TMI Blog2015 (11) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable. These appeals are remitted back to the file of the Commissioner of Income Tax (Appeals) for fresh consideration. - I.T.A.Nos. 2130 & 2131/Mds/2013 - - - Dated:- 28-8-2015 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER] For The Appellant : Shri. K. Balasubramanian, Advocate For The Respondent : Shri. A.V. Sreekanth, IRS, JCIT. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by the assessee are directed against different orders of the Commissioner of Income-tax (Appeals)-VII, Chennai for the above assessment years. Since the issue involved in these appeals are common in nature and only change in figures of disallowance, these appeals are combined, heard together, and disposed of by this order for the sake of convenience. 2. The common grounds in these appeals are follows:- 1. The learned Assessing Officer erred in holding that assessee is not eligible for exemption u/s.11 of the Act 2.1 The learned Commissioner of Income Tax (Appeals) though agreed that assessee is entitled to for exemption u/s.11 of the Act, erred in holding that to the extent of _ 2,72,90,563/- spent outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Authorised Representative for assessee at the time of hearing requested to admit additional grounds as well as additional evidences filed above as the assessee bonafidely not filed before the lower authorities. 4. Considering the plea of the assessee and judgment of the Supreme Court in the case of National Thermal Power Co. Ltd vs. CIT, 229 ITR 383, wherein held that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee, notwithstanding the fact the same was not raised before the lower authorities , we inclined to admit the additional grounds as well as the additional evidences for adjudication. 5. Coming to the facts of the case for the assessment year 2010- 2011, the assessee filed its return on 20.10.2010 admitting nil income. The return was processed u/s 143(1) of the Act on 20.09.2011. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued. In response, the authorized representative of the assessee appeared before the Assessing Officer. After considering the details of the case, the Assessing Officer completed the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted u/s 11(1)(a) of the Act. A perusal of accounts of the assessment year 2009-10 reveals that the entire expenditure was not spend/applied in India. During the assessment year 2009-10, the assessee spent ₹ 5,61,90,847/- abroad as per Income and Expenditure account as promotional expenses. The details are as under:- Advertisement Publication : ₹ 8,02,937/- Exhibitions : ₹ 2,89,78,549/- Member Exports grant : ₹ 2,43,81,500/- Design studios at Handloom Clusters : ₹ 20,27,861/- Total ₹ 5,61,90,847/- Expenditure in foreign currency was ₹ 2,55,74,281/- towards other promotional expense of Handloom exports during that period. The above sums were spent outside India as revealed by the annual reports of assessment 2009-10. It was in violation of sec.11(1)(a) of the Act which stipulates that income shall not be included in the total income to the extent such inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are otherwise not entitled to exemption u/s 11(1)(a) of the Act. Actually sec.11(1)(c) is a beneficial provision and the only. condition is to obtain the permission of the Board. (g) Since the assessee did not obtain the approval of the Board, it is in a cleft stick and tries to argue that there is no necessity to seek the permission of the Board. Governments do not forego their revenue in favour of charity spent outside their countries as held in England vs Webb(LR) 1898 AC 758, 762(PC); Canille Henry Dreyfus Foundation Inc. vs IRC (1954) 2 AN ER 466(CA). In conformity with this policy, the exemption that was being granted before 1952 in respect of charitable or religious expenditure outside India was withdrawn by the IT Amendment Act 1953 w.e.f. 01.04.1952. Contemporaneously with the withdrawal, power was, however, granted to the Central Board of Revenue to exclude from total income, incomes of trusts created before 01.04.1952 to the extent to which they are applied i.e. spent for charitable or religious purposes outside India, whatever be the kind of charity. In respect of trusts created after 01.04.1952, a similar power to exclude was granted to the Board by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no answer from the assessee. Therefore the arguments of the ld. Authorised Representative for assessee are not relevant to the issues involved in the appeals and hence rejected devoid of merit. The Commissioner of Income Tax (Appeals) considered the assessee was not entitled to exemption u/s.11(1)(a) of the Act to the extent such income was not applied/spent for charitable purposes in India. The assessee was also not eligible for exemption u/s.11(1)(c) of the Act as the assessee did not obtained permission from the Board. Therefore, the amount spent outside India both the assessment year under consideration are to be brought to tax. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to tax ₹ 5,61,90,847/- for the assessment year 2009-2010. Against, this the assessee is in appeal before us. 7. We have heard both the parties and perused the material on record. The main contention of the asseseee s counsel is that for the above reasons exemption u/s.11 of the Act was denied to the assessee which was overruled by the Commissioner of Income Tax (Appeals). Further, he invoked provisions of section 11(1)(a) of the Act so as to hold that assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the Commissioner of Income Tax (Appeals) hence, it is appropriate to reconsider this issue afresh in the light of the order of the Tribunal in the case Nirmal Agricultural Society vs. ITO 71 ITD 153 (Hyd) wherein that 8. We considered the matter in detail. The assessee has not been granted registration under section 12A, as the CIT, Guntur, thought it fit to refuse to condone the long delay caused by the assessee in applying for the registration. Therefore, the Assessing Officer had no other go but to complete the assessments in the status of AOP and also closing his eyes towards section 11 and section 13. To that extent, we are in agreement with the Assessing Officer, as he has acted only according to will of law. 9. But as far as the contents of the assessments are concerned, we find much force in the contentions advanced by the assessee. Even when the assessee has been assessed as AOP deprived of section 11 benefits, the Assessing Officer could assess only net income of the assessee and not gross receipts. As far as the assessee is concerned, construction of houses, reclamation of land, etc., are part of its regular activities. Houses are built on the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncoming and outgoing need not be reflected in the income and expenditure account of the assessee. At the end of the project, the balance, if any, available to the credit of Bread for the World, the donor, could be treated as income of the assessee, if the donor did not insist for the repayment of the balance amount. 12. Therefore, in the light of the examination of the facts of the case, we direct the Assessing Officer to redo the assessments in the following lines : (1) The tied-up grants received from the donor, Bread for the World, will be taken out of the computation of income from the income-side. (2) All the money spent under the tied-up programmes directed by the donor also will be taken out of the computation of income from the expense-side. (3) Any non-refundable credit balance in the personal account of Bread for the World will be treated as income in the year in which such non-refundable balance was ascertained. (4) The expenses incurred by the assessee for house construction, reclamation of land, non-formal education programme (other than covered by the tied-up grants) will be deducted as revenue expenses. 8. Further, we make i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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