Income Tax Appellate Tribunal - Delhi
Dcit (Exemption), New Delhi vs Society For Indian Automobile ... on 30 April, 2020
आयकर अपील य अधकरण, द ल यायपीठ "जी", नई द ल म
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G', NEW DELHI
सु ी सष
ु मा चावला, उपा य! एवं डॉ. बी आर आर कुमार ,लेखा सद)य के सम!
BEFORE MS. SUSHMA CHOWLA, V.P & DR. B.R.R. KUMAR, A.M.
आयकर अपील सं. / ITA No. 1284/Del/2015
िनधा रण वष / Assessment Year: 2010-11
M/s. Society for Indian Automobile Manufacturers,
Core-4B, India Habitat Centre,
Lodhi Road, New Delhi-110003.
PAN-AAATS4258A ............अपीलाथ /Appellant
vs
The ITO (Exemption),
Trust Ward-II, New Delhi. ............. यथ / Respondent
vs
आयकर अपील सं. / ITA No. 2861/Del/2011
िनधा रण वष / Assessment Year: 2006-07
The DCIT(Exemption),
Circle-2(1), Room No.2408, 24th Floor,
E-2 Block, Dr.S.P.Mukherjee Civic Centre,
New Delhi-110002. .............अपीलाथ /Appellant
vs
M/s. Society for Indian Automobile Manufacturers,
Core-4B, India Habitat Centre,
Lodhi Road, New Delhi-110003.
PAN-AAATS4258A ............. यथ / Respondent
अपीलाथ क ओर से / Appellant by: Sh. Gaurav Jain, Adv. &
Sh. Kunal Kokhale, Adv.
यथ क ओर से / Respondent by: Sh. Abhisek Kumar, Sr.DR
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 03.02.2020 Date of Pronouncement: 30.04.2020
आदेश / ORDER
PER SUSHMA CHOWLA, VP The present appeal filed by assessee and the Revenue is against order of CIT(A)-40, New Delhi dated 30.12.2014 and CIT(A)-36, New Delhi dated 30.09.2016 relating to assessment year 2010-11 & 2009-10 against the order passed under section 143(3) and 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act') respectively.
2. The Revenue and the assessee have raised following grounds in these appeals:-
Grounds of appeal
3. The issue raised vide Ground of appeal Nos. 1 & 2 by the assessee is against denial of exemption claimed u/s 11 & 12 of the Act.
4. Briefly the facts and circumstances of the case the assessee is a trade association which was created for the cause of Indian Automobiles. The assessee was constituted with the charitable objects and as part of the objects, it was receiving membership fee; income from distribution of technical literature, publication for the benefits of its.........................; was also organizing seminar/conference wherein participation fee was charged. The assessee was also organizing the Auto Expo Exhibition alongwith ITPO upto AY 2008-09. The expenses claimed by the assessee were allowed u/s 11 & 12 of the Act. However, from AY 2009-10 when proviso 2 was added u/s 15 of the Act, the exemption claimed u/s 11 & 12 of the Act was disallowed to the assessee. The year under appeal before us in AY 2010-11 and in view of Proviso 2 of Section 15 of the Act, the assessee was receiving membership fee and also charging participation fee for organizing different seminars, conferences, the exemption claimed u/s 11 & 12 of the Act was denied. The case of the Revenue was that the assessee was not doing for the benefit of publication at large. It was further held that the principle of mutuality would not apply as the income of the assessee was not exclusively from its own member only. The Assessing Officer denied the exemption claimed u/s 11 & 12 of the Act to the assessee and it was upheld by the CIT(A) against which the assessee is in appeal before us.
5. The Ld.AR for the assessee pointed out that the issue raised, stand decided in favour of the assessee by the order of the Tribunal in ITA No.4837/Del/2012 relating to AY 2009-10 dated 06.06.2016. Our attention was drawn to para 11 at page 83 in this regard. The Ld.AR for the assessee further pointed out that the Hon'ble High Court vide ITA No.857/2016 dated 14.12.2016 has upheld the order of the Tribunal. The SLP filed by the Department has been dismissed by the Hon'ble Supreme Court for low tax effect.
6. The Ld.DR for the Revenue fairly pointed out that the issue stands covered by the Tribunal in assessee's own case and by the judgement of the Hon'ble Delhi High Court.
7. The first issue raised in the present case is claimed of exemption u/s 11 & 12 of the Act. The assessee trust is a registered trust u/s 12A of the Act. It was constituted with the charitable object of taking up the cause of Indian Automobile Manufacturer, under which it received membership fee from its members and technical literature publication. The assessee also charged participation fee from seminars and conferences. The claim of exemption u/s 11 & 12 of the Act was denial of the assessee in Assessment Year 2009-10 consequent to the insertion of proviso 2 under section 15 of the Act. The Tribunal in AY 2009-10 (supra) has literally discussed the issue and vide para 11 onwards held and noted the various activities undertaken by the assessee and held the same to be chargeable. The Tribunal further held that where the assessee has generated some access of receipt over expenses in undertaking these activities. The same was normal incident of the activity of promotion of automobile industry and could not be characterized with business activities. The assessee was held to be entitled to claim the benefit u/s 11 & 12 of the Act. The Hon'ble Delhi High Court in assessee's own case vide order dated 14.12.2016 held that "the mere circumstance of collection of such amounts did not result in the assessee losing its essential character of being establish for charitable purposes." The Hon'ble Delhi High Court relied on the ratio laid down in the earlier judgements of Hon'ble Delhi High Court in India Trade promotion Organization vs DGIT 2015 (374) ITR 333 and Institution of Chartered Accounts vs DGIT(E) 2013 (358) ITR 91 (Del.).
8. The appeal filed by the Revenue before the Hon'ble Supreme Court has been dismissed in low tax effect.
9. The issue raised in the present appeal being squarely similar to the issue raised in Assessment Year 2009-10. Following the same parity of reasoning, we hold that the assessee is entitled to claim exemption u/s 11 & 12 of the Act and the same is directed to be allowed to the assessee. Thus, Ground Nos. 1 & 2 are allowed.
10. The Ld.AR for the assessee pointed out that the issue raised in Ground No.3 in this appeal was alternate plea made by the assessee, on without prejudice basis, it would become academic incase Ground Nos. 1 & 2 are allowed. Hence, Ground No.3 is dismissed.
11. Now, coming to the next issue vide Gorund No.4 wherein the assessee is aggrieved by the orders of the authorities below in holding that since the assessee was not entitled to claim deduction u/s 11 of the Act then the corpus donation was treated as income of the assessee.
12. The Ld.AR for the assessee drawn our attention to the audited balance sheet and income & expenditure account which is at page 9 of the Paper Book and pointed out that the surplus of the year was transferred to funds under different heads i.e Rs.80 Lakhs & Rs.90 Lakhs. He stressed that the said amounts which were added by the AO were not received in the year but transferred profits of the year. Our attention was drawn to Schedule (1) at page 10 of the Paper Book which talked of the corpus funds under which Rs.90 Lakhs was transferred under income & expenditure account then our attention was drawn to Schedule 4, 5 & 6 where amounts were again transferred from income & expenditure accounts totaling Rs.80 lakhs. He stressed that these were not shown and claimed as corpus received and there were not received any corpus donation. Then, he further drawn our attention to the computation of income at pages 2 & 3 of the Paper Book. The Ld.AR for the assessee pointed out that the aforesaid transferred to the income and expenditure account were not claimed as exemption of income but were added back and were part of the gross income declared by the assessee. The Ld.AR for the assessee stated that once the assessee had not claimed any exemption under said quotation, there was no merit in the aforesaid addition.
13. The Ld.DR for the Revenue placed reliance on the order of the AO and pointed out that the corpus funds were taxable in the hands of the assessee.
14. We have heard the rival contentions and perused the record. The limited issue which is arising vide Ground No.4 is against the action of the Revenue authorities in holding that the amount aggregating to Rsd.1,70,00,000/- transferred from surplus to corpus fund, clean air and vehicular emission fund, road safety and traffic management fund and automotive fund. The questions which needs to be addressed is as to whether the assessee had shown any such corpus donation and also whether the assessee claimed any exemption under the provisions of the Act on account of such amounts. The perusal of the income & expenditure account would reflect that after the income from various sources was shown and the expenditure was claimed under various heads, hence amounts were transferred which are as under:-
Page 9 A, B, C, D, E
15. In another words while drawing up the excess of expenditure carrying forward the amounts and the balance as excess income over expenditure. In the schedule to the balance sheet if we look at the corpus fund, the amounts of Rs.90 Lakhs transferred to corpus funds and the narration is "transfer from income and expenditure account i.e. for Rs.90 Lakhs". Similarly, amounts have been transferred to the different funds as tabulated above. While drawing up the income for the year under consideration, the assessee has very clearly pointed out that that all these amounts which are transferred to funds are not to be considered as application of income and accordingly, the income has been computed in the hands of the assessee. In such a scenario, we find no merit in the exercise undertaken by the AO, which has been confirmed by the CIT(A), we reverse the findings of the CIT(A) in this regard and direct the AO to delete the aforesaid addition made in the hands of the assessee. Thus, Ground No.4 raised by the assessee is allowed.
16. Next issue raised by the assessee vide Ground No.5 against the addition of Rs.64,72,647/- made on account of alleged foreign grants received during the year on account of pending approval under Foreign Contribution Regulation Act (in short "FCRA").
17. Briefly the facts relating to the issue, the AO vide para 13.1 notes from the schedule 7A of the balance sheet that "during the year foreign grant received and shown under the head "Foreign Grunt pending approval and utilization". The grant was received for Simba project and Stadium Project amounting Rs.33,68,659/- and Rs.9,93,520/- respectively and an amount of Rs.1,10,468/- was earned as interest thereon. The amount totaling Rs.64,72,647/- received on account of "Foreign Grants" and interest thereon has not been taken as receipts in the I & E A/c for the period under consideration. Since the assessee was following cash system of accounting, the whole of the amount i.e. Foreign Grants and interest thereon totaling Rs.64,72,647/- received during the year should have been shown as the income for the period under consideration, hence the same is added to the income."
18. The CIT(A) has upheld the aforesaid addition against which the assessee is in appeal before us.
19. The Ld.AR for the assessee further pointed out that from the narration itself, it is clear that these are the foreign grants pending approval and utilization for different projects. Our attention was drawn to schedule 7 & 8 of balance sheet and the Note No.3 of schedule 19 wherein it was pointed out that since funds were pending for approval, the same could not have been appropriated, so neither the grant nor the income was offered to tax. Our attention was also drawn to these FAQs issued by Ministry of Home Affairs in this regard with special reference to Question Nos. 15 & 31 wherein it has been clarified that the assessee can receive designated funds but the same could be utilized on its grant.
20. The Ld.DR for the Revenue pointed out where the assessee was following cash system of accounting, the said amount should have been added in the hands of the assessee.
21. The Ld.AR for the assessee in re-joinder stated that the advance if any received, even under cash system of accounting was not taxable. Reliance was placed on the ratio laid down in CIT vs Om Prakash Khaitan [2015] 376 ITR 390 (Del.) and various other decisions.
22. We have heard the rival contentions and perused the record. The issue which needs adjudication vide Ground No.5 against the foreign grant which was admittedly pending for approval and utilization. The assessee in its balance sheet under schedule A had pointed out that in respect of Simba Project, the grant received was Rs.33,68,659/- and under stadium project Rs.9,93,520/-. In this regard, a note was given under schedule 19 which read as under:-
"The society has since applied to Ministry of Home Affairs, Government of India under Foreign Contribution Regulation Act, 1976 (FCRA) for permission to accept the foreign contributions received during the year in respect of two projects viz. SIMBA and STADIUM. Pending approval of the same, the amount received in advance has been kept in a Foreign Contribution designated bank account along with the interest earned thereon. The corresponding credits have been shown in the Balance Sheet under the "Foreign grant pending approval and utilization". The grants and interest earned have not been considered as income of the year for computation of income under section 11 of the Income tax Act."
