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TMI Blog2014 (12) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... s held the amount of Grant to be not chargeable to tax, the irresistible conclusion which follows is that such ‘Other income’ partakes of the character of Grant only. There is a need to draw a line of distinction between the amount of ‘Other income’ adjusted by the Government against grant and the amount not so adjusted. Whereas, the first amount is to be considered as part and parcel of the amount of grant and hence not chargeable to tax, the second amount cannot be so considered. The reason is simple that the amount of such second part of ‘Other income’ does not bear the character of grant so as to avail any immunity from taxation. – Decided in favour of assessee. - Such second part, which is not considered by the Government as part of the grant, in our considered opinion is rightly chargeable to tax in view of the tribunal treating the status of the assessee as AOP. - Decided partly in favor of assessee. - ITA Nos. 1994 to 2001/Del/2013 - - - Dated:- 21-11-2014 - Shri R. S. Syal, AM And Shri C. M. Garg, JM,JJ. For the Petitioner : Shri S. Krishnan, Advocate For the Respondent : None ORDER Per Bench : This batch of eight appeals by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as justified in treating it as AOP. The ground raised by the assessee that the registration granted u/s 12A by the ld. CIT should be considered as retrospective from the date of inception of the institution, also came to be negative by the Tribunal. However, the ground on merits about treating the Grants received from the Government of India as not taxable, was decided in assessee s favour. While giving effect to such Tribunal order, the AO recomputed the income by his order passed u/s 254/143(3) adding a further sum of ₹ 1,21,612/-, which was Income earned from internal resources . The assessee challenged such assessment order. The ld. CIT(A) rejected the assessee s appeal. The matter was again agitated before the Tribunal. Vide order dated 6.11.2009, the Tribunal accepted the assessee s contention on the question of non-granting of adequate opportunity of hearing by the AO in the second round of proceedings giving effect to the Tribunal order. Without expressing any opinion on the merits of the taxability of Income from internal resources , the Tribunal remitted the matter to the AO for deciding it afresh, after allowing due opportunity of hearing to the assessee. 3. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for financial years 1986-87 up to 1991-92 in which total of such Other income has been given year-wise at ₹ 115.72 lakh. A perusal of the chart divulges that it includes Consultancy charges, Miscellaneous receipts, Sale of tender form, Pilotage charges and Other income. The case of the assessee is that the decision of the Tribunal, given vide order dated 31.7.2006, treating grants received by the assessee from the Government of India as not taxable, is fully applicable to Other incomes as well. We want to take note of the fact that there is no material on record to the effect that such order of the tribunal has been reversed or modified by the Hon ble High Court. It was explained that the assessee, a Government of India Undertaking, is fully financed by the Government of India in meeting all its expenses, whether administrative or otherwise. It was explained that the Government gives grant to the assessee for meeting all such expenses as reduced by the amount of Other income earned by it, which, in turn, is deployed for meeting the expenses. The position can be illustrated with the first grant of ₹ 100/- and the assessee incurring expenses of ₹ 90/- and, si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtakes of the character of Grant only. In our considered opinion, there is no qualitative difference in two situations, viz., one, where the amount of such Other income is firstly returned by the assessee to the Government and then the full amount of expenditure including the amount of Other income is received by way of Grant and the second, in which the amount of expenditure as reduced by Other income or unutilized grant, is received as net amount of grant from the Government of India. Instead of two-way traffic, the transaction of the receipt of grant has been designed by the Government of India to make it one-way, that is, releasing only the net amount of Grant. The essence of the matter is that the assessee, being a Government of India Undertaking, has to meet all its expenses from the amounts given by the Government in the form of Grant. If some Other income is received by the assessee, which is otherwise permissible as per its activities and the amount of grant is accordingly reduced to that extent, it cannot be said that the amount of Other income should be charged to tax and the amount of Grant should be considered as an item of non-revenue nature. Both the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 860 lakh, net of expenses incurred for earning such income, if any, other than those borne out of Government grant, is chargeable to tax in the respective years on year to year basis. We, therefore, hold that only that portion of such net income should be charged to tax which relates to the assessment years under consideration in this batch of appeals. 10. We, therefore, set aside the impugned order for the assessment years 1988-89, 1989-90, 1991-92 and 1992-93 with the direction to the AO for charging to tax only the excess amount of Other income at ₹ 7.86 lac as reduced by the expenses incurred for earning them, other than those which have been adjusted against the exempt amount of grant, in the relevant year in which such excess income was earned. As regards the remaining amount of ₹ 107.86 lac, we hold that the same is part of Grant of refund by the Government of India and, therefore, cannot be charged to tax in line with the decision taken by the Tribunal in the first round holding that the amount of Grant is not a revenue receipt and hence immune from taxation. AYs 1993-94 to 1996-97. 11. The facts and circumstances of these four years under considerati ..... 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