ITA No. 28/Nag/2015. IN INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No.28/Nag/2015. Assessment Year : 2008-09. Income-tax Officer, M/s Mahatma Gandhi Institute Ward-1, Wardha. Vs. of Rural Industriliszation, Wardha. PAN AACTM3142R. Appellant. Respondent. Appellant by : Smt. Agnes P. Thomas. Respondent by : Shri C.J. Thakar & Shri S.C. Thakar. Date of Hearing : 19-09-2016 Date of Pronouncement : 22nd Sept., 2016 ORDER This appeal by Revenue is directed against order of learned CIT(Appeals)-I, Nagpur dated 28-12-2014 and pertains to assessment year 2008-09. ground of appeal reads as under : On facts and in circumstances of case and in law, ld. CIT(A) erred in deleting addition of Rs.48,86,270/- made by Assessing Officer on account of grant which remained unspent on its objects. 2. In this case AO asked assessee to explain as to why amount of Rs.48,86,270/- appearing in balance sheet as unspent amount should not be treated as surplus liable to tax. assessee responded as under : amount received from Govt. is since in terms of specific budget and unspent amount is liable to be refunded and hence institute does not acquire any right interest on title in such grant and accordingly same cannot be considered as and income so as to bring within 2 ITA No. 28/Nag/2015. preview of Income Tax. relevant text of GFR is enclosed herewith from which it is evident that Government grant cannot be considered as income. Even interest earned on such grant is considered as part of Grants. assessee also submitted copies of correspondence relating to sanction, release and specific purpose of grant. However, AO was not satisfied. He held as under : 3.1 I have considered submission of assessee and documents filed during assessment proceedings. It is worthwhile to mention here that assessee-trust has been accorded approval u/s 12A of I.T. Act, 1961 w.e.f. Assessment Year 2010-11. Thus, in year under consideration, assessee-trust is unregistered under Income Tax Act. Further, as per provisions of I.T. Act, 1961, unregistered trust are required to utilize entire receipts in year of receipt itself and are not allowed to carry forward unspent amount in subsequent years. 3.2 Further, contention of assessee that amount if remained unspent is liable to be refunded or reappropriated as per directions is also misplaced and of no relevance to current case as under provisions of Income Tax Act, 1961, amounts received has to be utilized in year of receipt itself and provisions w.r.t. extention of time for its utilization are governed by Explanation 2 to section 11(1) which are again not applicable to unregistered trusts. Thus as per provision of Income Tax Act, 1961, any amount unspent is liable to tax irrespective of whether granting authority has or has not extended time for its application. 3.3 claim of assessee, that unspent amount if any is to be refunded and accordingly shown as liability also cannot be basis of any relief. What is relevant here is that assessee has received sums for utilization as per directions of payer. condition that unspent amount nis to be refunded is merely for preventing any misuse and/or utilization of funds for any other undirected purpose. said rider does not give Grants character of liability. 3.4 It is seen from record that assessee-trust has during year received grant of Rs.50,00,000/-, out of which only amount of Rs.1,13,730/- has been utilized. balance of Rs.48,86,270/- has not been utilized and hence treated as surplus liable to tax in light of 3 ITA No. 28/Nag/2015. above findings. Therefore amount of Rs.48,86,270/- is treated as income of assessee-trust and assessed accordingly. 3. Before learned CIT(Appeals) assessee inter alia contended that assessee never received amount. amount was lying in bank account of KVIC. Learned CIT(Appeals) accepted this contention. However, thereafter he held as under : 6.2 Now, having established fact in foregoing para that amount in question never vested with appellant in financial year 2007-08 relevant to AY 2008-09, question does arise that if amount was not vested with appellant society in relevant financial year 2007-08, min that case how society could spend part of amount to tune of Rs.1,13,730/- is mute question, which requires to be answered. 6.3 appellant in his submissions has very conveniently stated that alleged sum of Rs.48,86,270/- [Rs.50,00,000 (-) 1,13,730/-] which never was received nor was accrued to Appellant during year relevant to AY 2008-09, has been assumed as Income of Appellant without any cognizable basis. 6.4 Having quoted above lines of version of AR of appellant society, it becomes quite manifest that onus is cast on appellant society to explain as to how amount of Rs.1,13,730/- has accrued to it out of total sum of Rs. 50 lakhs, which entirely was lying in bank account of KVIC during relevant financial year 2007-08. In other words, how appellant society could spend part amount of Rs.1,13,730/- out of total sum of Rs. 50 lakhs without actual receipt of same which was still lying with KVIC? Further, on what basis appellant has taken sum of Rs.48,86,270/- in its balance sheet as on 31.03.2008? 6.5 contention of appellant in this regard is that though amount of Rs.50 lakhs was meant for expenditure by appellant on objects of appellant M/s MGIRI, Wardha, but said amount was never received by appellant physically in his bank account which remained lying in SB A/c of KVIC, Wardha. appellant further argues that even though assuming that appellant was entitled to amount for expenditure on its specified objects despite it remained deposited in SB A/c of KVIC, Wardha, it cannot be construed to be income of appellant in view of fact that as per Rules, whatever Government grants remains unspent, is required to be 4 ITA No. 28/Nag/2015. surrendered to Government account at end of financial year. Thus, having considered contentions of appellant, facts and circumstances and material on record, amount of Rs.48,86,270/- which remained unspent on its objects cannot be treated to be income for purpose of taxation in hands of appellant. Therefore, addition made b y AO is directed to be deleted. Hence, these grounds are allowed. 4. Against above order Revenue is in appeal before ITAT. 5. I have heard both counsel and perused records. Learned D.R. relied upon order of AO. She submitted that assessee has not got registration in concerned assessment year. Hence she submitted that assessee cannot claim benefit u/s 11(2) for provisions of I.T. Act regarding carry forward of unspent grant. She further submitted that learned CIT(Appeals) has accepted contention of assessee that amount was never received by it. That this contention was not before AO. Further more, she submitted that learned CIT(Appeals) has noted that when amount was not received by assessee how sum of Rs.1,13,730/- has been shown as expenditure. Inspite of this observation in para 6.4 of appellate order, learned CIT(Appeals) in end has gone to pass contradictory order and directed AO to delete addition. 6. Per contra learned counsel of assessee relied upon order of learned CIT(Appeals). He submitted that money in fact never vested with assessee as same was kept in bank account of KVIC. That this fact was evident from balance sheet submitted. Learned counsel further referred to case law for proposition that unspent grant cannot be taxed in hands of assessee. 7. Upon careful consideration I find that assessment order nowhere records submission of assessee that assessee had never received said grant. Further more it is also evident that when grant was not received by assessee how can assessee claim expenditure of Rs.1,13,730/- out of 5 ITA No. 28/Nag/2015. grant of Rs.50 lakhs unless it had control over amount involved. Learned CIT(Appeals) has himself noted this aspect in para 6.4 of order but has not recorded any reply of assessee or any finding of his own in this regard. issue in this appeal first revolves around first plank of assessee that amount was never received by assessee or when it had no control over it then how assessee has claimed expenditure out of it of sum of Rs.1,13,730/-. Secondly, it needs to be examined as to what was actual fate of remaining amount of Rs.48,86,270/-. Whether it was ultimately refunded or utilized has not been examined nor relevant details are available on record. This fact has also to be kept in mind that assessee has not obtained registration under I.T. Act in current assessment year. In these circumstances in my considered opinion there are lacunas in order of learned CIT(Appeals). Further more submissions of assessee which were before learned CIT(Appeals) were not before AO. In these circumstances, in my considered opinion, interest of justice will be served if issue is remitted to file of AO. AO is directed to consider issue afresh after giving assessee opportunity of being heard. 8. In result this appeal by Revenue stands allowed for statistical purposes. Order pronounced in Open Court on this 22nd day of Sept., 2016. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 22nd Sept., 2016. 6 ITA No. 28/Nag/2015. Copy forwarded to : 1. M/s Mahatma Gandhi Institute for Rural Industrilization, Wardha, Dist. Wardha. 2. I.T.O., Ward-1, Wardha. 3. C.I.T.- I, Nagpur. 4. CIT(Appeals), -I, Nagpur. 5. D.R., ITAT, Nagpur. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur. Wakode. Income-tax Officer, Ward-1, Wardha v. M/s Mahatma Gandhi Institute of Rural Industriliszation