ITO Vs Sports Goods Export Promotion Council (ITAT Delhi)
ITAT Delhi concluded that grants were given specifically for participation in a particular event held in abroad, grant was utilized as per terms and conditions and it was not free for the assessee to use the funds voluntarily. Accordingly, approval of CBDT u/s 11(1)(c) of the Act not required.
Facts- The present appeal is preferred by the revenue mainly on the ground that CIT(A) erred in holding that spending by the trust outside India, without approval of CBDT u/s 11(1)(c) of the Act is permissible, despite the fact and ration of relied upon cases were not directly related to application of section 11(1)(c) of the Act.
Conclusion- CIT(A) has granted relief to the assessee for AY 2012-13, 2013-14 and 2014-15 under identical facts and circumstances, wherein, it was held that grants were given specifically for participation in a particular events held in abroad, the grant approval included a condition that a separate account for the projects have to be maintained. The assessee had utilized the funds as per terms and conditions of grant and the grants were not to be utilized for any other purpose than for which it was issued and also execution of the project was not to be entrusted to any other organization. Therefore, it is evident that the assessee is not free to use the funds voluntarily as per its own whims and fancies and the same has to be spent as per the terms and conditions of the grant.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been directed against the order of Ld. Commissioner of Income Tax (Appeals ) 36 New Delhi dated 15.3.2018 for Assessment year 2011-12.
2, Grounds raised by the Revenue read as follows:-
“1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) was correct in holding that spending by the trust outside India without the approval of the CBDT u/s 11(1 )(c) of the Act is permissible, despite that the facts and ration of relied upon cases were not directly related to application of section 11 (1 )(c) of the Act.
2. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) erred in not appreciating the decision of the Hon’ble Delhi High Court in the case of NASSCOM, in which the Hon’ble Court held that non observance of the condition in section 11(1 )(c) of the Act amounts to treating the said section ‘infructuous’.
3. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) was correct in not appreciating that it was not established that the amount given as grant for specified purpose was actually utilized for the said purpose.
4. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) was correct in not appreciating as to whether it is open and permissible for a trust to receive any amount for any activity, which is not forming part of its income u/s 11 and 12 of the Act, especially after incorporation of proviso to section 2(15) of the I. T. Act.
5. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) was correct in treating of the Govt, grant as exempt income, not to be included as receipt without appreciating that as per I. T. Act no such exemption has been made for Govt, grants, even though for specific purposes,
6. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”
3. Supporting the assessment order the Ld. Sr. DR submitted that the Ld. CIT(A) was not correct in holding that spending money by the trust outside India without the approval of CBDT under section 11(1)(c) of the Act is permissible, despite that the facts and ratio of decisions relied upon cases were not directly related to application of section 11(1)(c) of the Act. Ld. Sr. DR submitted that the Ld. CIT(A) has also erred in not appreciating the decisions of Hon’ble Delhi High Court in the case of NASSCOM in which it was held that non observance of the condition in section 11(1)(c) of the Act amounts to treating the said section infructuous. Ld. Sr. DR also submitted that Ld. CIT(A) was correct in not appreciating as to whether it is open and permissible for a trust to receive any amount for any activity which is not forming part of its income under section 11 and 12 of the Act especially after incorporation of provision to section 2(15) of the Act. Therefore, Ld. Sr. DR submitted that the impugned first appellate order may kindly be set aside by restoring that of the AO. Supporting the first appellate order the Ld. assessee’s representative submitted that the Ld. CIT(A) after considering the facts and circumstances of the case rightly granted relief to the assessee by following the rule of consistency as the Ld. CIT(A) -40 New Delhi had accepted appellant’s grounds for assessment years 2012-13, 2013-14 and 2014-15 i.e. subsequent assessment years on the identical facts and circumstances. Therefore the Ld. CIT(A) was also right in following the order dated 09.02.2018 of Ld. CIT(A) -40 and granting relief to the assessee.
4. On careful consideration of the rival submissions from the first appellate order we observe that Ld. CIT(A) has allowed appeal of the assessee for AY 2011-12 with following observations and findings:
“4.2.3.1. I have considered the assessment order, submissions of the appellant, the Remand Reports both by the Assessing Officer as well as comments of the Joint Commissioner of Income Tax and rejoinders of the appellant. The AO has disallowed the said expenses by holding that income applied on activities outside India is not eligible for exemption unless the conditions laid down the provisions of section 11(1)(c) are met. It was also noted that the appellant has neither engaged in promotion of international welfare in which India is interested nor the appellant has furnished any approval of the CBDT as required under the said section.
4.2.3.2. The appellant has relied upon the judgment of the Hon’ble ITAT Delhi in the case of Apparel Export Promotion Council for the year 1998-99 in ITA No.2613/Del/2005 where expenditure incurred outside India on participation in fairs, buyers and sellers meets and delegation expenses have been allowed. If has further been mentioned that the appeal of Revenue has been dismissed by the Hon’ble Delhi High Court and Hon’ble Supreme Court. It has also been submitted that the case of the appellant is exactly the same as referred to in the case of Apparel Export Promotion Council and that the formation of aims and objects are also similar, the only difference being the product segment, i.e., promotion of export of sports item of India in the case of appellant as against apparel by Apparel Export Promotion Council. It has also been submitted that Ministry of Commerce is providing grants to the appellant to achieve the objects of export promotion and the said grant specific to the fares and exhibition or programmes for promotion of Indian Export of Supports Goods and Toys. It has further been submitted that the appellant does not have any discretion to spend these funds and as per the grants approval, any unspent money is to be refunded to the Ministry. It has also been submitted that these grants cannot be considered as voluntary contribution as defined under section 12 and thus cannot be concluded in total income of the appellant under section 11. Reliance has been placed on the decision of the Delhi High Court in the case of DIT Vs. Society for Development alternative [(2012) 205 taxman. 373 (Delhi)] and also in the case of Nirmal Agricultural Society vs. ITO [71 ITD 152 (Hyd.) and also in case of Dy. Director of Income-tax vs. Centre for World Solidarity (ITA No. 1443/Hyd/2014) of Assessment Year: 2011- 12.
4.2.3.3. I have also considered the documents through which administrative approval and expenditure sanction for release/approval of grant in aid was given to the appellant. It is seen from these documents that the grant in aid has been sanctioned for participation in specific events, details of which are as under:
