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2014 (12) TMI 219 - AT - Income TaxNature of receipt of grant - Chargeability of other income to tax - assessee’s contention that the income from internal sources was nothing, but a reduced portion of the Grant given by the Government of India for the purposes of meeting its expenses, was jettisoned. - Revenue was of the view that the ‘Other income’ is distinct from Grants and hence is chargeable to tax - Held that:- the unspent balance of previous grants has been taken into account while sanctioning this grant. If we see ‘Other income’ is isolation, it is undoubtedly income chargeable tax in view of the Tribunal holding in its first order dated 31.7.2006 that the grant of registration by the CIT is prospective and does not extend to the year under consideration and the consequential assessment of the assessee as AOP. But when we view ‘Other income’ in the setting and the context of the Scheme of the Government allowing Grants for meeting all of the assessee’s expenses as reduced by the amount of such ‘Other income’, in conjunction with the fact that the tribunal has held the amount of Grant to be not chargeable to tax, the irresistible conclusion which follows is that such ‘Other income’ partakes of the character of Grant only. There is a need to draw a line of distinction between the amount of ‘Other income’ adjusted by the Government against grant and the amount not so adjusted. Whereas, the first amount is to be considered as part and parcel of the amount of grant and hence not chargeable to tax, the second amount cannot be so considered. The reason is simple that the amount of such second part of ‘Other income’ does not bear the character of grant so as to avail any immunity from taxation. – Decided in favour of assessee. - Such second part, which is not considered by the Government as part of the grant, in our considered opinion is rightly chargeable to tax in view of the tribunal treating the status of the assessee as AOP. - Decided partly in favor of assessee.
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