DDIT (E), New Delhi V. Indo French Centre for the Promotion of Advanced Research, New Delhi

ITA 2802/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4818 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2802/DEL./2014 (ASSESSMENT YEAR : 2010-11) ACIT (E), VS. INDO-FRENCH CENTRE FOR THE CIRCLE 1 (1), PROMOTION OF ADVANCED RESEARCH, NEW DELHI. 5B, GROUND FLOOR, INDIA HABITAT CENTRE, LODHI ROAD, NEW DELHI. (PAN : AAATI0155Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.K. GUPTA, CA REVENUE BY : SHRI NAVIN CHANDRA, CIT DR DATE OF HEARING : 23.08.2017 DATE OF ORDER : 29.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TAX (E) , CIRCLE 1(1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE TH E IMPUGNED ORDER DATED 19.02.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XXI, NEW DELHI, FOR THE ASSESSMENT YEAR 2 010-11 ON THE GROUNDS INTER ALIA THAT :- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE INCOME OF THE ASSESSEE I S ITA NO.2802/DEL./2014 2 TO BE COMPUTED AS PER PROVISIONS OF SECTION 11 TO 13 OF THE ACT AND THEREFORE, THE EXPENSES AMOUNTING TO RS.11,43,35,344/ - INCURRED BY THE ASSESSEE OUTSIDE INDIA WERE NOT ALLOWABLE AS APPLICATION OF INCOME AS THE ASSESSEE WAS NOT NOTIFIED U/S 11(1)(C) OF THE ACT BY THE CBDT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO RE-COMPUTE THE INCOME ON COMMERCIAL PRINCIPLE IN RESPECT OF EXPENDITURE INCURRED OUTSIDE INDIA, IS NOT LAWFUL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT IN THIS CASE TRANSACTION OF 'FOREIGN CONTRIBUTION' WAS NOT TRANSACTED BETWEEN THE GOVERNMENT OF INDIA AND GOVERNMENT OF FRANCE. INSTEAD, THE TRANSACTION OF 'FOREIGN CONTRIBUTION' WAS TRANSACTED DIRECTLY BETWEEN GOVERNMENT OF FRANCE AND THE ASSESSEE SOCIETY. MOREOVER, IN THE CASE OF THE ASSESSEE COMPULSORY AUDITING BY C & AG IS NOT REQUIRED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ADJUDICATING THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) OF THE ACT 1961 IN RESPECT OF INTEREST OF RS.8,849/- EARNED ON INVESTMENT MADE WITH CREDIT INDUSTRIAL COMMERCIAL PARIS, FRANCE, BY THE ASSESSEE IN IGNORING THAT INVESTMENT WAS NOT MADE IN CONFORMITY WITH SECTION 11(5) OF THE INCOME TAX ACT, 1961. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE SOCIETY CAME INTO EXISTENCE IN 1986-87 AND WAS REGISTERED UNDER SOCIETY REGISTR ATION ACT, ITA NO.2802/DEL./2014 3 1860 AS A JOINT VENTURE OF GOVERNMENT OF INDIA AND GOVERNMENT OF FRANCE WITH OBJECT TO PROMOTE SCIENTIFIC RESEARCH I N BOTH THE COUNTRIES. ASSESSEE SOCIETY WAS EARLIER GRANTED EX EMPTION UNDER SECTION 35(1)(II) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AS A SCIENTIFIC RESEARCH INSTITUTION BUT SUBSEQUENT LY IT WAS REGISTERED UNDER SECTION 12AA OF THE ACT VIDE ORDER DATED 13.05.2004. ASSESSEE SOCIETYS INCOME IS EXEMPT U/ S 11(1)(C) AS PER APPROVAL GRANTED BY THE BOARD UP TO AY 2009-10 AND ITS FRESH APPLICATION FOR RENEWAL IS PENDING BEFORE THE BOARD . AS PER PERMISSIONS ACCORDED BY THE RESERVE BANK OF INDIA ( RBI), THE ASSESSEE SOCIETY HAS OPENED A BANK ACCOUNT WITH CRE DIT INDUSTRIAL COMMERCIAL PARIS IN FRANCE WITH OBJECTIVE OF RECEIV ING GRANT FROM THE FRENCH GOVERNMENT AND EXPENSES OF THE SOCIETY A RE MADE FROM THIS ACCOUNT AND BALANCE AMOUNTS ARE TRANSFERRED TO INDIA WHICH ARE UTILIZED BY THE SOCIETY. 