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TMI Blog2022 (3) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... As contended that the Revenue, as a matter of fact, cannot be said to have any grievance by the direction given by the learned CIT(A) on this issue to the Assessing Officer as the CIT(A) has not given any material relief to the assessee by giving this direction. In any case, since the impugned order of the learned CIT(A) on the main issue in allowing the claim of the assessee that the grants issued by the Government of Gujarat represented its Corpus Fund is upheld by us, we are of the view that the direction given by him on this consequential issue is fully justified and there is no infirmity in the same calling for any interference. We accordingly uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.2 of the Revenue s appeal Depreciation on assets whose cost had been allowed as application of income for charitable purposes under Section 11(1)(a) of the Act - HELD THAT:- As agreed by the learned representatives of both the sides, this issue is squarely covered in favour of the assessee by the decision in the case of CIT Vs. Rajasthan Gujarati Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] wherein it is held that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.11.2014 declaring Nil income. During the year under consideration, the assessee-trust had received grant of ₹ 6,18,22,000/- from the Government of Gujarat and the same was directly taken by the assessee-trust to Corpus Fund. During the course of assessment proceedings, it was noted by the Assessing Officer from the perusal of the relevant sanction letter that the said grants were received by the assessee-trust for various on-going projects and the same were not to be utilized for creation of any assets but were for administrative expenses related to the implementation of various projects. He, therefore, required the assessee to explain as to why the said grants should not be treated as revenue receipts. In reply, the following explanation was offered by the assessee in writing:- 1. We are enclosing herewith copy of Government Grant Account for grants received during the year from the Government of Gujarat, Industries Commissioner. Accordingly, total grants amount to ₹ 6,18,22,000/- received during the year has been shown as Corpus Fund in the Balance Sheet of our client EQDC. As shown in the Grant Account, grants have been received for different projects as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLP filed by the Department in case of CIT vs Gujarat Safai Kamdar Vikas Nigam. ii) Order dated 02.0.5.2011 of the Hon'ble High Court of Gujarat in case of CIT vs Gujarat Safai Kamdar Vikas Nigam (Tax Appeal No. 1934 of 2009) iii)Order of the Hon'ble ITAT, Ahmedabad in case of our client Gujarat Safai Kamdar Vikas Nigam [ITA No. 3232/Ahd/20081 for AY 2005-06]0. iv)Sukhdeo Charity Estate v ITO [192 1TR 615 (Raj)] v) Sukhdeo Charity Estate v ITO [149 ITR 470 (Raj)] vi)CIT v Karnataka Urban Infrastructure Development Finance Corporation [284 ITR 582 (Karn)] vii)CIT v. UPUpbhokta Sahakar Sangh Ltd [288 ITR 106 (All)] viii)Gujarat Municipal Finance Board v DCIT [221 ITR 317 (Guj)] We hope that the above will fully meet with the requirements for finalizing the assessment of our client EQDC. 4. The Assessing Officer did not find the explanation offered by the assessee to be acceptable mainly for the following reasons given in the assessment order:- 4.6 As per provisions of section 12(1) and section 11(1)(d), a corpus donation is that which comes with a specific direction of the donor that the said donation wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received by a trust created wholly or partly charitable or religious purposes, inter alia, shall form part of the income of such trust. 4.8 In the instant case, there is no dispute that the assessee trust has been created wholly for charitable purposes and, therefore, any voluntary contributions including corpus fund donations will form part of the income of the assessee. Further, by virtue of the provisions of section 13(8), the assessee cannot enjoy the benefit of tax exemption in respect of corpus fund donations u/s 11(1)(d). However, a question would arise whether the voluntary donations/corpus fund donations received from governments as grants-in-aid can be considered as voluntary contribution within the meaning of section 2(24)(iia). In this regard, the Hon'ble Bombay High Court in the case of CIT Vs Gem and Jwellery Export Promotion Council [143 ITR 579] has observed that grants made to institutions are at the discretion of the donors who do not expect anything in return, therefore, grants have to be considered as voluntarily contribution. It is further observed that there is no consideration which flows back to the donor in the case of gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of assessment proceedings (PI. see Page Nos.59 to 70 of Paper Book), It may kindly be noted that there is no any change in the Memorandum of Association and Rules of EQDC since it was granted registration U/S.12AA of the I.T. Act, 1961. Since then, the Appellant has filed its Returns of income claiming benefits of deductions u/s. 11 and 12 of the IT Act, 1961 which have been duly accepted. Assessments of the Appellant for A.Ys.2010-11 and 2012-13 have been finalized accordingly by orders passed u/s. 143(3) of the I.T. Act, 1961 (PI. see Page Nos. 167 to 173 of Paper Book). 