Astt. Commisioner of Income Tax (Exemption), Lucknow V. M/s Rajeev Gandhi Institute of Petroleum Technology,

ITA 167/LKW/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2545 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K SINGH
• Keywords: Capital asset; Charitable institution; Additional evidence; Question of law; Capital receipt; Condonation of delay; Capital expenditure
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 167/LKW/2017 ASSESSMENT YEAR: 2012 - 13 ACIT (EXEMPTIONS) LUCKNOW V. M/S RAJEEV GAND HI INSTITUTE OF PETROLEUM TECHNOLOGY BAHADURPUR MUKHETIA MORE AMETHI T AN /PAN : AAAJR0834R (APP ELLA NT) (RESPONDENT) APP ELL ANT BY: SHRI C. K. SINGH, D.R. RESPONDENT BY: SHRI RAKESH GARG, ADVOCATE DATE OF HEARING: 23 10 201 8 DATE OF PRONOUNCEMENT: 31 10 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF LD. CIT(A) - 4, LUCKNOW DATED 21/12/2016 AS PER FOLLOWING GROUNDS OF APPEAL: - 1. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE ASSESSEE TO TAKE THE AMOUNT OF RS.19,90,000/ - LA KH S IN COMPUTATION OF INCOME AS CAPITAL EXPENDITURE, IGNORING THE FACT THAT THE ASSESSEE HAS CLA IMED THIS CAPITAL GRANTS OF RS. 1 9,90,000/ - LACS AS EXEMPT U/S 11 ( 1 )(D) OF THE I.T. ACT AND IS NOT TAKEN IN THE COMPUTATION OF CURRENT YEAR. ITA NO.167/LKW/201 7 PAGE 2 OF 21 2. LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE ASSESSEE'S INCOME FOR ACCUMULATION U/S 11(2) OF THE I.T. ACT, 1961 WITHOUT FILING FORM NO. 10 IN TIME. 3. THE ORDER OF LD. CIT (A) BE CANCELLED AND THE ORDER OF THE A.O. RESTORED. 4. APPELLANT CRAVES LEAVE TO MODIFY/AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 2 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INSTITUTE CREATED BY RAJIV GANDHI INSTITUTE OF PETROLEUM & TECHNOLO GY ACT, 2007 PASSED BY THE GOVERNMENT OF INDIA VIDE G.O. NOTIFICATION DATED 28/5/2008. ASSESSEE INSTITUTE IS ALSO APPROVED UNDER SECTION 10(23C) OF THE INCOME - TAX ACT, 1961 VIDE ORDER DATED 24/8/2011 APPROVED BY THE CHIEF COMMISSIONER OF INCOME TAX, LUCKN OW. RETURN WAS FILED DECLARING NIL INCOME CLAIMING EXEMPTION 10(23C) SUB - CLAUSE (6) OF THE ACT . ASSESSMENT WAS FRAMED ON A TOTAL INCOME OF RS.7,11,21,530/ - . WHILE FRAMING ASSESSMENT, ASSESSING OFFICER HAS HELD THAT CAPITAL GRANT RECEIVED BY THE ASSESSEE IS TAXABLE. ASSESSING OFFICER WAS OF THE VIEW THAT EXPENDITURE INCURRED BY THE ASSESSEE ON CAPITAL ASSETS SHOULD HAVE BEEN SET OFF AGAINST CAPITAL GRANTS RECEIVED AND CANNOT BE CLAIMED TOWARDS INCOME APPLIED AGAINST INCOME OF THE CURRENT YEAR. AS PER AS SESSING OFFICER, ASSESSEE HAS RECEIVED RS.19.90 LAKHS AS CAPITAL GRANT. CAPITAL GRANT IS TO BE APPLIED FOR ACQUISITION OF CAPITAL ASSETS OR ON CAPITAL EXPENDITURE. ACCORDINGLY CAPITAL EXPENDITURE TO THE EXTENT OF RS.35.39 LAKHS IS TO BE CONSIDERED AGAINS T CAPITAL GRANT RECEIVED AND DEFICIT , IF ANY , AGAINST THE INCOME OF CURRENT YEAR. THE CLAIM OF ASSESSEE IS THAT CAPITAL GRANT IS FOR SPECIFIC PURPOSE AND CANNOT BE UTILIZED AND APPLIED FOR ANY OTHER PURPOSE. CAPITAL GRANT IF UNUTILIZED IS TO BE REFUNDED BACK TO THE CENTRAL GOVERNMENT. COPY OF LETTER/G.O. HAS ITA NO.167/LKW/201 7 PAGE 3 OF 21 ISSUED BY THE CENTRAL GOVERNMENT IN THIS CONTEXT HAS BEEN FILED ON RECORD. CAPITAL GRANT CAN NEVER BE PART OF INCOME OF THE ASSESSEE. IT HAS TO BE SPENT FOR SPECIFIC PURPOSE AND NON - SPENDING THE SA ME FOR SPECIFIC PURPOSE SHALL RESULT IN RECALLING BACK CAPITAL GRANT. ASSESSEE INSTITUTE HAS MAINTAINED ACCOUNTS WHICH HAVE BEEN AUDITED AND IT IS ALSO HAVING APPROVAL UNDER SECTION 10(23C) OF THE ACT. ONLY DISPUTE I S W ITH REFERENCE T O THE COMPUTATION OF INCOME AND ITS APPLICATION FOR THE PURPOSE OF WHICH INSTITUTE HAS BEEN ESTABLISHED. ASSESSEE WHILE FILING RETURN OF INCOME HAS CLAIMED THAT MORE THAN 85% OF THE SURPLUS OF THE INSTITUTION HAS BEEN APPLIED TOWARDS THE OBJECTS OF THE INSTITUTION AND THERE WAS NO SURPLUS LEFT TO BE TAXED. COMPUTATI O N OF INCOME AS DONE BY THE ASSESSEE IS AS UNDER: - GROSS INCOME AS PER INCOME & EXPENDITURE 42,24,25,629 ACCOUNT. LESS: NON CASH ITEM 1,78.07,233 40,46,18,396 EXPENDITURE: INCOME APPLIED FOR CHARITABLE PURPOSES: 1. EXPENDITURE 13,30,97,162 LESS: NON C A SH ITEMS 1,79,57,233 11,51,39,929 2. FIXED ASSETS 35,39,93,090 46,91,33,019 DEFICIT ( - ) 6,45, 14 ,623 THE AO ON HIS PART COMPUTED THE INCOME AS UNDER: INCOME: GRO SS INCOME AS PER INCOME & EXPENDITURE 42,24,25,629 ACC OUNT. L ESS: NON CASH ITEM 1 , 78,07,233 40,46,18,396 ITA NO.167/LKW/201 7 PAGE 4 OF 21 E XPENDITURE: INCOME APPLIED FOR CHARITABLE PURPO SES: 3. EXPENDITURE 13,30,97,162 LESS: NON CASH ITEMS 179,57,233 11,51,39,929 4. FIXED ASSETS 35,39,93,090 46,91.33,019 :CAPITAL ASSETS CREDITED OUT OF CAPITAL 19,90,00,000 GRANTS. 27,01,33,019 SURPLUS J3 , 44 , 8 5,377 3 . IN VIEW OF THE ABOVE, ASSESSING OFFICER HAS COMPUTED TAXABLE SURPLUS AS UNDER: - SURPLUS IS OF RS.13,44,85,377/ - (INCOME NET APPLICATION) WHICH IS ABOVE 15% OF GROSS RECEIPTS COMES TO RS.6,33,63,844/ - . THUS EXTRA SURPLUS IS OF RS.7,11,21,533/ - )RS13,44,85,377/ - - RS.6,33,63,844/ - _ WHICH IS TAXABLE, SINCE FORM NO.10 IS NOT FILED BY THE ASSESSEE. 4 . BEFORE THE LD. CIT(A), ASSESSEE HAS SUBMITTED DETAILED WRITTEN SUBMISSION WHICH IS AS UNDER: - THE AO WHILE FRAMING THE ASSESSMENT HEL D THAT THE CAPITAL GRANTS RECEIVED ARE TAXABLE. THE INSTITUTE RECEIVES GRANTS FROM THE GOVERNMENT OF INDIA FOR SPECIFIC PURPOSES. THESE GRANTS SO RECEIVED ARE TO BE UTILIZED FOR THE PURPOSES FOR WHICH THEY ARE MADE AVAILABLE. THE DETAILS OF THE GRANTS RECE IVED FROM TIME TO TIME ARE ALL CREDITED TO 'GRANT ACCOUNT' AS MAINTAINED IN THE ACCOUNTS. COPY OF THE AUDITED ACCOUNTS ALONG WITH AUDIT REPORT IS ATTACHED (PAGE 05 OF THE ACCOUNTS). THE ENDOWMENT GRANTS ARE IN THE NATURE OF FIXED GRANTS AND ONLY INTEREST E ARNED ON THE SAME IS ALLOWED TO BE USED. THE AMOUNT OF GRANT AS SUCH CANNOT BE USED. THE GO AS ISSUED IN THIS CONTEXT PERMITTING USE OF INTEREST ONLY DT. 09.10.2006 IS ATTACHED. LIKEWISE CAPITAL GRANT IS ALSO FOR LIMITED USE AND THE INTEREST EARNED ON THE CAPITAL GRANT IS TO BE PLOUGHED ITA NO.167/LKW/201 7 PAGE 5 OF 21 BACK FOR CAPITAL EXPENDITURE ONLY. DURING THE YEAR ENDOWMENT GRANT OF RS.14.99 CRORES WAS RECEIVED IN RESPECT OF INSTITUTE TO BE ESTABLISHED AT ASSAM. THE AO HAS TREATED THIS ENDOWMENT GRANT RECEIVED RELATING TO THE INSTITUT E AT ASSAM AS INCOME AND HAS REDUCED THE SAME FROM THE APPLICATION OF INCOME. IN OTHER WORDS THE ENDOWMENT GRANT HAS BEEN TREATED AS INCOME OF THE YEAR. AS SUBMITTED EARLIER THE ENDOWMENT GRANT IS FOR SPECIFIC PURPOSES AND DOES NOT FROM PART OF THE REVENUE RECEIPTS AND ONLY INTEREST EARNED THE SAME IS TO BE TREATED AS INCOME. THUS THE ACTION OF THE AO IN TREATING THE ENDOWMENT GRANT OF ASSAM INSTITUTE AS INCOME IS TOTALLY MISPLACED. ACCORDINGLY IF THE ENDOWMENT GRANT OF RS. 14.99 CRORES RELATING TO THE INS TITUTE TO BE ESTABLISHED AT ASSAM IS EXCLUDED THERE WOULD BE DEFICIT OF RS.48,42,49,567/ - (COMPUTATION ATTACHED) AND THERE WOULD ARISE NO QUESTION OF ANY SURPLUS AND LEVY OF TAX, FOR IN THAT CASE THE EXPENDITURE WOULD BE MORE THAN THE INCOME. FURTHER IF T HE INCOME AS COMPUTED BY THE AO IS TAKEN TO BE CORRECT THEN AGAIN, THE AMOUNT SPENT/INCURRED TOWARDS CAPITAL ASSETS BEING 'ADVANCE ON CAPITAL ACCOUNT' OF RS.6,60,00,000/ - SHALL HAVE TO BE ADDED TO THE TOTAL INCOME APPLIED DURING THE YEAR, IF THIS IS DONE I T WOULD GIVE A VERY NOMINAL SURPLUS OF RS.4,27,81,193/ - (RS.28,52,07,950/ - - RS.24,22,26,757/ - WHICH WOULD BE LESS THAN 15% OF THE TOTAL RECEIPTS, (SEPARATE COMPUTATION CHART ATTACHED). YET ANOTHER FACT REMAINS THAT NO PART OF THE GRANTS RECEIVED WOULD FROM PART OF THE TOTAL RECEIPTS ON REVENUE ACCOUNT. THUS THE ENTIRE AMOUNT OF GRANTS RECEIVED I.E. RS.14.99 CRORE (ENDOWMENT GRANT FOR ASSAM INSTITUTION) AND RS.4.91 AGGR EGATING RS. 19.90 WOU LD STAND EXCLUDED. (SEE COMPUTATION ATTACHED), THEN IN SUCH C IRCUMSTANCES THERE WOULD BE FURTHER DEFICIT OF RS. 53. 33 CRORES. ITA NO.167/LKW/201 7 PAGE 6 OF 21 THUS EXAMINED FROM ANY ANGLE, THERE IS NO SURPLUS FOR THE YEAR TO BE TAXED. IN THE ALTERNATIVE IT IS SUBMITTED: THE OTHER ASPECT IS THAT THE ASSESSEE INSTITUTE HAS NOT FILED FORM NO. 10 A ND AS SUCH, THE INCOME IS NOT EXEMPT. FIRST AND FOREMOST WITHOUT PREJUDICE, FORM NO. 10 DULY FILLED IN, IS ATTACHED. FORM NO. 10 CAN BE FILED ANY TIME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. IT HAS BEEN HELD THAT N OTWITHSTANDING ANYTHING CONTAINED SUPRA VARIOUS HIGH COURTS HAVE OBSERVED AND GIVEN THEIR FINDINGS THAT FORM 10 OF RULE 17 CAN BE FILED TILL THE MATTER IS PENDING FOR DISPOSAL BEFORE THE TRIBUNAL. THEY HAVE OBSERVED THAT RULE 17 OF THE RULES DID NOT PRESCR IBED ANY TIME LIMIT AND THE LIMITATION OF SIX MONTHS COMMENCING FROM THE END OF PREVIOUS YEAR FOR ISSUING THE NOTICE AS REQUIRED UNDER SECTION 11(2) OF THE ACT, WAS ONLY IN FORM NO.10, IT WAS NOT PERMISSIBLE FOR THE RULE MAKING AUTHORITY TO FIX SUCH A PERI OD OF LIMITATION BECAUSE THE LEGISLATURE DID NOT IMPOSE A LIMITATION FOR GIVING A WRITTEN NOTICE TO THE ASSESSING AUTHORITY. SO THERE IS NO TIME LIMIT FOR SUBMITTING FORM NO. 10, BUT IT SHOULD BE SUBMITTED BEFORE THE ASSESSMENT PROCEEDINGS ARE COMPLETE AS HELD BY HON'BLE GUJRAT HIGH COURT IN THE MATTER OF CIT VS. MAYUR FOUNDATION. THE QUESTION THEREFORE ARISES THAT WHEN CAN AN ASSESSMENT BE SAID TO BE COMPLETE OR TILL WHAT POINT OF TIME THE ASSESSMENT PROCEEDINGS CAN SAID TO BE ALIVE. THIS QUESTION IS ANSWE RED IN DETAIL BY THE HON'BLE GUJRAT HIGH COURT IN THE MATTER OF CIT VS MAYUR FOUNDATION. HON'BLE GUJRAT HIGH COURT HAS ACCEPTED THE FACT THAT FORM 10 CAN BE FILED TILL THE APPEAL IS PENDING BEFORE TRIBUNAL. RELEVANT PART OF THE ORDER IS REPRODUCE D BELOW FOR YOUR READY REFERENCE: ITA NO.167/LKW/201 7 PAGE 7 OF 21 'IN STROUD'S JUDICIAL DICTIONARY, FOURTH EDITION, VOLUME 4, AT PAGE 1975, IT IS STATED: 'A LEGAL PROCEEDING IS 'PENDING' AS SOON AS COMMENCED AND UNTIL IT IS CONCLUDED, I.E. SO LONG AS THE COURT HAVING ORIGINAL COGNIZANCE OF IT CAN MAKE AN ORDER ON THE MATTERS IN ISSUE, OR TO BE DEALT WITH, THEREIN.' APPLYING THE AFORESAID PRINCIPLE, CAN IT BE STATED THAT WHEN THE MATTER IS PENDING BEFORE THE TRIBUNAL BY WAY OF AN APPEAL, THE ASSESSMENT PROCEEDING IS PENDING? TH E ANSWER HAS TO BE IN THE AFFIRMATIVE. THE ASSESSING AUTHORITY IS EMPOWERED AND IS DUTY BOUND, TO PASS ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL FOR THE PURPOSES OF ASSESSING THE TAX LIAB ILITY OF AN ASSESSEE FOR THE ASSESSMENT YEAR WHICH WAS UNDER C ONSIDERATION BEFORE THE TRIBUNAL. IN THESE CIRCUMSTANCES, IT CANNOT BE CONTENDED ON BEHALF OF THE REVENUE THAT THE ASSESSMENT PROCEEDINGS CAME TO AN END AND WHEN THE ASSESSMENT ORDER IS FRAMED. THE CONTENTION ON BEHALF OF THE REVENUE TO EQUATE THE ASSESSME NT ORDER WITH ASSESSMENT PROCEEDING IS BASED ON A FALLACIOUS PREMISE. THUS, THE PROCEEDINGS BEFORE THE TRIBUNAL ARE MEANT TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. IF THIS BE SO, IT FOLLOWS THAT THE ASSESSMENT PROCEEDING CANNOT BE SAID TO BE CO MPLETE AND IS PENDING TILL THE APPEAL IS HEARD AND DISPOSED BY THE TRIBUNAL AND THE ORDER OF THE TRIBUNAL IS GIVEN EFFECT TO BY THE ASSESSING AUTHORITY BY COMPUTING THE CORRECT TAX LIABILITY OF AN ASSESSEE. IN OTHER WORDS, WHETHER AN ASSESSEE IS REQUIRED T O PAY TAX OR BECOMES ENTITLED TO A REFUND, WOULD BE ASCERTAINED BY THE ASSESSING AUTHORITY AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. IN THESE CIRCUMSTANCES, IN THE PRESENT CASE, THE TRIBUNAL WAS WELL WITHIN ITS JURISDICTION TO ENTERTAIN THE NEW GR OUND BY WHICH THE ASSESSEE CLAIMED THE BENEFIT UNDER SECTION 11(2) OF THE ACT AND ADJUDICATE THE TAX LIABILITY OF THE ASSESSEE. AS ALREADY NOTICED HEREINBEFORE, THE TRIBUNAL HAS CATEGORICALLY FOUND THAT 'THE ADDITIONAL GROUND INVOLVES THE QUESTION RELATING TO INTERPRETATION ITA NO.167/LKW/201 7 PAGE 8 OF 21 OF SECTION 11(2) AND THE FACTS ON THE BASIS OF WHICH SUCH A DECISION IS TO BE GIVEN REGARDING INTERPRETATION OF SECTION 11(2) ARE NOT AT ALL IN DISPUTE'. IN THE CIRCUMSTANCES, THERE IS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL, HOLDING T HAT THE ASSESSEE IS ENTITLED TO BENEFITS ALLOWABLE UNDER SECTION 11(2) OF THE ACT.' TO BUTTRESS OUR POINT FURTHER YOUR KIND ATTENTION IS SOUGHT IN THE MATTER OF SEWA EDUCATION TRUST, ALIGARH VS DEPARTMENT OF INCOME TAX ITA NO.L57/AGRA/2013 WHERE THE HONOU RABLE ITAT AGRA HAVE DISCUSSED THE ISSUE IN DETAIL. RELEVANT PRONOUNCEMENTS OF THE CASE ARE REPRODUCED BELOW: 'CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF FINDINGS OF THE ID. CIT(A) AND ABOVE DECISIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL A PPEAL. THE ASSESSEE SUBMITTED THE COMPLETE DETAILS BEFORE THE AUTHORITIES BELOW AND MADE A CLAIM THAT IT WAS RUNNING SCHOOL IN THE NAME OF WISDOM PUBLIC SCHOOL, ALIGARH. THE ASSESSEE ALSO CLAIMED THAT THE ASSESSEE EXISTS SOLELY FOR EDUCATIONAL PURPOSE. CLA IM OF THE ASSESSEE WAS NOT DISPUTED BY THE AO. IT IS ALSO NOT IN DISPUTE THAT TOTAL RECEIPTS OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL WERE LESS THAN RS.1 CRORE. THEREFORE, THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 10 (23C)(IIIAD) ON ADDITIONAL GROUND WAS CORRECTLY RAISED. THE ISSUE WAS LEGAL IN NATURE, THEREFORE, THE ID. CIT(A) CORRECTLY ADMITTED THE ADDITIONAL GROUND FOR THE PURPOSE OF HEARING. HON'BLE ALLAHABAD IN THE CASE OF BAR COUNCIL OF UTTAR PRADESH VS. CIT (SUPRA) HAS SPECIFICALLY HELD THAT BOTH THE ABOVE PROVISIONS ARE NOT MUTUALLY EXCLUSIVE AND THEY CAN HAVE SIMULTANEOUS APPLICATION IF THE NECESSARY INGREDIENTS OF THE PROVISIONS ARE MADE OUT. THUS, THE ASSE SSEE HAS BEEN ABLE TO PROVE THAT APART FROM CLAIMING DEDUCTION U/S.11 & 12 OF TH E ACT, THE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION UNDER SECTION 10(23C) OF THE ACT. THE LD. CIT(A) HAS GIVEN SPECIFIC FINDING THAT THE CONDITIONS OF ABOVE PROVISIONS ARE FULFILLED IN THE CASE OF ASSESSEE. NO ADVERSE MATERIAL IS ITA NO.167/LKW/201 7 PAGE 9 OF 21 PRODUCED BEFORE US TO CON TRADICT THE FINDING OF FACT RECORDED BY THE ID. CIT(A). THEREFORE, THE ID. CIT(A) WAS JUSTIFIED IN ADMITTING THE ADDITIONAL GROUNDS OF APPEAL AND DECIDING THE SAME IN FAVOUR OF THE ASSESSEE. WE MAY ALSO NOTE THAT GROUND NO.2 RAISED BY THE REVENUE IS DEFECT IVE BECAUSE THE REVENUE DID NOT CHALLENGE ADMISSION OF ADDITIONAL GROUND OF APPEAL BUT CHALLENGED THE ADMISSION OF ADDITIONAL EVIDENCE, FOR WHICH NO CASE IS MADE OUT BEFORE US. THEREFORE, GROUND NO.2 OF APPEAL OF THE REVENUE HAS NO MERIT. THE SAME IS ACCOR DINGLY DISMISSED. IN VIEW OF THESE FINDINGS, ADDITION OF RS.9,93,960/ - WOULD NOT STAND. ANYHOW, ON GOING THROUGH THE EVIDENCES AND MATERIAL ON RECORD, WE ARE OF THE VIEW THAT GROUND NO.1 IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF MAYUR FOUNDATION (SUPRA). THE ASSESSEE HAS PRODUCED SUFFICIENT EVIDENCES AND MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE MADE FULL COMPLIANCE OF PROVISIONS OF SECTION 11(2)( & (5) OF THE IT ACT BECAUSE RESOLUTION WAS PASSED TO THE EFFECT OF ACCUMULATION OF SURPLUS FUND IN THE ASSESSMENT YEAR UNDER APPEAL BY WAY OF CONVERTING THE AMOUNT INTO FOR WITH NATIONALIZED BANK, WHICH WAS TO BE USED FOR THE PURPOSE OF CONSTRUCTION OF SCHOOL BUILDING. COPIES OF THE RESOLUTION, BALANCE SHEET AND AUDIT REPORT ARE FILED TO INDICATE THE INTENTION OF THE ASSESSEE TO ACCUMULATE THE FUNDS FOR THE PURPOSE OF MAKING CONSTRUCTION IN THE SUBSEQUENT ASSESSMENT YEAR. THE ASSESSEE ALSO LATER ON MADE A REQUEST FOR CONDONATION OF DELAY IN FILI NG FORM NO.10 BELATEDLY BEFORE THE AO AS WELL AS CIT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, PARTICULARLY WHEN SURPLUS FUNDS WERE ACCUMULATED AND DEPOSITED WITH THE NATIONALIZED BANK, THE DELAY IN FILING FORM NO.10 SHOULD HAVE BEEN CONDONED BY THE AO AND THE ID. CIT. FURTHER, WHEN THE ASSESSEE EXISTS SOLELY FOR EDUCATIONAL PURPOSES, THEREFORE, ON MERE TECHNICAL ISSUE, THE AO SHOULD NOT HAVE MADE THE ADDITIONAL AGAINST THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES, IN THE LIGHT OF ABOVE DECISION, WE ARE OF THE VIEW THAT THE ID. CIT(A) CORRECTLY ITA NO.167/LKW/201 7 PAGE 10 OF 21 ALLOWED THE CLAIM OF ASSESSEE UNDER BOTH THE PROVISIONS ABOVE. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY DISMISSED. IN THE RESULT, THE DEPARTMENTAL APPEA L IS DISMISSED.' INFERENCE IS DRAWN FROM ABOVE JUDGMENTS THAT FORM 10 CAN BE SUBMITTED TILL THE TIME APPEAL IS PENDING BEFORE ITAT. IN OUR CASE FORM NO.10 WAS FILED IN TIME IN INCOME TAX OFFICE BUT WAS NOT PRODUCED BEFORE THE AO AT TIME OF ASSESSMENT. THE REFORE CLAIM OF THE APPELLANT MADE IN FORM NO.10 SHOULD BE ACCEPTED.' THE ABOVE PROPOSITION HAS BEEN OF LATE ACCEPTED BY THE ITAT, LUCKNOW BENCH IN THE CASE OF BORROWS BLUE BELLS SCHOOL, ITA NO.358/LKW/2016, ORDER DATED 31/8/2016. COPY ATTACHED. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS SUBMITTED, THAT THE ADDITIONS MADE, DENIED AND INCOME ASSESSED DENYING THE EXEMP TION MAY KINDLY BE DELETED. 5 . THE LD. CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND ASSESSMENT ORDER, HELD AS FOLLOWS: - 5.2 THE UNDISPUTED FACTS ARE THAT THE APPELLANT I.E. RAJIV GANDHI INSTITUTE OF PETROLEUM TECHNOLOGY (RGIPT) HAS BEEN ESTABLISHED BY RAJIV GANDHI INSTITUTE OF PETROLEUM TECHNOLOGY ACT, 2007, VIDE GOVT. OF INDIA'S NOTIFICATION DATED 28.05.2008. IT IS ALSO AN ADMITTED FACT THAT THE INSTITUTE IS APPROVED UNDER SECTION 10(23C)(VI) OF THE IT ACT, 1961 VIDE ORDER DATED 24.08.2011 APPROVED BY THE CHEF COMMISSIONER OF INCOME TAX, LUCKNOW. IT IS AN INSTITUTE OF NATIONAL IMPORTANCE. COPY OF THE GAZETTEE OF INDIA EXTRA ORDINARY DATED 20.12.2007 AS FILED BY THE APPELLANT IS ON RECORD. THE OBJECTS OF THE INSTITUTE AS PER CLAUSE 9 OF THE ACT IS TO (I) NATURE AND PROMOTE QUALITY AND EXCELLENCE IN EDUCATION AND RESEARCH IN THE AREA OF PETROLEUM AND HYDROCARBONS; (II) PROVIDE ITA NO.167/LKW/201 7 PAGE 11 OF 21 FOR PROGRAMMES AND COURSES OF INSTRUCTION AND RESEARCH LEADING TO THE AWARD OF THE BACHELORS, MASTERS AND DOCTORAL DEGREES IN ENGINEERING AND TECHNOLOGY, MANAGEMENT, SCIENCE AND ARTS IN THE AREA OF PETROLEUM AND HYDROCARBONS AND (III) GRANT, SUBJECT TO SUC H CONDITIONS AS THE INSTITUTE MAY DETERMINE, DEGREES, DIPLOMAS, CERTIFICATES OR OTHER ACADEMIC DISTINCTIONS OR TITLES AT VARIOUS ACADEMIC LEVELS TO CANDIDATES WHO HAVE ATTAINED THE PRESCRIBED STANDARD OF PROFICIENCY AS JUDGED ON THE BASIS OF EXAMINATION OR ON ANY OTHER BASIS'OF TESTING AND EVALUATION AND TO WITHDRAW ANY SUCH DEGREES, DIPLOMAS, CERTIFICATES OR OTHER ACADEMIC DISTINCTIONS OR TITLES FOR GOOD AND SUFFICIENT REASONS, IN ADDITION TO SEVERAL OTHER OBJECTS. 5.3 THE APPELLANT FILED ITS RETURN OF IN COME ON 15.02.2014 DECLARING NIL INCO M E. THE AO HAS FRAMED THE ASSESSMENT DETERMINING THE APPELLANT INCOME AT RS. 13,93,32,959/ - . AS PER THE FACTS AVAILABLE ON RECORD, THE APPELLANT HAD RECEIVED CERTAIN AMOUNTS FROM THE GOVT. OF INDIA AS GRANTS WITH SPECIF IC PURPOSE. THE AO HAS TREATED THESE GRANTS AS REVENUE IN NATURE AND HAS INCLUDED THE SAME IN THE INCOME AND EXPENDITURE ACCOUNT. THE APPELLANT HAS FILED A COPY OF BALANCE SHEET AS ON 21.02.2012. IT IS NOTICED, THAT THE INSTITUTE WAS ESTABL ISHED WITH A COR PUS/CAPITAL FUND BF RS. 50 CRORES, WHICH WAS LATER ON INCREASED BY ANOTHER RS.36 CRORES. THE A PP ELLANT HAS RECEIVED INTEREST ON THE SAID CORPU S FUNDS. THE A PPELLANT HA D RECEIVED 'GRANTS' CREDITED UNDER THE HEAD CAPITAL FUNDS FOR ASSAM PROJECT AMOUNTING T O RS. 15.66 CRORES IN THE PRECEDING YEAR AND ANOTHER RS. 2 CRORES DURING THE YEAR UNDER CONSIDERATION. THESE CAPITAL FUNDS ARE PROVIDED BY SIX(6) LIMITED COMPANIES, NAMELY, OIL & NATURAL GAS CORPORATION LTD., NUMALIGARH REFINERY LTD., INDIA OIL CORPORATION LTD, GAS AUTHORITY OF INDIA LTD, OIL INDIA LTD. AND OIL INDUSTRY DEVELOPMENT BOARD. IN ADDITION TO THE ABOVE, THE APPELLANT RECEIVED SPECIFIC SUM AS CORPUS FUNDS FOR SETTING UP ASSAM CENTRE. THE AO WHILE FRAMING THE ASSESSMENT, HAS TREATED THE ITA NO.167/LKW/201 7 PAGE 12 OF 21 GRANTS CREA TED UNDER THE HEAD CAPITAL FUNDS AS INCOME FOR THE YEAR UNDER CONSIDERATION, AND HAS DEDUCTED THE SAME AS AMOUNT NOT APPLIED FOR CHARITABLE PURPOSES OUT OF THE REVENUE RECEIPTS FOR THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, THE AO WHILE FRAMING THE AS SESSMENT HAS TAKEN INTO CONSIDERATION THE AMOUNT APPLIED BY THE APPELLANT TOWARDS THE OBJECTS, INCLUSIVE OF CAPITAL EXPENDITURE AND OUT OF THE SAME HAS REDUCED THE SAME BY RS. 23.85 CRORES, HOLDING THAT THE SAME BEING A CAPITAL GRANT, THE SAME TO BE SET OF F AGAINST THE CAPITAL EXPENDITURE. THE CASE OF THE APPELLANT IS THAT THE CAPITAL GRANT RECEIVED IS NOT TAXABLE AND CANNOT BE MADE PART OF THE INCOME EXPENDITURE ACCOUNT. IF THE SAME IS EXCLUDED, THE SURPLUS LEFT WOULD BE FAR LESS THAT 15% OF THE TOTAL RECE IPTS. IN SIMPLE TERMS, OUT OF THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION, IF THE AMOUNT APPLIED TOWARDS THE OBJECTS, BOTH ON REVENUE AND CAPITAL ACCOUNT IS DEDUCTED, THE AMOUNT APPLIED TOWARDS THE OBJECTS, BOTH ON REVENUE AND CAPITAL ACCOUNT IS DEDU CTED, THE SURPLUS LEFT WOULD BE FAR LESS THAT 15% OF THE GROSS INCOME. THE AO BY HOLDING THE CAPITAL GRANT OF RS. 23.85 CRORES TO BE SET OFF AGAINST CAPITAL EXPENDITURE HAS WORKED OUT THE SURPLUS OF RS. 21.46 CRORES. THE APPELLANT HAS FILED COPIES OF THE NO TIFICATIONS AS ISSUED BY THE GOVERNMENT OF INDIA FROM TIME TO TIME, WHICH WERE FILED BY THE APPELLANT BEFORE THE AO IN WHICH IT HAS BEEN SPECIFICALLY LAID DOWN, THAT THE GRANTS ARE FOR SPECIFIC PURPOSES AND ONLY THE INTEREST EARNED ON THE SAME IS TO BE USE D/ APPLIED FOR THE PURPOSES OF THE OBJECTS OF THE INSTITUTE. THE AMOUNTS ARE RECEIVED IN GRANTS HAVE TO BE HELD IN DEPOSITS AND ONLY THE INTEREST EARNED ON THE SAME IS TO BE APPLIED TOWARDS THE OBJECTS OF THE INSTATE. THE GRANT AS SUCH CANNOT BE APPLIED OR UTILIZED. 5.4 I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO THE PAPER BOOK FILED BY THE APPELLANT. THE APPELLANT HAS FILED THE TAX AUDIT REPORT, AS FILED ALONG WITH THE RETURN OF INCOME AS WELL AS THE COPIES OF NOTIFICATIONS , I N WHICH IT HAS BEEN ITA NO.167/LKW/201 7 PAGE 13 OF 21 SPECIFICALLY LAID DOWN THAT THE GRANTS ARE FOR PURPOSE SPECIFIC AND CANNOT BE USED/APPLIED AS SUCH. IT I S ONLY THE INTEREST EARNED ON THE GRANTS RECE IVED, THAT HAS TO BE APPLIED. THE AO WAS NOT JUSTIFIED IN TREATING THE CAPITAL GRANTS AS INCOME. THE R E I I NO DISPUTE THAT THE INTEREST EARNED IN THE GRANTS HAS BEEN ACCOUNTED FOR BY THE APPELLANT IN ITS INCOME. THE NOTIFICATIONS READ AS UNDER: - 5.5 LETTER DATED 9TH OCTOBER 2006 ISSUED FROM MINISTRY OF PETROLEUM AND NATURAL GAS, GOVT. OF IN DIA, SHASTRI BHAWAN, NEW DELHI. 3. THE PRESIDENT OF THE INTERIM BOARD OF TRUSTEES OF THE RGIPT SOCIETY, SHRI D.M. REDDY, EXECUTIVE DIRECTOR (HRS), PBCL HAS INFORMED THAT IT WOULD BE PRUDENT TO HAVE SOME FUNDS AT THE DISPOSAL OF THE SOCIETY TO MEET INCIDEN TAL EXPENDITURE AS THE SOCIETY IS SIMULTANEOUSLY PURSUING OUTLET ACTIVITIES SUCH AS STARTING OF ACADEMIC ACTIVITIES, DEVELOPMENT OF CURRICULUM, IDENTIFICATION OF TEMPORARY FACILITIES, PLANNING OF INFRASTRUCTURE DEVELOPMENT, ETC. FOR WHICH THE SOCIETY NEEDS SOME FUNDS AT ITS DISPOSAL. MOREOVER, IT IS ONE OF THE PREREQUISITE FOR SUBMISSION OF APPLICATION FOR ACQUISITION OF LAND TO HAVE ADEQUATE FUNDS AT THE DISPOSAL OF THE SOCIETY. IN VIEW OF THIS, THE PRESIDENT OF THE INTERIM BOARD OF TRUSTEES OF THE RGIPT S OCIETY HAD PROPOSED THAT THE FIRST INSTALLMENT, TOTALING RS. 50 CRORES, TOWARDS CREATION OF AN ENDOWMENT FUND OF RS. 250 CRORE MAY NOW BE CONTRIBUTED BY THE