TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 315
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....ous year and balance deficit of Rs. 2,49,21,508/- brought forward deficit of earlier years) relying upon the decision of the Hon'ble Bombay High Court in the case of CIT v/s. Institute of Banking Personnel Selection(IBPS)(264 ITR 110). 2. "Whether, on the facts and in circumstances of the case and in law the Ld.CIT(A), Mumbai was justified in deleting the disallowance of claim of deficit of Rs. 1,43,40,656/- of previous year relying upon the decision of the Hon'ble Bombay High Court in the case of CIT v/s. Institute of Banking Personnel Selection(IBPS)(264 ITR 110) when there was no actual deficit as per the commercial principles, therefore the ratio of this decision is not applicable. 3. "Whether, on the facts and in circumstances of the case and in law the Ld.CIT(A), Mumbai was justified in deleting the disallowance of claim of deficit of Rs. 1,43,40,656/- of previous year arising from claim 15% deduction u/s.11(1)(a) of the IT Act, 1961 despite the fact that the assessee trust has already applied 100% of income for charitable purpose in the previous year hence trust is not entitled to accumulate a notional deficit of 15% as has been upheld in Dawat Institute of Dawoo....
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....tire amount received on account of grants from specified agencies as income in the computation of income and claimed expenditure against the same. (c) The Appellant is consistently following the practice of considering the grants received from various organizations as income and claiming expenditure against it. (d) The above stand taken by the Appellant has been accepted by the AO in the previous assessment years. 3. The Appellant prays that earmarked grants be treated as income of the Appellant and the corresponding expenditure against the same be allowed. GROUND 11: WITHOUT PREJUDICE TO GROUND 1, INTEREST INCOME EARNED ON EARMARKED EUNDS SHOULD BE EXCLUDED: 1. The C1T(A) erred in confirming the action of the AO in not excluding the interest income of Rs. 3,98,007/- from income of the Appellant after excluding the income from earmarked grants from the income and corresponding expenditure thereto. 2. The Appellant therefore prays that if earmarked funds are held to be excluded from income, then the interest earned thereon be also held to be excluded from income of the Appellant. GROUND 111: WITHOUT PREJUDICE TO GROUND I, DEPRECIATION SHOULD BE EXCLUDED WHILE COMPUTING....
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....ee by observing as under:- "I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The issue before me is a purely legal issue which is as under: "Cart any deficit of any assessment year in case of a Trust is registered u/s 12A of the Act can be carried forward to for setting off against income of any subsequent assessment year?" I find that this issue came up before the Hon'ble Bombay High Court in the case of CIT v. Institute of Banking Personnel Selection (264 ITR 110). In that case, the Hon'ble Bombay High Court held that deficit of any assessment year in case of a trust is registered u/s 12A of the Act can be carried forward for setting off against income of any subsequent assessment year. The decision of the Hon'ble Bombay High Court has been upheld by the Hon'ble Supreme Court in the case of CIT(E) New Delhi v. Subros Educational Society (MA no.941/2018 in Civil appeal no. 5171/2016.). In view of the above, AO is directed to allow the deficit of the current assessment year and preceding assessment years to car....
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....e grants have been received by the assessee trust for disbursement and keeping in view of the fact that the same cannot be utilized for any other purpose other than payment of salary, it cannot be treated as income of the assessee. Based on above, the AO observed that detailed provisions are made for the allotment of fund to the assessee trust, it is a scheme envisaged for implementation of disbursement of salary etc. in particular manner. Though exact words may not have been used that funds made available are directed to form the corpus of the trust and to be used for such purpose, the entire purport of scheme has to be gathered from the reading of the scheme as a whole. If so, done, it leaves no doubt that funds were made available to the assessee for implementing the scheme in a particular manner. Hence, the earmarked fund with the specific direction (i.e. Grants) received from different organization cannot be considered as its income of the assessee trust. As the assessee trust must be used/applied only for specific purpose or if it is not used / applied, the specific fund is to be returned to the Funding Agency. As the assessee trust must be used / applied only for specific ....