3. It is submitted that the main objects of the Appellant are as per Clause IV. Objects of its Memorandum of Association. Accordingly, the Appellant, EQDC has been established by the Industries and Mining Department, Government of Gujarat for the purpose of providing facilities for testing, calibration and consultancy for the purpose of achieving better and standard quality of electronic and electrical products and equipments, including computers, communication equipment, instrumentation, process control instruments and electrical equipments, for benefit of users of such equipments and products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Research Institution (PI. see Page Nos.78 to 85 of Paper Book).. As can also be seen from the booklet submitted to the Assessing Officer, that EQDC is a State Govt. agency for this purpose (Pl see Page Nos.72 to 77 of Paper Book).. Moreover, the Appellant has also obtained accreditation/recognition from National Accreditation Board for Laboratories (NABL) of Government of India as well as from the Bureau of Indian Standards established by Government of India. 6. For carrying out above stated purposes, the Appellant has established laboratories/testing centers to meet the different requirements for ascertaining quality and standard of electronic or mechanical products to be tested and verified. Accordingly, the Appellant has flow meter testing lab, motor testing lab, energy efficient motor testing lab, pump testing lab, EMl/EMC lab, medical equipment testing lab as well as solar power generation site, research development centre and quality facility centre. It may also be noted that as listed in the booklet, major beneficiaries of the Appellant are Govt and Semi Govt bodies and research development institutes. Moreover, various public and private sector institutions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public. Details thereof are available in Schedule-D forming part of Income Expenditure Account (PL see Page No.31 backside of Paper Book). It may be noted that these activities have been very clearly mentioned in the Memorandum of Association of EQDC and income is in respect of charges and fees for services provided by EQDC is as per its rules which enables collection of fees for services provided. It is also important to note that these aspects of the Memorandum of Association as well as Rules have been duly considered before granting registration under section 12AA of the IT Act, 1961. 9. It is also submitted that the Appellant, EQDC is carrying on charitable activities covered under provisions of section 2(15) of the I.T. Act, 1961, and therefore, it is rightly assessable as a Charitable Institution. Moreover, proviso u/s.2(15) are not applicable to the case of the Appellant merely because the activities of conducting testing procedures involves charging of fees. Further, such claim is duly supported by the following judgments: (i) Bureau of Indian Standards vs. DGIT (Exemption) [(2013) 358 ITR 78 (Delhi)] (ii) GS 1 India vs. DGIT (Exemption) [(2014) 360 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng utilized for relevant projects. 13. As stated above, during the year under consideration, the Appellant EQDC has received Govt grants towards specific projects amounting to ₹ 6,18,22,000/- and the same has been treated as forming part of Corpus Fund and credited as corpus as shown in the Balance Sheet. As such, the said grants have been considered as voluntary contributions made with a specific direction, and therefore, eligible for exemption u/s 11(1)(d) of the I.T. Act, 1961 [PI see Page Nos.112 to 125 of Paper Book]. 14. It is submitted that the grants received from Govt. of Gujarat during the year by EQDC are treated as forming part of corpus and these grants are required to be utilized for specific purposes or objects for implementation of specific projects/schemes. Therefore, the same cannot be considered as income of the Appellant EQDC as being covered by provisions of section 11(1)(d) of the IT Act, 1961. Further, in this regard, the Appellant placed reliance on the following judgments: i) Order dated 02.01.2012 of the Hon'ble Supreme Court dismissing SIP filed by the Department in case of CIT vs. Gujarat Safai Kamdar Vikas Nigam ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and providing facilities for Dynamometer for testing labs. Thus, the Government grants have been received towards specific projects and thus they would be treated as forming part of the corpus fund. It also seen from the MOU filed by the appellant that the objects of the trust are clearly laid down and include among others provision of facilities for testing collaboration and consultancy for achieving quality of various products and equipments to provide training in various areas of quality awareness and testing, to carry out third party testing and inspection, to provide development support to entrepreneurs, to provide quality certification and testing reports with respect to various specifications to other agencies, bureaus laboratories and institution, etc. Therefore, after a perusal of the objects of the appellant trust and the nature of the grants received by the appellant towards specified projects it is evident that the grants have been received to fulfil the objects of the trust. 