2014 (12) TMI 219

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....n was granted u/s 12A vide order dated 13.4.1999 w.e.f. 1.4.1998. Original return in the status of Local Authority for the AY 1988-89 was filed belatedly on 28.12.1990 declaring loss of Rs. 4.55 crore. Subsequently, in response to notice u/s 148, a revised return declaring Nil income was filed on 29.4.1999. The assessee showed receipts of Rs. 501.45 lakh, which included Grants from the Government of India to the tune of Rs. 500.24 lakh and income from internal resources at Rs. 1.21 lac. Against the said receipts, the assessee claimed expenditure of Rs. 5.34 crore which included revenue expenditure of Rs. 4.09 crore. The assessee lodged a claim in its return filed on 29.4.1999 that no income was chargeable to tax in view of the registration granted to it u/s 12A of the Income-tax Act, 1961 (hereinafter also called 'the Act'). The AO, vide his order of January, 2001, determined total income at Rs. 62.03 lakh. The assessee's contention that it was entitled to registration retrospectively and hence, was a Local Authority, did not find favor with the AO. Such contention was rejected on the premise that the registration was granted prospectively only w.e.f. 01.04.1998. Eventually, he tre....

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....urnment applications moved by the Revenue in all the cases fixed for hearing today before this Bench, including the present batch of appeals. In fact, no one appeared on behalf of the Revenue to explain as to why the Bench be allowed to crash, more so, in view of the mounting pendency of cases before the Tribunal. One can understand the reason for the Department seeking adjournment in a few cases for some valid reason. But, the action of the Revenue in praying for adjournment on wholesale basis, of all the cases on the cause list, in such a casual manner and that too, without even putting in personal appearance, is not appreciable. We are, therefore, rejecting the Revenue's application for adjournment and proceeding to decide the matter ex parte qua the Revenue, after hearing the ld. AR on the merits of the appeals. 5. The solitary issue pressed by the ld. AR is against the chargeability of 'Other income' to tax. Other grounds about the reopening of assessment and one more additional ground taken by the assessee about the retrospective amendment to section 12AA, were not pressed by the ld.AR. Such non-pressed grounds are, therefore, dismissed. 6. We are left with the only que....

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....ssessee for debitable expenditure of Rs. 22.14 lac, 'after adjusting Internal resources' of Rs. 107.86 lac. Para 3 of this letter makes the position abundantly clear, which states that the unspent balance of previous grants has been taken into account while sanctioning this grant. Page No.76 of the paper book is the year-wise break-up of 'Income received' by the assessee for the Financial years 1986-87 upto 1991-92 totaling Rs. 107.86 lac. It is on the basis of this calculation of Rs. 107.86 lac that the Government reduced the amount of Grant for meeting the current expenditure to Rs. 22.14 lac. 8. Now, the question arises as to whether the amount of 'Other income' earned by the assessee, amounting to Rs. 115.72 lakh earned during financial years 1986-87 to 1991-92 can be charged to tax in the respective years, which includes a sum of Rs. 1.21 lac for the assessment years 1988-89. If we see 'Other income' is isolation, it is undoubtedly income chargeable tax in view of the Tribunal holding in its first order dated 31.7.2006 that the grant of registration by the CIT is prospective and does not extend to the year under consideration and the consequential assessment of the assessee....

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....the amount of such 'Other income' is distinct from Grants and hence should be charged to tax, more specifically, when the Grant has been held to be not chargeable to tax and it is not the case of the Revenue that the amount of Grant should also be charged to tax. Thus, the amount of 'Other income' earned by the assessee, to the extent it is adjusted against the grant, cannot be seen in a different shade from the amount of grant, which has been earlier held by the tribunal as not chargeable to tax. 9. However, there is a need to draw a line of distinction between the amount of 'Other income' adjusted by the Government against grant and the amount not so adjusted. Whereas, the first amount is to be considered as part and parcel of the amount of grant and hence not chargeable to tax, the second amount cannot be so considered. The reason is simple that the amount of such second part of 'Other income' does not bear the character of grant so as to avail any immunity from taxation. Such second part, which is not considered by the Government as part of the grant, in our considered opinion is rightly chargeable to tax in view of the tribunal treating the status of the assessee as AOP. In....