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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Hon’ble Shri Dr. Arjun Lal Saini, AM]
Per se, as regards the accounting treatment, I concur with the appellant. The government grant is not income. It is grant for specific target/ scheme use. Though it is not capital receipt in the strict sense, but it is Parliament voted specifically earmarked funds for specific target/scheme use. The Government Rules apply; not the Income Tax Act. The Funds are outside the purview of the Income Tax (save maybe for TDS provisions at the time of expending from out of the fund, if and where applicable).
When appellant being government institution is not liable to be assessable to incometax, the grants are government specific funds then how the impugned assessment, etc ...
The rootcause is obvious it is the Permanent Account Number [PAN].
The appellant institution had been established way back in the year 1978. But the grant' of registration u/s 12A was only until the year 2001; i.e., it had applied for registration u/s 12A only around the year 2001. The years around 2001 were the PANfever years. PAN had just been introduced with gusto and allout reach. PAN was compulsory to open Bank Account.
The appellant institution has to have bank account; more so, the Grants are to be credited to specific bank account. So having got PAN the common perception is that, now that you are in the taxnet, and so you are to furnish return of income. So the appellant must have applied for registration u/s. 12A as a educational institution to get the exemption u/s.11. The registration was granted. Things went fineuntil this impugned assessment order. 11. On the Grounds of Appeal, per se 14
15 ITA No. 1684/Kol/2017 ITO, E, W 1(1) Kol Vs. Central Tool Room & Training Centre, Kolkata Though I have suomoto held that the appellant institution is not liable to be assessable to incometax in the first place, being a government educational institution. I will hereunder briefly to through the Grounds of Appeal, and give my decision thereon. Ground No. Ground subject matter Decision/Remarks 1 General 2 ITO,AO treating the Allowed governmen6t grant as income .Government grant is no income. The grant is Parliament voted grant out o the Consolidated Fund of India as per Article 113 of the Constitution of India. .The grant is target use specific .The grant is subjected to the government financial rules. .The grant is government fund. The grant is not income u/s. 11(1)(a); nor is it contribution to corpus u/s, 11(1)(d) or 12(1). .The grant is outside the scope of the Income Tax Act. 3 ITO, AO not allowing towards [As ground No. 2 above is Allowed, application out of the grant this ground becomes infructious. Even so, the utilization should have been allowed.] 4 That the grants are ‘capital Treated as Allowed grants’[As12] .Though in the strict sense, the grants are not per se so as to be ‘capital grants’ for the specified target use is for ‘training of trainees’ and ‘units benefitted’, but as the grants are not ‘income’, they cannot be credited through the I & E A/c and so so have to be credited directly to the Balance Sheet. 5. Utilization certificate the [same as in ground No. 3 above] application should have been allowed. 6 General savings ground
16 ITA No. 1684/Kol/2017 ITO, E, W 1(1) Kol Vs. Central Tool Room & Training Centre, Kolkata 7. The learned departmental representative vehemently contends during the course of hearing that the CIT(A) has erred in law as well as in facts in treating the assesse to be an ‘person’ within the meaning of section 2(31) of the Act thereby deleting the impugned addition of Rs.8,21,56,000/- as grant received from Govt. of India. The department seeks to reiterate that assessee has nowhere placed on record the donor’s specific direction about utilization of the impugned sum as corpus fund. It therefore seeks to restore the impugned addition made by the Assessing Officer on account of non application of the impugned sum upto statutory limit of 85% u/s. 11 of the Act. The assesse on the other hand strongly supports the CIT(A)’s action deleting the impugned addition vide above extracting reasoning.
We have given our thoughtful consideration to the rival contentions. We find no merit in Revenue’s instant arguments. The assessee admittedly is a training centre enjoying section 12A registration since 12-06-2001. It receives Govt. of India’s grant as per specific directions. Copy of one such direction forms part of record vide letter dt. 10-06-2018 coming from Ministry of Micro, small & Medium Enterprises makes it clear that the grant in issue was to be utilized for creating capital asset in a given ratio. The impugned grant also came through the specified channel. This assessee’s utilization activity is very well recorded as per Form 19A prescribed in GFR (General Finance Rules). Necessary utilization certificate to this effect dated 23-05-2014 has been taken into consideration. The CIT(A) has reproduced the same in his lower appellate order in preceding paras. We observe that in these peculiar facts the Revenue has failed to rebut that assessee’s grant-in-aid had come with specific directions and the same has also been utilized as per prescribed purposes. It transpires during the course of hearing that Assessing Officer has accepted the very factual position in all preceding and succeeding assessment years. Coupled with this, various decisions/judicial precedents namely hon’ble Punjab & Haryana high court in ITA No. 210/ 11 CIT V/s. State Urban
17 ITA No. 1684/Kol/2017 ITO, E, W 1(1) Kol Vs. Central Tool Room & Training Centre, Kolkata Development Society decided on 9-10-1, the tribunal’s orders Chief Administrator Rural Development Authority V/s. ACIT 2014 162 TTJ Chd. 749, ITA Nos. 505- 506/Pune 2014 Arunava V/s ITO decided on 22-5-2017 DIT V/s. Society for Development (2012) 205 TAXMANN hold that government grants do not acquire taxable income’s status in such cases. We conclude in this peculiar facts and circumstances that the CIT(A) has rightly reversed the assessment findings making the impugned addition of Rs. 8.21 crores in issue on both counts.
This Revenue’s appeal is dismissed. Order pronounced in the Court on 10 -05-2019
Sd/- Sd/- [ Dr. Arjun Lal Saini ] [ S.S.Godara ] Accountant Member Judicial Member
Dated :10 -05-2019
**PRADIP, Sr. PS Copy of the order forwarded to: 1. Appellant/Department: Shri Krishnendu Sengupta, ITO, W-1(1), Kol 10B, Middleton Row, 5th Fl., Kolkata-71. 2. Respondent/Assessee: M/s. Central Tool Room & Training Centre, Kolkata, Bonhooghly Industrial Area, Kolkata-108. 3..C.I.T(A).- 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.