2021 (7) TMI 903 - AT - Income Tax

Exemption u/s 11 - transaction of foreign contribution - assessee has claimed expenses incurred in foreign currency outside India - Addition on no approval of the Board for exemption u/s 11(1)(c) - assessee did not register itself with FCRA nor filed return, the Assessing Officer was of the opinion that the assessee has violated the provisions of FCRA in respect of foreign contribution - addition had been made during the assessment since the order of the Board as per the proviso to section ll(l)(c) had not been received - HELD THAT - Findings of the ld. CIT(A) show that absence of order of the Board questioned by the Assessing Officer has been found subsequently at the appellate stage which prompted the ld. CIT(A) to delete the disallowance made by the Assessing Officer. Since the order is now available, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground is, accordingly, dismissed. Denial of application of income - HELD THAT - As decided in INDO-FRENCH CENTRE FOR THE PROMOTION OF ADVANCED RESEARCH 2017 (9) TMI 40 - ITAT DELHI when a transaction is between Government of India and Government of any foreign country or territory, FCRA is not attracted. When undisputedly, the transaction is a grant given by French Government to the assessee society which is a joint venture of French Government and Government of India, the transaction of transferring the grants is a transaction between both the countries as specified in the letter (supra). Furthermore, vide letter dated 08.06.1985, available addressed to Secretary General, Ministry of External Relations, Government of France by Shri Ramesh Bhandari, the then Foreign Secretary, it is categorically made clear that, the assessee society established for promotion of scientific research etc. will be exempt from payment of income-tax. we find no illegality or perversity in the findings returned by Id. CIT (A). - Decided against Revenue.

Summary

Issues:
1. Disallowance of expenses incurred in foreign currency.
2. Treatment of foreign contribution from the Government of France.
3. Compulsory audit requirement under FCRA.
4. Exemption under sections 11 & 12 of the Income Tax Act.

Issue 1: Disallowance of expenses incurred in foreign currency:
The Revenue challenged the CIT(A)'s order regarding the disallowance of expenses incurred in foreign currency. The Assessing Officer disallowed expenses of 17,71,551 euros as the assessee was not notified by the CBDT under section 11(1)(c) of the Act for the relevant assessment year. However, the CIT(A) allowed the expenses based on a subsequent order issued by the Board. The Tribunal upheld the CIT(A)'s decision, stating that since the Board's order was now available, there was no reason to interfere.

Issue 2: Treatment of foreign contribution from the Government of France:
The Revenue contested the treatment of foreign contribution received from the Government of France. The Assessing Officer added the contribution amount to the assessee's income, citing FCRA violations. However, the CIT(A) referred to previous orders and a letter from the Ministry of Home Affairs to support the assessee's position. The Tribunal upheld the CIT(A)'s decision, noting that the contribution was between the two countries and fell outside FCRA provisions.

Issue 3: Compulsory audit requirement under FCRA:
The Revenue argued that the assessee's failure to undergo a compulsory audit by the C & AG violated FCRA provisions. The CIT(A) relied on past orders and a letter from the Ministry of Home Affairs to support the assessee's position. The Tribunal upheld the CIT(A)'s decision, stating that the assessee, as a joint venture between India and France, was exempt from FCRA requirements.

Issue 4: Exemption under sections 11 & 12 of the Income Tax Act:
The Revenue challenged the allowance of exemption under sections 11 & 12 of the Income Tax Act to the assessee. The CIT(A) based the decision on past orders and the nature of the transaction between the two countries. The Tribunal upheld the CIT(A)'s decision, citing the joint venture status and the exemption granted by the Ministry of Home Affairs. Consequently, the appeal of the Revenue was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal against the CIT(A)'s order, upholding the treatment of expenses, foreign contributions, audit requirements, and exemption under the Income Tax Act in favor of the assessee.