2023 (7) TMI 730 - AT - Income Tax

Exemption u/s 11 - disallowance of expenditure incurred on foreign travel - Assessee s contention is expenditure incurred on foreign travel was to obtain donations from the donors who were abroad - HELD THAT - The donations received include from agencies such as Silicon Valley Foundation, Global Giving, etc. The chart showing the details of the foreign travel expenditure incurred along with the purpose is enclosed. The details of the donations received and utilization of the same is also enclosed in the records. The expenditure incurred was for obtaining the donations from the various donors who were stationed abroad and the utilization of the donation was also for the objects of the Trust. Thus donations received are utilized for charitable purpose which is never doubted by the AO, the foreign travel expenses incurred for obtaining the above said donations is to be allowed as an expenditure. Appeal of assessee allowed.

Summary

Issues involved: Delay in filing appeal, Disallowance of expenditure on foreign travel.

For the issue of delay in filing the appeal, the Appellate Tribunal considered the reasons provided by the assessee for the belated filing. The Tribunal noted that the assessee initially hesitated to file the appeal due to considering not doing so to avoid conflict, but later decided to appeal upon receiving a penalty order. The Tribunal found a "reasonable cause" for the delay and granted condonation, emphasizing that no fault could be attributed to the assessee for the delay. Consequently, the Tribunal proceeded to address the appeal on its merits.

Regarding the disallowance of expenditure on foreign travel, the Tribunal examined the facts of the case involving a charitable trust registered under section 12A of the Income Tax Act. The trust had filed a return declaring nil income for the Assessment Year 2016-17 and later revised it due to changes in corpus donations. The assessment resulted in disallowance of foreign travel expenditure. The CIT(A) upheld the disallowance, stating that the expenses did not qualify as application of income for the trust's purposes under section 11 of the Act. However, the assessee contended that the foreign travel expenses were incurred to obtain donations from overseas donors, which were used for the trust's objectives. The Tribunal reviewed the details of FCRA receipts, donations received, and utilization, concluding that the expenditure was indeed for obtaining donations and furthering the trust's objectives. Citing relevant judicial pronouncements, the Tribunal allowed the appeal, stating that the foreign travel expenses for obtaining donations should be considered as an allowable expenditure.

In conclusion, the Appellate Tribunal ITAT BANGALORE ruled in favor of the assessee, allowing the appeal based on the reasoning that the foreign travel expenses were incurred for obtaining donations used for charitable purposes, as supported by relevant case laws and the trust's objectives.