TMI Blog2019 (8) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... in Chainrup Sampatram vs. CIT [ 1953 (10) TMI 2 - SUPREME COURT ] settled the law long back that the principle of conservative and prudence in accounting treatment require that no anticipated profits are treated as income till realization. And that the converse is not true regarding anticipated losses which can be deducted from commercial profits at the first sign its reasonable probability. Hon'ble Bombay high court s decision Mrs.Meherbai N. Sethna [1993 (9) TMI 46 - BOMBAY HIGH COURT] holds that it is the accrual of income and not actual receipt which forms the only relevant factor for assessment of an overseas income de hors any restriction or prohibition on its remittance to India. We apply the very legal principle herein as well to conclude that the learned lower authorities have erred in treating the impugned piquet fund to be assessee s taxable income having escaped assessment after lapse of twelve years from assessment year 1995-96 when M/s Bouete (supra) had bequested her last. We lastly wish to observe that the Revenue s stand under challenge also does not satisfy sec. 160(1)(iv) r.w.s. 161 applicable in case of a representative assessee. There can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. This assessee is a charitable trust set up for imparting education as well as for running hospital and dispensary. It got registration as a society under the West Bengal Societies Registration Act 1961. There is no further dispute that the department also granted registration u/s. 12AA registration to the assessee as per the CIT s order dated 16.11.1987 to this effect. 3. This taxpayer filed its return on 29.10.2007 stating nil income after claiming sec. 11 exemption. The same stood summarily processed. The Assessing Officer thereafter formed reasons to believe that the assessee s income liable to be assessed had escaped assessment. He issues sec. 148 notice dated 07.03.2014 by recording the following reasons:- For the Assessment Year 2007-08, it has been gathered that on 28.08.1996, the London Solicitors M/s Couts Co. informed the said Society of the bequest made by two ladies namely Miss Grace Lounsbery and Madame Marguerite La Fuenmade to the said society of UK Pounds 1,75,000/- (₹ 1,51,09,500/- as per prevailing rate of exchange of RBI on the date of transfer i.e. 09-02-2007) The statement of cash in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13(2) of FEMA, 1999 after the repatriation into India. The Adjudicating Authority has passed the order for confiscation without issuing any show cause notice for the same. the principle of natural justice has been totally violated. The Adjudicating Authority has passed the order for confiscation as a matter of course without considering the totality of the facts of the case and by without giving any justification for the same. 22. The nature of this transaction i.e. the Realisation of the foreign exchange as per the Will of the foreign national being resident outside India doesn t spell any conscious wrong doing on the part of the appellant. The possession of foreign exchange was neither unlawful nor has remained unexplained. The appellant before realization of this amount outside India has requested to grant permission for the repatriation of this amount to India. The said request of the appellant is to be determined as per law. It was held in the case of CP Devasay Vs. Directorate of Enforcement (1998) 41 Taxman 39 (FERAB) and in the case of Dr. V.G. Joseph Vs. Additional Director (2004) 52 SCL 530 )ATFE) that in such circumstances the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the transactions pertains to the F.Y. 2006-07 as the amount was credited in the Treasury dated 09.02.2007. Hence, the addition should have been made in the A.Y. 2007-08. I have perused the facts of the case and order of the A.O. In the order itself the A.Y. is mentioned as 2007-08 and the A.O.in the entire order has mentioned A.Y. 2007-08. Therefore, the aforesaid objection of the appellant is wrong and without any substance. The aforesaid issue raised by the appellant is on the basis that in the column of previous year of the order it has been mentioned as 2008-09 whereas in the entire assessment order and in the body of the order of the assessment it is mentioned 2007-08. The mentioning of previous year as 2008-09 is typographical mistake. Therefore, it is nothing but typographical mistake and in all facts and essence it is passed for A.Y. 2007-08 such typographical mistake is curable u/s 296B of the LT. Act. Next ground of the appeal of the appellant relates to the issue of addition of Rs.l,sl,09,sOOjon account of the fact that the aforesaid money was transferred in the account of the appellant dated 09.02.2007. The A.O. while passing the order ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucknow Zonal Office, 2nd Floor, Princeton Business Park 16-Ashok Lucknow-226001 passed by Shri Vivek Prasad, Joint Director vide Adjudication Order No. Adj/15/LZO/2014/JD(VP) dated 29.05.2014 that the Mahabodhi Society of India violated Section 4 of Foreign Exchange Management Act, 1999 (FEMA) and Regulation 3 of the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000. BRIEF FACTS OF THE CASE Enquiries in this case were initiated on the basis of a Complaint dated 27.08.2009 made by one of the Managing Trustee, The Buddhist International, Mumbai to the effect that Dr. E.R. There, General Secretary, Mahabodhi Society of India, Kolkata had, in contravention of the Provisions of FEMA., 1999 got transferred an amount of UK Pounds of 1,75,000/- to the account NO.06185854 of the Mahabodhi Society of India, maintained with the Bank of Ceylon, Sri Lanka. The amount of UKP 1,75,000/- allegedly represented the amount which was donated by the Will dated 06/12/1956 of Late Miss Grace C. Lousbery and Late Madam Marguerite - La Fuerte's in favour of the Society. On the basis of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penalty of ₹ 1 Crore on Mahabodhi Society of India and ₹ 50 Lakhs on Dr. D.R. Thero, General Secretary of Mahabodhi Society of India, Kolkata has been imposed in terms of section 13(1) of the Foreign Exchange Management Act, 1999. Show cause notice was issued to the assessee on 27.02.2015 requested to explain why the amount of UK Pounds of 1,75,000 (₹ 1,51,09,500/- as prevailing rate of exchange of RBI on the date of transfer i.e. 09.02.2007) should not be added back to the total income. In response to this letter the A.R. of the assessee had stated that the above mentioned amount was invested into the account of Sri Lanka Govt. Treasury Bills in the name of Mahabodhi Society of India. The AR also stated that the Mahabodhi Society of India applied to the Govt. of India Ministry of Home Affairs for permission to bring the money of India. But the permission is still pending and total amount is still lying under custody of Ceylon Govt. Treasury Bill and for this reason -Mahabodhi Society of India did not show the amount in Books of Account for the A.Y.2007-08. So the assessee has admitted that the income was received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or otherwise to denote a normal income liable to tax. As per the terms of the settlement, the assessee will be the beneficiary of the trust fund after the death of the settlers. The assessee had just inherited the interest in the property of the trust whereby the trustees had transferred the fund to assessee's account. When a trustee holds a trust fund and same is bequeath and transferred on the beneficiary, the same can, at best be termed as ' capital receipt ' in the hands of the beneficiary - which is not liable to tax as income. In other words, even if, the transfer of fund from the trustee's account at London to the assessee's account at Sri Lanka is considered as a constructive receipt without accrual of any legal/financial right in favour of the assessee, it cannot be termed as a receipt of income. Considering the facts circumstances and the character of receipts, at best it can be termed as capital receipt not liable to tax. Therefore even if the transaction involved a receipt, there was no element of income within the same - which might have escaped assessment liable to be reopened by invoking section 147 of the IT Act. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been narrated in the assessment order which is not a debatable issue. It is a clear fact when money was created in the account of appellant and it was transferred into the account of appellant, where it was laying? - the same should have been shown in the hand of the appellant. Keeping in view of the facts I do not find any inconformity of the A.O. Therefore, the order passed by the A.O. is hereby upheld and the ground of appeal is dismissed. All this leaves the assessee aggrieved. 7. We now come to assessee s pleas its first and foremost legal plea that it had not received any income merely on account of transfer of UK based bequest to Sri Lanka based bank account and therefore no part of its taxable income had escaped assessment. Our attention is invited to sec. 2(24)(iia) of the Act treating a voluntary contribution received by a charitable / religious trust as income. The assessee contends that it was nowhere in receipt of the impugned sum since it had inherited the funds in the capacity of a beneficiary and all due permission thereof is still pending. It is reiterated that the assessee s request seeking repatriation of the impugned sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s account in Sri Lanka and the same is entitled treated as its income of the relevant previous year neither claimed for exemption sec. 11(1) nor set apart sec. 11(2) of the Act. 11. We have given our thoughtful consideration to foregoing rival arguments. The above narrated fact makes it clear that the impugned sum is lying in the treasury of bank of Ceylon since 09.02.2007. The assessee s request seeking transfer thereof to India is pending till date as per the Appellate Authority s order / direction(s) (supra). The question that arises for our apt direction in the instant lis is as to whether the said sum can be held to be the assessee s income accrued or receive u/s 5 of the Act in these facts and circumstances so as to be held as having escaped assessment giving rise to the re-opening / re-assessment in question. We find no force either in Revenue s arguments or in lower authorities action treating the above bequest as assessee s taxable income. We wish to emphasise here that the assessee is yet to enjoy a clear legal title on the trust property and therefore, the same could not have been treated as its income received under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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