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TMI Blog2021 (11) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 27-10-2021 - Shri Shamim Yahya (AM) And Shri Amarjit Singh (JM) For the Assessee : Shri Ronak Doshi For the Revenue : Shri Brajendra Kumar ORDER PER SHAMIM YAHYA, A. M.: These cross appeals by the Revenue and the Assessee are directed against the respective orders of the learned Commissioner of Income Tax (Appeals), Mumbai ( ld.CIT(A) for short) for the respective assessment years. 2. Since, the issues are common and connected and the appeals were heard together, these have been consolidated and disposed of by this common order. ITA Nos.6424 6425/Mum/2019 (Revenue appeals):- 3. Common grounds are raised in revenue s appeal, as lead case, we are referring to grounds of appeal from ITA No. 6425/Mum/2019 for AY 2012-13 which read as under:- 1. Whether, on the facts and in circumstances of the case and in law the Ld.CIT(A), Mumbai was justified in deleting the disallowance of claim of deficit of ₹ 3,92,62,164/- (₹ 1,43,40,656/- of previous year and balance deficit of ₹ 2,49,21,508/- brought forward deficit of earlier years) relying upon the decision of the Hon'ble Bombay High Court in the case of CIT v/s. Instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals)-3, Mumbai be set aside and that of the Assessing Officer be restored. ITA Nos.6221 6222/Mum/2019 (Assessee appeals):- 4. Common grounds are raised in assessee s appeal, as lead case, we are referring to grounds of appeal from ITA No. 6221/Mum/2019 for AY 2012-13 which read as under:- GROUND NO. 1: GRANTS RECEIVED FROM AGENCIES TO BE CONSIDERED AS ELIGIBLE INCOME FOR SECTION 11 OF THE INCOMETAX ACT, 1961 (*the Act'): 1. On the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals)-3 ['CIT(A)'] erred in confirming the action of the Income-tax Officer (E)-l(l) ('the AO') of treating the grants received by the Appellant from different organizations as specific grants and thus, treating it as a capital receipt. 2. The Ld. C1T(A) failed to appreciate and ought to have held that; (a) Earmarked grants are in the nature of voluntary contributions and accordingly, the same should be treated as income under section 12 of the Act. (b) The Appellant has shown the entire amount received on account of grants from specified agencies as income in the computation of income and claimed expenditure against the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws:- i) CIT(E) v. Subros Educational Society (2018) (303 CTR 1) (SC) ii) Lalji Velji Chartibable Trust v. ITO (E)(ITA No.5322-5323 /M/16, order dated 28.02.2018) (TMum) (Relevant page 19-20 iii) Iris Knowledge Foundation v. ITO (E) (ITA No.3408/M/18, order dated 10.12.2020)(TMum)(Relevant page 24-33) iv) ITO v. Utthan Sewa Sansthan (ITA No.2017/Ahd/16, order dated 24.01.2019) (TAhd) (Relevant page 40-42) 8. As regards, the issue of deletion of addition of ₹ 3,98,007/- towards interest on earmarked grants. It is the claim of the assessee s counsel that the issues covered by the following case law:- i) CIT v. Punjab Energy Development Agency (2009) (184) Taxman 273) (P H HC) (Relevant page 44-45 9. It is further pleaded that this is consequential to assessee s ground No.1 10. We have heard both parties and perused the record. As regards, the issues raised in revenue s appeal, the same are duly covered in assessee s favour by Hon ble Bombay High Court decision referred in ground of appeal itself. Further, we note that Ld.CIT(A) has allowed this issue in favour of assessee by observing as under:- I have considered the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be refunded to the Funding Agency. Moreover, the assessee itself accepted that trust has not treated the above grants as income and trust has maintained a separate Bank Account for obtaining and maintaining the grants. The grants do not form corpus of the assessee nor it is income of the assessee as per section 11 of the Act. Such grants are not the donation or voluntary contributions under section 12 of the Act, Thus, the grants received by the assessee trust should not be considered either as income or for ascertaining the amount expended or amount to be accumulated. Provisions of sec. 11 12 of the Act are not applicable for grants received by the assessee under the schemes for specific purpose. Hence, the accounting standard cannot override the Income Tax Act. The AO further observed that the assessee has shown the entire grant as its income which is routed through income and expenditure account is not determinative of nature as the mere entries in the Income Expenditure account do not decide the nature of receipt and its taxability. The assessee trust has to keep funds in separate accounts. Since, the grants have been received by the assessee trust for disbursemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as assessee's income. The decision in Gujarat Municipal Finance Board v/s DCIT (1996) (5) TMI 71-Gujarat High Court followed. The AO also mentioned that in the case of CIT v/s Gujrat Safai Kamdar Vikas Nigam (2011) (5) TMI 015-Hon'ble Gujarat High Court held that grant received from the Government of Gujarat for implementation of certain Government programmes cannot be treated as income of the trust, even though it is received by the trust without any direction that it should from corpus fund. In view of the above, AO held that any grant received for specific purpose whether (Capital expenditure or Revenue expenditure) does not constitute