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2013 (11) TMI 212 - AT - Income TaxTaxability of grant in aid - local authority u/s 10(20) - whether assessee was an organ of the state as such immune of Article 289 of the Constitution - Whether only surplus remaining after allowing expenses as per the account of the assessee should be brought to tax - Held that:- There is nothing to suggest that the assessee is carrying on any business activities, generating income. Accordingly, the ld. CIT(A) concluded that there was no surplus with the assessee and therefore, there was no question of any taxable income. Admittedly, the grant-in-aid in question is a financial aid or subsidy given by the State Government of UP and Sugar factories for the specific purpose of construction of roads. In section 2(24) of the Act, it is declared that "income includes" various items which are enumerated therein in clauses (i) to (xv). In the said section 2(24), such a grant-in-aid has not been specifically included as an income or a revenue receipt. Therefore, considering the use for the worked "include" in section 2(24), the word "income" shall be construed as comprehending not only those items which said section declared that these shall include but also such items which said section declares that these shall include but also such items as it signified according to its natural import. Since section 2(24) has not declared that such a grant-in-aid shall be included in the income the word "revenue" shall be construed as comprehending what it signified according to its natural import. In relation to a business undertaking, the word "revenue" connotes incomings of the undertaking which are products of the normal working of the undertaking. The giving of financial aid or subsidy to the aforesaid committee, which admittedly is not carrying on any business, is at the discretion of the Government or Sugar factors. Thus, the grant-in-aid in question was not a product of the normal business activities of the assessee committee, assessed by the AO as a local authority. Therefore, such a grant-in-aid could not be termed as a revenue receipt so as to form part of the total income. As already pointed out, the ld CIT(A) concluded that the aforesaid funds received by the assessee from State Government and Sugar factories have been spend only for those specific projects and there was no surplus with the assessee. Since the Revenue have not placed before us any material, controverting these findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter, there is no basis to interfere with his findings - Matter is restored to A.O.
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