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2020 (5) TMI 379 - AT - Income TaxDenial of exemption claimed u/s 11 & 12 - assessee is a trade association which was created for the cause of Indian Automobiles - assessee has generated some access of receipt over expenses in undertaking these activities - corpus donation was treated as income of the assessee - whether the assessee had shown any such corpus donation and also whether the assessee claimed any exemption under the provisions of the Act on account of such amounts? - HELD THAT:- The perusal of the income & expenditure account would reflect that after the income from various sources was shown and the expenditure was claimed under various heads, hence amounts were transferred. While drawing up the excess of expenditure carrying forward the amounts and the balance as excess income over expenditure. In the schedule to the balance sheet if we look at the corpus fund, the amounts of ₹ 90 Lakhs transferred to corpus funds and the narration is “transfer from income and expenditure account i.e. for ₹ 90 Lakhs”. Amounts have been transferred to the different funds as tabulated above. While drawing up the income for the year under consideration, the assessee has very clearly pointed out that that all these amounts which are transferred to funds are not to be considered as application of income and accordingly, the income has been computed in the hands of the assessee. We find no merit in the exercise undertaken by the AO, which has been confirmed by the CIT(A), we reverse the findings of the CIT(A) in this regard and direct the AO to delete the aforesaid addition made in the hands of the assessee. Thus, Ground No.4 raised by the assessee is allowed. Addition made on account of alleged foreign grants received during the year on account of pending approval under Foreign Contribution Regulation Act (in short “FCRA”) - whether the said foreign grant received by the assessee and the interest on the same are taxable in the hands of the assessee? - HELD THAT:- Bank interest earned on such deposits was in the form of foreign contribution and the same does not approve to the assessee till specific approval for utilization of funds was given by the Central Government. There is no merit in access the foreign grant received pending sanction as income of the assessee. Now coming to the second aspect of the issue that where the assessee has following cash system of accounting, can be added in the hands of the assessee. CIT vs Om Prakash Khaitan [2015 (7) TMI 785 - DELHI HIGH COURT] had laid down the proposition that the characterization of a receipt could taxable only at the time of appropriation and not at the time of receipt which at best was advanced received, which did not bear in particular characterization for the purpose of treating it as income. Applying the said proposition to the issue in hand, we find no merit including the foreign grant as pending approval as income of the assessee. Ground raised by the assessee is allowed.
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