ORDER

Per: SHRI JAGADISH, A.M.:

1. This appeal filed by the assessee is directed against the order dated 05.11.2024 passed by the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi for the assessment year 2017–18 arising out of the assessment framed under section 143(3) of the Income-tax Act, 1961 (in short “the Act”).

2. The grievance of the assessee is against the action of the lower authorities in excluding the Government Salary Grant from the eligible income for the purpose of computing accumulation under section 11(1)(a) of the Act.

3. Briefly stated, the assessee is a charitable trust engaged in the field of education and is registered under the provisions of the Act. The assessee filed its return of income declaring total income of ₹2,46,583 after claiming exemption under section 11. The case was selected for scrutiny. During the assessment proceedings, the Assessing Officer noticed that the assessee had received Government Salary Grant amounting to ₹12.26 crore. The said amount was credited to the Income & Expenditure Account and the assessee claimed accumulation at the rate of 15% under section 11(1)(a) on the entire income including such grant. The Assessing Officer held that the said grant was a tied-up grant meant specifically for disbursement of salaries and was subject to definite obligations. It was held that such receipt could not be treated as income available for application or accumulation within the meaning of section 11(1)(a). The Assessing Officer, therefore, excluded the grant from the base of income for accumulation and disallowed the claim.

4. The Ld. CIT(A) upheld the action of the Assessing Officer by holding that the grant, being subject to specific utilisation conditions, does not partake the character of income available for accumulation.

5. Before us, the Ld. Authorised Representative submitted that the Government grant constitutes voluntary contribution within the meaning of section 2(24)(iia) read with section 12(1) of the Act. It was contended that there is no direction to treat the same as corpus and therefore the grant forms part of income eligible for application and accumulation. It was further submitted that the assessee is under an independent obligation to incur salary expenditure and the receipt of grant does not alter the nature of such income. Reliance was placed on the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Gem & Jewellery Export Promotion Council.

6. The Ld. Departmental Representative supported the orders of the lower authorities and submitted that the grant is a tied-up receipt and hence cannot be considered as income for the purpose of accumulation.

7. We have heard the rival submissions and perused the material available on record. The issue for consideration is whether the Government Salary Grant received by the assessee can be regarded as “income derived from property held under trust” so as to form part of the base for computing permissible accumulation under section 11(1)(a) of the Act.

8. The scheme of section 11(1)(a) restricts the exemption to income derived from property held under trust which is either applied or accumulated for charitable purposes. The provision presupposes that such income is at the disposal of the assessee and capable of being applied or set apart at its discretion. Though the expression “property held under trust” has been interpreted broadly, the income contemplated therein must be one which accrues to the assessee with a corresponding beneficial interest and control. The concept of accumulation under section 11(1)(a) necessarily requires that the assessee has the liberty to decide the manner and timing of application of such income.

9. In the present case, the Government Salary Grant does not arise from any property or activity of the trust. It is a financial assistance provided under a Government scheme with a specific and binding obligation that the same shall be utilised for payme