What is the correct treatment of accounting for the grants with specified end objectives received from the donor agencies (from the Income Tax angle)?

This issue was addressed in a particular case and the following was prescribed:

·         The tied up grants received for the end objectives shall be credited to the Donor agency’s account

·         The Donor account shall be debited with the amount of the expenses incurred .

·         Any non refundable credit balance in the personal account of the Donor shall be treated as income in the year in which such non refundable balance was ascertained.

The major advantage coming from this accounting treatment is that the society /trust need not comply with any of the conditions as prescribed in Sec. 11/12/12A etc.

An alternative treatment is the usual way of crediting the Income side with the amount of grants received and then complying with the condition of expending at least 75% of the amounts of these grants.