9911796707
TMI Blog2012 (7) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of any particular section of community, but is meant for larger interest of the country. The objects transcends the boundaries of so-called charity or charitable purposes, though by and large are confined to a particular section of a society. Here, the trust is for the benefit of whole nation. So, any contrary view, as submitted by the assessee, would be unpragmatic and retrogressive. Assessing Officer did not accept the contention of the assessee, but treated the amount of Rs. 1,95,26,111/- spent in participation of Hannover Fair in Germany by discussing and considering the issue has held as falling in the mischief u/s 11(1)(a) & 11(1)(b) of the Act and was taxed accordingly. 3. Assessee took up the matter in appeal and it was submitted before first appellate authority, for allowing claim of the assessee being not taxable, but the CIT(A) upheld the order of the Assessing Officer as per paras.4 to 4.4 of his order as under: "4. The assessee has taken various grounds of appeal but the effective ground is against the disallowance of Rs. 1,95,26,116/- on account of the fact that this amount is spent outside India for participating in the Hannover Fair. 4.1 The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pent. But this decision was in context of section 4(3)(i) of the Act. It may be noted that in the old Act, the income was exempt irrespective of application or accumulation. In other words, even 100 per cent accumulation was permissible therefore application or non-application did not have may tax implications. The implication of the term 'application' is different under the new Act. On the basis of recent case laws currently the term, 'applied' is more or less closer to the term 'spent' unless there is no doubt about the authenticity 01 application. The accounting standards and the guiding principles of 'accrual accounting' are also relevant. And showing application through book entries is not permissible. In the case of Nachimuthu Industrial association v. CIT [1999] 235 ITR 190, the Supreme Court upheld the decision of Madras High Court where it was held that sums transferred to a donation reserve fund could not be treated as application of funds. From the above discussion it is clear that the word applied is synonymom the word spent in the context of section 11 of the IT Act and hence it is mandatory the amount should be spend and applied in India. The plea taken by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip of Commerce Secretary. Modalities of participation was decided by the Organizing Committee under the Chairmanship of Additional Secretary, Ministry of Commerce and Industry. From the minutes, it is clear that entire control was with the Ministry and India Brand Equity Foundation (assessee trust) and Engineering Export Council roles were decided by the organizing committee for role of India Branch Equity Foundation (IBEF) and in this regard minutes of meeting of India Hannover Fair can be referred to as is apparent, even the role was chalked out by the Ministry and IBEF had no free control over the event. IBEF was participating as agent for the Ministry. For the purpose of participation in fair, Ministry of Commerce & Industry directed its sponsored body Engineering Export Promotion Council to transfer Rs. 3 crores to the assessee trust for setting up Indian Pavilion in the fair as a partner country. By relying upon Cotton Textiles Export Promotion Council [1968] 67 I.T.R. 539, Nirmal Agriculture Society [1999] 71 I.T.D. 152 (Hyd.), Sukhdeo Charity v. CIT [1984] 19 Taxman 222 (Raj.), it was pleaded that for the purpose of participation in the fair, Ministry of Commerce and Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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, Assessing Officer was correct in subjecting to tax the amount of Rs. 1,95,26,116/- and Ld. CIT(A) has justifiably confirmed the order of Assessing Officer in this regard, whose action being perfectly justified needs further confirmation and may be confirmed. 7. In order to counter the submissions of Ld. DR, Ld. Counsel for the assessee while laying stress on the language of section 11(1)(a), 11(1)(b) & 11(1)(c) of the Act has pleaded that though charitable purposes should be confined to India, and the application of the income of the trust the execution of such purposes can be outside India, as provided in relevant provisions of law. Therefore, it was pleaded for deletion of he impugned addition. 8. We have heard both the sides, considered the material on record as well as case laws cited. It is not in dispute that amount of Rs. 1,95,26,116/- was spent for participating in Hannover Fair held in Germany and for such participation, Steering Committee under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only to charitable purposes, but also applied in India to such purposes. The submissions of Ld. Counsel that the words "in India" qualify only the words "such purposes" so that only the purposes are geographically confirmed to India does not appear to us to be the natural and grammatical way of construing the provision. That would break or clog the natural flow of the entire group of words "to the extent to which such income is applied to such purposes in India". The meaning sought to be attached by Ld. Counsel to the words "in India" as qualifying only the 'purposes' places a strain on the natural or grammatical interpretation of the group of words. If what Ld. Counsel contends is correct, then section 11(1)(c) may become redundant and otiose. If as he says, the income of the trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and which was created after 1.4.1952 to apply to the CBDT for a general or special order directing that the income to the extent to which it is applied to the promotion of international welfare outside India sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of disallowance, we dismiss this ground of appeal of the assessee. 11. As regards ground no. 6 regarding disallowing the deprecation on Rs. 2,77,149/- as application of the income. It is the contention of the Ld. Counsel of the assessee that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Punjab and Haryana High Court in the case of C.I.T. v. Tiny Tots Education Society 330 ITR 21, which has followed the decision of the Punjab and Haryana High Court in the case of C.I.T. v. Market Committee, Pipli 330 ITR 16, so it was prayed for deletion of disallowance made by the Assessing Officer and confirmed by the CIT(A). 12. Ld. DR did not object to such factual aspect, but relied upon the orders of the authorities below to plead for confirmation of the order in this regard. 13. We have heard both the sides and considered the material on record as well as precedents relied upon by the Ld. Counsel for the assessee and find that the issue raised in this appeal is squarely covered by the decision of the Hon'ble Punjab and Haryana High Court in the case of C.I.T. v. Tiny Tots Education Society 330 ITR 21, which has followed the decision of the Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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