Hriday Vs ITO (Exemption) (Delhi High Court)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, decided a batch of five appeals filed by a charitable society registered under Section 12A of the Income-tax Act, 1961 for Assessment Years (AYs) 2010–11 to 2014–15. The appeals challenged a common order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 27 March 2017, which had partly upheld additions made by the Assessing Officer (AO) relating to grants remitted to the University of Texas, USA.
Since the issues across the appeals were identical, the Tribunal treated AY 2010–11 as the lead case and applied its findings to the remaining assessment years.
Background of the Assessee and Its Activities
The assessee is a voluntary organization named “HRIDAY (Health Related Information Dissemination Amongst Youth).” It is engaged in promoting health awareness and health activism among youth in India. The organisation conducts research and advocacy on health-related issues, particularly focusing on school students aged 10 to 13 years. It also undertakes community-based health education initiatives through schools.
The society received registration under Section 12A of the Income-tax Act on 14 December 1999. Its activities include promoting healthy lifestyles, providing health education on nutrition, physical activity and addiction avoidance, conducting research on health issues, and organising awareness programmes.
To further its objectives, the society collaborated with investigators from the University of Texas and other researchers in projects aimed at preventing tobacco use among youth. The collaborative research included designing and evaluating behavioural interventions and conducting school-based studies involving thousands of students.
Receipt of Grants and Sub-Grant to University of Texas
During the relevant years, the assessee received research grants from the National Institutes of Health (NIH), USA. The grants were intended for projects relating to prevention of tobacco use among adolescents and the development of community-based interventions.
Under the project framework, the investigators from the University of Texas were responsible for designing research methodology, modelling behavioural interventions and ensuring scientific integrity of the study. As part of the collaboration, a portion of the grant received by the assessee was remitted to the University of Texas as a sub-grant for services rendered in the project.
For AY 2010–11, the assessee received a grant of ₹91,07,120 from NIH and remitted ₹55,73,410 to the University of Texas. Similar remittances were made in subsequent assessment years.
Assessment Proceedings
During scrutiny assessment proceedings, the AO questioned the remittance of funds to the University of Texas and asked the assessee to explain why Section 11(1)(c) of the Income-tax Act should not apply. This provision deals with income applied outside India by charitable trusts.
The assessee submitted that the funds were transferred under a research collaboration agreement and that the University of Texas was a co-investigator responsible for scientific aspects of the project. It also explained that:
