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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. A. D. Jain, Vice-Dr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of ld. CIT(A)-40, New Delhi dated 22.09.2017.
Following grounds have been raised by the Revenue:
“1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in ignoring the fact that in this case, transaction of ‘foreign contribution’ was not transacted as per the directive of the M/o Home Affairs dated 02.01.2014 issued to the assessee under FCRA rules.
On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in not appreciating the fact that foreign contribution was not between the Govt. of India and the Govt. of France, but it was between the Govt. of France and the assessee.
3) On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in not appreciating
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the fact that in the case of the assessee a compulsory audit by the C & AG was not required.
4) On the facts and in circumstances of the case and in law, Ld CIT(A) has erred in allowing the benefit of exemption u/s 11 & 12 of the Income Tax Act, to the assessee.”
The facts of the case are that the assessee filed return of income on 30.09.2013 showing Rs. Nil income. The assessee is registered u/s 12A vide order dated 12.05.2004. The basic aims and objects of the assessee are as under:
i. To promote cooperation between India and France in advance areas of fundamental and applied scientific research, the field for which could be identified periodically taking into account advancements in discipline of science. ii. To develop cooperation by identifying scientists and scientific institutions of the 2 countries likely to cooperate in a profitable way in the fields chosen by mutual agreement. iii. To provide assistance in the form of grant an equipments as well as other appropriate means for the pursuit of advanced scientific research.
It was noted by the Assessing Officer that vide order dated 08.02.2016, the expenditure incurred outside India for the purpose of international welfare amounting to Rs.9,08,87,288/- for the financial year relevant to the assessment year under consideration was to be approved by the CBDT.
The Assessing Officer observed that the foreign contribution received from the Government of France is a
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contribution received from foreign source within the meaning of the provisions of section 2(1)(j) of the FCRA and hence registration and filing of return in respect of these foreign contributions in FC-3 was required as per the provisions of FCRA. It was further observed that the assessee has neither registered itself with FCRA nor filed FC-3 with Ministry of Home Affairs and thus violated the provisions of FCRA in respect of foreign contribution of Rs. 12,20,86,317/- received from Government of France. In view of this application of income in respect of foreign contribution received from Government of France amounting to Rs.12,20,86,317/- was disallowed and added back to the income of the assessee.
Aggrieved, the assessee filed appeal before the ld. CIT(A).
The ld. CIT(A) deleted the addition relying on the detailed order of the ITAT in the case of the assessee for A.Y. 2010-11.
The operative part of the order of the ITAT is as under:
"9. AO made disallowance of Rs.9,45,28,000/- on the ground that since the assessee society has received foreign contribution from Government of France within the meaning of section 2(1)(j) of FCRA without filing return qua these contributions in FC-3 to Ministry of Home Affairs as per FCRA.
Undisputedly, the assessee society is registered under Societies Registration Act, 1860 as a joint venture of Government of India and Government of France with an object to promote scientific research in both the countries. The Id. DR for the Revenue vehemently contended that since the assessee society is not a Government society, the Id. CIT (A) has grossly erred in deleting this addition by treating the assessee society
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as a Government society. However, we are of the considered view that when the assessee society is a registered society under the Societies Registration Act established as a joint venture with an object to promote scientific research of both the countries and the entire funds are contributed by Government of India and Government of France, the same is an instrumentality of the Government of India.
The Id. AR for the assessee drew our attention towards a letter, available at page 44 of the paper book, addressed to the assessee's society by the Ministry of Home Affairs explaining the transactions not attracting provisions of FCRA. For facility of reference, letter (supra) is reproduced as under:
NO…………………Government of India/Bharat Sarkar Ministry of Home Affairs/Grih Mantralaya
1st Floor, NDCC-II Building, jai Singh Road, Off. Parliament Street, Near Jantar Mandir, New Delhi-110 001, Date: 2.01.2014
To, Dr. Debapriya Dutta, Director, ………….,5B, Ground Floor, India Habitat Centre, Lodhi Road, New Delhi-110003.
Subject: Permission under Foreign (Regulation) Act, 2010
Sir,
I am directed to refer to your letter dated 18 Sept 2013 on the subject mentioned above and to state that Foreign
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Contribution (Regulation) Act, 2010 does not attract in respect of the following transactions: a) Transaction between the Govt. of India and the Govt. of any foreign country or territory - Clause 51 of FCRA 2010. b) Bodies constituted or established by or under a Central Actor a State Act requiring compulsory auditing by C&AG Notification No.S.O.1492(E) dated 1st July, 2011.
In view of above, it is required to examine the subject proposal. If the foreign contribution receiving body comes within the purview of above provision. If not, then apply online in FC-4 through this Ministry's website i.e. www.mha.nic.in.
Yours faithfully, Sd/- (Gopal Jha) Under Secretary to the Govt. of India"
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 Rs.9,45,28,000/- 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 08.06.1985, available at page 28 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 established for promotion of scientific research etc. will be exempt from payment of income-tax." So,
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in these circumstances, we find no illegality or perversity in the findings returned by Id. CIT (A). Consequently, Ground No.3 of original grounds and Grounds No.2 & 5 of additional grounds are determined against the Revenue."
Since, the facts of the case for the current year are the same as those for assessment year 2010-11 and since the order of the ld. CIT(A) has totally relied upon the order of the ITAT in the appeal for assessment year 2010-11, we decline to interfere with the order of the ld. CIT(A).
In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 08/02/2022.
Sd/- Sd/- (A. D. Jain) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 08/02/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR