2011 (5) TMI 815 - HC - Income Tax

Whether the grant received from the Govt. of Gujarat can be treated as income of the Trust, since the same is received by the Trust without any direction that it should from corpus Trust Held that - It was a scheme envisaged for implementation of certain Government programmes in particular, to uplift the living condition of manual scavengers and other Safai Kamdars involved in similar activities. assessee Corporation was not sole trustee, Scheduled Caste Development Board was also liable for implementation of the scheme to be supervised by a Committee headed by the Deputy Minister which included other Government officials, Tribunal committed no error in holding that the grant in question fulfills the requirement of section 11(d)(1) read with section 12(1) of the Act, tax appeal is dismissed - there was a direction contained in the Government circular releasing grant in favour of the assessee thus such amount shall not form corpus of the assessee.

Summary

Issues:
- Whether the grant received from the Govt. of Gujarat can be treated as income of the Trust?
- Whether the Appellate Tribunal was correct in deleting the additional by following the principles of res judicata?
- Whether the Appellate Tribunal was right in reversing the order of the CIT(A) regarding the income under section 12(1) of the Act?

Analysis:

The primary issue in this case was whether the assessee, a Government-owned Corporation established for the upliftment of Safai Kamdars and Scheduled Caste members, was entitled to claim the benefit of section 11(1)(d) of the Income Tax Act, 1961 concerning a Government grant of Rs.8.97 crores received during the relevant assessment year. The assessee contended that under section 11(1)(d), they were not liable to pay income tax on the grant received. The Assessing Officer and the Appellate Authority ruled against the assessee, but the Tribunal allowed the appeal, holding that the assessee was entitled to claim exemption under section 11(1)(d) read with section 12(1) of the Act.

The main contention raised by the Revenue before the High Court was that there was no specific direction in the Government circular releasing the grant to the assessee that the amount should form part of the corpus of the assessee. The Revenue argued that without such a direction, the Tribunal erred in granting the benefit under section 11(1)(d) of the Act. The Revenue relied on a Division Bench decision to support their argument.

Upon examining the documents on record, the High Court noted that the Tribunal extensively considered the background of the assessee Corporation, the Government scheme under which the grant was provided, and the specific purposes for which the grant was to be utilized. The Court observed that the grant was disbursed for a particular purpose outlined in the Government resolution, which aimed at the rehabilitation and upliftment of manual scavengers and Safai Kamdars. The Court found that the scheme clearly detailed the utilization of funds for specific activities benefiting the target groups.

The High Court further analyzed the scheme's provisions, the involvement of the Scheduled Caste Development Board, and the establishment of a committee to oversee the scheme's implementation. Despite the absence of explicit language directing the funds to form part of the Corporation's corpus, the Court concluded that the entire scheme indicated the funds were intended for specific purposes outlined in the scheme. The Court emphasized that the Tribunal did not err in holding that the grant fulfilled the requirements of section 11(1)(d) read with section 12(1) of the Act, ultimately dismissing the tax appeal.

In conclusion, the High Court upheld the Tribunal's decision, affirming that the grant received by the assessee from the Government of Gujarat qualified for exemption under the relevant provisions of the Income Tax Act, emphasizing the specific purposes outlined in the Government scheme for the upliftment and rehabilitation of manual scavengers and Safai Kamdars.