Delayed s12A charity registration and tied-up donor grants: assessed as AOP; beneficiary housing spend allowed as revenue deduction.

Registration under s 12A was unavailable because the CIT refused to condone the assessee's long delay in applying; accordingly, the AO was legally bound to assess it in AOP status and could not apply ss 11 and 13, and this approach was upheld. On computation of income, amounts spent on beneficiaries' house construction, land reclamation and similar programmes were held to be revenue expenditure because the assessee had no legal title in the properties and the spending was in the ordinary course of its charitable objects; deduction was directed. "Tied-up" donor grants were treated as held in a trustee capacity and were to be excluded from both receipts and expenses, with only any later ascertained non-refundable balance taxable; assessments were directed to be redone and appeals allowed.

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Issues involved: Assessment of income u/s 12A, treatment of grants received, eligibility for tax exemptions u/s 11 and 13.

Assessment of income u/s 12A: The appellant, a registered society engaged in charitable activities, filed appeals for assessment years 1982-83 and 1983-84 after the Assessing Officer determined higher incomes than reported. The Commissioner rejected the belated application for registration u/s 12A, leading to assessments as an AOP without considering exemptions u/s 11 and 13.

Treatment of grants received: The society received tied-up grants from a foreign donor, Bread for the World, with specific conditions and a requirement to return unspent funds. The Assessing Officer treated these grants as income, disallowing expenses for construction and land reclamation, resulting in increased taxable incomes.

Eligibility for tax exemptions u/s 11 and 13: The appellant argued that the grants should not be considered income due to their specific purpose and the nature of the society's activities. The Tribunal agreed, directing the Assessing Officer to exclude the tied-up grants and related expenses from income computation, while allowing deductions for expenses related to charitable activities.

Conclusion: The Tribunal allowed the appeals, emphasizing that the tied-up grants should not be treated as income, and expenses for charitable activities must be considered as deductible revenue expenses. The Assessing Officer was directed to revise the assessments accordingly, ensuring a fair treatment of the appellant's financial transactions.

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