TMI Blog2018 (12) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... . The grants so received by the appellant from the Government to tie utilized for specific purpose cannot be held to be income of the appellant. - decided in favour of assessee. - ITA No.281/LKW/2017 - - - Dated:- 30-11-2018 - SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER For The Appellant : Shri Rakesh Garg, Advocate For The Respondent : Shri A. K. Bar, CIT (DR) ORDER PER T.S.KAPOOR, A.M: This is an appeal filed by the Revenue against the order of ld. CIT(A) dated 14/2/2017. Revenue has taken the following grounds of appeal:- 1. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing the assessee to take the amount of ₹ 23,85,00,000/- lacs in computation of income as capital expenditure, ignoring the fact that the assessee has claimed this capital grants of ₹ 23,85,00,000/- lacs as exempt u/s 11(1)(d) of the I.T. Act and is not taken in the Computation of Current Year. 2. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing the assessee's income for accumulation u/s 11 [2] of the I.T. Act, 1961 without filing Form No. 10 in time. ITA No.281/LKW/2017 Pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer was of the view that expenditure incurred by the assessee on capital assets should have been set off against capital grants received and cannot be claimed towards income applied against the income of current year. The claim of the assessee was that capital grant was for specific purpose and cannot be utilized or applied for any other purpose. The ld. CIT(A) has allowed relief to the assessee by holding as under:- 5.2 The undisputed facts are that the appellant i.e. Rajiv Gandhi Institute of Petroleum Technology (RGIPT) has been established by Rajiv Gandhi Institute of Petroleum Technology Act, 2007, vide Govt. of India's Notification dated 28.05.2008. It is also an admitted fact that the Institute is approved under section 10(23C)(vi) of the IT Act, 1961 vide order dated 24.08.2011 approved by the Chef Commissioner of Income tax, Lucknow. It is an Institute of national importance. Copy of the Gazettee of India Extraordinary dated 20.12.2007 as filed by the appellant is on record. The objects of the Institute as per clause 9 of. the Act is to (i) nurture and promote quality and excellence in education and research in the area of petroleum and hydrocarbons; (ii) p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant towards the objects, inclusive of capital expenditure and out of the same has reduced the same by ₹ 23.85 crores, holding that the same being a Capital Grant, the same to be set off against the Capital Expenditure. The case of the appellant is that the Capital Grant received is not taxable and cannot be made part of the income expenditure account. If the same is excluded, the surplus left would be far less that 15% of the total receipts. In simple terms, out of the total income for the year under consideration, if the amount applied towards the objects, both on revenue and capital account is deducted, the surplus left would be far less that 15% of the gross income. The AO by holding the Capital Grant of ₹ 23.85 crores to be set off against capital expenditure has worked out the surplus of ₹ 21.46 crores. The appellant has filed copies of the Notifications as issued by the Government of India from time to time, (which were filed by the appellant before the AO) in which it has been specifically laid down, that the Grants are for specific purposes and only the Interest earned on the same is to be used/ applied for the purposes of the objects of the Instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of their Profit After Tax (PSAT) during the last Financial Year. 5.6 Thus, in light of the above Notifications, it is clear, that the Grants are Capital Receipts for specific purpose, and they cannot be treated as income of the appellant. The appellant has relied upon the following case laws: Crook vs. Seaham Harbour Dock Company 16 TC 333 (HL) 1931,48TLR (HR) CIT vs. Handicrafts and Handlooms Export Corpn. of India Ltd. Delhi. A similar issue was adjudicated upon by Hon'ble ITAT Chandigarh Chief Administrator, Haryana Rural Development Authority vs. DCIT, Panchkula reported in 44 Tax mann.com 233 (2014). It was held that when assessee authority has been constituted by Government for specific purposes of carrying on activities of Government and where grants and advances ior loans are disbursed by Government to assessee, such grants and advances cannot be held to be income of assessee. 5.7 A similar issue of assessability of grants arose before the Hon'ble Punjab and Haryana High Court in case of CIT vs. State Urban Development Society (IT Appeal No. 2010 of 2011 dated 19.10.2011) wherein the Hon'ble High court held as under:- The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been considered by the Tribunal, wherein, it has been held that reflection in the profit and loss account towards the income is not determinative. The entries in the books of account do not decide the nature of receipts. Since, the grants have been received by the assessee for disbursement and keeping in view the fact that the same cannot be utilized for any other purpose such as distribution for the poverty in furtherance to the object of the Schemes, it cannot be treated as income of the assessee. As per the finding of fact recorded by the Tribunal, no substantial question of law arises in the present petition. A similar issue of assessability of Grants in aid arose before Hon'ble ITAT Delhi in case of Addl. CIT vs. IMS Committees, Muzzafarnagar in ITA No. 1541/Del./2008 for A.Y. 2006-07. The Hon'ble ITAT vide order dated 04.04.2012 held as under- We have heard the Ld. AR and gone through the facts of the cafe. Indisputably, the Ansh Dan and fund for Nirman Yojna, were given to the assessee by the State Government Sugar Factories for specific projects, of road construction and as pointed out by the Ld. CIT(A), these funds have been spent also for tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of funds received for specific purposes was decided by Hon'ble Patna High Court in case of Bihar Agricultural Produce vs. CIT reported in 205 Taxman 378. The Hon'ble Court held as under:- Applying the ratio of the judgment to the present situation, it appears to us that the Board's fund was meant for specific purposes, namely, to meet the expenses for establishment of the Board and those incurred in the interest of the Market committee. The aims and objects of the Market committee, and the purpose for which the committee itself could use the funds, are laid down in section 30 of the local Act. In such a situation, it is a statutory compulsory contribution by the market committee to the Board's fund, meant for specified statutory purposes, which cannot be used for any purpose that the Board desires, and surely cannot be used for commercial activities, or trade and business. It does not permit any profit motive. It is apparent from the aims and objects of the Act that the functions of the Board are entirely statutory specified, and to alleviate the situation affecting plight of agriculturist in the State of Bihar. In such a situation, it is not a revenue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust vs. Deptt. Of Income Tax in ITA No. 157/Agra 2013 and judgement of Hon'ble Jurisdictional ITAT in the case of Barrows Blue Bell School dated 31.08.2016 in ITA 358/LKW/2016. Respectfully following these decisions, on this count also, the surplus, if any, cannot be treated as income for the year. The surplus is to be accumulated for a period of five years and to be applied towards the object of the Institute in subsequent years. 7. We find that Tribunal has dismissed the appeal of the Revenue on similar findings of ld. CIT(A). Tribunal in para 6 of its order for assessment year 2012-13 has made the following findings:- 6. We have perused the case record, heard the rival contentions and analysed the facts of the case and it is crystal clear from record that grants received by the assessee from Government of India was for specific purpose. As per notifications issued by the Government of India, it has been specifically laid down that these grants are for specific purpose and only interest earned on the same is used for the purpose of objects of the assessee Institute. The amounts received in grant have to be held as deposit and only interest earned therein to be app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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