The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) has held that the government grant received by the trust towards specific projects to achieve objects of the trust constituted its Corpus Fund and not chargeable to tax.
The assessee, Electronics & Quality Development Centre, is a trust which is established with the main object to provide facilities for testing, calibration and consultancy for achieving quality of electronic products and equipment’s including computers, communication equipment instrumentation, process, control instruments and electrical equipment’s. It is duly registered under Section 12AA of the Income-tax Act, 1961. The return of income for the year under consideration was filed by it declaring Nil income. During the year under consideration, the assessee trust had received grant of Rs.6,18,22,000/- from the Government of Gujarat and the same was directly taken by the assessee-trust to Corpus Fund. During the course of assessment proceedings, the Assessing Officer, however, did not accept this treatment given by the assessee-trust and treated the same as income of the assessee mainly on the ground that there was no specific direction of the donor that the said grants constituted corpus donation and the same were available to the assessee-trust to meet certain expenditures.
Aggrieved by the order of the AO, assessee appealed before the CIT (A) and CIT (A) found merit in the submissions made on behalf of the assessee before him and proceeded to delete the addition of Rs.6,18,22,000/- made by the Assessing Officer on account of grant received from the Government of Gujarat. Appeals filed by revenue against the order of CIT (A) before the Tribunal.
The assessee submitted that merely because there was certain incidental surplus generated out of the activities of the Trust carried out for the object of the Trust, it cannot mean that Trust is engaged in business activity and hit by provisions of Section 2(15) of the Act. The assessee has relied on the decision of Honorable Gujarat High Court in the case of CIT Vs. Gujarat Safai Kamdar Vikas Nigam, it was held thatalthough it was not expressly made clear that the grants were being made available to form the corpus of the Trust and to be applied for such purpose, it was held by the Hon’ble jurisdictional High Court after considering the entire purport of the scheme that the grants made available to the assesse trust for implementing the scheme in a particular manner cannot be treated as income of the assessee-trust.
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