TMI Blog2015 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... e grant is a capital receipt and not a revenue receipt and hence a non taxable receipt. The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Chitrakalpa, [1988 (8) TMI 34 - ANDHRA PRADESH High Court] held that the subsidy given by the govt. to the assessee was not a revenue receipt. We also see from the notes and accounts that the capital grant received are adjusted from the cost of fixed assets. Hence we are of the opinion that the grant received is of capital in nature and does not have the income character and the assessee has treated it rightly as a corpus donation. Non eligiblilty for claiming exemption u/s 11 and u/s 10(23C(vi)) by assessee is incorrect. Further the CIT has also held that the AO ought to have verified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived ₹ 2,62,45,200/- as grants which were credited to Reserves and Surplus. The AO disallowed the claim of exemption u/s 10(23C)(vi)/11 by doing so the AO should have brought to tax of these receipts. As the AO has not done, the order passed by the AO for the A.Y 2010-11 is erroneous and prejudicial to the interest of revenue. Further, it is seen from the consolidated balance sheets as at 31.03.2010 and 31.03.2009 that provision gratuity was ₹ 1,56,44,796/- and ₹ 1,11,44,796/- respectively. It is thus evident that gratuity expenditure of ₹ 45,00,000/- debited to income and expenditure account for A.Y 2009-10 was unpaid and is therefore, required to be disallowed u/s 40A(7) of the I.T. Act. 3. Accordingly a show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iced with respect to any grant received by the Society. In view of this fact, the assessment order neither suffer from any error nor prejudicial to the interest of the Revenue for exercising your powers u/s 263. Grant At this juncture we wish to bring to your kind notice that the society under an MOU dated 24th February, 2005 with the Govt. of Andhra Pradesh has agreed to implement reforms under the Technical Education Quality Improvement Programme (TEQUIP). The society received the grant and utilized it to acquire assets and the infrastructure to run the programme. The nature of the grant is a capital receipt and does not have income character. It cannot be brought to tax in any manner. The entire grant was used to acquire asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts/grants from World Bank so as to bring the same to tax net. Thus, non-exemption of the above issues definitely makes the order passed by the AO as erroneous and prejudicial to the interest of Revenue. 5. The CIT further held that the order passed by the AO u/s 143(3) r.w.s. 153A of I.T. Act for the A.Y 2010-11 is set aside with a direction to examine all the issues as above, in detail and re-do the assessment orders after making detail enquiries and investigation and examining the taxability of the receipts of grants from World Bank. 6. Aggrieved, the assessee preferred appeal before the Tribunal. The ld Counsel for the assessee Shri Ajay Gandhi stated that the ITAT has in ITA No.563/Hyd/2012 (Sic 564/Hyd/2012) in assessee s own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make an independent enquiry/examination at the time of assessment for each assessment year and decide in accordance with law. Therefore, it was submitted that the denial of exemption u/s 11 for the A.Y 2007-08 by the AO is erroneous. 7. The ld Counsel for the assessee also submitted that the Society received grant and utilized it to acquire assets and infrastructure to run its programme. The nature of the grant is a capital receipt and does not have income character. He also pointed out the letter dated 09.09.2011 wherein information has been submitted with respect to A.Y 2004-05 to A.Y 2010-11 and item No.8 is with respect to details of additions to corpus fund/building fund etc., as appearing in the balance sheet of the respective y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence a non taxable receipt. The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Chitrakalpa, reported in 177 ITR 5640 held that the subsidy given by the govt. to the assessee was not a revenue receipt. We also see from the notes and accounts at page 76 that the capital grant received are adjusted from the cost of fixed assets. Hence we are of the opinion that the grant received is of capital in nature and does not have the income character and the assessee has treated it rightly as a corpus donation. Further, the AO has been directed to grant the assessee exemption u/s 11 of the Act by the Hon'ble Tribunal by order dated 31st July, 2013 in ITA No.563/Hyd/2012 (Sic 564/Hyd/2012). In these circumstances, the order u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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