TaxTMI 
TaxTMI 
2021 (11) TMI 315
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....deficit of Rs. 3,92,62,164/- (Rs. 1,43,40,656/- of previous 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 ....
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....y contributions and accordingly, the same should be treated as income under section 12 of the Act. (b) The Appellant has shown the entire 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,....
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....erused the record. As regards, the issues raised in revenue's appeal, the same are duly covered in assessee's favour by Hon'ble Bombay High Court decision referred in ground of appeal itself. Further, we note that Ld.CIT(A) has allowed this issue in favour of assessee 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 h....
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....sessee has shown the entire grant as its income which is routed through income and expenditure account is not determinative of nature as the mere entries in the Income & Expenditure account do not decide the nature of receipt and its taxability. The assessee trust has to keep funds in separate accounts. Since, the 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. Grant....
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....n of application of income in the form of disbursement of grant for specific purpose does not arise because the source of fund itself is not considered as income. Therefore, the grants received for specific purpose is neither treated as income nor the corresponding payment out of grant received for specific purposes is treated as application of income 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 speci....
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....sbursement of grant for specific purpose does not arise because the source of fund itself is not considered as income. Therefore, the grants received from Govt. for specific purpose is neither treated as income nor the corresponding payment out of grant received for specific purposes i.e. disbursement of salary is treated as application of income u/s 11(1)(a) of the Act. Hence, while computing 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 f....
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.... be exempt under section 12 of the Act. The relevant extract of the decision is reproduced hereunder for ease of reference: "6......................................................................................................... As already pointed out, it is not in dispute that the company in question is one established for charitable purposes. Now it is well known that grants-in-aid are made by the Government to provide certain institutions with 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 acq....
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....isions relied upon by the AO, viz. CIT v. State Urban Development Society (ITA No 210/2011, order dated 19-10-2011)(P&H HC), CIT v. Gujarat State Disaster Management Authority - 2014 (2) TMI 789 (Guj HC) and CIT v. Gujarat Safai Kamdar Vikas Nigam (2011)(5) TMI 015 (Guj HC), the Appellant most humbly submits that these decisions are distinguishable for the following reasons: a) Firstly, in all these decisions, the concerned assessee trust/organization was an entity either set up under an Act of 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 De....