very premise on which the Assessing Officer had proceeded, was wrong and the same cannot be sustained. Further the grant received was on capital account and not a recurring grant towards revenue expenses. Hence it could not be taken to income and expenditure account as per Accounting Standards 12 issued by the Institute of Chartered Accountants of India. Therefore, the learned Commissioner of Income-tax (Appeals) rightly held that the project grant was neither income nor corpus of the assessee-society. As far as interest on fixed deposit receipt is concerned the same related to the unutilised project grant on which the Government had overriding title. Further, this interest was also at par with the grant received from the Government of India and, therefore, the same reasoning would apply to the interest on fixed deposit receipt as to the grant. Therefore, interest on fixed deposit receipt amounting to ₹ 2,20,21,847 could not be treated as income of society - Decided in favour of assesse.
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