Oisca North India, New Delhi V. ITO (E) - Ward- 2(4), New Delhi

ITA 7925/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1401 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 29-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 142(1); 80G; 12A; 143(1); 143(2)

Judgement Text

1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.7925/Del/2019 [Assessment Year : 2016-17] Oisca North India, A-27, Oisca North India, Okhla Industrial Area, Phase-1, Delhi-110022. PAN-AAAAO0549D vs ITO (Exemption), Ward-2(4), New Delhi APPELLANT RESPONDENT Appellant by None Respondent by Shri Om Prakash, Sr.DR Date of Hearing 24.05.2022 Date of Pronouncement 24.05.2022 ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2016-17 is directed against the order of Ld. CIT(A)-40, Delhi dated 05.07.2019. 2. The assessee has raised following grounds of appeal:- 1. “The Learned Assessing Officer has erred on facts and in law in passing the impugned order which is contrary to law, equity and justice and facts and material on record, arbitrary based on conjectures and surmises, passed without application to defend. 2. The appellant denies his liability to tax as determined and computed by the learned assessing officer and the manner in which it has been so determined or computed. 3. The Learned Assessing Officer has erred on facts and in law in calculating the Total income and disallowing the education expenses amounting to Rs 30,91,864. 4. The Learned Assessing Officer has erred in law and on facts in initiating the penalty proceedings us 271(1)(C).” 2 | Page 3. At the time of hearing, no one was present on behalf of the assessee. It is seen from the records that since 22.12.2020, no one has been attending the hearing on behalf of the assessee. The notices sent through speed post are returned unserved with remark “address left without instruction”. The assessee has not provided current address to the Registry. It was incumbent upon the assessee to notify the change into address. However, no such information was given to the Registry. Under these facts, the appeal of the assessee is taken up for hearing in the absence of the assessee and is being disposed off on the basis of material available on record. 4. The only effective ground in this appeal is against the disallowing the expenditure amounting to Rs.30,91,864/-. FACTS OF THE CASE 5. Facts giving rise to the present appeal are that the assessee filed its return of income through e-mode declaring income of Rs.5,900/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (“the Act”) and the case was selected for limited scrutiny under CASS to ascertain whether outward foreign remittance is from disclosed sources and appropriate withholding and reporting obligations have been complied with. Accordingly, notices u/s 143(2) & 142(1) of the Act were issued to the assessee on 10.07.2017 and 11.05.2018. The assessee is a trust duly registered u/s 12A of the Act. The assessee was also granted registration u/s 80G of the Act vide order dated 16.08.2010. The Assessing Officer (“AO”) observed that as per Form No.15CB submitted by the assessee, there was foreign remittances of Rs.3,10,000/- on 25.03.2016; Rs.8,95,390/- on 08.12.2016 and Rs.18,86,474/- on 16.10.2015. Thus, the 3 | Page assessee made foreign remittance of Rs.30,91,864/-as payment against education tour package. The AO called upon the assessee to explain regarding allowability of the expenditure. The assessee filed its response. The reply of the assessee was not found acceptable and the assessing authority therefore, held that expenses of Rs.30,91,864/- were applied outside India and was in contravention u/s 11(1)(c) of the Act. 6. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who sustained the addition, thereby the finding of AO was affirmed. 7. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 8. Ld. Sr. DR strongly supported the orders of the authorities below and submitted that there is no infirmity in the order of the authorities below. He contended that the expenditure was incurred outside India and no permission from CBDT is required u/s 11(1)(c) of the Act was obtained. 9. I have heard the contention of the Ld.Sr.DR and perused the material available on record and gone through the orders of the authorities below. Before the AO, the submissions of the assessee was that amount of expenditure incurred by the society was not for a charitable purpose which tends to promote international welfare in which India is interested. Therefore, provision of section 11(1)(c) of the Act and approval by the CBDT, could not be applicable. This contention of the assessee was rejected by both the authorities below. Ld.CIT(A) has given a detailed reasoning for not accepting the contention of the assessee by observing as under:- 4 | Page 4. Determination 4.1. Grounds of appeal Nos.1, 2, 3 & 4 challenge the disallowance of Rs.30,91,864/- as application of income in view of the provisions of section 11(1)(c). 4.1.1. The Assessing Officer held that the provisions of section 11(1)(c) were applicable in the case of the assessee and that in absence of approval of the CBDT as required under section 11(1)(c), the amount of Rs, 30,91,864/- which was remitted to Japan was not allowed as application. The appellant has submitted that the provisions of section 11(1)(c) are not applicable in the case of the appellant. It has been submitted that the assessee society neither has property in its own name nor derived any income from the property during the year under consideration. It has further been submitted that a programme was organised and that the amount of expenditure incurred by the society was not for a charitable purpose which tends to promote international welfare in which India is interested. 4.1.2. I have considered the assessment order and the submissions of the appellant. Section 11(1)(c) reads as under: "11. (1) 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 — (c) income [derived] from property held under trust— (i) created an or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April 1952, to the extent to which such income is applied to such purposes outside India: 5 | Page Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income;. 4.1.3 From a plain reading of section 11(1)(c) it is clear that income applied on activities outside India is not eligible for exemption unless the following conditions are fulfilled: i. The charitable organization is a trust which has been created before 01.04.1952 or is engaged in promotion of international welfare in which India is interested. ii. The CBDT by a general or special order has granted exemption for carrying out such activities. 4.1.4 In the case of Director of Income-tax (Exemption) Vs. National Association of Software & Services Companies [(2012) 345 ITR 362 (Delhi)], the Hon'ble Delhi High Court held that the income of the trust should not only be applied for charitable purposes but should also be applied in India to such purposes. "...The meaning sought to be attached by assessee to the words 'in India' as qualifying only the 'purposes’ places a strain on the natural or grammatical interpretation of the group of words. If what assessee contends is correct, then section 11(1)(c) may become redundant and otiose. If as assessee says, the income of the trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and which was created after 2-4-2952 to apply to the CBDT for a general or special order directing that the income to the extent to which it is applied to the promotion of international welfare outside India shall not be denied the exemption, nor would it be necessary for a charitable or religious trust created before the aforesaid date to seek such an order from CBDT in respect of its income which is applied to charitable or religious purposes outside India. Therefore, the words 'in India' appearing in section 11(1) a) and the words 'outside India' 6 | Page appearing in section 11(1)(c) of the Act qualify the verb 'applied' appearing in these provisions and not the words 'such purposes'." 4.1.5 In the case of India Brand Equity Foundation vs. Assistant Commissioner of Income- tax (Exemption), Trust Ward-II, New Delhi [(2012) 53 SOT 506 (Delhi)], in para 9, the Hon'ble ITAT held as under: "Now, it is to be seen that the words ’to the extent to which such income is applied to such purposes in India' appearing in section 11(1)(a) only require that the charitable purposes should be confined to India or the application of the income of the trust to the execution of such purposes can be outside India. The word 'applied' is a verb used in past tense. In the provision, it is used in the transitive form because it is followed by the words 'to such purposes in India'. It answers three questions which would arise in the mind of the reader: apply what? Applied to what? And where? The answers would then make the meaning obvious. The answer to the first question would be: apply the income of the trust. The answer to the second question will be : applied to charitable purposes. The answer to the third question will be; applied in India. Thus, even grammatically speaking, the group of words 'to such purposes in India’ qualifies the preceding verb applied'. It is a case of a verb being qualified by two prepositions which follow, viz., 'to' and 'in'. So, grammatically also, it would be proper to understand requirement of the provision in this way, that is, that the income of the trust should be applied not only to .charitable purposes, but also applied in India to such purposes. The submissions of the assesses that the words 'in India' qualify only the words 'such purposes' so that only the purposes are geographically confined to India does not appear to be the natural and grammatical way of construing the provision. That would break or dog the natural flow of the entire group of words 'to the extent to which such income is applied to such purposes in India. The meaning sought to be attached by the 7 | Page assesses to the words 'in India' as qualifying only the 'purposes' places a strain on the natural or grammatical interpretation of the group of words. If what the assesses contends is correct, then section 11(1)(c) may become redundant and otiose. If as he says, the income of the trust am be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and which was created after 1-4-2952 to apply to the CBDT for a general or special order directing that the income to the extent to which it is applied to the promotion of international welfare outside India shall not be denied the exemption, nor would it be necessary for a charitable or religious trust created before the aforesaid date to seek such an order from CBDT in respect of its income which is applied to charitable or religious purposes outside India. Therefore, the words 'in India' appearing in section 12(2)(a) and the words ’outside India' appearing in section 11(l)(c) qualify the verb 'applied' appearing in these provisions and not the words 'such purposes'." 4.1.6 In the case of the assessee it is a fact that die amount has been applied outside India. In view of the fact that die expenditure was incurred outside India and in view of the judgement of the Hon'ble Delhi High Court in the case of Director of Income-tax (Exemption) Vs. National Association of Software & Services Companies (supra) and decision of the Hon’ble ITAT, Delhi in the case of India Brand Equity Foundation vs Assistant Commissioner of Income Tax (Exemption), Trust Ward-II, New Delhi (supra), the disallowance of expenditure applied outside India is upheld. Grounds of appeal Nos. 1, 2, 3 and 4 are dismissed.” 10. From the above decision of Ld.CIT(A), it is clear that he has relied upon the decision of the Tribunal and Hon’ble Delhi High Court in the case of DIT(Exemption) vs National Association of Software & Services Companies [2012] 8 | Page 345 ITR 362 (Delhi). The assessee has not rebutted the finding of the authorities below and has not stated as to how the case laws as relied upon by the authorities below, are not applicable to the facts of the present case. Therefore, in the absence of any other contrary binding precedence, I don’t see any reason to interfere in the finding of Ld.CIT(A), the same is hereby affirmed. The grounds raised by the assessee are therefore, rejected. 11. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 24 th May, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI