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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI K.N. CHARY
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the Revenue is preferred against the order of the CIT(A)-40, Delhi dated 22.09.2017 pertaining to A.Y 2014-15.
The grievances of the Revenue read as under:
“On the facts and in the circumstances of the case and in law, 1) 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, 2) 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.
On the facts and in the circumstances of the case and in law, 3) Ld. CIT(A) has erred in not appreciating the fact that in the case of the assessee a compulsory audit by the C & AG was not required.
On the facts and in circumstances of the case and in law, Ld. 4) CIT(A) has erred in allowing the benefit of exemption u/s 11 & 12 of the Income Tax Act, to the assessee.
The appellant craves leave to add, to alter or amend any ground 5) of appeal raised above at the time of hearing.”
Briefly stated, the facts of the case are that the assessee society is registered u/s 12A of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] vide Registration No. DIT(E)/2004-05/I-993/03/168 dated 12.05.2004.The basic aims and objects of the assessee, inter alia, are:
(i) To promote cooperation between India and France in advanced areas of fundamental and applied scientific research.
These fields will be identified periodically taking into account advancements in disciplines of science.
(ii) To develop cooperation by identifying scientists and scientific institutions of the two countries likely to cooperate in a profitable way in the fields chosen by mutual agreement.
(iii) To provide assistance in the form of grants and equipment as well as other appropriate means of rte pursuit of advanced scientific research.
The assessee trust had been notified u/s 11(1)(c) of the Act by CBDT vide notification dated 08.02.2016, for the F.Ys 2009-10 to 2012-
In the F.Y. 2013- 14, pertaining to A.Y. 2014-15, the assessee has not been notified by the CBDT u/s 11(1)(c) of the Act.
During the course of scrutiny assessment proceedings, the Assessing Officer noticed from the Income and Expenditure Account that the assessee has claimed expenses of 17,71,551 euros i.e. Rs. 12,32,00,388/- incurred in foreign currency outside India and the Assessing Officer found from the documents submitted during the scrutiny assessment that the assessee was not notified by the CBDT u/s 11(1)(c) of the Act for the A.Y under consideration. The Assessing Officer, accordingly, made disallowance of Rs. 12.32 crores.
Proceeding further, the Assessing Officer noticed that the assessee has received foreign contribution from the Government of France amounting to. 18,23,738.51 euros i.e Rs. 12,68,29,706/-. The assessee claimed that the transaction is covered under Clause 51 of FCRA, 2010. This claim of the assessee was dismissed by the Assessing Officer who was of the opinion that the said clause 51 of FCRA, 2010 speaks of transactions between two governments only.
The Assessing Officer further observed that the Government of India, vide order dated 01.07.2011, through S.O. 1492 stated that only those Central Government or State Government Organizations constituted under the Comptroller and Auditor General of India are outside the purview of FCRA and the assessee is neither a trust/institution constituted under a Central Act or State Act, nor its accounts are audited by the C&AG. Since the assessee did not register itself with FCRA nor filed return, the Assessing Officer was of the opinion that the assessee has violated the provisions of FCRA in respect of foreign contribution of Rs. 12.68 crores and accordingly, made addition of the same.
The assessee carried the matter before the ld. CIT(A) and reiterated its claim.
After considering the facts and submissions, the ld. CIT(A) held as under:
4.1.1 I have considered the assessment order and submissions made by the appellant. This addition had been made during the assessment since the order of the Board as per the proviso to section ll(l)(c) had not been received. Subsequently, the said order has been issued vide F. No. 180/08/2016-ITA-I dated 13.01.2017, relevant portion of which is reproduced below:
"In exercise of the powers conferred by proviso to clause (c) of sub-section (I) of section 11 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby directs that the income derived from property held under the trust known as "Indo-French Centre for Promotion of Advanced Research", New Delhi shall not be included in the total income of the person in receipt of such income as is applied outside India for charitable purpose which tends to promote international welfare in which India is interested to the extent as provided below:
S.N Assessment Expenditure incurred outside India for the o Years purpose of International welfare (in Rs.) 1) 2014-15 12,32,00,428 2) 2015-16 12,80,46,948 Total 25,12,47,376
This order shall have effect for the period covered by Assessment Years 2014-15 to 2015-16."
4.1.2 Since the order of the Board as required by the proviso to section ll(l)(c) has been issued for the amount of Rs. 12,32,00,428/- for assessment year 2014-15, this amount is allowed as application of income outside India. This ground of appeal is allowed.”
10. A bare perusal of the aforesaid findings of the ld. CIT(A) show that absence of order of the Board questioned by the Assessing Officer has been found subsequently at the appellate stage which prompted the ld. CIT(A) to delete the disallowance made by the Assessing Officer. Since the order is now available, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground is, accordingly, dismissed.
Next grievance relates to denial of application of income amounting to Rs. 12.68 crores.
13. The ld. CIT(A) held as under:
“I have considered the assessment order and submissions made by the appellant. I have also referred to the order of my Id. predecessor CIT(A)-XXI in the appellant's case for assessment year 2010-11 in Appeal No. 97/2013-14 and the order of the Hon'ble ITAT Delhi, Bench "C" in for assessment year 2010-11 wherein appeal of the revenue on the said issue has been dismissed. My Id. predecessor, on the said issue, held as under:
"4.3 I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee that the provisions of FCRA is not applicable in the case of the assessee vide clause-51 and the same has been clarified by the Government of India, Ministry of Home Affairs in the letter dated 2/1/2014 and as such the AO is not justified to make the addition and accordingly the same is deleted."
4.2.2 The Hon'ble IT AT in appellant's own case for assessment year 2010-11 (supra) while deciding '.he appeal of revenue the said issue held as under:
“9 A0 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.
10. 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 asessee society is not a Government society, the Id. CIT (A) has grossly erred in deleting this addition In treating the assessee society 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/Grill Mantralaya 1st Floor, NDCC-1I 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 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 Act or a State Act requiring compulsory auditing by C&AG Notification No.S.0.1492(E) dated 1 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.