2019 (1) TMI 142 - AT - Income Tax

Exemption u/s 11 denied - Income applied by the assessee outside India - assessee has incurred an amount on international meet and no prior approval of the board has been taken, which is in violation of section 11(1)(c) - Held that - Assessee has not incurred these expenditure outside India but incurred in India in Indian rupees. This fact has not been controverted either by the learned assessing officer or by the learned departmental representative before us. The provisions of section 11 (1)(c) (ii) applies only if such income is applied to such purposes outside India, without the approval of the central board of direct taxes. In the present case, as no income, except what has been confirmed by the learned Commissioner of income tax appeals, is applied by the assessee outside India but in India. Therefore, those provisions do not apply to the assessee. In view of this we do not find any infirmity in the order of the learned Commissioner of income tax appeals in deleting the above addition. It is further to be noted that the learned Commissioner of income tax appeals in his order has upheld the amount of money spent by the assessee of INR 6 68300/ outside India towards hotel and other expenditure. - decided against revenue

Summary

Issues involved:
1. Disallowance of expenditure incurred outside India without approval under section 11(1)(c) of the Income Tax Act.

Analysis:
The appeal was filed by the revenue against the order of the ld CIT(A)-36, New Delhi for the Assessment Year 2006-07. The revenue contended that the ld CIT(A) erred in allowing the appeal of the assessee without obtaining approval under section 11(1)(c) of the Act for incurring expenditure outside India for a charitable purpose promoting international welfare. The case involved the disallowance of INR 1,246,479 spent outside India without prior approval, leading to the reopening of the assessee's case under section 147 of the Income Tax Act.

The assessing officer disallowed the above sum as it was not eligible for exemption under section 11(1)(c) due to lack of prior approval from the CBDT. The assessee, an association of persons, explained that the expenditure was for Indian Railway players participating in international meets, promoting the country's interest in sports globally. The AO computed the taxable income at INR 8,803,681, adding the amount spent outside India without approval.

The ld CIT(A) deleted the addition, emphasizing that the expenditure was not for an international meet but for promoting sportspersons in India. The activities were aimed at promoting the interest of the country internationally and nationally, with only a portion spent in foreign currency. The assessee had exemption under section 10(23C)(IV) for most years, and the expenditure was not for the welfare of the assessee but for supporting Indian players in sports events.

The revenue challenged the ld CIT(A)'s order, arguing that the expenditure was indeed for an international meet as per the books of accounts. However, the Tribunal observed that the expenditure was incurred in India in Indian rupees, not outside India. As per section 11(1)(c)(ii), the provisions apply only if income is applied outside India without approval, which was not the case here. The Tribunal upheld the deletion of the addition, except for the amount spent outside India towards hotel and other expenses.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the ld CIT(A)'s order, stating that the provisions of section 11(1)(c) did not apply as the expenditure was incurred in India, not outside the country.