2010 (12) TMI 1057 - HC - Income Tax

Tribunal decision upheld: Grants deemed capital receipts, not taxable income.

COMMISSIONER OF INCOME TAX GANDHINAGAR Versus GUJARAT COUNCIL OF SCIENCE CITY

The High Court upheld the Tribunal's decision in a case where grants received by the assessee were deemed capital receipts, not taxable income. The grants ... Maintained proper books of accounts during the year and such accounts were audited by the Chartered Accountant as required. The assessee filed return of income as per income and expenditure statement and claimed exemption for such income. Issues:1. Challenge to the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961.2. Whether grants received by the assessee constitute capital or revenue receipts.Issue 1: Challenge to the Tribunal's OrderIn this case, the appellant-revenue challenged the order of the Income Tax Appellate Tribunal (the Tribunal) which deleted an addition of Rs. 23,17,13,997 as income, contending that the grants received were capital receipts. The Assessing Officer treated these grants as income, leading to a dispute that was appealed before the Commissioner (Appeals) and then before the Tribunal. The Tribunal upheld the deletion of the addition, prompting the appellant to approach the High Court.Issue 2: Nature of Grants ReceivedThe main issue revolved around whether the grants received by the assessee were capital or revenue receipts. The assessee argued that the grants were meant for a specific project and were to be utilized as per the directions of the Government of India and the Government of Gujarat. The Commissioner (Appeals) and the Tribunal both found that the grants were capital receipts and did not form part of the income of the trust. The Tribunal relied on a Government Resolution confirming the nature of the grants and a previous High Court decision to support its conclusion.The Tribunal's decision was based on the fact that the grants were provided for capital expenditure and development of a specific project, and were intended to contribute towards the corpus of the funds of the society. The Tribunal held that the grants were part of the corpus and not income of the assessee, entitling the assessee to exemption under section 11(1)(d) of the Income Tax Act.The High Court concurred with the Tribunal's findings, emphasizing that the grants were specifically directed to form part of the corpus of the trust or institution, as per the Government Resolution. The High Court cited relevant provisions of the Income Tax Act and a previous judgment to support the conclusion that the grants were not income derived from property held under trust wholly for charitable or religious purposes.In conclusion, the High Court upheld the Tribunal's decision, stating that there was no legal question arising from the case that warranted interference. The appeal was dismissed, affirming that the grants received by the assessee were capital receipts and not taxable income.