9911796707
TMI Blog2013 (6) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... was in the name of Department of Heavy Industry and not in the name of the assessee. Considering the terms of the grant, this objection is not sustainable. Therefore, the purchase of land is also to be considered as application of income. Accordingly, there was no violation of section 11(5). Therefore, the very premise on which the Assessing Officer had proceeded, was wrong and the same cannot be sustained. Further the grant received was on capital account and not a recurring grant towards revenue expenses. Hence it could not be taken to income and expenditure account as per Accounting Standards 12 issued by the Institute of Chartered Accountants of India. Therefore, the learned Commissioner of Income-tax (Appeals) rightly held that the project grant was neither income nor corpus of the assessee-society. As far as interest on fixed deposit receipt is concerned the same related to the unutilised project grant on which the Government had overriding title. Further, this interest was also at par with the grant received from the Government of India and, therefore, the same reasoning would apply to the interest on fixed deposit receipt as to the grant. Therefore, interest on fixed dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the name of Department of Heavy Industries. This was also not in accordance with section 11(5) of the Act. The Assessing Officer, after examining the income and expenditure account, concluded that only ₹ 24 lakhs was incurred towards expenses and, therefore, determined the assessee's income at ₹ 3,99,85,170, inter alia, observing that the assessee had not utilised the amount to the extent of 85 per cent. of the receipts. 5. Before the learned Commissioner of Income-tax (Appeals) the assessee had, inter alia, stated that the assessee was acting only as a trustee of Government funds. It was further submitted that the assessee-society had earned interest amounting to ₹ 2,20,71,587 on the fixed deposit made out of the unutilised project grant received by it during the year for implementation of the project on behalf of the Government of India. It was further clarified that the assessee-society was under obligation to refund the interest so earned on unutilised grant to the Government of India as per the General Financial Rules and Ministry of Finance Directives. The assessee further pointed out that it had received project grant as per grant release lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultants. (iv) Change in financing pattern of project. (v) Fundamental change in Governance structure of the centers. (vi) Change in incumbency of project director of the chief executive Officer of NATIS. 6. The learned Commissioner of Income-tax (Appeals) allowed the assessee's appeal, inter-alia, observing that : (a) project grant is neither income nor corpus of the assessee-society ; (b) interest received on fixed deposit receipts made out of unutilised project grant received by the assessee-society was not an income of society. 6.1. Being aggrieved with the order of the learned Commissioner of Income- tax (Appeals), the Department is in appeal before us and has taken following grounds of appeal : On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in allowing the assessee's appeal because the investment made by the assessee-society is not according to section 11(5) of the Act and had violated the provisions of section 13(1)(d) of the Income-tax Act. 7. The learned Departmental representative relied on the order of the Assessing Officer. 8. Learned counsel submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per section 11(5). In our opinion the reasoning given by the Assessing Officer is not correct inasmuch as the advances given by the assessee towards implementation of its project have to be treated as application of income and not as an investment out of the grant received by the assessee. The word applied need not necessarily imply spent . Even if an amount is irretrievably earmarked and allocated for the charitable or religious purpose or purposes, it may be said to have been applied to the said purposes. (CIT v. Radhaswami Satsang Sabha [1954] 25 ITR 472 (All)). Therefore, the Assessing Officer was wrong in observing that the application of funds by the assessee was not according to section 11(5) and the advance was not utilisation of the funds. Therefore, the advance to the tune of ₹ 59.63 crores and ₹ 1.36 crores was to be treated as application of income. Further, the Assessing Officer held that purchase of land at Silchar for ₹ 11,25,297 was in violation to section 11(5) as property purchased was in the name of Department of Heavy Industry and not in the name of the assessee. Considering the terms of the grant, this objection is not sustainable. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Financial Rules (GFR's) and Ministry of Finance (MOF) directives. Thus the interest on fixed deposit receipt's earned by the society belongs to the Government of India and is not an income of the appellant-society. The learned Assessing Officer, while drafting the impugned assessment order has failed to understand the true nature of the grant-in aid received from the Government of India and income thereon in the shape of interest on fixed deposit receipt. The alleged income of the appellant-society is per se a grant made by the Government of India with specific direction that they shall form part of the corpus of the society. Likewise, the alleged income on fixed deposit receipt amounting to ₹ 2,20,21,847 is not the income of the appellant-society at all as the same has to be refunded back to the Government of India or alternatively the interest income or any other income on the grant money earned by the appellant-society shall be adjusted towards total approved grant for the project, as per letter dated March 5, 2007. Copy of which was supplied to the Assessing Officer during the course of assessment proceedings. Thus, in sum and su ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
