ITO, NEW DELHI vs. SH. BRIJENDRA PAL SINGH,, MEERUT

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘A’ : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER and SHRI A.T. VARKEY, JUDICIAL MEMBER ITA No.3870/Del./2013 (ASSESSMENT YEAR : 2009-10) ITO, Ward 1 (1), vs. Shri Brijendra Pal Singh, Meerut. B – 135, Shastri Nagar, Meerut. (PAN : ABZPS8358P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Vinod Kumar Goel, Advocate REVENUE BY : Shri Manoj K. Chopra, Senior DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :

This appeal, at the instance of the revenue, is filed against the order of the CIT (Appeals), Meerut dated 04.03.2013 for the assessment year 2009-10. 2. The solitary ground of appeal is regarding deletion of addition of Rs.25,67,236/- from M/s. Engender Health, New Delhi which has been claimed exempt under section 10 (8) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

3. The AO was of the opinion that the assessee does not qualify for the exemption and made addition. Aggrieved the assessee preferred an appeal before the CIT (A) who was pleased to delete the same holding that the assessee is in fact qualify for the exemption as claimed by the assessee. For the sake of clarify, the relevant portion of the order of the ld. CIT (A) is reproduced hereunder :- “2.3 The exemption under Section 10(8) of the Act is admissible to an individual who is assigned to duties in India in connection with any cooperative technical assistance program or project in pursuance of an agreement between the Governments of India and USA. Two other conditions are that the terns of the agreement should provide for the exemption under this provision and secondly that the remuneration received by the individual should be directly or indirectly from the government of the foreign state for such duties. A copy of the agreement between the two countries dated 30. 09. 1992 has been filed at page 33 of the paper book submitted during the appeal proceedings and the project is to assist the Government of India in reorienting and analyzing its family planning programme. Section 8.3 of the said agreement provides that the goods, services, training and contractor personnel financed by the grant or provided by A.I.D/Washington will be exempt from any taxation, duties 0] fees imposed under laws in effect in the territory of India. The specific project under the agreement in connection of which the assessee appears to have rendered services is the Innovation in Family Planning Services (IFPS). The IFPS project was originally designed in 1992 to assist the Indian government in revitalizing family planning services using the state of UP as the primary site and testing ground for program innovations. An independent society, the State Innovation in Family Planning Services Project Agency (SIFPSA) was created to oversee the implementation of activities. During the assessment proceedings, a letter had been filed by the employer of the assessee to the effect that the assessee was working as a specialist under the Quality Assurance Project under the IFPS II Technical Assistance Project funded by the USAID. From the details submitted, it appears that the prime contractor in the said project was Constella Futures International and Engender Health, the employer of the assessee, was a subcontractor. However, the said party was a subcontractor specifically for the IFPS II project. Under the circumstances, it does appear that the assessee was working on a project which was funded by the USAID. That being so, it can also not be said that the assessees remuneration was not indirectly paid by the USAID. In the assessment order for A.Y. 2008-09, the AO has referred to the insertion of subsections 8A & 8B in section 10 by the Finance Act 1991. The AO has tried to show that the case of the assessee was covered by section 10 (8A) rather than section 10(8) on the ground that USAID was an international agency. The AO has completely ignored the agreement dated 30. 09. 1992 which was between the Governments of India and USA Moreover, as is evident from the explanatory notes to the Finance Bill 1991, subsection 8A was intended to extend the benefit of section 10(8) to multilateral agencies such as the World Bank. Certainly, USAID cannot be termed as a multilateral agency. Further, the relevant agreement categorically provides exemption not only to goods, services, training but also to the, contractor personnel. If the prime contractor has subcontracted part of the work to a subcontractor, the personnel of such subcontractor, who is deployed on the project being implemented in terms of the intergovernmental agreement, would also qualify for the exemption.

2.4 Without prejudice to the above, the factor which weighs most in favour of the assessee, are the orders issued by the CIT (A) dated 07.05.2002 and of the Honorable ITAT, Delhi dated 28. 10. 2005 in the asses sees own case for the AY.1999-2000 & 2000-01. The facts for the year are similar to the year under consideration. It is true that in those years, the appeals related to rejection of rectification application made by the assessee. Nevertheless, there is a categorical finding by the CIT (A) that "the remunerations had been received by the assessee in pursuance of project under the Cooperative Technical Assistance Program and the project was a result of an agreement entered into by the governments of India and the USA for innovation in family planning services. The clauses of the agreement provides for exemption of remuneration from taxation. Since all the conditions are satisfied, there is no doubt that the income/remuneration received by the appellant was exempt from tax". Even the ITAT has held that on the facts available on record the income of the assessee is "undisputedly exempt from tax".

2.5 In view of the above, it is held that assessee is entitled to exemption.”

“10(8) In the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)— (a) the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and (b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State; A bare reading of the aforesaid provisions of law is that the conditions stipulated for claiming the exemption are that if an assessee is assigned to duties in India in connection with any cooperative technical assistance programmes and projects which is in accordance with the agreement entered into by the Central Government and a foreign State and in the said agreement between the two countries, the terms for exemption are provided as per the requirement of this section i.e. section 10 (8) of the Act. On the perusal of the records, we find that the assessee is employed by Engender Health previously known as AVSC International which is an international non-Government organisation and a not for profit organisation approved by USAID to work as NGO. The assessee was working with the said organization as “Quality Improvement Specialist for the USAID Supported Project, Smastha”. Vide letter dated 16.06.2010, page 34 of the paper book, the employer has specifically confirmed that the payments made to the assessee are made out of funds received from agency like United States Agency for International Development and all the funds are received in Dollars and paid to assessee after converting into Indian currency. The agreement dated 30.09.1992 between the United States of America and the Union of India is placed from pages 15 to 29 of the paper book in which the term of section 8.3 states as follows :- “SECTION 8.3. ……….

The Parties agree that references to “the Grant” in Annex 2 shall include all goods, services, training, and contractor personnel provided by A.I.D./Washington in support of the Project. Therefore, for example, goods, services, training, and contractor personnel financed by the Grant or provided by A.I.D. / Washington will be exempt from any taxation, duties or fees imposed under laws in effect in the territory of the Grantee.”

As per the conditions prescribed in secti8on 10 (8), the project Samastha which the employer of the assessee stems from the agreement between the Indian and the foreign State USA by virtue of agreement dated 30.09.1992 and the terms of the agreement specifically exempts income of the personnel working with the USAID Project as required by the section 10(8) of the Act and the assessee being paid indirectly by the United States Agency for International Development satisfies the requirement of law to claim exemption u/s 10 (8) of the Act. Moreover, we also get support from the decision of the coordinate Bench of the Tribunal wherein the Tribunal has also accepted the claim of the assessee in the assessment years 1999-00 and 2000-01. In the said factual backdrop and since there is no change in the facts, we find no infirmity in the order of the ld. CIT (A) and, therefore, we uphold the order of the CIT (A) and dismiss the appeal of the revenue.