ITAT rules in favor of assessee, deleting rental income addition, remanding unspent grant issue for verification.

The ITAT upheld the deletion of the rental income addition in the department's appeal, finding that the rental income was already included in the computation of income. The ITAT remanded the unspent grant addition issue back to the AO in the assessee's appeal for proper verification and decision, allowing the assessee's appeal for statistical purposes.

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Issues:
1. Department's appeal against deletion of addition on account of rental income.
2. Assessee's appeal against the sustenance of addition on account of grant remaining unspent.

Issue 1: Department's Appeal - Rental Income Addition

The department appealed against the deletion of an addition made by the AO on account of rental income amounting to Rs. 6,72,30,455. The assessee had initially declared Nil income, but the assessment was framed at Rs. 26,03,64,279. The AO made the addition as the rental income was not included in the computation of income. The assessee contended that the rental income had already been disclosed in the computation of income. The ld. CIT(A) deleted the addition, stating that the rental income was already included in the income shown and offered, thus the AO's findings were misconceived. The department argued that the rental income was not shown in the books of account or computation of income. However, the assessee's counsel demonstrated that the rental income was indeed included in the computation of income. The ITAT held that since the assessee disclosed the rental income, the addition made by the AO was unjustified, and the ld. CIT(A) rightfully deleted it. The department's appeal was dismissed.

Issue 2: Assessee's Appeal - Unspent Grant Addition

The assessee appealed against the sustenance of an addition of Rs. 2,22,88,491 made by the AO on account of an unspent grant. The AO observed that the grant was not taken into income as grants directly from corpus and made the addition as no explanation was provided by the assessee. The ld. CIT(A) confirmed the addition, stating that unspent grant is considered income of the recipient. The assessee argued that the fixed assets created using the grants should be allowed as the assessee held registration u/s 12A. The ITAT noted that the entries in the income and expenditure account were not considered properly by the authorities. The issue was remanded back to the AO for verification and a fresh decision in accordance with the law after providing a reasonable opportunity to the assessee. Consequently, the department's appeal was dismissed, and the assessee's appeal was allowed for statistical purposes.

In summary, the ITAT upheld the deletion of the rental income addition in the department's appeal and remanded the unspent grant addition issue back to the AO in the assessee's appeal for proper verification and decision.

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