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2015 (11) TMI 435

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....xtent of _2,72,90,563/- spent outside India assessee is not entitled to exemption u/s.11(1)(a) of the Act. 2.2 They failed to appreciate that the assessee received 'tied up grants'' from GOI and participation fees from Members for meeting the above expenditure of conducting trade fairs, advt. etc., outside India ; such receipts are not part and parcel of its income and hence is outside the purview of Sec. 11. The assessee filed additional grounds as under:- ''1.1 The authorities below failed to appreciate that assessee received tied up grants of _1,43,76,117/- from GOI (which was credited to separate bank account for that purpose) and participation fees from Members to the extent of _3,60,68,121/- which are not income of the assessee and which can be utilsied only for the purpose for which it was granted and therefore they erred in bringing to tax the sum of _5,04,44,238/- 1.2 They failed to appreciate that the above being ''tied up grants' are not part and parcel of its income from deductions and hence is outside the purview of Sec.11. 1.3 They failed to appreciate the proof, by way of grants Sanction letters of GOI, with rider that if such grants are not utilized for the....

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....ment u/s 143(3) of the Act on 31.01.2013 determining the total income at Rs. 52,35,216/-. During the course of assessment proceedings the Assessing Officer found that the assessee was in receipt of participation fees, membership fees, advertisement charges, service charges, sale of publication and. news letters, etc. The Assessing Officer was of the view that these receipts clearly fall within the ambit of amended provisions of sec.2(15) of the Act as the assessee's object was of general public utility and the activities of the assessee was in the nature of trade, commerce or business. Hence, the Assessing Officer held that the assessee was not eligible for exemption u/s 11 of the Act for both the assessment years. The Assessing Officer treated the assessee as AOP and taxed accordingly. The Depreciation claimed for the assessment year under consideration was disallowed by the Assessing Officer. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 6. The Commissioner of Income Tax (Appeals) observed that a perusal of the assessment order and the arguments advanced by the assessee against the denial of exemption u/s 11 of the Act reveals t....

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.... its eligibility u/s 11(1)(c) of the Act vide letter dated 26.09.2013. The assessee was further asked to clarify the applicability of sec.11(1)(c) of the Act by this office letter dated 04.10.2013 also. The assessee in its letter dated 14.10.2013 stated that it claimed exemption u/s 11(1)(a) and not u/s 11(1)(c)(ii) of the Act because only in those cases where sec.11(1)(c) was applicable, the permission of the Board has to be obtained in order to claim such income exempt u/s. 11(1). Since neither the main section nor the proviso there under was applicable to the assessee, there was no necessity for the assessee to seek the permission of the CBDT. It was also stated that the whole of expenditure were not incurred outside India but only a part of it. To the extent of expenditure incurred in India, the same is not attracted by any of the sub-sections of sec. 11 of the Act. The assessee's objections was carefully considered by the Commissioner of Income Tax (Appeals) and found not tenable for the following reasons:- (a) The appellant itself admitted in its letter dated 14.10.2013 that some expenditure was incurred outside India in both the assessment year. 2009-10. The annual repo....

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....the above case unless the Board by a general or special order has directed the exclusion of such income from the total income of the assessee: These features under the Act of 1922 are continued under the Act of 1961 also. To sum up the position was this : ' i) No exemption is available in respect of trusts for charitable purposes outside India except under a general or special order of the Board. ii) The Board could grant exemption in respect of later deeds only in the limited cases where such purposes intended to promote international welfare. In view of the above position, the Commissioner of Income Tax (Appeals) has directed the assessee to show cause as to why enhancement of income should not be done as per sec.251(1) of the Act by this office letter dated 17.10.2013. In response, the ld. Authorised Representative for assessee stated that the AO brought to tax the net profit after allowing expenses for earning the net profit but without allowing depreciation for the assessment year under consideration. The ld. Authorised Representative for assessee also stated that the amount spent abroad was allowable u/s 37(1) of the Act especially under the circumstances when statu....

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....assessee also filed the following documents. Sl. No Particulars Paper book at Page No. 1 Assessment year 2009-10, Annual report indicating grants from 2 Ministries 113 2 Assessment year 2009-10, statement showing details of grants from Ministry of Textiles 126 3 Assessment year 2009-10, grants-in-aid sanction letters from Ministry of Textiles 128,136,140,146, 156,166, 174 & 178 4 Assessment year 2009-10, Utilization certificates 142, 150, 152, 162, 172, 180 5 Assessment year 2009-10, statement showing details of grants from Ministry of Commerce 182 6 Assessment year 2009-10, Grants - in-aid sanction letters from Ministry of Commerce 184, 188, 192 7 Assessment year 2009-10, utilization certificate 186 8 Assessment year 2009-10, Statement showing details of grants from Ministry of Textiles 230 9 Assessment year 2009-10, grants-in-aid letters from Ministry of Textiles 244 10 Assessment year 2009-10, utilization certificate 246, 254, 260, 268, 272, 280, 286, 294, 302, 312, 322, 330, 334, 338 & 342 11 Assessment year 2009-10, statement showing details of grant received from Ministry of Commerce 348 12 Assessment year 2009-10, Grants in aid sanction ....

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....s which are for specific purposes do not belong to the assessee-society. Such grants do not form corpus of the assessee or its income. Those grants are not donations to the assessee so as to bring them under the purview of section 12 of the Act. Voluntary contributions covered by section 12 are those contributions freely available to the assessee without any stipulation which the assessee could utilise towards its objectives according to its own discretion and judgment. Tied-up grants for a specified purpose would only mean that the assessee, which is a voluntary organisation, has agreed to act as a trustee of a special fund granted by Bread for the World with the result that it need not be pooled or integrated with the assessee';s normal income or corpus. In this case, the assessee is acting as an independent trustee for that grant, just as same trustee can act as a trustee of more than one trust. Tied-up amounts need not, therefore, be treated as amounts which are required to be considered for assessment, for ascertaining the amount expended or the amount to be accumulated. 11. The assessee should have actually credited that grant in the personal account of the donor, Bread....