ACIT (Exemption) Vs Indian Institute of Carpet Technology (ITAT Lucknow)
Govt Grant Not Income: Corpus by Conduct: Even Without Explicit Direction, Govt Grant Held Non-Income – AO’s 15% Surplus Addition Overturned by Tribunal-
Assessee, registered u/s 12A, received capital grants aggregating ₹2,90,56,214 from the Ministry of Textiles for setting up various institutional facilities. AO noted that the amount was directly credited to balance sheet instead of income & expenditure account, issued show-cause, & added the amount to gross receipts after allowing 15% deduction u/s 11(1). AO also disallowed depreciation u/s 11(6), computing taxable income at ₹1,70,77,516.
Before CIT(A), Assessee submitted that the grants were specific-purpose capital receipts forming part of the corpus; utilization certificates certified by C.A. demonstrated full application within the stipulated period. CIT(A) accepted that the grants were for creation of capital infrastructure, hence corpus in nature, & deleted the addition.
Revenue appealed, arguing that receipts must be routed through income & expenditure & 85% applied, failing which accumulation u/s 11(2) was required. Tribunal rejected this contention, holding that Government grants received for setting up of the institute constitute capital receipts not falling within income u/s 2(24). ITAT relied on Gujarat High Court in CIT Vs Gujarat Safai Kamdar Vikas Nigam, holding that specific-purpose Government grants, though not explicitly directed as corpus, are corpus by their inherent character & cannot be treated as income.