3. ASSESSING OFFICER MADE AN ADDITION OF RS.11,43,3 5,344/- UNDER THE HEAD FOREIGN EXPENDITURE FOR LACK OF AP PROVAL OF THE BOARD FOR EXEMPTION U/S 11(1)(C). THE AO HAS FURTH ER MADE ADDITION OF RS.9,45,28,000/- ON THE GROUND THAT THE ASSESSEE SOCIETY HAS RECEIVED GRANT FROM FRENCH GOVERNMENT IN VIOLAT ION OF FCRA (FOREIGN EXCHANGE REGULATION ACT). AO FURTHER MADE ADDITION OF RS.8,849/- ON THE GROUND THAT THE DEPOSIT IN THE FR ENCH BANK ITA NO.2802/DEL./2014 4 ACCOUNT VIOLATES THE PROVISIONS OF SECTION 11(5) RE AD WITH SECTION 13(1)(D) OF THE ACT. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF AN APPEAL WHO HAS ALLOWED THE APPEAL. FEELING AGGR IEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF C HALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT (A). 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. BY MOVING A SEPARATE APPLICATION, ASSESSEE SOCIE TY SOUGHT TO RAISE ADDITIONAL GROUNDS ON THE GROUND THAT THE SAM E GO TO THE ROOT OF THE CASE WHICH ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO RE-COMPUTE THE INCOME ON COMMERCIAL PRINCIPLE IN RESPECT OF EXPENDITURE INCURRED OUTSIDE INDIA, IS NOT LAWFUL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT IN THIS CASE, TRANSACTION OF 'FOREIGN CONTRIBUTION' WAS NOT TRANSACTED BETWEEN THE GOVERNMENT OF INDIA AND GOVERNMENT OF FRANCE. INSTEAD, THE TRANSACTION OF 'FOREIGN CONTRIBUTION' WAS TRANSACTED DIRECTLY BETWEEN GOVERNMENT OF FRANCE AND THE ASSESSEE SOCIETY. MOREOVER, IN THE CASE OF THE ASSESSEE, COMPULSORY AUDITING BY C&AG IS NOT REQUIRED. ITA NO.2802/DEL./2014 5 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN ADJUDICATING THAT THERE IS NO VIOLATION OF SECTION 13(1)(D) OF THE ACT, 1961 IN RESPECT OF INTEREST OF RS.8,849/- EARNED ON INVESTMENT MADE WITH CREDIT INDUSTRIAL AT COMMERCIAL PARIS, FRANCE, BY THE ASSESSEE IN IGNORING THAT INVESTMENT WAS NOT MADE IN CONFORMITY WITH SECTION 11 (5) OF THE INCOME TAX ACT, 1961. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN ADMITTING AND ADJUDICATING THIS GROUND IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE IN DIRECTING THE AO TO RE-COMPUTE INCOME ON COMMERCIAL PRINCIPLE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN MAKING THE OBSERVATIONS THAT THE ASSESSEE IS A GOVERNMENT SOCIETY AS THERE IS NO CONCEPT AS GOVERNMENT SOCIETY AS PER THE SOCIETIES REGISTRATION ACT, 1860. 6. THE ORDER PASSED BY LD. CIT(A) IS IN VIOLATION OF LAW AS WELL AS FACTS OF THE CASE. 7. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 7. KEEPING IN VIEW THE FACT THAT THE ADDITIONAL GRO UNDS SOUGHT TO BE RAISED BY THE ASSESSEE COMPANY, THOUGH NOT RA ISED BEFORE THE LD. CIT (A), ARE NECESSARY FOR COMPLETE ADJUDICATIO N OF THE CONTROVERSY AT HAND, THE APPLICATION FOR ADDITIONAL GROUNDS IS HEREBY ALLOWED. ITA NO.2802/DEL./2014 6 GROUNDS NO.1 & 2 OF ORIGINAL GROUNDS AND GROUNDS NO.1 & 4 OF ADDITIONAL GROUNDS 8. AO MADE AN ADDITION OF RS.11,43,35,344/- ON THE SOLE GROUND THAT THE ASSESSEE DID NOT GET APPROVAL OF TH E BOARD FOR EXEMPTION U/S 11(1)(C) OF THE ACT. HOWEVER, FROM T HE ORDER DATED 08.02.2016 ISSUED BY CENTRAL BOARD OF DIRECT TAXES (CBDT), AVAILABLE AT PAGE 1 OF THE PAPER BOOK, THE PERMISSI ON HAS BEEN ACCORDED TO THE ASSESSEE U/S 11(1)(C) OF THE ACT AN D EXPENSES TO THE TUNE OF RS.11,43,35,344/- INCURRED BY THE ASSESSEE OUTSIDE INDIA FOR THE PURPOSE OF INTERNATIONAL WELFARE ARE ORDERED TO BE NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE SOCIETY. THIS FACTUAL POSITION HAS NOT BEEN CONTROVERTED BY THE LD. DR, HENCE, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED B Y THE LD. CIT (A) ON THIS GROUND. CONSEQUENTLY, GROUNDS NO.1 & 2 OF ORIGINAL GROUNDS AND GROUNDS NO.1 & 4 OF ADDITIONAL GROUNDS ARE DETERMINED AGAINST THE REVENUE. GROUND NO.3 OF ORIGINAL GROUNDS AND GROUNDS NO.2 & 5 OF ADDITIONAL GROUNDS 9. AO MADE DISALLOWANCE OF RS.9,45,28,000/- ON THE GROUND THAT SINCE THE ASSESSEE SOCIETY HAS RECEIVED FOREIG N CONTRIBUTION FROM GOVERNMENT OF FRANCE WITHIN THE MEANING OF SEC TION 2(1)(J) ITA NO.2802/DEL./2014 7 OF FCRA WITHOUT FILING RETURN QUA THESE CONTRIBUTIO NS IN FC-3 TO MINISTRY OF HOME AFFAIRS AS PER FCRA. 10. UNDISPUTEDLY, THE ASSESSEE SOCIETY IS REGISTERE D UNDER SOCIETIES REGISTRATION ACT, 1860 AS A JOINT VENTURE OF GOVERNMENT OF INDIA AND GOVERNMENT OF FRANCE WITH AN OBJECT TO PROMOTE SCIENTIFIC RESEARCH IN BOTH THE COUNTRIES. THE LD. DR FOR THE REVENUE VEHEMENTLY CONTENDED THAT SINCE THE ASSESSE E SOCIETY IS NOT A GOVERNMENT SOCIETY, THE LD. CIT (A) HAS GROSS LY ERRED IN DELETING THIS ADDITION BY TREATING THE ASSESSEE SOC IETY AS A GOVERNMENT SOCIETY. HOWEVER, WE ARE OF THE CONSIDE RED VIEW THAT WHEN THE ASSESSEE SOCIETY IS A REGISTERED SOCIETY U NDER THE SOCIETIES REGISTRATION ACT ESTABLISHED AS A JOINT VENTURE WIT H AN OBJECT TO PROMOTE SCIENTIFIC RESEARCH OF BOTH THE COUNTRIES A ND THE ENTIRE FUNDS ARE CONTRIBUTED BY GOVERNMENT OF INDIA AND GO VERNMENT OF FRANCE, THE SAME IS AN INSTRUMENTALITY OF THE GOVER NMENT OF INDIA. 11. THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS A LETTER, AVAILABLE AT PAGE 44 OF THE PAPER BOOK, ADD RESSED TO THE ASSESSEES SOCIETY BY THE MINISTRY OF HOME AFFAIRS EXPLAINING THE TRANSACTIONS NOT ATTRACTING PROVISIONS OF FCRA. FO R FACILITY OF REFERENCE, LETTER (SUPRA) IS REPRODUCED AS UNDER :- NO. GOVERNMENT OF INDIA/BHARAT SARKAR MINISTRY OF HOME AFFAIRS/GRIH MANTRALAYA ITA NO.2802/DEL./2014 8 1 ST FLOOR, NDCC-II BUILDING, JAI SINGH ROAD, OFF. PARLIAMENT STREET, NEAR JANTAR MANDIR, NEW DELHI 110 001, DATE : 2.01.2014 TO DR. DEBAPRIYA DUTTA, DIRECTOR, .., 5B, GROUND FLOOR, INDIA HABITAT CENTRE, LODHI ROAD, NEW DELHI 110003. SUBJECT : PERMISSION UNDER FOREIGN (REGULATION) ACT , 2010 SIR, I AM DIRECTED TO REFER TO YOUR LETTER DATED 18 SEP T 2013 ON THE SUBJECT MENTIONED ABOVE AND TO STATE THAT FOREI GN CONTRIBUTION (REGULATION) ACT, 2010 DOES NOT ATTRACT IN RESPECT OF THE FOLLOWING TRANSACTIONS : A) TRANSACTION BETWEEN THE GOVT. OF INDIA AND THE GOVT. OF ANY FOREIGN COUNTRY OR TERRITORY CLAUSE 51 OF FCRA 