2016 (6) TMI 48 - AT - Income Tax

Exemption u/s 11 - whether the amount was expended wholly for charitable activities and in accordance with the purpose for which it was given by the donor - Held that - The basic purpose of foreign contributions for activities on health and education. The agreement was entered in Canada on April 1, 2006, referred at page 28 of the paper book and there is no fresh evidence filed as its forming part of the assessment record and in the nature of clarifactory explanations. We find the activities and arguments of the learned authorised representative are supported with documentary evidence with duly signed and dated credential agreements along wtih photographs. The assessee has complied with the FCRA provisions for donations received for the purpose of health and educational programme as per the mandate of the Canadian donor and the assessee claimed such expenses as application of income for school and hospitals. Considering the apparent facts, evidence, activities and the FCRA provisions and clarificatory explanation of the learned authorised representative and duly signed documentary proof, we are not inclined to interfere with the order of the Commissioner of Income-tax (Appeals) who has dealt exhaustively vis-a-vis explanations and clarification and we confirm the same. - Decided against revenue

Summary

Issues: Appeal against Commissioner of Income-tax (Appeals) order under Income-tax Act, 1961 for assessment year 2006-07 - Addition of expenditure for charitable activities - Validity of agency agreement - Admission of new evidence - Compliance with foreign contribution regulations.

Analysis:
1. Addition of Expenditure for Charitable Activities:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in deleting the addition of a specific amount spent on charitable activities, arguing that the expenditure did not align with the specified tasks in the agency agreement. However, the Commissioner upheld the deletion, emphasizing that the expenditure was in line with the purpose for which it was donated. The Tribunal concurred with the Commissioner's decision, noting that the activities were conducted as per the conditions agreed with the Canadian donor, supported by documentary evidence, including a letter from the donor agency confirming the scope of the agency agreement.

2. Validity of Agency Agreement:
The Revenue raised concerns regarding the agency agreement's clarity and validity, pointing out discrepancies in the agreement's content and date. The Tribunal examined the agreement in detail, highlighting that the amended agency agreement, signed by both parties, specified the terms of engagement and activities to be followed. It was noted that the agreement was in accordance with the terms, and the activities were conducted as per the agreed conditions, as evidenced by the signed documentary proof provided by the assessee.

3. Admission of New Evidence:
The Revenue objected to the admission of new evidence, particularly a letter from the president of the donor agency, arguing that it was prepared post-assessment and should not form the basis for allowing expenditure towards school/hospital. However, the Tribunal found that the letter, along with other documentary evidence, clarified the scope of the agency agreement and confirmed that the expenses were incurred for health and education programs as mandated by the Canadian donor. The Tribunal upheld the Commissioner's decision to admit the new evidence and allow relief to the assessee.

4. Compliance with Foreign Contribution Regulations:
The case involved scrutiny of foreign contributions and their utilization for specific purposes as directed by the donor. The Assessing Officer raised concerns about the utilization of funds for activities not covered under the donor's directions. However, the Commissioner and the Tribunal found that the activities were in line with the donor's mandate, as confirmed by the documentary evidence and clarifications provided by the donor agency. The Tribunal affirmed that the assessee had complied with the FCRA provisions for donations received for health and educational programs, dismissing the appeal of the Department.

In conclusion, the Tribunal upheld the Commissioner's order, emphasizing the importance of documentary evidence, compliance with donor directives, and adherence to foreign contribution regulations in determining the validity of expenditure for charitable activities.