2013 (4) TMI 726 - AT - Income Tax

Summary

Issues involved: Interpretation of legal provisions u/s 12(1) and 11 of the Act, mandatory vs optional intimation under explanation 2 to section 11(1), fulfillment of conditions u/s 11(1) regarding application of funds, exemption u/s 11(1) based on utilization certificate.

Interpretation of Section 12(1) and 11 of the Act:
The appeal challenged the order of the CIT(A) regarding the character of grant received and its application under Section 12(1) and 11 of the Act. The appellant argued that the grant received was not a voluntary contribution but a corpus donation exempt u/s 11(1)(d) as it was accompanied by a legal obligation. The Tribunal found that the grant was distributed as per guidelines, constituting application of income under Section 11, and the conditions of Section 11(1) were duly complied with.

Mandatory vs Optional Intimation under Explanation 2 to Section 11(1):
The appellant contended that the intimation under explanation 2 to section 11(1) was optional, not mandatory. The Tribunal held that the intimation was not mandatory, supporting the appellant's argument.

Fulfillment of Conditions u/s 11(1) Regarding Application of Funds:
The CIT(A) held that the appellant failed to fulfill the conditions u/s 11(1) regarding the application of funds received. However, the Tribunal noted that the grant amount was applied in the current and subsequent assessment years as per guidelines, meeting the requirements of Section 11(1).

Exemption u/s 11(1) Based on Utilization Certificate:
The CIT(A) denied the exemption u/s 11(1) claiming it depended on a utilization certificate. The Tribunal disagreed, stating that the liability attached to the grant was discharged upon fund disbursement, and the application of income should be allowed to the appellant authority.

Separate Judgment by the Tribunal:
The Tribunal, after considering the submissions and relevant documents, ruled in favor of the appellant. It concluded that the grant received was in the nature of a grant and had been distributed to beneficiaries promptly, following the decision of the Hon'ble Gujarat High Court in a similar case. As a result, the appeal of the assessee was allowed.