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TMI Blog2019 (8) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... me received under the provision of the Act. Hon ble apex court s landmark decision in Chainrup Sampatram vs. CIT [ 1953 (10) TMI 2 - SUPREME COURT ] settled the law long back that the principle of conservative and prudence in accounting treatment require that no anticipated profits are treated as income till realization. And that the converse is not true regarding anticipated losses which can be deducted from commercial profits at the first sign its reasonable probability. Hon ble Bombay high court s decision Mrs.Meherbai N. Sethna [1993 (9) TMI 46 - BOMBAY HIGH COURT] holds that it is the accrual of income and not actual receipt which forms the only relevant factor for assessment of an overseas income de hors any restriction or prohibition on its remittance to India. We apply the very legal principle herein as well to conclude that the learned lower authorities have erred in treating the impugned piquet fund to be assessee s taxable income having escaped assessment after lapse of twelve years from assessment year 1995-96 when M/s Bouete (supra) had bequested her last. We lastly wish to observe that the Revenue s stand under challenge also does not satisfy sec. 160(1)(iv) r.w.s. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as a society under the West Bengal Societies Registration Act 1961. There is no further dispute that the department also granted registration u/s. 12AA registration to the assessee as per the CIT's order dated 16.11.1987 to this effect. 3. This taxpayer filed its return on 29.10.2007 stating nil income after claiming sec. 11 exemption. The same stood "summarily" processed. The Assessing Officer thereafter formed reasons to believe that the assessee's income liable to be assessed had escaped assessment. He issues sec. 148 notice dated 07.03.2014 by recording the following reasons:- "For the Assessment Year 2007-08, it has been gathered that on 28.08.1996, the London Solicitors M/s Couts & Co. informed the said Society of the bequest made by two ladies namely Miss Grace Lounsbery and Madame Marguerite La Fuenmade to the said society of UK Pounds 1,75,000/- (₹ 1,51,09,500/- as per prevailing rate of exchange of RBI on the date of transfer i.e. 09-02-2007) The statement of cash in hand and bank balance as on 31.03.2007 has been examined and found that Bank of Ceylon shows only ₹ 2/- as bank balance. Ven. P. Seewalee Thero, the Acting General Secretary of the Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der for confiscation as a matter of course without considering the totality of the facts of the case and by without giving any justification for the same. 22. The nature of this transaction i.e. the Realisation of the foreign exchange as per the Will of the foreign national being resident outside India doesn't spell any conscious wrong doing on the part of the appellant. The possession of foreign exchange was neither unlawful nor has remained unexplained. The appellant before realization of this amount outside India has requested to grant permission for the repatriation of this amount to India. The said request of the appellant is to be determined as per law. It was held in the case of CP Devasay Vs. Directorate of Enforcement (1998) 41 Taxman 39 (FERAB) and in the case of Dr. V.G. Joseph Vs. Additional Director (2004) 52 SCL 530 )ATFE) that in such circumstances the order for confiscation is unjustified. The finding in this regard are against the law and facts and circumstances of the present matters. The order for confiscation is based on assumptions and suppositions. No cogent reasons has been given for passing the order. It was held in the case of Abdul Razak Haji Ismail Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wrong and without any substance. The aforesaid issue raised by the appellant is on the basis that in the column of previous year of the order it has been mentioned as 2008-09 whereas in the entire assessment order and in the body of the order of the assessment it is mentioned 2007-08. The mentioning of previous year as 2008-09 is typographical mistake. Therefore, it is nothing but typographical mistake and in all facts and essence it is passed for A.Y. 2007-08 such typographical mistake is curable u/s 296B of the LT. Act. Next ground of the appeal of the appellant relates to the issue of addition of Rs.l,sl,09,sOOjon account of the fact that the aforesaid money was transferred in the account of the appellant dated 09.02.2007. The A.O. while passing the order has observed that: "the above mentioned amount was invested into the account of Sri Lanka Govt. Treasury Bills in the name of Mahabodhi Society of India. The A.R. also stated that the Mahabodhi Society of India applied to the Govt. of India, Ministry of Home Affairs for permission to bring the money of India. But the permission is still pending and total amount is still lying under custody of Ceylon Govt. Treasury ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a Complaint dated 27.08.2009 made by one of the" Managing Trustee, The Buddhist International, Mumbai to the effect that Dr. E.R. There, General Secretary, Mahabodhi Society of India, Kolkata had, in contravention of the Provisions of FEMA., 1999 got transferred an amount of UK Pounds of 1,75,000/- to the account NO.06185854 of the Mahabodhi Society of India, maintained with the Bank of Ceylon, Sri Lanka. The amount of UKP 1,75,000/- allegedly represented the amount which was donated by the Will dated 06/12/1956 of Late Miss Grace C. Lousbery and Late Madam Marguerite - La Fuerte's in favour of the Society. On the basis of the information and documents provided by the complainant, Dr. D.R. Thero, General Secretary of the Society of India was examined U/s 37 of FEMA, 1999 on 17.03.2009, 18.03.2009 and 20.04.2009. Sri Thero in his statements, inter-alia, stated that he was a Sri Lankan national residing in India and his passport had been deposited with District Magistrate, Varanasi in terms of the Hon'ble High Court of Allahabad in connection with a FERA case pending against him; that he was residing in India since 1976 and had been Nepal, Sri Lanka and Japan in conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above mentioned amount was invested into the account of Sri Lanka Govt. Treasury Bills in the name of Mahabodhi Society of India. The AR also stated that the Mahabodhi Society of India applied to the Govt. of India Ministry of Home Affairs for permission to bring the money of India. But the permission is still pending and total amount is still lying under custody of Ceylon Govt. Treasury Bill and for this reason -Mahabodhi Society of India did not show the amount in Books of Account for the A.Y.2007-08. So the assessee has admitted that the income was received by it. Now it for some reason or other the same could not be applied, then the assessee had two options for claiming exemptions (a) Exercise option vide Explanation 2 to Section 11(1) of the IT. Act, 1961 Set apart u/s 11(2) of the IT. Act, 1961." The appellant in his submission dated 12.10.2017 stated that from the fact of the case as stated herein above, it can be seen that the assessee was not in receipt of any voluntary contribution rather inherited a property through a deed of settlement which was lying outside India having statutory restriction imposed by the Central Government right from 1999 for bringing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt at Sri Lanka is considered as a constructive receipt without accrual of any legal/financial right in favour of the assessee, it cannot be termed as a receipt of income. Considering the facts & circumstances and the character of receipts, at best it can be termed as capital receipt not liable to tax. Therefore even if the transaction involved a receipt, there was no element of income within the same - which might have escaped assessment liable to be reopened by invoking section 147 of the IT Act. Accordingly the reopening proceedings are unsustainable and liable to be quashed. Without prejudice to what has been stated herein before, we submit that the reopening proceeding is invalid even from the view point of failure on the part of the AO to maintain the statutory time limit for issuance of notice u/s 148 of the IT Act, 1961. U/s 149(b) of the Act, no notice u/s 148 can be issued for any income chargeable to tax has escaped assessment for a period beyond 6 years. In the present case, the trust was formed outside India with a fund for the benefit of some persons. As per the terms of the settlement, on their death, the trustees shall hold the fund in trust for the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment. Our attention is invited to sec. 2(24)(iia) of the Act treating a voluntary contribution received by a charitable / religious trust as income. The assessee contends that it was nowhere in receipt of the impugned sum since it had inherited the funds in the capacity of a beneficiary and all due permission thereof is still pending. It is reiterated that the assessee's request seeking repatriation of the impugned sum to India is still pending as per the case records (supra) and therefore, the above sum wrongly treated as having the colour of its taxable income. 8. The assessee's next quotes sec. 11(1) Explanation that since it had not enjoyed a clear title qua the impugned bequest there was no question of either claiming exemption or set it apart u/s 11(2) of the Act. The assessee further submits that even if the UK based bequest amount is treated as accrued and not received till date so as to be taken as income u/s 5 of the Act, then, the very accrual took place on Mrs. Boust's demise (supra) on 26.06.1994 as she had enjoyed life time interest in trust funds going by supplementary trust dated 28.05.1957 and not on account of transfer from London to Ceylon. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion. We find no force either in Revenue's arguments or in lower authorities' action treating the above bequest as assessee's taxable income. We wish to emphasise here that the assessee is yet to enjoy a clear legal title on the trust property and therefore, the same could not have been treated as its income received under the provision of the Act. Hon'ble apex court's landmark decision in Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC) settled the law long back that the principle of conservative and prudence in accounting treatment require that no anticipated profits are treated as income till realization. And that the converse is not true regarding anticipated losses which can be deducted from commercial profits at the first sign its reasonable probability. We refer the above narrated factual position in totality to observe that the assessee could not have recognized the London based bequest transfer to Sri Lanka as its income since the said amount is yet to be received as per the detailed procedure pending as on date seeking repatriated of trend to India. 12. There can be further no dispute as per sec.5 of the Act defining scope of the total income in case of a recipie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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