JUDGMENT : Satyen Vaidya, J. By way of instant appeal, challenge has been laid to order dated 20.01.2016 passed by the Income Tax Appellate Tribunal, Chandigarh, in Income Tax Appeal No. 875/CHD/2014, whereby the order of CIT (Appeals), Shimla, in Appeal No. IT/76/13-14/Sml. has been affirmed. 2. Brief facts giving rise to the instant appeal are that the appellant (for short “Assessee”) was released a sum of Rs. One Crore, for its upgradation/strengthening under scheme of upgradation/strengthening of nursing services under human resources for health, by the Government India, for the year 2008-2009 vide communication dated 18th March, 2009. The amount so released was grant-in-aid provided by the Government of India subject to following conditions: - “(i) Audited statement of expenditure and Utilization Certificate for sanctioned amount from the competent authority should be furnished to the Nursing Adviser, Ministry of Health and Family Welfare, Nirman Bhawan, New Delhi-110011 Tel. 23062726 (Fax No. 23062310). (ii) The funds may be deposited in a separate Bank Account opened for this purpose only. Further, interest earned on the grant should also be accounted for and utilized for the same scheme/purpose. (iii) For speedy implementation of the scheme, the civil construction under the scheme may be got executed through the agencies approved by the State Govt. (iv) The funds sanctioned will be utilized for the purpose for which it is sanctioned. (v) This is one time assistance both for non-recurring and recurring expenditure for the entire XI plan period. The State Govt. will bear the recurring expenditure form XII plan onwards. (vi) Quarterly Progress report may be sent to Mr. T. Dileep Kumar, Nursing Adviser, Ministry of Health & Family Welfare, Nirman Bhawan, New Delhi. (vii) The expenditure should be incurred as per guidelines in the attached Annexure.” 3. The assessee, in its Income Tax Return for the assessment year 2010-2011 declared nil income claiming exemption under Section 11(i) (a) of Income Tax Act, 1961 (for short “the Act”). In pursuance to scrutiny proceedings, the Assessing Officer framed assessment under Section 143(3) of the Act and a sum of Rs.1,40,17,323/- was assessed as income of the assessee for the relevant assessment year. This amount included the unspent amount of the grant-in-aid paid to the assessee by the Government of India during the financial year 2008-2009. In pursuance to scrutiny proceedings, the Assessing Officer framed assessment under Section 143(3) of the Act and a sum of Rs.1,40,17,323/- was assessed as income of the assessee for the relevant assessment year. This amount included the unspent amount of the grant-in-aid paid to the assessee by the Government of India during the financial year 2008-2009. The amount received by the assessee through grant-in-aid was considered as income of the assessee under Section 2(24)(iia) of the Act. The Assessing Officer concluded that the assessee was not entitled to any exemption as its registration under Section 12AA was effective from 01.04.2010, relevant for assessment year 2011-2012 and the assessee also did not qualify to be entitled for exemption under Section 10 (23C) (iiiab) of the Act. 4. The assessee preferred an appeal before the CIT (Appeals), Shimla, but without success. Further appeal of the assessee to ITAT was also dismissed. Hence the instant appeal. 5. This court admitted the instant appeal for hearing on 04.10.2016 on following substantial questions of law :- (a) Whether the learned Income Tax Appellate Tribunal is right in law in holding that appellant council established under the H.P.N.R.C. Act, 1977 not to be entitled to exemption under section 10(23C)(iiiab) of the Income Tax Act though the primary object of the appellant was to regulate the standard of nursing education and training? (b) Whether the learned Income Tax Appellate Tribunal is right in law in holding that appellant was not entitled to the benefits of provisions of Sections 11, 12 and 13 as the appellant had been accorded registration under Section 12AA of the Income Tax Act, 1961 w.e.f. A.Y. 2011-12? (c) Whether the learned Income Tax Appellate Tribunal is right in law in holding that the grant received was a voluntarily contribution by the Govt. of India as such the same was income of the appellant under Section 2(24)(iia) of the Income Tax Act, 1961? (d) Whether the orders of the learned Income Tax Appellate Tribunal is perverse as the same is based on incorrect application of the provisions of law? 6. We have heard Mr. Vishal Mohan, learned counsel for the appellant & Mrs Vandana Kuthiala, learned Counsel for the respondent and have also gone through the entire record. 7. The primary issue is whether the grant-in-aid received by the assessee was capital receipt or revenue receipt? 6. We have heard Mr. Vishal Mohan, learned counsel for the appellant & Mrs Vandana Kuthiala, learned Counsel for the respondent and have also gone through the entire record. 7. The primary issue is whether the grant-in-aid received by the assessee was capital receipt or revenue receipt? Thus, the substantial questions (c) and (d) are being taken for consideration in the first instance. 8. Section 2(24) of the Act defines income. According to assessment order, the grant-in-aid was income of assessee under Section 2(24)(iia) of the Act. Before adverting further, it will be gainful to analyse the nature of transaction by way of which the assessee received grant-in-aid. 9. Assessee is an institution which is the creation of Himachal Pradesh Nursing Registration Council Act, 1977. The purpose of constitution of assessee is to carry out the provisions of the Act supra. Assessee is substantially funded by the Government. The predominant function of the assessee is to regulate the registration of nursing and allied staff and to maintain the high standards of professionalism in nursing profession. The assessee has thus gratuitous functions without any independent source of income. 10. The grant-in-aid was issued in favour of assessee by the Government of India for specific purpose of upgradation and strengthening of the institutions itself. As per Clause 2 of the communication dated 18th March, 2009, whereby the aforesaid amount was sanctioned, the specific heads of expenditure were mentioned as under:- “2. The details of the expenditure sanctioned per Council is given below:- Items (Rs. In Lakhs) Non -Recurring Expenditure Estimated expenditure (i) Additional and Alteration of existing building Rs.77.00 (ii) LC Projector with screen, Computer with Server, data machine and other accessories, Fax Machine, Photocopier, Scanner, Air Conditioner etc. (iii) Furniture and Transport Recurring Expenditure on staff/contingencies (as per para 3(x) in Annexure) Rs.23.00 Total Rs. 100.00 The assessee was under obligation to deposit the amount in a separate bank account and interest earned thereon was also liable to be accounted for and utilized for the same scheme/purpose. The funds could not be utilized for any other purpose. The grant-in-aid was one time assistance. 