2017 (6) TMI 830 - AT - Income Tax

Accrual of income - receipt of grant - assessee trust received funds from the Government of India as per sanction of the President of India under the scheme of Support to Training and Employment Programme for women STEP - Held that - Where the assessee was constituted by the Government of India for specific purpose of carrying the activities for the empowerment of women and the grants & advances disbursed by the Government to the assessee cannot be held to be the income of assessee since the said grants were released for specific purpose in the field of empowerment of women and the surplus, if any, is not assessable in the hands of assessee as income for the respective assessment years. Even where the assessee had shown the said amounts in the Receipts and Expenditure Account but the same cannot be held to be income of the assessee as no part of the said grants could be utilized by the assessee for any other purpose other than specific purpose, for which the same was granted. Accordingly, we direct the Assessing Officer to delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Taxability of surplus corpus donation received from the Government of India.
2. Justification of interest levy under sections 234A, 234B, and 234C.

Analysis:

Issue 1: Taxability of surplus corpus donation
The appeals were against the CIT(A)'s order related to assessment years 2007-08 & 2008-09 under section 143(3) r.w.s 147 of the Income-tax Act, 1961. The assessee argued that surplus from corpus donations received from the Government of India was not taxable as it was meant for specific purposes and to be carried forward for trust objectives. The Revenue contended that as the trust was registered post the assessment years in question, the surplus was taxable. The ITAT observed the trust's activities aimed at women's upliftment and the grants received. The ITAT noted that the grants were for specific purposes and surplus not assessable as income for the respective years, citing legal precedents. The ITAT directed the Assessing Officer to delete the additions made for the surplus amounts, allowing the appeals.

Issue 2: Justification of interest levy
The assessee challenged the levy of interest under sections 234A, 234B, and 234C. The ITAT did not delve into this issue in the detailed analysis provided. The ITAT's judgment focused on the taxability of the surplus corpus donation and did not mention any specific ruling on the interest levy. Therefore, the ITAT's decision did not address the justification of the interest levy under the mentioned sections. The judgment solely revolved around the taxability of the surplus corpus donation and the relief granted to the assessee in that regard.

In conclusion, the ITAT Pune allowed the appeals filed by the assessee concerning the taxability of surplus corpus donations received from the Government of India for specific purposes. The ITAT held that the surplus was not taxable as income for the assessment years in question, based on the nature of the grants and the trust's objectives. The ITAT directed the Assessing Officer to delete the additions made, providing relief to the assessee. The judgment did not address the justification of the interest levy under sections 234A, 234B, and 234C, as the focus was primarily on the taxability of the surplus corpus donations.