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• The foreign contributions received by the assessee have been shown differently in FCRA audited accounts and annual financial statements. Whereas, the assessee failed to explain the discrepancy between the figures. • The books of account are not complete and entries made are not supported by proper vouchers.
• Figures of income and expenditure account are unverifiable in absence of matching figures from the relevant ledger heads.
• The application of 85% of income towards charitable purpose, a condition precedent for granting approval under

7|Page AY: 2016-17 difference in the figures of foreign contribution as per the FCRA Account in Form FC-4 and as declared in the income and expenditure account. Further, he observed, though, the assessee claims itself to be a non-profit and non-Government organization with a mandate to assist Government of India and State Governments in the field of reproductive health, HIV/AIDS prevention, eradication of tuberculosis and maternal and child health with its main objects, in reality, it is indulging in business activity with a profit motive and not doing any charitable work. He observed, though, the assessee was involved in two major projects promoted by Government, however, in the garb of promoting such projects, the assessee, in fact, has promoted its own products, thereby, increasing its market presence. In the process, the assessee has diverted the donor's money for promotion, brand establishment by mass advertisement of own contraceptive brands. The nature of activity is purely commercial and no charity is involved. Thus, by diverting the Government grants and donor's fund to promote its own brand, the assessee has not applied its income wholly and exclusively for the objects for which it is established, hence, violated the conditions of third proviso to section 10(23C) of the Act. Further, he observed,

a) Difference in foreign contributions admitted in Income & Expenditure account as compared to the foreign contributions as per FCRA return in Form FC-4 filed by the assessee.
b) No separate books of account maintained for the business activity as required under 7th proviso to section 10(23C) of the I.T. Act, 1961.
c) The assessee is not carrying out any charitable activities as envisaged in Section 2(15) read with section10(23C)(iv) and other enabling sections of Income tax Act in true spirit and intention.

20. As regards the first allegation relating to the alleged difference in foreign contribution shown in the income and expenditure account and the FCRA return in Form FC-4, from the stage of Assessing Officer itself, the assessee has explained 23 | P a g e AY: 2016-17 that as per the FCRA Regulations, the assessee has to show the actual receipts received during the year. Whereas, in the income and expenditure account, the assessee, in terms with Income Tax Act has to show the foreign contribution on accrual basis. On a perusal of the statutory audit report for the year ended 31st March, 2016, it is observed, in a note forming part of the financial statements, the auditor has specifically stated that donations/grants received, other than the grants for specific purposes, are regarded as income when it is reasonably expected that the ultimate collection will be made during the year. Thus, from the aforesaid, it is observed that the income/fund shown in the income and expenditure account is on accrual basis, as, the assessee was reasonably certain that it will receive the grant/fund. From the details available on record, it is observed that in FCRA return filed in Form FC-4, the assessee has shown foreign contribution of Rs. 93,45,00,516/-, whereas, in the income and expenditure account, the assessee has shown such figure at Rs.107,61,69,730/-. Thus, the explanation of the assessee that the foreign contribution in FCRA return has to be shown on receipt basis is acceptable.