2014 (2) TMI 846 - HC - Income Tax

Disallowance of claim u/s 11(1) Explanation 2 of the Act - Nature of grant received Held that - The decision in CIT v . Gujarat State Disaster Management Authority 2014 (2) TMI 789 - GUJARAT HIGH COURT followed - the amount received by the assessee by way of grant cannot be said to be an income thus, the ITAT has rightly deleted the addition made by the Assessing Officer - when the amount received by the assessee by way of grant from the State Government cannot be said to be an income and consequently the additions made by the Assessing Officer is deleted, then there is no need to interfere in the order of ITAT Decided against Revenue.

Summary

Issues:
1. Disallowance of grant claimed as income under Section 11(1) Explanation 2 of the Income Tax Act.

Detailed Analysis:

1. The appellant, a government-incorporated agency managing blood transfusion funds, filed a return for the Assessment Year 2009-10 declaring 'NIL' income. The Assessing Officer observed a grant of Rs.7,68,96,000 received from the State Government claimed under Section 11(1) Explanation 2. The Officer disallowed the claim, stating the appellant failed to exercise the option before the due date. Consequently, Rs.7,68,96,000 was added to the total income.

2. The appellant appealed to the CIT(A) against the addition, but the appeal was dismissed. Subsequently, the appellant approached the ITAT, which allowed the appeal and deleted the addition, stating the grant received cannot be considered income. The revenue then filed the present Tax Appeal questioning the ITAT's decision.

3. During the hearing, the revenue's counsel argued that the grounds on which the ITAT allowed the appeal were not raised before the Assessing Officer or the CIT(A). However, the Court noted that the grant received by the appellant from the State Government was not seriously disputed and referred to a previous decision where a similar grant was not considered income.

4. The Court emphasized that the grant received was distributed to blood banks and held that it cannot be classified as income. Citing precedents, the Court upheld the ITAT's decision to delete the addition made by the Assessing Officer. Given the circumstances and facts of the case, the Court found no substantial question of law to interfere with the ITAT's judgment.

5. Consequently, the Court dismissed the Tax Appeal, concluding that the grant received by the appellant from the State Government cannot be treated as income, and therefore, the addition made by the Assessing Officer was rightly deleted by the ITAT.