TMI Blog2022 (7) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts were apparent and clearly on record, we do not agree with the CIT(E) that any further inquiry/verification was warranted in the facts of the present case. There was nothing on record to invite further enquiry into the matter in view of the disclosures already made. According to CIT(E), AO fell in error by not enquiring about the source of money applied by the Appellant towards the objects of the trust since the foreign contribution was deposited in escrow account. See CHOTANAGPUR DIOCESAN TRUST. VERSUS INCOME TAX OFFICER. [ 1986 (7) TMI 210 - ITAT PATNA] As Appellant had submitted that the assessment order is not erroneous and in support thereto had highlighted that the amendments to Section 10(23C) and 11 of the Act which provide that applications out of corpus shall not be considered as application for charitable purposes have been introduced w.e.f. 01.04.2022, and are not applicable to Assessment Year 2015-16. Ld. Authorised Representative for the Appellant has contended that the view taken by the AO is correct. According to us it is certainly a plausible view, if not the correct view, which cannot be disturbed by CIT(E) in exercise of powers of revision under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raves leave to add, amend, modify, rescind, supplement or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal. 3. The brief facts of the case are that the Appellant is a public charitable trust registered under Section 12A of the Act. The Appellant e-filed its return of income for the Assessment Year 201516 on 29.09.2015 declaring Nil income. The case of the Appellant was selected for scrutiny and notice under Section 143(2) and 142(1) along with the questionnaire were served upon the Appellant vide order dated 08.12.2017, the Assessing Officer completed assessment under Section 143(3) of the Act accepting the returned income. 4. Thereafter, on verification of assessment record, the CIT(E) noted that the Appellant had applied for registration under Foreign Contribution Regulation Act, 2010 (FCRA) during the previous year relevant to the Assessment Year 2015-16 (hereinafter referred to as PY14-15 ) and obtained approval during the previous year relevant to the Assessment Year 2016-17 (hereinafter referred to as PY15-16 ). The CIT(E) noted that the Appellant had received foreign contribution amounting to INR 63,21,92,771/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as audited financial statements, statement of computation of income, details of non-corpus donations received during the year, income expenditure account, receipt payment account etc. were furnished during the assessment proceedings. He stated that the amount of INR 63,21,92,771/- credited in escrow account was reflected under the head Cash And Bank Balances in the balance sheet. The receipts and payments account showed that general donation of INR 65,68,99,773/- were received during the year. It further showed that the Appellant had applied INR 7,33,37,103/- for educational purposes, INR 87,27,010/- for medical relief and INR 57,54,93,392/- for advancing the charitable objects of the trust. In the Schedule of Significant Accounting Policies it was clearly disclosed that contribution of INR 63,21,92,771/- has been kept in escrow account on account of pending registration /approval under FCRA. He further submitted that the Appellant had actually incurred aggregate expenditure of INR 65.75 Crores towards the objects of the trust from the general corpus funds available with the Appellant since the contribution of INR 63,21,92,771/- had to be kept in escrow account on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d he referred to the notice issued under Section 263(1) of the Act and order passed by the CIT(E) under Section 263 of the Act. He contended that in the present case, the assessment order has been set aside because the Assessing Officer had failed to make the necessary enquiries and therefore, the judgment of Hon ble Bombay High Court in the case of Gabriel India Ltd. (supra) was not applicable. 10. We have given a thoughtful consideration to the rival contentions and have perused the material on record. It is the admitted position that foreign contribution of INR 63,18,46,554/- and other donations of INR 2,50,53,213/- were received by the Appellant during the PY14-15. Pending registration/approval under FCRA the aforesaid amount of INR 63,18,46,554/- was kept in escrow account. As on 31.03.2015, the balance in the escrow account was 63,21,92,771/- (including interest of INR 3,46,217/-). Since FCRA registration/approval was pending the Appellant was not permitted to utilize this amount and was under obligation to return the same as noted in the Schedule of Significant Accounting Policies (at page 10 of the paper-book). On perusal of material on records It is clear the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le purpose in the year of receipt of Income as per the provisions of section 11(1)(a) of the act i.e. 85% or more of its income for charitable purpose. As such, the question of exercising the option mentioned in Explanation to section 11(1)(a) of the Act does not arise. 12. Thereafter, the Appellant had also filed letter dated 03.11.2017 explaining the receipts and payments account: 1.0 Receipts and Payments account: 1.1 The Trust is registered with the Charity Commissioner, Mumbai under the Bombay Public Trust Act, 1950 ( Trust Act ) and has prepared the financials in accordance with the applicable accounting standards issued by the Institute of Chartered Accountants of India and the provisions of the Trust Act. 1.2 Further, the Trust also prepares Receipts and Payments Account which is summary of cash and bank transactions for every Financial Year ( FY ) with bank balances at the beginning and closing of the said FY. All the receipts and payments are included in this account, whether revenue or capital in nature or whether they are related to current, account, whether revenue or capital in nature or whether they are related to current, account, whether rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich such income is applied to such purposes in India. The case of the department, as we see it, rests on the meaning of the phrase such income . According to the department, such income refers to the income earned during the previous year and not to any other fund. On the other hand, according to the assessee, such income is only a measure for determining the amount to be spent during the previous year and it is not essential that the said amount should come only from the income of the previous year. Considering the context and the scheme of the section, we agree with the contention of the assessee. The intention of the section is quite clear. The income derived by a charitable trust cannot be accumulated beyond a limit. The section requires that the income of the trust should be substantially spent during the previous year in which it was earned. In our opinion, the emphasis is on the spending of the income and not on confining the source of the amount spent to the income earned during the previous year. In this view of the matter, we hold that the assessee is entitled to succeed in this appeal. . (Emphasis Supplied) 14. Further, Ld. Authorised Representative for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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