PROTECTING OIL PSUS. IT MAY BE KINDLY RECALLED THE INTEREST EARNED FROM THE ENDOWMENT FUND OF RS. 2 50 CRORE IS TO BE UTILIZED FOR MEETING RECURRING EXPENDITURE FOR THE PROJECT. LETTER DATED 7TH OCTOBER 2009 ISSUED FROM GOVT. OF INDIA, MINISTRY OF PETROLEUM AND NATURAL GAS, SHASTRI BHAWAN, NEW DELHI. ITA NO.167/LKW/201 7 PAGE 14 OF 21 5. THE ENDOWMENT FUND AMOUNTING TO RS. 182 CRORE MAY BE MET OUT OF CONTRIBUTION BY THE PROMOTING OIL PSUS. THE SHARE OF EACH OIL PSUS MAY AGAIN BE WORKED OUT IN THE RATIO OF THEIR PROFIT AFTER TAX(PSAT) DURING THE LAST FINANCIAL YEAR. 5.6 THUS, IN LIGHT OF THE ABOVE NOTIFICATIONS, IT IS CLEAR, THAT THE GRANTS ARE CAPITAL RECEIPTS FOR SPECIFIC PURPOSE, AND THEY CANNOT BE TREATED AS INCOME OF THE APPELLANT. THE APPELLANT HAS RELIED UPON THE FOLLOWING CASE LAWS: CROOK VS. SEAHAM HARBOUR DOCK COMPANY 16 TC 333 (HL) 1931,48TLR (HR) CIT VS. HANDICRAFTS AND HANDLOOMS EXPORT CORPN. OF INDIA LTD. DELHI. A SIMILAR ISSUE WAS ADJUDIC ATED UPON BY HON'BLE ITAT CHAND I GARH IN CASE OF CHIEF ADMINIS TRATOR, HARYANA RURAL DEVELOPMENT AUTH O RITY VS. D CI T, PANCHKULA REP ORTED IN 44 TAXMANN .COM 23 3 (2014) . IT WAS HELD THAT W HEN ASSESSEE AUTHORITY HAS BEEN CONSTITUTED BY GOVERNMENT FOR SPECIFIC PURPOSES OF CARRYING ON ACTIVITIES OF GOVERNMENT AND WHERE GRANTS AND ADVANCES OR LOANS ARE DISBURSED BY GOVERNMENT TO ASSESSEE, SUCH GRANTS AND ADVANCES CANNOT BE HELD TO BE INCOME OF ASSESSEE. 5.7 A SIMILAR ISSUE OF ASSESSABILITY OF GRANTS AROSE BEFORE THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT VS. STATE URBAN DEVELOPMENT SOCIETY (IT APPEAL NO. 2010 OF 2011 DATED 19.10.2011) WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER: - 'THE TRIBUNAL HELD THAT THE SOCIETY IS ACTING AS A NODAL AGENCY RECEIVING GRANT FROM GOVERNMENT OF INDIA AND STATE GOVERNMENTS AND DISTRIBUTES TO DISTRICT AUTHORITIES FOR IMPLEMENTATION OF VARIOUS SCHEMES OF GOVERNMENT OF INDIA ITA NO.167/LKW/201 7 PAGE 15 OF 21 AND SUPERVISING THE EXECUT ION OF SCHEMES. IT HAS NO DISCRETION TO UTILIZE THE AMOUNT AS PER OWN REQUIREMENTS. IT ALSO FOUND THAT IN CASE OF NON - UTILIZATION AT THE CLOSE OF THE SCHEME, THE FUNDS ARE TO BE REFUNDED ALONG WITH INTEREST TO THE GOVERNMENT OF INDIA AND STATE GOVERNMENTS. THE GRANTS RECEIVED BY THE ASSESSEE DO NOT BELONG TO THE ASSESSEE SOCIETY. THE GRANTS DO NOT FORM CORPUS OF THE ASSESSEE NOR IT IS INCOME OF THE ASSESSEE UNDER SECTION 11 OF THE ACT. SUCH GRANTS ARE NOT THE DONATIONS OR VOLUNTARY CONTRIBUTIONS UNDER SECTI ON 12 OF THE ACT. THUS, THE GRANTS RECEIVED BY THE ASSESSEE SHOULD NOT BE CONSIDERED EITHER AS INCOME OR FOR ASCERTAINING THE AMOUNT EXPANDED OR AMOUNT TO BE ACCUMULATED. PROVISIONS OF SECTION 11 AND 12 OF THE ACT ARE NOT APPLICABLE FOR GRANTS RECEIVED BY THE ASSESSEE UNDER THE SCHEMES. IT FURTHER HELD THAT THE ASSESSEE IS STATUTORILY REQUIRED TO FILE ITS INTENTION OF EXPANDING THE ACCUMULATED FUNDS IN FUTURE BY WAY OF FORM NO. 10. THE ARGUMENT THAT THE ASSESSEE HAS SHOWN THE ENTIRE AMOUNT AS ITS INCOME IN THE PROFIT AND LOSS ACCOUNT AS NOT DETERMINATIVE OF NATURE AS THE MERE ENTRIES IN THE BOOKS OF ACCOUNT DO NOT DECIDE THE NATURE OF RECEIPT AND ITS TAXABILITY. THE TRIBUNAL ALSO HELD THAT EVEN IF THE AMOUNT IS NOT DISBURSED DUE TO IMPOSITION OF MODEL CODE OF CONDUCT BY THE ELECTION COMMISSION, THE SURPLUS AT THE END OF THE YEAR CANNOT BE INCLUDED AS INCOME UNDER SECTIONS 11 AND 12 OF THE ACT. IF THE GRANT IS NOT INCLUDABLE AS INCOME THE SURPLUS AT THE END OF THE YEAR REMAINING UNSPENT IS NOT OF ANY RELEVANC E. IN RESPECT OF THE BANK INTEREST, THE TRIBUNAL FUND THAT THE ASSESSEE HAS TO KEEP FUNDS IN SEPARATE ACCOUNTS AND SUCH INTEREST IS TREATED AS PART OF THE GRANTS UNDER RESPECTIVE SCHEMES TO WHICH SAID FUNDS RELATE. HENCE, WITH THE SAID FINDINGS, THE ORDERS OF THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX(APPEALS) WAS SET ASIDE. ITA NO.167/LKW/201 7 PAGE 16 OF 21 LEARNED COUNSEL FOR THE AP PELLANT HAS REFLECTED THE GRANTS RECE IVED FROM CENTRAL AND STATE GOVERNMENTS AS INCOME. THEREFORE, IT IS NOT OPEN TO THE ASSESSEE TO TAKE A STAND THAT SUCH GRANTS ARE THE INCOME. THE SAID ASPECT HAS BEEN CONSIDERED BY THE TRIBUNAL, WHEREIN, IT HAS BEEN HELD THAT REFLECTION IN THE PROFIT AND LOSS ACCOUNT TOWARDS THE INCOME IS NOT DETERMINATIVE. THE ENTRIES IN THE BOOKS OF ACCOUNT DO NOT DECIDE THE NATURE OF RECEIPTS. SINCE, THE GRANTS HAVE BEEN RECEIVED BY THE ASSESSEE FOR DISBURSEMENT AND KEEPING IN VIEW THE FACT THAT THE SAME CANNOT BE UTILIZED FOR ANY OTHER PURPOSE SUCH AS DISTRIBUTION FOR THE POVERTY IN FURTHERANCE TO THE OBJECT OF THE SCHEMES, IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. AS PER THE FINDING OF FACT RECORDED BY THE