2010. B) BODIES CONSTITUTED OR ESTABLISHED BY OR UNDER A CEN TRAL ACT OR A STATE ACT REQUIRING COMPULSORY AUDITING BY C&AG NOTIFICATION NO.S.O.1492(E) DATED 1 JULY, 2011. IN VIEW OF ABOVE, IT IS REQUIRED TO EXAMINE THE SUB JECT PROPOSAL. IF THE FOREIGN CONTRIBUTION RECEIVING BODY COMES WITHI N THE PURVIEW OF ABOVE PROVISION. IF NOT, THEN APPLY ONLINE IN F C-4 THROUGH THIS MINISTRYS WEBSITE I.E. WWW.MHA.NIC.IN. YOURS FAITHFULLY, SD/- (GOPAL JHA) UNDER SECRETARY TO THE GOVT. OF INDIA 12. BARE PERUSAL OF THE LETTER (SUPRA) GOES TO PROV E THAT WHEN A TRANSACTION IS BETWEEN GOVERNMENT OF INDIA AND GOVE RNMENT OF ANY FOREIGN COUNTRY OR TERRITORY, FCRA IS NOT ATTRA CTED. WHEN UNDISPUTEDLY, THE TRANSACTION OF RS.9,45,28,000/- I S A GRANT GIVEN BY FRENCH GOVERNMENT TO THE ASSESSEE SOCIETY WHICH IS A JOINT ITA NO.2802/DEL./2014 9 VENTURE OF FRENCH GOVERNMENT AND GOVERNMENT OF INDI A, THE TRANSACTION OF TRANSFERRING THE GRANTS IS A TRANSAC TION BETWEEN BOTH THE COUNTRIES AS SPECIFIED IN THE LETTER (SUPRA). FURTHERMORE, VIDE LETTER DATED 08.06.1985, AVAILABLE AT PAGE 28 OF TH E PAPER BOOK, ADDRESSED TO SECRETARY GENERAL, MINISTRY OF EXTERNA L RELATIONS, GOVERNMENT OF FRANCE BY SHRI RAMESH BHANDARI, THE T HEN FOREIGN SECRETARY, IT IS CATEGORICALLY MADE CLEAR THAT, THE ASSESSEE SOCIETY ESTABLISHED FOR PROMOTION OF SCIENTIFIC RESEARCH ET C. WILL BE EXEMPT FROM PAYMENT OF INCOME-TAX. SO, IN THESE CIRCUMSTANCES, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNE D BY LD. CIT (A). CONSEQUENTLY, GROUND NO.3 OF ORIGINAL GROUNDS AND G ROUNDS NO.2 & 5 OF ADDITIONAL GROUNDS ARE DETERMINED AGAINST TH E REVENUE. GROUND NO.4 OF ORIGINAL GROUNDS AND GROUND NO.3 OF ADDITIONAL GROUNDS 13. AO MADE AN ADDITION OF RS.8,849/- UNDER THE HEA D INTEREST INCOME U/S 13(1)(D) ON THE GROUND THAT DEPOSITS IN THE FRENCH BANK VIOLATES THE PROVISIONS OF SECTION 11(5) READ WITH SECTION 13(1)(D). FOR THE SAKE OF REPETITION, WE ARE OF THE CONSIDERE D VIEW THAT WHEN THE ASSESSEE SOCIETY IS A JOINT VENTURE OF GOVERNME NT OF INDIA AND GOVERNMENT OF FRANCE TO PROMOTE SCIENTIFIC RESEARCH IN BOTH THE COUNTRIES AND FUNDS ARE JOINTLY CONTRIBUTED BY BOTH THE GOVERNMENTS, THE FUNDS RECEIVED AS GRANT BY THE ASS ESSEE FROM THE ITA NO.2802/DEL./2014 10 FRENCH GOVERNMENT ARE DEPOSITED IN THE CREDIT INDUS TRIAL COMMERCIAL PARIS, FRENCH BANK WHICH ARE IN ACCORDAN CE WITH THE RULES AND REGULATIONS OF SOCIETY, INTEREST THEREON IS NOT HIT BY PROVISIONS OF SECTION 11(5) READ WITH SECTION 13(1) (D) OF THE ACT IN ANY MANNER, THE SAME BEING NOT AN INVESTMENT. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED B Y LD. CIT (A), HENCE THIS GROUND IS ALSO DETERMINED AGAINST THE RE VENUE. GROUND NO.5 OF ORIGINAL GROUNDS GROUNDS NO.6 & 7 OF ADDITIONAL GROUNDS 14. GROUND NO.5 OF ORIGINAL GROUND AND GROUNDS NO.6 & 7 OF ADDITIONAL GROUNDS ARE GENERAL IN NATURE NOR ANY AR GUMENT HAS BEEN ADDRESSED BY THE LD. DR, HENCE THE SAME ARE DISMISS ED. 13. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF AUGUST, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF AUGUST, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.