Orissa Space Application Centre, Bhubaneswar V. Income Tax Officer, Ward 2(1), Bhubaneswar

ITA 442/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65168 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-12-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 16-08-2012
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: SUNIL DASAR
• Keywords: Charitable institution; Principle of natural justice
• Section: 6; 12; 11; 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 442/CTK/2012 / ASSESSMENT YEAR 2009 - 10 ORISSA SPACE APPLICATION CENTRE, PLOT NO.45/48(P), JAYADEV VIHAR, UNIT 16, BHUBANESWAR 751 023 PAN: AABOO 092 N - - - VERSUS - INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI SUNIL DAS,AR / FOR THE RESPONDENT: / S MT. PARAMITA TRIPATHY, CIT - DR / D ATE OF HEARING: 11.12.2012 / DATE OF PRONOUNCEMENT: 14.12.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. THAT, THE ORDER OF THE LEARNED C IT (A) IS AR BITRARY, ILLEGAL, CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND PROVISIONS OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AND FOR WHICH THE ORDER OF THE LEARNED CIT (A) AS WELL AS THE ORDER OF THE ASSESSING OFFICER IS LIABL E TO BE QUASHED. 2. THAT, THE LEANED ASSESSING OFFICER HAS ISSUED NOTICE U/S 143(2) OF THE ACT ON AN EXTRANEOUS REASON WITHOUT APPLICATION OF MIND AND FOR THAT MATTER THE ASSESSMENT ORDER BASED ON SUCH ILLEGAL NOTICE IS LIABLE TO BE QUASHED. 3. THAT, T HE LEARNED CIT (A) HAS COMMITTED SERIOUS ERROR IN NOT TREATING THE APPELLANTS INCOME AS EXEMPT WHEN THE LEARNED COMMISSIONER OF INCOME - TAX HAS REGISTERED THE ASSOCIATION U/S 12AA OF THE ACT. 4. THAT, THE LEARNED CIT (A) HAS COMMITTED SERIOUS ERROR IN NO T DELETING THE GRANTS IN AID FROM THE TOTAL INCOME OF THE APPELLANT IN VIEW OF THE ORDER OF THE HONBLE INCOME - TAX I.T.A.NO. 442/CTK/2012 2 APPELLATE TRIBUNAL IN THE CASE OF ORISSA FOREST DEVELOPMENT SOCIETY VS. INCOME - TAX OFFICER. 5. THAT, THE LEARNED CIT (A) HAS COMMITTED SERI OUS ERROR IN NOT CONSIDERING THAT THE APPELLANT TRUST IS CREATED BY THE GOVT. WITH SPECIFIC DIRECTION TO DO CERTAIN WORK IN ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED BY THE GOVT. OF ODISHA AND FOR THAT MATTER THE RECEIPT BY THE APPELLANT FROM THE GOVT. OF ODISHA WITH SPECIFIC DIRECTION CANNOT CONSTITUTE AS THE INCOME OF THE APPELLANT. 6. THAT, THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIALS INTO RECORD THAT THE INCOME OF THE APPELLANT HAS NOT BEEN APPLIED FOR THE PURPOSE FOR WHICH THE REGISTRATION HAS BEEN GIVEN BY THE LEARNED COMMISSIONER OF INCOME - TAX AND FOR THAT MATTER THE LEARNED CIT (A) HAS ERRED IN LAW IN NOT ALLOWING THE BENEFIT OF SECTIONS 11 & 12 OF THE ACT TO THE APPELLANT . 2. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THE BRIEF FACTS THAT THE ASSESSEE IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860, CREATED ON 24.04.1985 . IT IS AN AUTONOMOU S SCIENTIFIC ORGANIZATION UNDER THE DEPARTMENT OF SCIENCE AND TECHNOLOGY, GOVERN MENT OF ORISSA. THE CENTRE IS ESTABLISHED BY THE STATE GOVERNMENT OF ORISSA VIDE R ESOLUTION NO TECH - IL - 15/834903/STE DATED 14/ 15TH MAY 1984 (COPY PLACED ON PAPER BOOK) WITH THE OBJECTIVES AND FUNCTION AS ENUMERATED THEREIN. PERUSING THE SAID RESOLUTION, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAID RESOLUTION HAS NOT ONLY BEEN BY THE GOVERNMENT OF ORISSA TO ESTABLISH THE SOCIETY (ASSESSEE) BUT ALSO ALL THE MEMBERS ARE FROM GOVERNMENT AND IT HAS BEEN DIRECTED TO BE PUBLISHED IN THE ORISSA GAZETTE . NONE OF THE M EMBERS ARE ENTITLED TO ANY REMUNERATION OR PERQUISITE ETC., BEING GOVERNMENT EX - OFFICIO. THE ASSESSEE SOCIETY HAS NOT RECEIVED ANY VOLUNTARY CONTRIBUTION SINCE THE CREATION OF THE SOCIETY EXCEPT RECEIVING GRANTS FROM THE GOVERNMENT OF ORISSA TO FULFILL THE AIMS AND OBJECTIVES IN ACCORDANCE WITH THE DIRECTION AND NECESSITY OF THE GOVERNMENT OF ORISSA. THE ACTIVITIES OF THE SOCIETY HAVE BEEN TOTALLY UNDER THE CONTROL OF THE I.T.A.NO. 442/CTK/2012 3 GOVERNMENT OFFICIALS. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE P URPOSE AND OBJECTIVE OF THE ASSESSEE SOCIETY IS BEING CARRIED OUT WITH THE ASSISTANCE FROM THE GOVERNMENT AND THAT TOO IN ACCORDANCE WITH THE DIRECTION OF THE GOVERNMENT. THE MEMBERS OF THE SOCIETY AS WELL AS SOCIETY DOES NOT HAVE ANY AUTHORITY TO DIVERT T HE FUND ACCORDING TO THEIR OWN WILL OR CHANGE THE BYE LAW WITHOUT HAVING THE APPROVAL OF THE GOVERNMENT OF ORISSA. THE FUNDS ALLOCATED TO THE SOCIETY BY THE GOVERNMENT OF ORISSA HAS TO BE AUDITED BY THE GOVERNMENT AUDIT ORGANIZATION FOR THE PURPOSE OF MONI TORING THE EFFECTIVENESS OF IMPLEMENTING THE PROJECT OF THE GOVERNMENT IN ACCORDANCE WITH THE BYE LAW AFTER RECEIVING THE FUND FROM THE GOVERNMENT OF ORISSA. PERUSING THE SANCTION ORDER NO. 860 DATED 09.02.2009 (COPY PLACED IN THE PAPER BOOK) THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT IT CLEARLY SPEAKS ABOUT THE AMOUNT OF SANCTION WHEREIN IT IS SPECIFICALLY MENTIONED THAT THERE IS GRANT - IN - AID IN FAVOUR OF THE SOCIETY BY GOVERNMENT OF ORISSA. THE SAID GRANT - IN - AID RELEASED SHOULD BE UTILIZED FOR THE PURPOSE FOR WHICH IT IS SANCTIONED AND SIMILARLY AT PARA - 8 THEREOF IT IS CLEARLY MENTIONED THAT THE ASSETS SO ACQUIRED SHOULD NOT BE TRANSFERRED/SOLD/ REPLACED OR DISPOSED IN ANY MANNER WITHOUT PRIOR APPROVAL OF THE SANCTIONING AUTHORITY (GOVERNMENT OF ORISSA) AND IN THE SAID SANCTION ORDER IT HAS BEEN SPECIFICALLY MENTIONED THAT CERTAIN REGISTERS HAS TO BE MAINTAINED IN ACCORDANCE WITH THE ORISSA GOVERNMENT FINANCE RULES AND TO BE AUDITED BY THE LOCAL FUND AUDIT, ORISSA AND OPEN TO TEST CHECK AUDIT BY THE ACCOUNTANT GENERAL, ORISSA. IT IS ALSO FURTHER MENTIONED THAT THE SOCIETY SHOULD UTILIZE THE AMOUNT DURING THE FINANCIAL YEAR 2008 - 09 AND ANY UNSPENT AMOUNT OR BALANCE OUT OF GRANT AT THE END OF THE YEAR 2008 - 09 SHOULD BE DULY SURRENDERED TO THE GOVERN MENT. IT IS ALSO MENTIONED THAT ANY PURCHASE OUT OF ITS GRANT SHOULD BE MADE FOLLOWING THE PROCEDURES LAID DOWN IN ORISSA I.T.A.NO. 442/CTK/2012 4 GOVERNMENT FINANCE RULES AND ORDERS AND INSTRUCTIONS ISSUED BY THE GOVERNMENT OF ORISSA SCIENCE AND TECHNOLOGY DEPARTMENT FROM TIME TO TIME. