9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (7) TMI 799 - AT - Income TaxApplication of income outside India - Charitable activity - Disallowance of amounts spent outside India for participating in Hannover Fair in Germany - the mischief u/s 11(1)(a) & 11(1)(b) - Held that - The words to the extent to the which such income is applied to such purposes in India appearing in section 11(1)(a) only require that the charitable purposes should be confined to India on the application of the income of the trust to the execution of such purposes can be outside India, appears to us to be also opposed to the natural and grammatical meaning that can be ascribed to the words - it is mandatory that the amount should be spent and applied in India. As regards plea taken by the assessee, it has participated in Hannover Fair at the instance of the Ministry of Commerce, cannot override the Income-tax Act and there is no bar in applying for charitable purpose outside India, if there is an approval from CBDT which is not there. So, in the absence of such approval, disallowance in this regard could validly be made. Disallowing the deprecation - Held that - The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue - in favour of the assessee
Issues Involved:
1. Taxability of Rs. 1,95,26,116/- spent outside India for participating in Hannover Fair, 2006. 2. Disallowance of depreciation amounting to Rs. 2,77,149/-. Issue-wise Detailed Analysis: 1. Taxability of Rs. 1,95,26,116/- spent outside India for participating in Hannover Fair, 2006: The primary issue in this case revolves around whether the amount of Rs. 1,95,26,116/- spent by the assessee trust for participating in the Hannover Fair, 2006, held in Germany, should be considered as taxable income under Section 11 of the Income Tax Act, 1961. The assessee argued that the trust, set up by the Government of India, was meant for the larger interest of the nation, and the amount spent should not be taxable. The Assessing Officer (AO) did not accept this contention and treated the amount as taxable, falling under the mischief of Sections 11(1)(a) & 11(1)(b) of the Act. The CIT(A) upheld this view, stating that under Section 11(1)(c), income applied outside India is not eligible for exemption unless the trust was created before 1-4-1952 or is engaged in promoting international welfare in which India is interested, and such activity is specifically exempted by CBDT. The assessee, in further appeal, argued that the sum of Rs. 3,00,00,000/- was specifically given by the Ministry of Commerce and Industry for participating in the Hannover Fair and should not be treated as taxable income. The counsel for the assessee emphasized that the trust acted as an agent for the Ministry, and the entire control was with the Ministry. The Tribunal, after considering the material on record and relevant case laws, concluded that the words "to the extent to which such income is applied to such purposes in India" in Section 11(1)(a) require that the income must be applied in India. The Tribunal held that the expenditure incurred outside India could not be considered as application of income in India. This view was supported by the Delhi High Court's decision in DIT v. National Association of Software. Therefore, the Tribunal upheld the disallowance of Rs. 1,95,26,116/- spent outside India for participating in the Hannover Fair, confirming the AO's and CIT(A)'s actions. 2. Disallowance of depreciation amounting to Rs. 2,77,149/-: The second issue pertains to the disallowance of depreciation amounting to Rs. 2,77,149/- as an application of income. The assessee contended that this issue was covered in their favor by the Punjab and Haryana High Court's decision in CIT v. Tiny Tots Education Society, which followed the decision in CIT v. Market Committee, Pipli. The Tribunal, after considering the material and precedents, found that the issue was indeed covered in favor of the assessee. The Punjab and Haryana High Court had held that depreciation should be reduced from the income for determining the percentage of funds to be applied for the purposes of the trust, and there was no double deduction claimed by the assessee. Therefore, the Tribunal directed the deletion of the disallowance of depreciation made by the AO and confirmed by the CIT(A). Conclusion: The appeal filed by the assessee was partly accepted. The Tribunal upheld the disallowance of Rs. 1,95,26,116/- spent outside India for participating in the Hannover Fair but directed the deletion of the disallowance of depreciation amounting to Rs. 2,77,149/-.
|