23. In the note, it was clearly pointed out that the assessee had applied to the Ministry of Home Affairs for permission to accept foreign contribution received. Further, the amount was kept in foreign contribution designated bank account pending approval of Ministry of Home Affairs. Further, the bank interest was also earned on such deposits which was shown as Rs.1,10,468/-. The question which arises is whether the said foreign grant received by the assessee and the interest on the same are taxable in the hands of the assessee. The certain FAQs have been answered by the Ministry of home Affairs on the said foreign grant and vide Question No.15, it has been clarified that interest of any other income earned from foreign contribution was to be considered as foreign contribution; the answer was "yes". Further, vide Question No.31, the query raised was it was pointed out "D''
24. In case, the same is viewed then it is clarified by the authorities that the banks made credit in foreign contribution received by an association without registration or prior permission. However, the banks are required to sent the report to MHA as per rule and the bank was also ensure that no withdrawal or transfer or utilization of the FC amount shall be made by the party, till such time the association produced documentary evidence from MHA permitting it to do so. So, the requirement of the law is that MHA has to permit the association to receive any foreign contribution and pending such permission, the receipts though credited to the bank accounts of the association would not became the income of the association as it has no power to withdraw the sum or utilize the sum.
25. Section 11 of the Foreign Contribution (Regulation) Act of 2010, sub- section (1) very clearly provides that no person shall accept foreign contribution unless such persons obtained a certificate from Central Government. Further, sub-section (2) provides that foreign contribution is to be utilized for specific purpose only after obtaining appropriate permission of the Central Government. In such a scenario, the assessee did not have the authority to utilize the sum which was received by it as foreign contribution though it was credited to its bank account. Similarly, the bank interest earned on such deposits was in the form of foreign contribution and the same does not approve to the assessee till specific approval for utilization of funds was given by the Central Government.
26. In such circumstances, we hold that there is no merit in access the foreign grant received pending sanction as income of the assessee. Now coming to the second aspect of the issue that where the assessee has following cash system of accounting, can be added in the hands of the assessee. The Hon'ble Delhi High Court in CIT vs Om Prakash Khaitan (supra) had laid down the proposition that the characterization of a receipt could taxable only at the time of appropriation and not at the time of receipt which at best was advanced received, which did not bear in particular characterization for the purpose of treating it as income. Applying the said proposition to the issue in hand, we find no merit including the foreign grant as pending approval as income of the assessee. Accordingly, Ground No.5 raised by the assessee is allowed.
27. The Ground Nos. 6 & 7 are consequential hence the same are dismissed.
28. The Ground No.1 raised by the Revenue is against the penalty levied u/s 271(1)(c) of the Act relating to Assessment Year 2009-10. Consequent to the order of the Tribunal (supra) when no quantum additions remain in the hands of the assessee, there is no merit in the levy of penalty u/s 271(1)(c) of the Act. Accordingly, we dismissed the appeal filed by the Revenue in this regard.
29. In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.
Order pronounced in the open court on 30th April, 2020.
Sd/- Sd/-
(DR. B.R.R. KUMAR) (SUSHMA CHOWLA)
लेखा सद य/ACCOUNTANT
सद य MEMBER उपा य /VICE
उपा य PRESIDENT
द ल / दनांक Dated : 30th April, 2020
* Amit Kumar *
आदे श क, -.त0ल1प अ2े1षत / Copy of the Order is forwarded to :
1. अपीलाथ5 / The Appellant
2. -6यथ5 / The Respondent
3. आयकर आय7 ु त (अपील )/ The CIT(A)
4. म:
ु य आयकर आय7 ु त / The Pr. CIT
5.
6. गाड< फाईल /Guard file.
आदे शानस ु ार/ BY ORDER, स6या1पत -.त //True Copy// Assistant Registrar, ITAT, Delhi