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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI Dr. B.R.R.KUMAR
ORDER
PER AMIT SHUKLA, JUDICIAL MEMBER :
The aforesaid appeal has been filed by the revenue against impugned order dated 19.07.2016, passed by Ld. CIT(Appeals)-36, New Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2011-12.
In grounds of appeal revenue has raised following grounds -:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in ignoring the fact that donation in foreign currency amounting to Rs. 17,91,030/- was received by the assessee since the assessee itself in its submission dated 13/03/2014' before the Assessing Officer has stated that the intended donations in foreign currency were left by the anonymous devotees unknown to them in hundi boxes.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law & fact by ignoring the fact that the matter of registration of the assessee u/s 12A has not still been finally accepted by the Department and the expenses, disallowed by the Assessing Officer as para 8 & 9 of his order dated 27.03.2014, should not be allowed to the assessee.”
The facts in brief are that the assessee trust had applied for registration u/s 12A/12AA for claiming benefit u/s 11 from assessment year 2011-12. The assessee trust was formed with following main objects: a. To preach the understanding and practicing of Dharma according to the tenets of the Karma Kagyu lineage of Buddhism and propagate it for the benefit of the entire mankind without any discrimination on account o: origin, colour, religion, cast, creed or gender. b. To organise performance of all Dharma rituals and rites for the benefit and participation of member of the society at large
without any discrimination on account of origin, colour, religion, cast, creed or gender. c. To establish, aid, manage and or run Educational Institutions or projects for the benefit of members of the society at large without any discrimination on account of origin, colour, religion, cast, creed or gender.” It had filed its return of income for the assessment year 2011-12 on 30.09.2011, declaring total deficit of Rs. 68,84,350/- after claiming benefit of Section 11. However, assessee’s application for registration was rejected by the DIT (E) vide order dated 30.09.2011.
The Ld. AO noted that assessee’s appeal before the Tribunal was set aside to the file of the DIT (E) to decide afresh and in set aside proceedings, Ld. DIT (E) has again rejected the application of the assessee for grant of registration u/s 12AA. Since assessee was not granted registration, he denied the benefit of section 11. Assessing Officer further noted that assessee has claimed to have received Rs. 3,49,65,983/- for the charitable and religious purpose, which he took as income of the assessee trust. Thereafter, he proceeded to make various disallowances and additions, firstly, on account of donation in foreign currency of Rs. 17,91,030/- which was shown as the provision. Secondly, he made disallowance of Rs.16,20,978/- on the ground that TDS has not been deducted on legal and accounting fees. Lastly, he disallowed the accumulation of 15 % of the surplus and expenses incurred on religious activities for sums aggregating to Rs. 1,70,36,553/-. Finally, he made the assessment as AOP and income was computed and assessed at Rs. 2,06,94,510/-.
Before the Ld. CIT (A) it was brought on record that ITAT Delhi Bench vide order dated 08.09.2015 had directed Ld. DIT(E) to grant registration u/s 12AA from the assessment year 2011-12 onwards; and in pursuance to such direction, Ld. DIT(E) vide order dated 02.11.2015 has granted registration with effect from AY 2011-12. This fact was confronted to the AO by the Ld. CIT (A) and remand report was called for. In the remand report, AO had stated that department has preferred appeal before the Hon’ble High Court and did not give any further comment. Since AO had disallowed the accumulation of 15 % of the surplus and expenditure due to non- availability of registration u/s 12A, he therefore, directed the AO to delete the disallowance of expenditure because there is no finding that these expenses are not genuine or not incurred towards the objects of the Trust. Regarding disallowance of 17,91,030 on account of donation of foreign currency, he observed and held as under :- “9. Coming to the issue of income of 17,91,030/- in foreign currency, it is observed that the entire foreign currencies have since been confiscated by appropriate authority on behalf of the Government of India and nothing remains with the appellant. The assessee is neither allowed to receive it or apply it. It is as if 'not received' or even accrued. The assessee can only use and apply it when allowed by ED under FEMA/FERA/FCRA. The addition may therefore be deleted. It
may be added in the year in which ED allows the assessee to convert it to Indian Currency & use it for application. Further, the AO has disallowed an aggregate amount of Rs. 16,20,978/- claimed by the appellant as deduction in its I & E a/c on account of professional charges for the appellant's failure to deduct TDS following the provision of section 40(a)(ia) of the Act. The AO is directed to allow the amount as per rules according to section 11 to 13 of the Act.”
After hearing both the parties and on perusal of the impugned order, we find that the disallowance has been made Assessing Officer by taxing the entire surplus and disallowing the accumulation of 15% surplus over expenditure on the ground that assessee’s registration u/s 12A/12AA has been cancelled. Now the same now stands reversed in light of the fact that the assessee trust has been finally granted registration by Ld. DIT (E) in pursuance of the decision / order of the Tribunal (supra). Thus, denying the benefit of Section 11 for the reason that department has preferred in appeal before the Ld. High Court cannot be upheld, because as on date registration u/s 12AA stands the income in expenditure has to be computed in terms of Section11 to 13. Accordingly, Ground no. 2 is dismissed.
In so far as addition of Rs. 17,91,030/-, it is a matter of record that the entire foreign currency has been confiscated by appropriate authority Government of India and nothing has been received by the assessee and nor it has been allowed to apply for any charitable purpose. If the amount has not been received or even accrued, then same cannot be added as income. Ld. CIT (A) has given the direction that it may be added in the year in which Enforcement Directorate allows the assessee to convert it to Indian currency and use it for application. As regards disallowance of Rs. 16,20,978/- as deduction on account of professional charges by invoking of provision of section 40(a)(ia). The Ld. CIT (A) has mainly directed the AO to allow the amount in accordance with Section 11 to 13. There is no infirmity in such a direction which is in accordance with the law. Accordingly, grounds raised are dismissed.
In the result appeal of the revenue is dismissed. Order pronounced in open court on this 8th November, 2019.