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED IN VIEW OF THE SANCTION ORDER THAT THE ASSESSEE S OCIETY DOES NOT HAVE ANY AUTHORITY, INDEPENDENCE TO SPENT MONEY OTHER THAN THE PURPOSE FOR WHICH IT HAS BEEN GIVEN AND THE SURPLUS AMOUNT HAS TO BE SURRE NDERED TO GOVERNMENT OF ORISSA AND IT IS CRYSTAL CLEAR THAT THERE IS NO VOLUNTARY CONTRIBUTION EITHER FROM GOVERNMENT OR FROM ANYBODY TO UTILIZE THE FUND IN ACCORDANCE WITH THE RESOLUTION OF THE SOCIETY. 2.1. CONSIDERING THE OBJECTIVES OF THE ASSESSEE SOC IETY, THE LEARNED CIT HAS GRANTED REGISTRATION U/S.12AA W.E.F. 1.4.2009. THEREFORE, THERE IS THERE IS NO NECESSITY OF CREATING THE DEMAND AS THE FUND HAS BEEN NOT UTILIZED OTHER THAN THE PURPOSE FOR WHICH THE REGISTRATION U/S 12AA OF THE ACT HAS BEEN GRANT ED BY THE LEARNED CIT AND FOR THAT MATTER MERELY BECAUSE THE REGISTRATION HAS NOT BEEN GRANTED FOR THE EARLIER YEARS, IT CANNOT LEAD TO ABSURD CONCLUSION THAT THE SAID OBJECTIVES ARE NOT CHARITABLE FOR THE EARLIER YEARS. IN OTHER WORDS, THE ASSESSING OFFIC ER HAS ACCEPTED THAT THE FUND HAS BEEN UTILIZED FOR CHARITABLE PURPOSE FOR WHICH THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS ALLOWED EXPENDITURE SO MADE DURING THE YEAR AMOUNTING TO RS.3,91,31,307 AS THE EXPENDITURE MADE FOR THE CHARITABLE PURPOSE. 2 .2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE TERMS AND CONDITIONS OF THE SANCTION ORDER FOR GRANT - IN - AID THE MONEY SO NOT SPENT EVEN FOR THE SAKE OF ARGUMENT IS ACCEPTED AND RETAINED BY THE ASSESSEE SOCIETY , STILL THEN THE ASSESSE E SOCIETY CANNOT RETAIN IT BEYOND THE PERIOD AND HAS TO SURRENDER IN ACCORDANCE WITH THE DIRECTION OF THE GOVERNMENT. IN OTHER WORDS THE APPELLANT SOCIETY HAS TO RETURN THE FUND I.T.A.NO. 442/CTK/2012 5 EXCESS LYING WITH IT TO THE GOVERNMENT FROM WHICH THE GRANT HAS BEEN RECEIVED AND FROM WHICH IT IS CRYSTAL CLEAR THAT NEITHER THERE IS ANY VOLUNTARY CONTRIBUTION SO AS TO TAX THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE AS INCOME NOR THE SOCIETY CAN RETAIN THE UNSPENT AMOUNT IN ITS DISPOSAL UNTIL AND UNLESS SAME HAS BEEN DIRECTED B Y THE GOVERNMENT TO KEEP IT FOR A SPECIFIC PERIOD IN ACCORDANCE WITH THE DIRECTION OF THE GOVERNMENT AND THE TAX THAT HAS BEEN IMPOSED ON A LIABILITY RATHER THE INCOME AS THE EXPENDITURE IS LIABLE TO BE ACCEPTED BY THE ASSESSING OFFICER U/S.11 . HE PLACED RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S.ORISSA FORESTRY SECTOR DEVELOPMENT SOCIETY V. INCOME - TAX OFFICER WARD - 2(2), BHUBANESWAR IN ITA NO - 465/CTK/2010 DATED 21.01.2011 WHEREIN HONBLE TRIBUNAL HAS OBSERVED - THE SANCTION BY THE HONBLE PRESIDENT OF INDIA FOR DISTRIBUTION BY GOVERNMENT OF ORISSA INVOLVES VARIOUS AUTHORITIES TO IMPLEMENT THE OBJECTS OF THE ASSESSEE WAS AFTER INCURRING EXPENDITURE AS APPROVED BY THE JAPAN BANK FOR INTERNATIONAL CO - OPERATION AND GOVERNMENT OF ORISSA WITH SO MANY STIPULATIONS FOR THE UTILIZATION THEREFORE EVEN THE INTEREST WAS SOUGHT TO BE CONSIDERED AS GRANT IN AID AVAILABLE TO THE ASSESSEE FOR UTILIZATION OF ITS OBJECTS KNOWING FULLY WELL THAT THE GOVERNMENT OF ORISSA WAS ANSWERABLE TO THE CAG AND AG OF ORISSA ON BEHALF OF THE PRESIDENT OF INDIA. CONSIDERING THESE FACTS, THE HONBLE TRIBUNAL HAS HELD AS UNDER. .THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE SOCIETY IRRESPECTIVE OF FAILING REGISTRATION U/S.12A, WHETHER COULD BE TA XED ON THE GRANT - IN - AID SO RECEIVED FROM THE GOVERNMENT OF ORISSA COULD BE SUBJECTED TO THE INCOME - TAX APPEARS TO BE A FAR - FETCHED EXERCISE BY THE LEARNED CIT (A) IN SO FAR AS FUNDS OF AN AUTHORITY CANNOT BE TAXED IN ACCORDANCE WITH AN ACT TO TAX EXPENDITU RE WHICH THE LEARNED CIT(A) APPEARS TO HAVE APPLIED. SIMILARLY THE INTEREST EARNED ON BANK DEPOSITS BEING PART OF GRANT - IN - AID HAS BEEN EARMARKED BY THE GOVERNMENT OF ORISSA AS PART OF THE LOAN DISBURSEMENT IN ACCORDANCE WITH THE GAZETTE NOTIFICATION THERE FORE HAS BEEN IDENTIFIED TO BE REPAID CANNOT BE TAXED IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW THEREOF, THE INCOME SO ENHANCED TO RS.12,90,20,652 UNDER THE PROVISIONS OF I.T.A.NO. 442/CTK/2012 6 SECTION 251(2) OF THE I.T.ACT,1961 IS DIRECTED TO BE DELETED AND EXPENDITURE DISALLOWE D BY THE ASSESSING OFFICER UNDER VARIOUS PROVISIONS AND CONTENTION AS NOTED BY HIM ON ACCOUNT OF ASSESSEE NOT SEEKING REGISTRATION U/S.12A IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT,1961 IS DIRECTED TO BE DELETED IN SO FAR AS IT HAS BEEN SUBMI TTED THAT THE SOCIETY HAS APPLIED REGISTRATION U/S.12A WHICH APPLICATION IS PENDING WITH THE COMMISSIONER OF INCOME TAX IS TO BE PERSUADED WITH IN ACCORDANCE WITH HIS DIRECTION. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER RELIED ON THE DECISION OF THE ITAT,CUTTACK BENCH IN THE CASE OF VSS MEDICAL COLLEGE & HOSPITAL SOCIETY V. COMMISSIONER OF INCOME - TAX (COPY SUBMITTED) . 2.3. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT IN THE PRESENT CASE, THE UNSPENT AMOUNT OUT OF THE AMOUNT OF GRANT - IN - AID RECEIVED FROM GOVERNMENT OF ORISSA, SO LYING IN THE HAND OF THE ASSESSEE AS CALCULATED BY THE ASSESSING OFFICER FOR TAXATION PURPOSE IS LIABLE TO BE DELETED , AS THE SAME IS NEITHER THE INCOME NOR THE PROPERTY OF THE SOCIETY BUT HAS TO BE SPENT IN ACCORDANCE WITH THE DIRECTION OF THE GOVERNMENT AND THE UNSPENT AMOUNT HAS TO BE SURRENDERED TO THE GOVERNMENT IN ACCORDANCE WITH THE SANCTION ORDER. 2.4. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE BASIS OF ABOVE SUBMISSIONS, PRAYED FOR DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A). 3. THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL OF THE ASSESSEE SIMPLY BECAUSE THE ASSESSEE HAD BEEN GRANTED REGISTRATION U/S.12A W.E.F. 1.4.2009 WHICH WAS AVAILABLE TO THE ASSESSING OFFICER WHO PASSED THE ORDER U/S.143(3) ON 15.9.2011. THE FACTS AS HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAVE NOT BEEN DISPUTED BY THE LEARNED COUNSEL OF THE ASSESSEE AS OF NOW AND THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY CONFIRMED THAT SECTIONS 11 TO 13 ARE SELF SUFFICIENT CODE WITHIN THE INCOME TAX ACT FOR ASSESSMENT OF TRUST OR CHARITABLE ORGANIZATION WHEN I.T.A.NO. 442/CTK/2012 7 THE EXCESS OF INCOME OVER EXPENDITURES BROUGHT ON RECORD BY THE ASSESSEE ITSELF WAS TO BE TAXED WAS CONSIDERED BY THE LEARNED CIT(A) ON THE BASIS OF TOTALITY OF THE FACTS, WHICH MAY KINDLY BE CONFIRMED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO THE MATERIAL AVAILABL E ON RECORD AND WE ARE INCLINED TO HOLD THAT THE ASSESSMENT HAS BEEN MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON THE PREMISE THAT THE ASSESSEE WAS CARRYING OUT ITS OBJECTS WERE NOT CHARITABLE FOR THE IMPUGNED ASSESSMENT YEAR INSOFA R AS THE ASSESSEE WAS GRANTED REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA W.E.F. 1.4.2009. THE ASSESSMENT ORDER HAS BEEN PASSED O N 15.9.2011 RATHER LEANS IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE ASSESSING OFFICER HAS CONSIDERED THAT OUT OF T HE TOTAL RE CEIPTS EXEMPT U/S.12A AMOUNTING TO 6.05 CRORES STOOD SPENT FOR THE PURPOSE IT HAD GOT ITSELF REGISTERED TO THE EXTENT OF 3.91 CRORES. IN OTHER WORDS, THE EXCESS OF INCOME OVER EXPENDITURES BEING THE GRANT FOR A SPECIFIC PURPOSE HAS BEEN CONSIDERED UTILIS ED BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 11 WHEN THERE WAS NO WHISPER OF VIOLATING THE PROVISIONS OF SECTION 13 BY THE ASSESSING OFFICER. IT IS THE LEARNED CIT(A) WHO HAS CONSIDERED THE CASE OF THE ASSESSEE APPELLANT BEFORE IT THAT THE ASSESSMENT HAS BEEN MADE IN THE HANDS OF THE ASSESSEE SOCIETY AS AOP WOULD GIVE BENEFIT TO THE MEMBERS OF THE SOCIETY HOLDING THE PROPERTY BEING THE UNUTILIZED PORTION OF THE GRANT RECEIVED FROM THE GOVERNMENT OF ORISSA. IN OTHER WORDS, THE LEARNED COUNSEL OF THE AS SESSEE EMPHASIZED THAT THE GRANT HAS TO BE USED FOR THE SPECIFIC PURPOSE AND NOT FOR HOLDING AS CORPUS OR AS EXCESS OF INCOME OVER EXPENDITURE. THE LEARNED COUNSEL OF THE ASSESSEE HAS ALSO SUBMITTED THAT UNUTILIZED PORTION OF THE GRANT HAS TO BE RETURNED T O THE GOVERNMENT OF ORISSA THEREFORE WAS SUBJECTED TO TAX BY THE ASSESSING OFFICER WHEN THE I.T.A.NO. 442/CTK/2012 8 PORTION OF THE GRANT REMAINING UNUTILIZED WAS CONSIDERED BY THE ASSESSING OFFICER AS TAXABLE IN THE HANDS OF THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 11 INSOFAR AS ONLY A PART OF THE GOVERNMENT GRANT HAD BEEN UTILISED FOR THE PURPOSE IT HAD RECEIVED THE SAME. WE HAVE PERUSED THE FINANCIAL STATEMENTS DULY AUDITED BY THE CHARTERED ACCOUNTANT WHEREIN THE INCOME AND EXPEND ITURE ACCOUNT ALONG WITH THE BALANCE SHEET FILED BY THE ASSESSEE CLEARLY INDICATE THAT THERE IS NO VIOLATIONS OF THE PROVISIONS OF SECTIONS 11 AND 13 TO THE EXTENT THAT THE ASSESSEE HAD FILED RETURN AS A CHARITABLE INSTITUTION IN VIEW OF THE FACT THAT IT H AD BEEN GRANTED REGISTRATION U/S.12A W.E.F. 1.4.2009. THEREFORE, THE ASSESSEE WAS CLEAR THAT THE UNUTILIZED PORTION OF THE GRANT WAS NOT REFUNDED TO THE GOVERNMENT AS PER THE SANCTION ORDER BECAUSE THE ASSESSEE HAD INSCRIB ED THAT INCOMPLIANCE TO SECTION 11 IT WAS HOLDING THE AMOUNT FOR THE BUILDING WHICH BUILDING WAS TO BE CONSTRUCTED AS PER THE MAIN OBJECT FOR THE CHARITABLE PURPOSE SANCTIONED BY THE CIT GRANTING REGISTRATION U/S.12A. THE ASSESSING OFFICER THEREFORE RIGHTLY ALLOWED ALL THE EXPENDITURES INC URRED FOR THE PURPOSE INSOFAR AS THE GRANT IN AID WAS A LIABILITY ROUTED TROUGH INCOME AND EXPENDITURE ACCOUNT AND NOT BECAUSE IT HAD VIOLATED THE PROVISIONS OF THE I.T.ACT WHEN THE ASSESSE E CHO SE TO ROUTE IT THROUGH THE INCOME AND EXPENDITURE ACCOUNTS FUL LY AWARE OF THE FACT THAT THE REGISTRATION WAS GRANTED U/S.12A W.E.F. 1.4.2009. NO CONTROVERSY WAS FOUND BY THE ASSESSING OFFICER ON BRINGING ON RECORD VIOLATION OF SECTION 13 TO THE EXTENT THAT THE RECEIPTS AT THE THRESHOLD WAS A GRANT IN AID AND NOT A DO NATION FOR CLAIMING EXEMPTION U/S.12A. A LIABILITY AND THAT TOO FROM A GOVERNMENT DEPARTMENT HELD BY GOVERNMENT EX - OFFICIO MEMBERS OF THE ASSESSEE SOCIETY BY NO STRETCH OF IMAGINATION BE SUBJECTED TO INCOME - TAX FOR THE IMPUGNED ASSESSMENT YEAR. THE FIGURES CLEARLY INDICATE THAT THE ASSESSEE WAS TO UTILIZE I.T.A.NO. 442/CTK/2012 9 THE AMOUNT REMAINING UNUTILIZED WHEN THE SANCTIONED GRANT WAS STILL TO BE RECEIVED AND IT WAS ONLY A PORTION THEREOF WHICH HAD BEEN TAXED IN THIS YEAR. THE LEARNED CIT(A) THEREFORE ERRED IN GIVING A FINDIN G THAT EVEN THE INCOME - TAX SO CLAIMED BY THE ASSESSING OFFICER WOULD BE CAPITALIZED AS PART OF BUILDING FUND WHICH IN OUR CONSIDERED VIEW WAS CONTRADICTORY INSOFAR AS THE ASSESS EE HAD ALREADY PAID A SUM OF 71.65 LAKHS AND WAS BEFORE THE TRIBUNAL FOR STA Y OF THE RECOVERY OF THE BALANCE DEMAND BEING THE INTEREST PORTION U/S.234A AND SECTION 234B. REFRAINING OURSELVES ON THE CONTENTIONS THAT A GRANT WHETHER COULD BE TAXED AS CAPITAL OR REVENUE WAS NOT THE CASE OF THE RIVAL PARTIES BEFORE US . THEREFORE, ON T HE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE AS HAVE BEEN BROUGHT O N RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE UNUTILIZED PORTION OF THE GRANT CANNOT BE TAXED AS EXCESS OF INCOME OVER EXPENDITURE AS THE GRANT REMAINED UNUTILIZED WHEN THE ASSESSEE H AD TO RECEIVE FURTHER GRANT FROM THE GOVERNMENT OF ORISSA FOR GENERAL PUBLIC UTILITY AND FOR WHICH PURPOSE REGISTRATION U/S.12A WAS GRANTED BY THE LEARNED CIT. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFI CER TO ACCEPT THE RETURN AS FILED BY THE ASSESSEE AND REFUND THE TAX SO COLLECTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT,1961 . 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 14.12.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 442/CTK/2012 10 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ORISSA SPACE APPLICATION CENTRE, PLOT NO.45/48(P), JAYADEV VIHAR, UNIT 16, BHUBANESWAR 751 023 2 / THE RESPONDENT: INCOME - TAX OFFIC ER, WARD 2(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 12.12.2012 . 2. DATE ON WHI CH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.12.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.12.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..