9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (4) TMI 1410 - AT - Income TaxGrant to Co-operative Societies - Deductible Expenditure u/s 36(1)(xii) - As per agreement, if the utilization of grants is not as per the objectives laid down in the agreement, then such grants would be converted into interest free loan or interest bearing loan - As per AO as such grants were conditional loan and were not expenditure - CIT(A) confirms the disallowance HELD THAT - We find considerable force in justification of the assessee whether the alleged non-refundable grants given in the previous year, relevant to the AY under appeal are from grants received or not needs verification at the end of the AO. In this context, as per decision in case of OIL INDUSTRY DEVELOPMENT BOARD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. 2009 (3) TMI 225 - ITAT DELHI-E , relied on by assessee, expenditure incurred by way of disbursement of grants for objects and purposes authorised by the Act is allowable as deduction under section 36(1)(xii). The plea of assessee that non-refundable grants sanctioned, are claimed as deduction only when funds are already utilized/Fund Utilisation Report (FUR) are received, also needs verification at the end of the AO. We, therefore, set aside the order of the CIT(A) on this issue and restore the matter back to the file of AO with the direction that AO may verify both the aforesaid contentions and re-adjudicate the disallowance afresh, after giving opportunity of being heard to the assessee. The assessee is also directed to furnish complete details to Assessing Officer, in this regard, for verification - Matter restored back
Issues Involved:
1. Deductibility of grants given to various cooperative societies under section 36(1)(xii) of the Income Tax Act. 2. Nature of the grants as either deductible expenditure or conditional loans. Detailed Analysis: 1. Deductibility of Grants under Section 36(1)(xii): The Assessee appealed against the order of the Commissioner of Income Tax (Appeals)-IV, Baroda, which confirmed the disallowance of Rs. 10,31,34,920/- given as grants to various cooperative societies, arguing that these grants were not deductible under section 36(1)(xii) of the Income Tax Act. The Assessee contended that these grants were in the nature of expenditure and should be allowable under section 36(1)(xii). 2. Nature of the Grants: The Assessing Officer (AO) examined the disbursements and concluded that the grants were not expenditure but conditional loans. The AO observed that the agreements included conditions that could convert the grants into loans if the funds were not utilized as per the objectives. Thus, the AO disallowed the deduction, considering the possibility of the funds returning to the Assessee. Commissioner of Income Tax (Appeals) Findings: The Commissioner upheld the AO's decision, noting that the disbursements were conditional and could revert to the Assessee, thus not qualifying as irrevocable expenditure. The Commissioner argued that for expenditure to be deductible, it must be irrevocable and not merely a contingent liability. Arguments by Assessee: The Assessee's Counsel argued that the grants were given in furtherance of the Assessee's objectives and were non-refundable, thus qualifying as deductible expenditure under section 36(1)(xii). The Counsel cited precedents, including the ITAT Delhi Bench's decision in the case of Oil Industry Development Board vs. ACIT, which allowed deductions for disbursements made for objects authorized by the Act. Revenue's Argument: The Revenue's representative supported the Commissioner's decision, emphasizing that the grants were conditional and could be refunded with interest if not utilized as specified, making them akin to loans rather than expenditure. The representative also pointed out that the grants received by the Assessee were not accounted for in the Income & Expenditure account, further supporting the non-deductibility of these disbursements. Tribunal's Decision: The Tribunal found merit in the Assessee's argument that the nature of the grants needed verification. It noted that the Assessee claimed deductions only for non-refundable grants and that the Fund Utilization Report (FUR) was a key factor in determining the nature of the disbursements. The Tribunal set aside the Commissioner's order and remanded the matter back to the AO for verification of whether the non-refundable grants were from grants received and if the funds had been utilized as claimed. The AO was directed to re-adjudicate the disallowance after providing the Assessee an opportunity to present evidence. Conclusion: The Tribunal allowed the Assessee's appeal for statistical purposes, directing the AO to verify the nature and utilization of the grants and re-adjudicate the issue accordingly. The Order was pronounced on 21.04.2011.
|
