Law: Income Tax Act, 1961

Section: 2

Income tax---Voluntary contributions Assessee, Gems and Jewellery Export Promotion Council Assessee receiving grants in aid from Government-¬Grants in aid given on certain conditions in order to ensure that amounts are properly utilized Held, such conditions would not alter the nature of grant as voluntary contribution from Government. Signet v. Commissioners of Inland Revenue (1886) 2 Tax Cas 257 rel. Inland Revenue Commissioner v. National Book League (1958) 34 I TA 461 (A11.) distinguished. (1958) 34 I T R 461 Inland Revenue Commissioners v. National Book League (1957) 3 W L R 222 and Society of Writers to the Signet. v. Commis¬sioners of Inland Revenue (1886) 2 Tax Cas 257 ref. ORDER CHANDURKAR, J. The assessee is a company established for the advancement of an object of general .public utility i. e. to support, protect, maintain, increase and promote exports of gems and jewellery including pearls, precious and semi precious stones, diamonds, synthetic stones, imitation jewellery, gold and non gold jewellery and articles thereof. It was to undertake market studies in individual foreign countries and carry out such other object as may be necessary for the promotion of export of gems and jewellery. There is no dispute that the assessee Company is a company whose income is applicable only to charitable purpose as defined in section 2(15) of the Income tax Act, 1961. The assessee Company receives grants in aid from the Government of India. Some of the conditions on which these grants in aid are given are the following (i) The finds should be kept with the State Bank of India, the total expenditure should not be more than the expenditure approved by the Central Government for each project ; separate accounts should be kept for Code and non Code projects and the accounts were to be audited by Chartered Accountants approved by the Government. (ii) Any amount unspent was to be surrendered to the Government by the end of the financial years unless allowed to be adjusted against next year's grant. (iii) The grant should be spent upon the object for which it bad been sanctioned. The assets acquired wholly or substantially out of Government grant in aid would not,…

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