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TMI Blog2016 (11) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case and also when the Appellant was clearly guided by the directions of the Government of Karnataka with regard to both the grant as well as interest earned on the unspent money kept with banks? (b) Whether in law, the authorities below are justified in rejecting the plea of the Appellant and treating the grant and the interest earned thereon as income of the Appellant when admittedly the funds were held by the Appellant in the capacity of custodian only and the funds and interest were to be utilized as per the directions of the Government of Karnataka alone? (c) Whether in law, the authorities below are justified in interpreting the order of the Government of Karnataka dated 02.02.2010 as an after thought wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's own case for Assessment Year 2009-10. In its order in ITA No.1843/Bang/2013 dated 9.5.2014 the co-ordinate bench adjudicated these issues in favour of Revenue and against the assessee holding as under at paras 12 to 14:- "12. We have given a careful consideration to the rival submissions. At pages 58 & 59 of the assessee's paper book are copies of the English translation of the Government Order dated 17.1.2009 releasing grants to the assessee society for the year 2008-09. The order in vernacular is placed at pages 60 to 61 of the assessee's paper book. The operative portion of the Government Order reads thus:- "Government Order No.UDD 15 SFC 2008 Bangalore, dated 17.01.2009 As explained in the Preamble, Government has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs 3) Government Order No.15 SFC 2008 dated 27/08/2009 Rs. 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 Bangalore, Dated 02-02-2010 As explained in the preamble it is here by directed that the amounts aggregating Rs. 299/- lakhs granted to Society be utilized by the Society after prior approval of the Government for specific purpose. The Government also reserves the right to direct Society to use the fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in ITA No.1843/Bang/2013 dated 09.05.2014 in the assessee's own case for Assessment Year 2009-10, we hold that in the factual matrix of the case, it is clear that even after the Addendum of GOK dated 20.2.2010, whatever the assessee does out of the grant and interest accrued can only be said to be application of income for the stated objects and activity of the assessee society and therefore reject the assessee's plea that there was diversion of income by overriding title. Consequently, the grounds at S. Nos. 1 to 4 raised by the assessee are dismissed." Similar is the view taken by the Tribunal in the other matters. Under these circumstances, appeals before this Court. 4. We have heard Mr.Parthasarathy, learned counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which finance could be provided to various agencies such as water, sewerage boards, municipal corporations, etc. The objective is to create and maintain a fund for the development of infrastructural assets on a continuing basis and, therefore, the assessee is a nodal agency formed/created by the Government of Karnataka as per the guidelines; there is no profit motive as the entire fund entrusted and the interest accrued therefrom on deposits in bank though in the name of the assessee has to be applied only for the purpose of welfare of the nation/States as provided in the guidelines; the whole Of the fund belongs to the State Exchequer and the assessee has to channelise them to the objects of centrally sponsored scheme of infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government money released to the assessee by way of a grant and the interest thereon is also to be utilised as per the terms and conditions of the grant, the view taken by the Tribunal cannot be sustained for two reasons. One is that such cannot be termed as 'income' of the assessee and another is that even if the addendum is issued by the Government for controlling the utilization of the amount of interest on the deposit at the later date the character of the money would remain the same and addendum can be termed as only by way of a clarification. It was not a matter where the question was to be considered with the retrospectivity as observed by the Tribunal. When the assessee is held as a custodian and the full command for utilization ..... X X X X Extracts X X X X X X X X Extracts X X X X
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