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2015 (11) TMI 435 - ITAT CHENNAI

2015 (11) TMI 435 - ITAT CHENNAI - TMI - Eligibility for exemption u/s.11 - Held that:- 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 computat .....

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considered above grant as income of the assessee in its income and expenditure account, then the finding of the Tribunal above 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, .....

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icer 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 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 .....

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tilsied 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 purpose for which the sanction is i ntended, the appellant has to return .....

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in-aid received by it from Government of India was for the specific purpose for which it was granted, that the said grants cannot be utilized for any other purpose other than the one for which it was granted and hene the same, being tied up grants is not its income, filed evidence, covered by items (9) to 15 and (17) to (22) of Paper Book on 16.07.2014 for both the above assessment years Appellant prays that Hon ble Bench may be pleased to admit the above items as the same are vital for deciding .....

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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 pr .....

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eceipt 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 o .....

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t reveals that the assessee was entitled to exemption u/s 11 of the Act provided the assessee satisfies sec.11(1)(a) of the Act. For the sake of clarity, sec.11(1)(a) of the Act was reproduced as under: Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income - (a) Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such i .....

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ome and hence minimum amount to be set apart u/s 11(2) of the Act was nil for AY 2009-10 according to the assessee. The assessee therefore means that it spent its income wholly for charitable or religious purposes and hence 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 .....

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. 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 income was applied to charitable or religions purposes in India. Therefore, the assessee was not entitled to exemption u/s 11(1)(a) of the Act as claimed by it. But sec.11(1)(c) of the Act provides for exemption in such type of cases. Therefore, the assessee was asked to offer its reply regarding its eligibility u/s 11(1)(c) of the Act vide letter dated 26.09 .....

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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 admitte .....

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)(c)(i) of the Act is not applicable to the - appellant because CIT(A) himself did not invoke this subsection. It is immaterial to the claim of exemption. (e) The appellant tries to argue that sec.11(1)(c) is not applicable to it and sec.11(1)(a) alone is applicable. This does not hold water as .sec.11(1)(a) clearly says that application /spending should be for charitable or religious purposes in India. (f) Sec.11(1)(c) was introduced with a view. to help the assessee who have to spend outside I .....

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); 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. .....

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not operate in either of 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 t .....

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ation 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 status of the assessee was changed to AOP from that of a trust with advancement of any other object of general public utility u/s 2(15) of the Act. It was also argued that the whole net surplus was not taxable if the CIT(A) is inclined to treat the assessee as trust with advancement of .....

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t abroad" in their annual reports is allowable u/s.11 of the Act. For his specific question, there 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 Indi .....

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cord. 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 eligible for exemption as the assessee spent the money outside India. Before us, the ld. Authorised Representative for assessee filed a copy of grant sanctioned letter of Ministry of Commerce & Ind .....

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40,146, 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 letter .....

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ence, 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 sta .....

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essee is concerned, construction of houses, reclamation of land, etc., are part of its regular activities. Houses are built on the land of poor agriculturists. The assessee-society has no legal title or right over the land or houses of those villagers/agriculturists who are the beneficiaries. The purpose and activity of the assessee-society is to engage in such charitable activities. Whatever amount has been spent on those programmes/projects, they were spent in the usual course of carrying on i .....

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claiming the land, for non-formal education, etc., has to be allowed as deduction in the computation of income. 10. The grants received from Bread for the World were for specific purposes. The grants 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 .....

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cting 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 for the World and any amount spent against that grant should have been debited to that separate account .....

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