TRIBUNAL, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT PETITION.' \ A SIMILAR ISSUE OF ASSESSABILITY OF GRANTS IN AID AROSE BEFORE HON'BLE ITAT DELHI IN CASE OF ADDL. CIT VS. IMS COMMITTE E S, MUZZAFARNAGAR IN ITA NO. 1541/DEL./2008 FOR A.Y. 2006 - 07. THE HON'BLE ITAT VIDE ORDER DATED 04.04.2012 HELD AS UNDER: - WE HAVE HEARD THE LD. AR AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ANSH DAN AND FUND F OR NIRMAN YOJNA, WERE GIVEN TO THE ASSESSEE BY THE STATE GOVERNMENT & SUGAR FACTORIES FOR SPECIFIC PROJECTS OF ROAD CONSTRUCTION AND AS POINTED OUT BY THE LD. CIT(A), THESE FUNDS HAVE BEEN SPENT ALSO FOR THOSE SPECIFIC PROJECTS. THERE IS NOTHING TO SUGGEST THAT FIE ASSESSEE IS CARRYING ON ANY BUSINESS ACTIVITIES, GENERATING INCOME. ACCORDINGLY, THE LD. CIT(A) CONCLUDED THE THERE WAS NO SURPLUS WITH THE ASSESSEE AND THEREFORE, THERE WAS NO QUESTION OF ANY TAXABLE INCOME. ADMITTEDLY, THE GRANT - IN - AID IN QUEST ION IS A FINANCIAL AID OR SUBSIDY GIVEN BY THE STATE GOVERNMENT OF UP & SUGAR FACTORIES FOR THE SPECIFIC PURPOSE OF CONSTRUCTION OF ROADS. IN SECTION 2(24) OF THE ACT, IT ITA NO.167/LKW/201 7 PAGE 17 OF 21 IS DECLARED THAT 'INCOME 'INCLUDES' VARIOUS ITEMS WHICH ARE ENUMERATED THEREIN IN CLA USES(I) TO (XV). IN THE SAID SECTION 2(24), SUCH A GRANT IN AID HAS NOT BEEN SPECIFICALLY INCLUDED AS AN INCOME OR A REVENUE RECEIPT. THEREFORE, CONSIDERING THE USE OF THE WORD 'INCLUDE' IN SECTION 2(24) THE WORD 'INCOME' SHALL BE CONSTRUED AS COMPREHENDIN G NOT ONLY THESE ITEMS WHICH SAID SECTION DECLARES THAT THESE SHALL INCLUDE BUT ALSO SUCH ITEMS AS IT SIGNIFIES ACCORDING TO ITS NATURAL IMPORT. SINCE, SECTION 2(24) HAS NOT DECLARED THAT SUCH A GRANT IN AID SHALL BE INCLUDED IN THE INCOME. THE WORD 'REVEN UE' SHALL BE CONSTRUED AS COMPREHENDING WHAT IT SIGNIFIES ACCORDING TO ITS NATURAL IMPORT. IN RELATION TO A BUSINESS UNDERTAKING, THE WORD 'REVENUE' CONNOTES INCOMINGS OF THE UNDERTAKING WHICH ARE PRODUCTS OF THE NORMAL WORKING OF THE UNDERTAKING WHICH ARE PRODUCTS OF THE NORMAL WORKING OF THE UNDERTAKING. THE GIVING OF FINANCIAL AID OR SUBSIDY TO THE AFORESAID COMMITTEE, WHICH ADMITTEDLY IS NOT CARRYING ON ANY BUSINESS, IS AT THE DISCRETION OF THE GOVERNMENT OF SUGAR FACTORIES. THUS, THE GRANT IN AID IN QU ESTION WAS NOT A PRODUCT OF THE NORMAL BUSINESS ACTIVITIES OF THE ASSESSEE COMMITTEE, ASSESSED BY THE AO AS A LOCAL AUTHORITY. THEREFORE, SUCH A GRANT IN AID COULD NOT BE TERMED AS A REVENUE RECEIPT SO AS TO FORM PART OF THE TOTAL INCOME. AS ALREADY POINTE D OU T, THE L D. CIT(A) CONCLUDED THAT THE AFORESAID FUNDS RECEIVED BY THE ASSESSEE FROM STATE GOVERNME NT AND SUGAR FACTORIES HAVE BEEN SPENT ONLY FOR THOSE SPECIFIC PROJECTS AND T HERE WAS NO SURPLUS WITH THE ASSESSEE. SINCE, THE REVENUE HAVE NOT PLACED BE FORE US ANY MATERIAL, CONTROVERTING THESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) SO AS TO ENABLE US TO TAKEN A DIFFERENT VIEW IN THE MATTER, THERE IS NO BASIS TO INTERFERE WITH HIS FINDINGS. CONSEQUENTLY, GROUND NOS. 1 TO 3 N THE APPEAL RE DISMISSED. ' ITA NO.167/LKW/201 7 PAGE 18 OF 21 A SIMILAR ISSUE REGARDING ASSESSABILITY OF FUNDS RECEIVED FOR SPECIFIC PURPOSES WAS DECIDED BY HON'BLE PATNA HIGH COURT IN CASE OF BIHAR AGRICULTURAL PRODUCE VS. CIT REPORTED IN 205 TAXMAN 378. THE HON'BLE COURT HELD AS UNDER: - 'APPLYING THE RATIO OF T HE JUDGMENT TO THE PRESENT SITUATION, IT APPEARS TO US THAT THE BOARD'S FUND WAS MEANT FOR SPECIFIC PURPOSES, NAMELY, TO MEET THE EXPENSES FOR ESTABLISHMENT OF THE BOARD AND THOSE INCURRED IN THE INTEREST OF THE MARKET COMMITTEE. THE AIMS AND OBJECTS OF TH E MARKET COMMITTEE, AND THE PURPOSE FOR WHICH THE COMMITTEE ITSELF COULD USE THE FUNDS, ARE LAID DOWN IN SECTION 30 OF THE LOCAL ACT. IN SUCH A SITUATION, IT IS A STATUTORY COMPULSORY CONTRIBUTION BY THE MARKET COMMITTEE TO THE BOARD'S FUND, MEANT FOR SPEC IFIED STATUTORY PURPOSES, WHICH CANNOT BE USED FOR ANY PURPOSE THAT THE BOARD DESIRES, AND SURELY CANNOT BE USED FOR COMMERCIAL ACTIVITIES, OR TRADE AND BUSINESS. IT DOES NOT PERMIT ANY PROFIT MOTIVE. IT IS APPARENT FROM THE AIMS AND OBJECTS OF THE ACT THA T THE FUNCTIONS OF THE BOARD ARE ENTIRELY STATUTORY SPECIFIED, AND TO ALLEVIATE THE SITUATION AFFECTING PLIGHT OF AGRICULTURIST IN THE STATE OF BIHAR. IN SUCH A SITUATION, IT IS NOT A REVENUE RECEIPT AND THEREFORE, CANNOT BE TAXED. WE MUST ALSO NOTICE THE DEFINITION OF 'INCOME', OCCURRING IN SUB - SECTION (24) OF SECTION 2 OF THE ACT IT IS QUITE CLEAR IN OUR MINDS THAT THE BOARD'S FUND RECEIVED UNDER SECTION 33 - C OF THE LOCAL ACT IS NOT AN INCOME FOR PROFIT AND GAINS, IS NOT DIVIDEND, IS NOT VOLUNTARY CONTRI BUTION, NOR IS IT COVERED BY ANY ONE OF THE REMAINING CLAUSES OF SUB - SECTION (24) OF SECTION 2 OF THE ACT. WE, THEREFORE, CONCLUDE THAT THE BOARD'S FUND RECEIVED AND COLLECTED UNDER THE PROVISIONS OF SECTION 33C OF THE ACT IS NOT INCOME WITHIN THE MEANING OF SUB - SECTION ((24) OF SECTION 2 OF THE ACT, AND IS BEYOND THE PURVIEW OF THE ACT' ITA NO.167/LKW/201 7 PAGE 19 OF 21 5.8 IN THE PRESENT CASE THE GRANTS WERE RECEIVED BY THE APPELLANT FROM GOVERNMENT OF INDIA FOR SPECIFIC PURPOSE. AS PER THE NOTIFICATIONS ISSUED BY GOVERNMENT OF INDIA IT HAS BEEN SPECIFICALLY LAID DOWN THAT THESE GRANTS ARE FOR SPECIFIC PURPOSES AND ONLY THE INTEREST EARNED ON THE SAME IT TO BE USED/APPLIED FOR THE PURPOSES OF THE OBJECTS OF APPELLANT INSTITUTE. THE AMOUNTS REC EIVED IN GRANTS HAVE TO BE HELD AS DEPOSITS AN D ONLY INTEREST EARNED THEREIN IS TO BE APPLIED TOWARDS OBJECTS OF INSTITUTE. THE GRANTS AS SUCH CANNOT BE APPLI ED OR UTILIZED . THE APPELLANT HAS ACCOUNTED THE INTEREST EARNED ON THE GRAN TS AS ITS INCOME. IN VIEW OF THE FACTS MENTIONED IN PARA 5.2 TO 5.7 OF THIS ORDER AND THE JUDGEMENTS OF HON'BLE HIGH COURT AND HON'BLE ITAT'S AS OUTLINED IN PART 5.7 OF THIS ORDER, THE GRANTS SO RECEIVED BY THE APPELLANT FROM THE GOVERNMENT TO BE UTILIZED FOR SPECIFIC PURPOSE CANNOT BE HELD TO BE INCOME OF THE APPELLANT. T HE GROUNDS OF APPEAL NO. 1,3,4,6,7,8,10 AND 12 ARE ALLOWED. THE GROUNDS OF APPEAL NO. 2,5,9,11,13 AND 14 ARE CONSEQUENTIAL IN NATURE AND DO NOT REQUIRE SEPARATE ADJUDICATION. 5.9 ALTERNATIVELY, THE APPELLANT HAS ALSO PLEADED, THAT THE ENTIRE SURPLUS W OULD BE EXEMPT FOR THE REASONS THAT THE APPELLANT HAD PASSED A RESOLUTION ACCUMULATING THE SURPLUS, IF ANY, TO BE APPLIED TOWARDS THE OBJECTS OF TJHE INSTITUTE. FORM NO. 10 HAS BEEN FILED BEFORE ME DURING THE APPELLATE PROCEEDINGS. IT IS CLAIMED BY THE APP ELLANT THAT FORM NO. 10 CAN BE FILED ANY TIME EVEN DURING THE APPELLATE PROCEEDINGS. RELIANCE IS ALSO PLACED ON THE JUDGEMENT OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF CIT VS MAYUR FOUNDATION, JUDGEMENT OF HON'BLE ITAT, AGRA IN CASE OF SEWA EDUCATION TRU ST VS. DEPTT. OF INCOME TAX IN ITA NO. 157/AGRA 2013 AND JUDGEMENT OF HON'BLE JURISDICTONAL ITAT IN THE CASE OF BARROWS BLUE BELL SCHOOL DATED 31.08.2016 IN ITA 358/LKW/2016. RESPECTFULLY FOLLOWING THESE DECISIONS, ON THIS COUNT ALSO, THE SURPLUS, IF ANY, CANNOT BE TREATED AS INCOME FOR ITA NO.167/LKW/201 7 PAGE 20 OF 21 THE YEAR. THE SURPLUS IS TO BE ACCUMULATED FOR A PERIOD OF FIVE YEARS AND TO BE APPLIED TOWARDS THE OBJECT OF THE INSTUTE IN SUBSEQUENT YEARS. 6 . WE HAVE PERUSED THE CASE RECORD, HEARD THE RIVAL CONTENTIONS AND ANALYSED THE F ACTS OF THE CASE AND IT IS CRYSTAL CLEAR FROM RECORD THAT GRANTS RECEIVED BY THE ASSESSEE FROM GOVERNMENT OF INDIA WAS FOR SPECIFIC PURPOSE. AS PER NOTIFICATIONS ISSUED BY THE GOVERNMENT OF INDIA, IT HAS BEEN SPECIFICALLY LAID DOWN THAT THESE GRANTS ARE F OR SPECIFIC PURPOSE AND ONLY INTEREST EARNED ON THE SAME IS USED FOR THE PURPOSE OF OBJECTS OF THE ASSESSEE INSTITUTE. THE AMOUNTS RECEIVED IN GRANT HAVE TO BE HELD AS DEPOSIT AND ONLY INTEREST EARNED THEREIN TO BE APPLIED FOR OBJECTS OF THE INSTITUTE, BU T GRANTS AS SUCH CANNOT BE APPLIED OR UTILIZED. ASSESSEE HAS ACCOUNTED INTEREST EARNED ON THE GRANTS AS ITS INCOME. GRANTS SO RECEIVED BY THE ASSESSEE FROM GOVERNMENT TO BE UTILIZED FOR SPECIFIC PURPOSE , CANNOT BE HELD TO BE INCOME OF THE ASSESSEE, ESPEC IALLY IN VIEW OF THE JUDICIAL PRONOUNCEMENTS BY HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. STATE URBAN DEVELOPMENT SOCIETY IN I. T APPEAL NO . 2010 OF 2011 DATED 19.10.2011; HON'BLE PATNA HIGH COURT IN CASE OF BIHAR AGRICULTURAL PRODUCE VS. CIT, 205 TAXMAN 378 AND ITAT DELHI BENCH IN THE CASE OF ADDL. CIT VS. IMS COMMITTEES, MUZZAFARNAGAR IN ITA NO. 1541/DEL./2008 FOR A.Y. 2006 - 07 . IN ALL THESE CASES UNANIMOUS VIEW TAKEN SEEMS TO BE THAT ONCE A GRANT IS RECEIVED FROM GOVERNMENT AGENCY WITH CERTAIN CONDITIONS AND STIPULATIONS PROVIDED THEREIN AND IT IS ALSO SPECIFIED FOR WHICH PURPOSES SUCH GRANT HAS TO BE UTILIZED, THEN THAT GRANT CANNOT BE THE INCOME OF THE ASSESSEE. IF SUCH GRANT IS NOT UTILIZED FOR SPECIFIC PURPOSE, THEN AUTOMATICALLY I T HAS TO BE REFUNDED BACK AGAIN TO THE GOVERNMENT AGENCY. LD. CIT(A) WHILE PROVIDING RELIEF TO THE ASSESSEE IN THIS CASE HAS RELIED ON THE AFORESAID ITA NO.167/LKW/201 7 PAGE 21 OF 21 JUDICIAL PRONOUNCEMENTS AND WE FIND NO INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) AND RELIEF PROVIDED T O THE ASSESSEE IS, THEREFORE, SUSTAINED. 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 / 10 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST OCTO BER , 201 8 JJ: 2310 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR