Civil Services Institute not liable to pay Tax on Fund Received from Govt: ITAT [Read Order]

Civil Services Institute - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the Civil Services Institute, Dehradun is not liable to pay tax on the amount received from the Uttarakhand Government.

In the instant case, the Assessing Officer held that the amount received by the assessee-society  comes within the definition of income under Section 2 (24) of the Income Tax Act and therefore, interest income earned on FDs should be treated as “Income from Other Sources”

The assessee submitted that money received by Society from Government of Uttarakhand was towards corpus, and these funds were to be expended only after the budget, and not to be used for day-to-day activities of society, therefore, did not fall under the purview of section 2 (24) (iia) of the Act.

The Tribunal noticed that from communication between assessee and Government of Uttarakhand Department of Culture, Tourism and Games, Dehradun, dated 01/12/14, that funds were released, as ‘corpus fund’ for the operation of Civil Services Institute construction at Dehradun.

“It is also observed that only reason for disallowance of claim of assessee is because, phrase “Corpus Fund” has not been mentioned in letter dated 23/03/11, issued by Principal Secretary, Government of Uttarakhand to Director of Sports, Uttarakhand Culture, Tourism and Games. However it is observed that in Minutes of meeting by Government of Uttarakhand Department of Culture, Tourism and Games, dated 31/05/13 presided over by Chief Secretary, there is a specific reference regarding budget allocation of Rs. 5 crore as “corpus fund” from Sports Department to assessee, for its daily functioning in clause (vii).”

The Tribunal, therefore, concluded that “We therefore do not have any doubt on nature of funds to be towards ‘corpus’. Further assessee has been able to prove that corpus fund was received for meeting out capital expenditure which according to explanation of assessee have been used actually to meet the capital expenditure. Thus, in our considered opinion, corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of the Society, even if no registration u/s 12AA has been granted.”

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