2020 (1) TMI 86 - AT - Income Tax

Exemption u/s 11(1)(c) - assessee has failed to get approval of the Central Board of Direct Taxes (CBDT) for exemption u/s 11(1)(c) - HELD THAT - From the impugned order passed by Ld. CIT(A) it is proved that the said approval has been accorded by CBDT vide letter no. E. No. 180/04/2011-ITA-1 dated 08.02.2016 which is effective for AY 2011-12 and 2012-13, the years under assessment to incur the expenses to the tune of ₹ 9,90,14,418/- and 6,08,87,282/- for AY 2011-12 and 2012-13 respectively by the assessee outside India for the purpose of International Welfare and the same has been ordered to be included in the total income of the assessee society. Since aforesaid factual position has not been controverted by Ld. DR, We find no illegality or perversity in the findings written by Ld. CIT(A) in deleting the aforesaid additions Disallowance assessee society has received foreign contribution from the Government of France within meaning of Section 2(1)(j) of FCRA without filing return qua these contributions in FC-3 to the Ministry of Home Affairs as per FCRA Guidelines - HELD THAT - Bare perusal of the letter (supra) goes to prove that when a transaction is between Government of India and Government of any foreign country or territory, FCRA is not attracted. When undisputedly, the transaction of ₹ 9,96,35,250 /- and ₹ 9,16,98,000/- for AY 2011-12 2012-13 respectively 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 02.01.2014, available at page 21 of the paper book, 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 is established for promotion of scientific research etc. will be exempt from payment of income-tax. So, in these circumstances, we find no illegality or perversity in the findings returned by ld. CIT (A). - Decided against the Revenue

Summary

Issues:
- Disposal of appeals on identical issues
- Exemption under Section 11(1)(c) of the Act
- Addition of foreign contributions under FCRA
- Nature of the assessee society
- Approval of CBDT for exemption
- Disallowance of foreign contributions

Analysis:

1. The judgment deals with the disposal of appeals on identical issues raised by the Deputy Commissioner of Income Tax regarding the impugned order passed by the Commissioner of Income Tax (Appeals) for the Assessment Years 2011-12 and 2012-13. The appeals sought to set aside the orders on grounds related to the transaction of foreign contributions and computation of taxable income.

2. The Assessing Officer made additions under Section 11(1)(c) of the Act for expenses incurred outside India and disallowed foreign contributions under the Foreign Contribution Regulation Act (FCRA). The total income of the assessee was assessed accordingly. However, the Commissioner of Income Tax (Appeals) deleted these additions, leading to the revenue's appeal before the Tribunal.

3. The Tribunal analyzed the grounds of appeal, focusing on the approval of the Central Board of Direct Taxes (CBDT) for exemption under Section 11(1)(c) of the Act. It was found that the approval had been granted by the CBDT, and the additions made by the Assessing Officer were unjustified. Therefore, the Tribunal decided against the revenue on this ground.

4. Regarding the disallowance of foreign contributions under FCRA, the Tribunal considered the nature of the assessee society, established as a joint venture of the Governments of India and France for scientific research. The Tribunal emphasized that the society, being an instrumentality of the Government of India, was exempt from FCRA provisions for transactions between the two governments.

5. The Tribunal referred to a letter from the Ministry of Home Affairs, which clarified that transactions between the Government of India and a foreign country were not subject to FCRA regulations. This supported the Tribunal's decision to dismiss the revenue's appeal on the disallowance of foreign contributions, as the grants received by the assessee society were in line with the exemption criteria.

6. Additionally, the Tribunal noted that similar issues had been previously decided in favor of the assessee by a Co-ordinate Bench of the Tribunal, further strengthening the dismissal of the revenue's appeals for the Assessment Years 2011-12 and 2012-13. The judgment was pronounced on December 31, 2019, in open court, upholding the decisions made by the Commissioner of Income Tax (Appeals) in favor of the assessee society.