2012 (8) TMI 401 - HC - Income Tax

Capital grant - taxability - assessee charged with duty of implementing a scheme of industries in Delhi which had been formulated by the Delhi Government and as a developing agency and not as the owner of this scheme and had been given the grant only for implementing the scheme - Held that - It is amply clear that the amount in this regard is a capital grant received in order to carry out the policies of the Government in the manner it is sought to be utilized by the assessee and no administrative expenditure has been incurred out of it. CIT(A) rightly deleted the addition - Decided in favor of assessee Depreciation - non-entitlement of depreciation of the building constructed with the aid of the grant in view of the provisions of Section 43(1) - Held that - It is clarified that it would be dealt with in the appropriate manner at the relevant stage. Maintenance receipts credited to Maintenance Fund - addition - Held that - There is no trust under which the assessee can be said to hold the receipts. The assessee is collecting the maintenance charges for maintaining the properties of the housing scheme, and obviously for defraying the expenses. The receipts are its own and merely because some expenditure is required to be incurred on maintenance, the funds collected do not become funds kept or held in trust. Addition confirmed - Decided in favor of Revenue.

Summary

Issues:
1. Whether the sum of Rs.4.1 crores received as grant-in-aid should be assessed as income.
2. Whether the maintenance receipts of Rs.1,23,84,000/- and Rs.60,000/- should be considered as income.

Analysis:
1. The High Court considered the appeal regarding the sum of Rs.4.1 crores received as grant-in-aid by the assessee for implementing a scheme of industries in Delhi. The Assessing Officer included this sum in the computation of income, but the Appellate Commissioner and ITAT held that it should not be treated as income. The Court agreed with this finding, stating that the grant was for a specific purpose and should not be considered as income. The Court clarified that the question of depreciation would be addressed at the relevant stage.

2. Regarding the maintenance receipts of Rs.1,23,84,000/- and Rs.60,000/-, the revenue argued that these amounts should be considered as income since they were collected for maintenance expenses. However, the assessee contended that these receipts were not treated as income in previous years and should not be considered as income in the current assessment year. The Court noted that the funds collected for maintenance were not held in trust and were used for defraying expenses related to maintaining properties. The Court upheld the Assessing Officer's order, stating that the maintenance receipts should be treated as income and allowed as expenses based on actual expenditure incurred.

In conclusion, the High Court partially allowed the appeal, ruling in favor of the revenue regarding the treatment of maintenance receipts as income. The Court restored the Assessing Officer's order regarding the maintenance receipts and clarified that the actual expenditure on maintenance would be allowed for the assessment year in question.