TaxTMI 
TaxTMI 
2010 (3) TMI 2
X X X X Extracts X X X X
X X X X Extracts X X X X
....asst. yr. 2004-05, ITA No. 89/Del/2009 is the appeal by the Revenue and ITA No. 3625/Del/2008 is the appeal by the assessee has been preferred against the order of learned CIT(A)-XXI, New Delhi in Appeal No. 293 of 2007-08, dt. 31st Oct., 2008 for the asst. yr. 2005-06. As all the appeals relate to the same assessee and having interconnected issues as also the identical issues for the different assessment years, all the appeals are being disposed of by this common order. 2. In the assessee's appeal in ITA No. 429/Del/2005 the assessee has challenged (i) the action of the learned CIT(A) in not treating the amount of taxes paid in respect of the income disclosed under VDIS as application of income for the purpose of s. 11, (ii) the action of the learned CIT(A) in upholding the view of the AO that the expenditure incurred on the event of activities outside India are not eligible to be treated as application of income for charitable purpose under s. 11 of the Act. 3. In the Revenue's appeal in ITA No. 580/Del/2005 the Revenue has challenged the action of the learned CIT(A) in directing that the subscription received is to be treated as income under s. 28(3) of the Act and to gran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the expenditure incurred on events and activities outside India has not eligible to be treated as application of income for charitable purpose under s. 11 of the Act. Each of the issues, which have been raised in the appeals are disposed of in seriatim. 6. With regard to the issue raised by the assessee challenging the action of CIT(A) in upholding that the action of the AO in not treating the taxes paid in respect of the income declared under VDIS as application of income for the purpose of s. 11 of the Act, the learned counsel for the assessee submitted that the assessee is a charitable institution which had not filed its returns of income since its inception in 1998 under the bona fide belief that its income was not liable to tax that under the legal provisions, the assessee was not entitled exemption under s. 11 of the Act and as the assessee did not have the registration under s. 12A, the assessee had filed its return for the asst. yrs. 1989-90 to 1997-98 under the VDIS Scheme of 1997 and had paid the aggregate of tax to an extent of Rs. 43,76,392 during the asst. yr. 1998-99, that the payment of applicable taxes are required to be made by virtue of the statutory prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x on account of income earned in an earlier assessment year and if at all an exemption is to be given, the exemption could have been given only to the income on which the taxes had been paid and as the income was not eligible for exemption provided under s. 12A, the expenses could not be treated as application of income. He vehemently supported the order of the AO and the CIT(A). 8. We have considered the rival submissions and have perused the material on record. At the outset, the undisputed fact remains that the assessee did not have the registration under s. 12A for the asst. yrs. 1989-90 to 1997-98 and the assessee had registration under s. 12A only for the asst. yr. 1998-99. Undisputedly, the taxes paid by the assessee also relate to the income generated by the assessee from whatever source for the asst. yrs. 1989-90 to 1997-98. True the tax, which has been paid during the asst. yr. 1998-99, is the tax in relation to the income for the asst. yrs. 1989-90 to 1997-98. However, once the assessee has the fact that it is not a new organization which has got registration under s. 12A the same assessee who did not have registration under s. 12A for the asst. yrs. 1989-90 to 1997-9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose of the charitable activities of the assessee; that the fact that the expenditure was incurred for attaining the objects of the assessee trust was not in dispute and the dispute centered only on the issue that the expenditure had been incurred outside India and not in India; that the provisions of s. 11 (1)(a) of the Act envisage the ground of exemption with respect of income, i.e., applied for attaining the charitable purpose or not of incurring the expenditure, is not relevant; that even though s. 11 (1)(a) uses the word "in India", what is intended is that the income is to be applied to such purpose in India, i.e., the purpose of the expenditure should be to attain the charitable objects in India; that the expenditure need not be incurred in India; that i.e., the benefit of the expenditure incurred should give the charitable benefit in India; that if any expenditure is incurred even outside India to achieve the charitable objects in India, it should be allowed as application, as it has been expended for advancing charitable objects in India and for fulfilling the charitable purpose in India that the assessee is primarily looking after the interest of the software develo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad been incurred outside India and that the intention of the legislature was to allow permission only if the expenditure was incurred in India. He vehemently supported the order of the learned CIT(A) and the AO. 11. We have considered the rival submissions. A perusal of the provisions of s. 11 (1)(a) of the Act clearly shows that the words used are "is applied to such purpose in India". The words are not "is applied in India". The fact that the legislature has put the words "to such purpose" between 'is applied' and 'in India' shows that the application of income need not be in India, but the application should result and should be for the purpose of charitable and religious purpose in India. Undisputedly, the assessee is registered under s. 12A as a charitable institution. It is also not disputed that the activities of the assessee are charitable. It is also not the case of the Revenue that the expenditure incurred by the assessee in Hanover, Germany has not resulted in the benefit being derived in India. In these circumstances, it cannot be said that the expenditure incurred by the assessee in Hanover, Germany, which resulted in and which was for the purpose of attaining the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibution towards the corpus that was not liable to tax in view of the provisions of s. 11(1)(d) of the Act the assessee had received subscription amount from its members in the form of non-refundable admission fee and annual subscription charges; that in terms of the memorandum of association of the assessee, every member was required to pay a one-time non-refundable admission fee of Rs. 5,000 at the time of admission, that in the case of the associate members, the fee was Rs. 3,000; that apart from this amount, each member was required to pay an annual subscription of an amount based in relation to the turnover of the members, that in terms of cl. 12.4 of the memorandum of association, the one-time non-refundable fee can be utilized only for the purpose of capital nature; that in these circumstances, the assessee had claimed the one-time admission fee for the new members as being in the nature of donation towards corpus and it is not to be included in the total income of the assessee in view of the provisions of s. 1(1)(d) of the Act; and that the learned CIT(A) deleted the addition made by the AO by holding that the assessee had not utilized the admission fee only for the capital ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be treated as income of the assessee, as per the provisions of s. 11(1)(d) of the Act. In these circumstances, the findings of learned CIT(A) on this issue are found to be well versed and the same are upheld. 15. Concerning the issue raised by the Revenue in ITA No. 172/Del/2008 challenging the action of learned CIT(A) in deleting the provisions for doubtful debts, it was submitted by the learned counsel for the assessee that the assessee had claimed deduction on account of the provisions for doubtful debts and the same was disallowed by the AO on the ground that there was no outflow of cash and consequently, no deduction would be allowed on the said amount; that similar disallowances had been made for the asst. yrs. 2002-03 and 2003-04 and the CIT(A) had deleted the said disallowances, but the Revenue had not filed any appeal for the disallowance for the asst. yrs. 2002-03 and 2003-04 that the CIT(A) had deleted the addition holding that the AO had failed to assign any cogent reason for disallowance of the expenditure; that on the principles of consistency, the deletion as made by the CIT(A) was liable to be upheld; and that the income derived by a trust/society claiming exe....