income. Hence, the grant received by the assessee trust for the specific purpose does not constitute income. Therefore, the question of application of income in the form of disbursement of grant for specific purpose does not arise because the source of fund itself is not considered as income. Therefore, the grants received for specific purpose is neither treated as income nor the corresponding payment out of grant received for specific purposes is treated as application of income u/s, 11(1)(a) of the I. T. Act. Hence, while computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pus fund. The Hon'ble Supreme Court has in all the above cases held that grants in aid cannot be treated as income of the assessee trust even if the same is not accompanied with a specific letter stating it to be corpus and SLP was dismissed by the Hon'ble Supreme Court in the above mentioned case of Gujarat State Disaster Management Authority on 21/02/2012 and in the case of Gujarat Safai Kamdar Vikas Nigam by 02/01/2012. In view of the above, it is clarified that any grant received for specific purpose whether Capital expenditure or Revenue expenditure) do not constitute income. Hence, the grant received by the assessee trust for the specific purpose do not constitute income. Therefore, the question of application of income in the form of disbursement of grant for specific purpose does not arise because the source of fund itself is not considered as income. Therefore, the grants received from Govt. for specific purpose is neither treated as income nor the corresponding payment out of grant received for specific purposes i.e. disbursement of salary is treated as application of income u/s 11(1)(a) of the Act. Hence, while computing the income, grants received of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the Appellant is necessarily towards the public at large i.e. the society and therefore the grants received by the Appellant cannot be said to be 'for any consideration' and as a result the 'voluntary' nature of the grants remains unchanged. 7. Hence, the AO's contention that since these grants are conditional, the same are not the income of the Appellant cannot be sustained. 8. The Hon'ble Jurisdiction;!] Bombay High Court in the case of CIT v. Gem Jewellery Export Promotion Council (143 ITR 579)(Refer page no 18-20 of the LPB) has on similar facts held that none of the conditions attached to the grant affected the voluntary nature of the contribution and accordingly they would be exempt under section 12 of the Act. The relevant extract of the decision is reproduced hereunder for ease of reference: 6......................................................................................................... As already pointed out, it is not in dispute that the company in question is one established for charitable purposes. Now it is well known that grants-in-aid are made by the Government to provide certain institutions with suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The conditions referred to above and relied upon by the learned counsel for the revenue are merely intended to see that the amounts are properly utilised. These conditions did not, therefore, detract from the voluntary nature of the grant ............................................................... 11. The conditions in the instant case, as already pointed out, are merely to see that the funds are properly applied and accounted for. There is no element of any consideration anywhere for the grant. It is clear, therefore, that the finding recorded by the AAC and the Tribunal that the grants in aid were voluntary contributions was clearly justified in law.. 9. As regards the decisions relied upon by the AO, viz. CIT v. State Urban Development Society (ITA No 210/2011, order dated 19-10-2011)(P H HC), CIT v. Gujarat State Disaster Management Authority - 2014 (2) TMI 789 (Guj HC) and CIT v. Gujarat Safai Kamdar Vikas Nigam (2011)(5) TMI 015 (Guj HC), the Appellant most humbly submits that these decisions are distinguishable for the following reasons: a) Firstly, in all these decisions, the concerned assessee trust/organization was an entity either set up under an Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deserves to be followed in the absence of any change in facts. Reliance is placed on a. Radhasaomi Satsang v. CIT ( 1 93 ITR 32 1 )(SC) b. H.A. Shah Co. v. CIT 30 ITR 618)(Bom HC) c. Jivat Lal Purtapshi v. CIT (65 ITR 261)(Bom HC) d. CIT v. Godavari Corporation Ltd. (156 ITR 835)(MP HC) 11. In view of the foregoing facts and submissions and various judicial pronouncements of the Jurisdictional High Court, the Appellant most humbly submits that it be held that the earmarked grants be allowed to be treated as income of the trust and expenditure against the same be allowed as per the provisions of the Act. 16. We note that the issue involved has rightly been claimed to be covered by Hon ble jurisdictional High Court order in case of CIT v Gem Jewellery Export Promotion Council (143 ITR 579). Despite the same being before Ld.CIT(A), he has not followed the same. Not only not follow, he has not bothered to refer or distinguish the same. Despite that he has referred to non jurisdictional High Court decision and rejected assessee s plea. This is absolute violation of judicial discipline. It is settled law that decision of Hon ble jurisdictional High Court is binding upon subor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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