3.2.2 Looking at the facts of the case, I am also of the view that the appellant's case is covered by the decision of the Hon'ble Delhi High Court in the case of Bureau of Indian St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Bureau of Indian Standards (supra), which is also relied upon by the learned CIT(A) in his impugned order, the learned Counsel for the assessee contended that the activities of the assessee cannot be considered as trade or commercial activities and the Assessing Officer was patently wrong to consider the same as such. He also relied on the decision of Hon ble Gujarat High Court in the case of CIT Vs. Gujarat Safai Kamdar Vikas Nigam (Tax Appeal No.1934 of 2009 dated 02.05.2011) wherein it was held that the grant received from the Government of Gujarat cannot be treated as income of the trust merely because the same was received by the Trust without any direction that it should form corpus Trust. He also relied upon the decision of the Hon ble Gujarat High Court in the case of DIT(E) vs. Sabarmati Ashram Gaushala Trust, reported in [2014] 362 ITR 539 (Guj.), for the proposition that merely because there was certain incidental surplus generated out of the activities of the Trust carried out for the object of the Trust, it cannot mean that Trust is engaged in business activity and hit by provisions of Section 2(15) of the Act. The learned Counsel for the assessee also pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed even by the Assessing Officer. He however held, by relying on the fact that the assessee-trust was charging fees for various services rendered, that it is engaged in the business activity and its case is covered by the provisions of Section 2(15) of the Act read with (i) and (ii) proviso thereto. In this regard, the learned CIT(A) has relied on the decision of Hon ble Delhi High Court in the case of Bureau of Indian Standards (supra) wherein it was held that even if the appellant was taking license fee for granting certification, it could not be said to be for the profit and if any profit or revenue is generated, the same was only incidental to the charitable activity mainly carried on by the assessee. It was held that the assessee, therefore, could not be said to have involved in carrying out any activity in the nature of trade, commerce or business. To the similar effect is the decision of Hon ble Gujarat High Court in the case of Sabarmati Ashram Gaushala Trust (supra), cited by the learned Counsel for the assessee, wherein it was held that merely because there was incidental surplus generated out of the activities of the trust carried out for the objects of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme in a particular manner cannot be treated as income of the assessee-trust. In our opinion, the ratio of this decision of Hon ble Gujarat High Court is squarely applicable to the facts of the present case and respectfully following the same, we uphold the impugned order of the learned CIT(A) allowing the claim of the assessee that the government grant of ₹ 6,18,22,000/- received by the assessee-trust towards specific projects to achieve objects of the Trust constituted its Corpus Fund which was not chargeable to tax. Ground No.1 of the Revenue s appeal is accordingly dismissed. 16. The issue raised in Ground No.2 of the Revenue s appeal relates to the addition of ₹ 1,10,04,394/- made by the Assessing Officer by disallowing the deduction of expenditure incurred by way of application for acquisition of capital assets. 17. The addition of ₹ 1,10,04,394/- made by the Assessing Officer by disallowing the deduction of expenditure incurred by way of application for acquisition of capital assets was challenged by the assessee in appeal before the learned CIT(A); and, in support of its contention on this issue, the following submissions were made on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this issue basically is consequential in nature inasmuch as if the impugned order of the learned CIT(A) allowing the claim of the assessee for the grants received from the Government of Gujarat as its Corpus Fund is upheld by the Tribunal while deciding Ground No.1 of the Revenue s appeal, the direction given by the learned CIT(A) to the Assessing Officer on this issue vide paragraph No.4.2 of his impugned order is fully justified as a necessary corollary. Learned Counsel for the assessee has also agreed with this proposition. He has contended that the Revenue, as a matter of fact, cannot be said to have any grievance by the direction given by the learned CIT(A) on this issue to the Assessing Officer as the CIT(A) has not given any material relief to the assessee by giving this direction. In any case, since the impugned order of the learned CIT(A) on the main issue in allowing the claim of the assessee that the grants issued by the Government of Gujarat represented its Corpus Fund is upheld by us, we are of the view that the direction given by him on this consequential issue is fully justified and there is no infirmity in the same calling for any interference. We accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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