2017 (2) TMI 222 - AT - Income Tax

Disallowance being the amount spent outside India as not an application of money in India in terms of provisions of section 11 - Held that - We find that the alternative argument advanced by the ld. counsel of the assessee has got a direct bearing on the instant case and the assessee has relied inter-alia on the judgement of the Hon ble Bombay High Court in Gem and Jewellery Export Promotion Council 2015 (4) TMI 1126 - BOMBAY HIGH COURT wherein held hat the grants-in-aid were made by the Government to provide certain institutions with sufficient funds to carry on their charitable activities. On reading the conditions on which those grants-in-aid were given, it was obvious that the institutions or associations to which the grant was made had no right to ask for the grant and it was solely within the discretion of the Government to make grants to institutions of a charitable nature. Again, the Government did not expect any return for the grants given by it to such institutions and there was nothing which was required to be done by these institutions for the Government, which could be considered as consideration for the grant. Therefore, none of the conditions attached to the grant affected the voluntary nature of the contribution. Hence, the impugned grant was exempt under section 12. Therefore, we admit under Rule 29 of the ITAT Rules, 1963 the alternative argument filed by the assessee on 21/10/2016 before the Tribunal. However, the above alternative argument was not there before the AO or the ld. CIT(A) . In view of the above, we set aside the order of the ld. CIT(A) and remit the case to the file of the AO (i) to consider the main as well as the alternative argument of the assessee - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Disallowance of amount spent outside India under section 11 of the Income Tax Act 1961.

Analysis:

Issue 1: Disallowance of amount spent outside India under section 11

The appeal was filed against the order of the Commissioner (Appeals)-7 Mumbai concerning the disallowance of ?32,90,030 spent outside India by the assessee trust, which was confirmed by the Commissioner (Appeals). The assessee argued that the trust's object of promoting exports in silk industries falls under public utility services. The Assessing Officer (AO) disallowed the amount citing that the application of income and charitable purposes should be in India, based on a previous decision. The Commissioner (Appeals) upheld this decision, relying on other cases. The assessee contended that the trust's activities were distinct from cases cited, emphasizing the necessity of participating in fairs abroad to achieve its objectives. The assessee cited various decisions where amounts spent outside India for promoting exports were deemed applied for charitable purposes in India. The Departmental Representative supported the Commissioner (Appeals) order, citing precedents. The Tribunal found that the alternative argument presented by the assessee had merit and was directly relevant to the case. Despite not being raised before the AO or Commissioner (Appeals), the Tribunal admitted the alternative argument and remitted the case to the AO for fresh assessment, considering both main and alternative arguments and relevant judicial decisions.

This detailed analysis provides a comprehensive overview of the legal judgment, highlighting the issues involved and the arguments presented by the parties, leading to the Tribunal's decision to remit the case for fresh assessment based on the alternative argument raised by the assessee.