2016 (1) TMI 1525 - AT - Income Tax

Addition in respect unutilized grant in aid which was received by the council from Govt. of India with specific direction for Development of Infrastructure i.e. for the maintenance/development of Building and other facilities - reply of the assessee was not found satisfactory by AO on the ground that mixed method of accounting adopted by the assessee was not permissible as per the provisions of section 145(1) and since the assessee institution was not registered u/s 12AA of the Act for the year under consideration. HELD THAT - No material is produced before us to show that assessee satisfied the requirements of Section 10(23C)(iiiab) of the Income Tax Act. Therefore this claim of assessee was correctly rejected by the authorities below. Since the assessee has received voluntary contribution therefore provisions of Section 2(24)(iia) of the Income Tax Act would squarely apply and the amount received by the assessee from Government of India would be the income of the assessee which assessee has failed to show in the computation of income. During the course of arguments assessee was not able to show as to under which provisions of law the income of the assessee would be exempt. Therefore assessee miserably failed to rebut the findings of authorities below. Finding of fact recorded by the authorities below has also not been rebutted by the assessee in any manner. It is therefore clear that assessee earned income during the year under consideration despite it has received grant from the Government of India for upgradation/strengthening of nursing services. In the absence of any plausible explanation and in the absence of any explanation as to under which provision of law income of the assessee would be exempt we do not find any justification to interfere with the orders of authorities below. The assessee has made a claim of exemption before authorities below under section 11/12AA of the Income Tax Act and Section 10(23C) of the Act which are clearly not applicable to the facts and circumstances of the case. Thus assessee failed to prove any case of exemption of income under any provisions of Income Tax Act.

Summary

The appeal before the Appellate Tribunal concerned the addition of Rs. 1,40,17,320 in the assessment of the appellant for the year 2010-11. The issue revolved around the unutilized grant-in-aid of Rs. 1.00 Crores received by the council from the Government of India for the development of infrastructure, specifically for the maintenance and development of buildings and other facilities. The appellant contended that the addition made by the Assessing Officer was not sustainable in the eyes of the law.The facts revealed that the appellant, H.P. Nursing Registration Council, is a regulatory body established by the State Government of Himachal Pradesh under the H.P.N.R.C. Act, 1977. The council's main function is to regulate and conduct various categories of nursing personnel working in the government or private sector, as well as nursing institutions in the state.The Assessing Officer disallowed the appellant's claim based on the mixed method of accounting adopted, the absence of registration under section 12AA for the relevant year, and the failure to meet the expenditure requirements under section 11 of the Income Tax Act. The AO treated the unutilized surplus as taxable income, leading to the appellant's appeal.During the appeal hearing, the appellant argued that it fell within the ambit of section 10(23C) of the Act and was covered under section 10(23A) as an association or institution established in India to regulate the profession of Medicine. The appellant also emphasized that the grants received were activity-wise, not year-wise, and any unspent amounts had to be refunded to the government.The ld. CIT(Appeals) dismissed the appeal, stating that the appellant's lack of registration under section 12AA for the relevant year and its failure to meet the expenditure requirements under section 11 rendered the AO's action justified. The CIT(A) held that the provisions of section 10(23C)(iiiab) were not applicable to the appellant, as it was neither a university nor an educational institution solely for educational purposes.The Tribunal upheld the orders of the lower authorities, noting that the appellant's claim for exemption under section 10(23C)(iiiab) was untenable due to its failure to satisfy the required conditions. The Tribunal emphasized that the appellant's voluntary contributions fell under section 2(24)(iia) of the Act, making the amount received from the Government of India taxable income.The Tribunal found no justification to interfere with the lower authorities' orders, as the appellant failed to demonstrate any legal basis for income exemption. The Tribunal confirmed the findings of the CIT(A) and dismissed the appellant's appeal.In conclusion, the Tribunal upheld the decision to treat the unutilized grant-in-aid as taxable income due to the appellant's lack of registration under section 12AA and failure to meet the expenditure requirements under the Income Tax Act. The appeal was dismissed, affirming the lower authorities' rulings.