2016 (4) TMI 1342 - HC - Income Tax

Nature of receipts - grants in aid from the government - AO treated the grant to be income and assessed it for tax - Commissioner Appeal and the Appellate Tribunal found that the grants were received from the government by the society for creation of capital assets like Building and other Equipments and as the same has been used for the said purpose only and it is a capital assets - Held that - As held that the aid received is in the nature of capital asset is capital revenue and not income therefore the finding of the AO has been interfered with. In doing so no error had been committed by the learned Authorities warranting consideration the concurrent finding recorded by the Commissioner and the Income Tax Appellate Tribunal are in accordance with the requirement of law. We see no substantial question involved warranting consideration. - decided against revenue

Summary

Issues:
Appeals filed under Section 260-A of the Income Tax Act challenging deletions granted by the Commissioner Appeals regarding treatment of grants received by societies as income.

Analysis:
In the judgment delivered by the High Court, the main issue revolved around the treatment of grants received by societies as income for tax assessment purposes. The facts of the cases revealed that the societies had received grants from the government for creating capital assets such as school buildings, girls hostels, and equipment for educational purposes. The assessing officer had initially treated these grants as income and assessed them for tax. However, both the Commissioner Appeals and the Income Tax Appellate Tribunal disagreed with this treatment. They found that the grants were specifically received for creating capital assets and had been utilized for the intended purpose only. Therefore, they concluded that the grants were in the nature of capital assets, not income, and hence not taxable.

The judgment emphasized that the grants received by the societies were utilized for creating capital assets like buildings and equipment, which were essential for the functioning of educational institutes. As these grants were utilized for the intended purpose and were considered as capital revenue, they were not classified as income for tax purposes. The High Court upheld the decisions of the Commissioner Appeals and the Income Tax Appellate Tribunal, stating that no error had been committed by these authorities in their findings. The court concluded that the grants received were in the nature of capital assets and not income, thereby dismissing the appeals filed under Section 260-A of the Income Tax Act.

In summary, the judgment highlighted the distinction between grants received for creating capital assets and income for tax assessment purposes. It reiterated that grants utilized for specific purposes like constructing buildings and purchasing equipment for educational institutes should be treated as capital revenue, not income. The decision of the High Court reaffirmed the findings of the lower authorities, emphasizing that the grants in question were rightfully considered as capital assets and not taxable income, leading to the dismissal of the appeals challenging the deletions granted by the Commissioner Appeals.