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2024 (10) TMI 259 - AT - Income TaxAddition made on account of 15% grants utilized as income of assessee as per GOG resolution which the assessee offered in the previous years - HELD THAT - The assessee furnished documentary evidence including the GOG resolution dated 27.05.1998 and audited financial statements to demonstrate the consistent and appropriate application of the 15% charge only to grants utilized by TCGL. The records clearly indicate that the decentralized grants were merely routed through TCGL and were directly managed and utilized by other government agencies such as District Collectors. These passthrough funds did not impact TCGL s operational finances and therefore were not subject to the 15% charge. We find that the assessee s treatment of these funds is in line with the established accounting practices and the terms of the GOG Resolution. CIT(A) conducted a thorough examination of the facts submissions and relevant financial records. CIT(A) rightly observed that the AO s addition was based on assumptions and conjecture without any substantive evidence to support the contention that TCGL was obligated to charge 15% of the decentralized grants as income. CIT(A) s findings are well-reasoned and supported by the consistent policy followed by the assessee in recognizing income. The principle that only real income can be taxed and not notional or hypothetical income is well-settled in law. The alleged income was never accrued to TCGL nor did it represent real income as the funds were never utilized by TCGL but were simply transferred to other government agencies as per GOG s directions. The addition made by the AO goes against the basic tenet of income tax law which mandates that taxation must be based on income that has actually accrued or arisen. Appeal filed by the Revenue is dismissed.
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