TMI Blog2015 (8) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 - SHRI VIJAYPAL RAO AND SHRI JASON P. BOAZ, JJ. For The Appellant : Shri H. V. Gouthama, C.A. For The Respondent : Dr. P. K. Srihari, Addl. CIT (D.R.) O R D E R Per Shri Jason P. Boaz, A.M. : These appeals by the assessee are directed against the orders of the Commissioner of Income Tax (Appeals) V, Bangalore dt.22.8.2014 for Assessment Year 2008-09 and dt.20.8.2014 for Assessment Year 2010-11. Since common issues are involved, these appeals were heard together and are being disposed off by way of this common order. 2. The facts of the case, briefly, are as under :- 2.1 The assessee is a registered society engaged in assisting its members for data generation and other related technical issues. The assessee was Registered as a society on 12.2.2008 under the Karnataka Society Registration Act under the directions from Govt. of Karnataka with the main object of strengthening the quality of urban local government through e-governance. Members are enrolled as per the rules and bye-laws of the society. The assessee made an application for grant of registration under Section 12A of the Income Tax Act, 1961 (in short 'the Act') to the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the principle of mutuality. The Assessing Officer accordingly completed the assessments for Assessment Years 2008-09 and 2010-11 under Section 143(3) rws 147 of the Act vide separate orders dt.21.3.2013 wherein the assessee's income was computed as under :- For Assessment Year 2008-09 Income as per return of income : NIL. Add Additions as discussed above Govt. Grants treated as income : Rs.1,97,00,000. Total assessed income : Rs.1,97,00,000. For Assessment Year 2010-11. Income as per return of income : Rs.50,090. Add : Additions are considered as income as discussed above. Government Grant received : Rs.25,,00,000. Interest Income : Rs.29,25,518. Total : Rs.54,75,608. Less : Expenses Claimed. Man Power Expenses : ₹ 23,35,776. Advertisement expenses : ₹ 2,22,932 Rs.25,58,708. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount even after 3 years, therefore, the amount is required to be included as taxable income. For the above and any other grounds that may be advanced at the time of hearing, the appellant prays that, appeal be allowed. 4.2 Before us, the learned Authorised Representative reiterated the contentions put forth before the learned CIT (Appeals). It was contended that the Govt. of Karnataka by an Addendum dt.2.2.2010 had specifically directed that the grant money and any accrued interest on FDs out of the grant money was to be utilized only for the purpose of assisting the member bodies in implementation of e-governance and that the interest on grant would stand on the same footing as the grant itself. The assessee contended that because of the conditions imposed by the Addendum, the grant as well as the interest income on FDs cannot be considered as the assessee's income by virtue of there being an overriding title to the income even before it reaches the assessee and the principle of diversion of income by overriding title is applicable. 4.3 Per contra, the learned Departmental Representative supported the impugned orders of the learned CIT (Appeals) as being in order. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the purpose for which the grant is to be utilized and the utilization of interest income out of the grant have not been specifically spelt out. However, in the addendum dated 2.2.2010, this lacunae has been filled up. This was done apparently after the rejection of the assessee s application for grant of registration u/s. 12A of the Act, pursuant to order of the DIT(E) dated 22.1.2010. This addendum reads thus:- Preamble: Government has released a total sum of ₹ 299 lakhs as under, for meeting the expenditure of the Karnataka Municipal Data Society; 1) Government order No. 15 SFC 2008 dated 07/03/2008 ₹ 197 lakhs 2) Government order No. 15 SFC 2008 dated 17/01/2009 ₹ 77 lakhs 3) Government order No. 15 SFC 2008 dated 27/08/2009 ₹ 25 lakhs However, the Government has not specified the purposes for which the grant is to be utilized nor quantified the amounts to be utilized against such purposes. It is felt necessary to issue an addendum to the above Government orders specifying the conditions of the grants released. After careful consideration the following addendum. Addendum to GO No. UDD/ 15/SFC/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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