2022 (7) TMI 1215 - AT - Income Tax

Exemption u/s 11 - amount spent outside India on account of boarding and lodging local transport etc. - HELD THAT - In the case of India Brand Equity Foundation 2012 (7) TMI 799 - ITAT DELHI it was held that amount spent outside India for participating in a fare held outside India cannot be treated as application of income of trust for purpose of section 11(1 )(a) - as observed that if the income of die trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for die trust which tends to promote international welfare in which India is interested and which was created after 04/01/1952 to apply to the CBDT for a general or special order directing dial the income to the extent to which it is applied to die promotion of international welfare outside India shall not be denied die exemption nor would it be necessary for a charitable or religious trust created before die aforesaid date to seek such a order from CBDT in respect of its income which is applied to charitable or religious purposes outside India. It was further held that the words in India appearing in section ll(l)(a) and the words outside India appearing in section 11(l)(c) qualified the word applied appearing in these provisions and not the words said purposes. Thus, it is well settled law that the expenditure incurred by the trust outside India cannot be considered as application of income as per Section 11(1)(a) of the Act. Therefore in the present case, the disallowance of Rs. 10,15,818/- which was spent outside India on account of boarding and lodging local transport etc. cannot be considered as application income as per Section 11(1)(a) of the Act. Assessee has not even produced any iota of evidence/materials before the AO/CIT(A) or before us to suggest that the assessee has received foreign contribution as per law to meet the expenditure incurred by the assessee for boarding and lodging, local transport etc. outside India. Therefore we are not in a position to uphold the theory of reimbursement taken by the Assessee. Thus Order passed by the Ld. CIT (A) is just and proper, which requires no interference, accordingly we dismiss the Grounds No. 1 to 3 of the assessee.

Summary

Issues Involved:
1. Legality of the CIT(A) order confirming the AO's decision.
2. Disallowance of Rs. 10,15,818/- spent on foreign travel.
3. Application of relevant judicial precedents.
4. Potential double addition to gross total income.

Issue-wise Detailed Analysis:

1. Legality of the CIT(A) Order Confirming the AO's Decision:
The appellant contended that the order of the Commissioner of Income Tax (Appeals) confirming the Assessing Officer's decision was "bad in law and on facts and against the principles of natural justice" and should be quashed. The Tribunal evaluated whether the CIT(A)'s order was justified and found no grounds for interference, thereby dismissing the appeal.

2. Disallowance of Rs. 10,15,818/- Spent on Foreign Travel:
The primary issue was whether the expenditure of Rs. 10,15,818/- on foreign travel (boarding, lodging, and local transport) could be considered as application of income under Section 11(1)(a) of the Income Tax Act. The Tribunal referred to the jurisdictional High Court's ruling in the case of Director of Income-tax (Exemption) Vs. National Association of Software and Services Companies, which held that expenditure incurred outside India cannot be considered as application of income for charitable purposes in India. The Tribunal upheld the disallowance of Rs. 10,15,818/- based on this precedent.

3. Application of Relevant Judicial Precedents:
The Tribunal cited the Delhi High Court's decision in Director of Income-tax (Exemption) Vs. National Association of Software and Services Companies and India Brand Equity Foundation vs. Assistant Commissioner of Income Tax (E) to support its decision. These cases clarified that the income of a trust must be applied within India for it to be considered as application of income under Section 11(1)(a). The Tribunal concluded that the expenditure incurred outside India could not be treated as application of income for charitable purposes in India.

4. Potential Double Addition to Gross Total Income:
The appellant argued that sustaining the disallowance would result in the amount being added twice to the gross total income. However, the Tribunal noted that the appellant had not raised this ground before the CIT(A) or the Tribunal, and no evidence was provided to suggest that the foreign contribution was received to meet the expenditure. Therefore, the Tribunal did not uphold the theory of reimbursement proposed by the appellant.

Conclusion:
The Tribunal concluded that the CIT(A)'s order was "just and proper" and required no interference. Consequently, the appeal was dismissed, and the disallowance of Rs. 10,15,818/- was upheld as it could not be considered as application of income under Section 11(1)(a) of the Act. The decision was pronounced in the open court on 26th July 2022.