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....come u/s, 11(1)(a) of the I. T. Act. Hence, while computing the income, grants received of Rs. 3,76,58,807/- and corresponding expenditure of Rs. 4,92,07,672/-was not considered as income as well as application of income respectively." 14. Upon assessee's appeal Ld.CIT(A) confirmed the same holding as under:- "I have considered the facts and circumstances of the case, gone through the assessment order of the AO and the submissions of the appellant and also discussed the case with the AR of the appellant. It has been submitted by the appellant that the Grants received from different organization were for specific purpose and it has no discretion to utilise this fund for any other purposes and in case of its non-utilisation for the said purpose, these grants are to be refunded to the funding agency. Since, it is granted for specific purpose and, cannot be considered as income available for deduction u/s 11(1)(a) of the Act. This view has been upheld by the Hon'ble Punjab & Haryana High Court in the case of CIT v/s M/s State Urban Development Society, dated, 19.10.2011 ITA No. 210 of 2011 (Punjab & Haryana High Court), the Hon'ble Court held that "Grants received by the....
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....ing the income, grants received of Rs. 6,78,46,911/- and corresponding expenditure of Rs. 6,78,46,911/- is not considered as income as well as application of income respectively. Therefore, the question of allowability of 15% of income allowed to be set apart / accumulated in terms of clause (a) of sub-section (1) of section 11 do not arise. Hence, notional accumulation @ 15% u/s 11(1)(a) on grant of Rs. 6,78,46,911/- is not allowable to the appellant. There is a merit in the argument of the AO and no interference is caused in the order of the AO." 15. We have heard both the parties and perused the record. It may be gainful to refer to the assessee's written submission before the Ld.CIT(A) in paper book at page No.128 to 131 submitted before us. 1. Earmarked grants received from various organisations are in the nature of voluntary contributions. 2. The conditions attached to the grants would not alter the voluntary nature of contributions. The said conditions and restrictions are merely intended to facilitate utilisation of grants towards the fulfillment of specific and intended purpose. 3. As submitted by the Appellant during the course of assessment proceedings and as re....
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....sufficient funds to carry on their charitable activities. The institutions or associations to which the grant is made have no right to ask for the grant. It is solely within the discretion of the Government to make grants to institutions of a charitable nature. The Government does not expect any return for the grants given by it to such institutions. There is nothing which is required to be done by these institutions for the Government, which can be considered as consideration for the grant. To borrow the language of the Lord President, in Society of' Writers to the Signet v. CIR 2 TC 257, who was considering the meaning of the words 'voluntarily contributed', in the context of an exemption for property acquired by or with funds voluntarily contributed to anybody, corporate or unincorporate, within a period of 30 years immediately preceding, in section II of the Customs and Inland Revenue Act, 1885, the meaning of the word 'voluntary'is 'money gifted voluntarily contributed in the sense of being gratuitously given'. While dealing with the meaning of the words 'voluntarily contributed', the learned Lord President observed as follows: "In one sen....
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....f the concerned State Government or set up by the State Government with a specific purpose. To be precise, i. the State Urban Development Society was set up by the Government of Haryana as per the regulations of Government of India for implementation and monitoring of 'Poverty Eradication Programmes' in the urban areas of Haryana; ii. the Gujarat State Disaster Management Authority was set up under Gujarat State Disaster Management Act; iii. Gujarat Safai Kamdar Vikas Nigam Ltd. was set up for the upliftment of 'Safai Kamdars' through various schemes in collaboration with the Government bodies and with National Safai Karmcharis Finance and Development Corporation and acting as channelizing agency, and for examining the problems of safai kamdars. b) The respective entity was duty bound to follow the provisions of the concerned legislature under which the same was set up. c) The ratio of all these decisions is that since these entities were operating on behalf of the respective State Government, the receipts of these entities could not be held to be their income but was of the respective State Governments only. This analogy is based on the theory of 'Age....