11. Thus, there is no doubt that the assessee could not have spent the amount received by it through the grant-in-aid except for the purpose specified in the aforesaid communication. The funds could not be utilized for any other purpose. The grant-in-aid was one time assistance. 11. Thus, there is no doubt that the assessee could not have spent the amount received by it through the grant-in-aid except for the purpose specified in the aforesaid communication. A sum of Rs.77 lacs was towards non-recurring expenditure, which as per the details noticed above, cannot be said to be receipt in the nature of revenue. Similarly, remaining amount of Rs.23 lacs was also towards the capital receipt. There is nothing on record to suggest that the assessee is a profit earning organization or has been constituted as a profit-making venture. 12. In Lachit Filma vs. Commissioner of Income Tax, (1992) 195 I.T.R. 402, the Gauhati High Court had an occasion to consider almost an identical question as is before this Court. It was held that the grant-in-aid by the Government in such like cases would not be a revenue receipt. It was further observed that in relation to business undertaking, word “revenue” connotes incomings of the undertaking which are products of the normal working of the undertaking. The giving of financial aid or subsidy is at the discretion of the Government. The grant-in- aid, thus, in that case was not held to be a product of normal business activity. The case in hand, in our considered view, has better footing. 13. The matter can be viewed from another angle. The term income as defined in Section 2(24) is inclusive of various heads mentioned therein. Prior to amending Act 20 of 2015, there was nothing specific in Section 2(24) of the Act which would include grant-in-aid by the Central or the State Government called by whatever name. It was only by way of said amendment, made effective from 01.04.2016 that such monetary release by State or Central Government has been incorporated as income by way of Section 2(24) (xviii). Even in this clause exemption has been carved out in respect of subsidy or grant by Central Government for the purpose of corpus of a trust or institution established by the Central Government or State Government, as the case may be. This clearly illustrates the legislative intent that prior to 01.04.2016, the type of grant as is the subject matter of instant lis was not specifically included as income. The latter inclusion of such provision will not have retrospective application. This clearly illustrates the legislative intent that prior to 01.04.2016, the type of grant as is the subject matter of instant lis was not specifically included as income. The latter inclusion of such provision will not have retrospective application. Even by way of aforesaid amendment, exemption is available to the institutions like the assessee, as noticed above. 14. In Kalpna Palace vs. Commissioner of Income Tax, (2005) 275 I.T.R. 365 , the Allahabad High Court examined the fall out of the grant in aid and incentives etc., provided by the government. It was held that grant-in-aid received by assessee, in that case, was capital receipt. The grant -in-aid, in that case, was provided by the State Government for construction of permanent Cinema Halls during a specified period. The Court after analysing the facts found that since the grant-in-aid was only for specific purpose of construction of Cinema Halls in the rural areas, it could not be termed as revenue receipt. 15. Similarly, in Commissioner Income Tax vs. Ponni Sugars and Chemical Ltd., (2008) 306 ITR 392 , the Hon'ble Supreme Court has held as under :- “14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly, the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant.” Applying the purpose test to the facts of that case, it was held that the payment received by assessee under the scheme was not in the course of a trade but was of a capital nature. In Ponni Sugars case (supra), the incentive conferred was in the nature of higher free sale sugar quota and allowance to collect excise duty even on the sale price of free sale sugar. The purpose obviously was to promote the concerned business. 16. Reference can also be made to a decision in Karnataka Municipal Data Society vs. Income Tax Officer, (2016) 389 ITR 441 wherein the Karnataka High Court has held that the amount given by the Government for a specified purpose and the government having control on its expenditure cannot be said to be income accrued to the assessee. 17. ITAT has definitely not considered the matter in the above noted context. The fact that the assessee received only one time grant with a specific purpose which nowhere suggested scope of profit generation or revenue for the assessee, the amount received by the assessee by way of grant-in-aid thus could not be termed to be revenue receipt. Substantial questions of law No. (c) and (d) are accordingly decided in favour of the assessee and against the revenue. 18. Since, we have already held that the amount received by the assessee by way of grant-in-aid from Government of India was not the income accrued to the assessee, the substantial questions No. (a) & (b) are rendered redundant. 19. In the light of the above discussion, there is merit in the instant appeal and it is accordingly allowed. 18. Since, we have already held that the amount received by the assessee by way of grant-in-aid from Government of India was not the income accrued to the assessee, the substantial questions No. (a) & (b) are rendered redundant. 19. In the light of the above discussion, there is merit in the instant appeal and it is accordingly allowed. Consequently, order dated 20.01.2016 passed by the Income Tax Appellate Tribunal, Division Bench, Chandigarh, in Income Tax Appeal No. 875/CHD/2014 affirming the order dated 20th January, 2016, passed by the Commissioner of Income Tax (Appeals), Shimla in Appeal No. IT/76/13-14/Sml and assessment order dated 18.5.2013 are set aside. No order as to the costs. Pending application(s), if any, shall also stand disposed of.