TaxTMI 
TaxTMI 
2024 (2) TMI 698
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....ee is neither genuine nor incidental to the attainment of aims and objectives. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) is erred in allowing appeal of the assessee by merely relying on order of the Hon'ble ITAT without appreciating the facts of the case and findings of the AO. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) is erred in allowing appeal of the assessee by merely relying on order of the Hon'ble ITAT, whereas the same has not been accepted by the revenue and further appeal is being filed before the Hon'ble High Court. 5. The Appellant craves leave to add, alter, amend, append or delete any of above grounds." 3. Briefly stated, the assessee trust e-filed its return for AY 2016-17 on 11.10.2016 declaring Nil income. The return was processed under section 143(1)(a) of the Income Tax Act, 1961 ( the "Act" ) on 26.11.2016. The case was selected for scrutiny. During the course of assessment proceedings the Ld. Assessing Officer ("AO") noticed difference in the donation as per FCRA returns and those shown in Income and Expenditure Account. The Ld. AO submitted proposal....
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....ely commercial and no charity is involved and hence violated the conditions of third proviso to section 10(23C) of the Act. The Assessee also violated the conditions of 7th proviso to section 10(23C) by not maintaining separate books of account for its business activity. Based on the above observations, the learned CIT(E) has withdrawn the approval granted under section 10(23C) (iv). The Appellant had filed a TA appeal before the Delhi bench of the Income-tax Appellate Tribunal ("the Tribunal") bearing ITA No.433/Del/2021 challenging the action of the CIT(E) in rejecting the registration/ approval granted to the Appellant under section 10(23C)(iv). Vide order dated 30.11.2022, the Tribunal categorically rejected each and every allegation of the CIT(E) and held the order passed by the CIT(E) withdrawing approval granted under section 10(23C)(iv) of the Act, to be unsustainable and accordingly, set aside the same. The relevant observation of the honourable ITAT is quoted as under: "Now, the core issue which arises for consideration is, whether it can be said that the assessee is not carrying out charitable activity as envisaged in section 2(15) read with section 10(23C) (iv)....
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....ny allegation regarding the diversion of foreign contribution received for any other purpose, except the purpose for which it was given or it was utilized for the business gain of the assessee. Even, there is no violation, as alleged, under the Foreign Contribution Regulation Act. Thus, in absence of any contrary material brought on record by the Revenue, it cannot be said that the assessee has utilized the foreign contribution received in respect of Pehel Project' for its own commercial gain. 23. As regards the allegation of the Departmental Authorities that the assessee has earned profit by selling products, viz., Masti Brand of condoms in NACO project. The facts on record reveal that, though, as per the agreement with the Government, the Government has to supply the assessee two different brands of condoms, viz., Deluxe Nirodh and Masti, which are to be sold in the ratio of 70:30 respectively. However, the Government failed to supply the required number of Deluxe Nirodh indented by the assessee, which resulted in breach of contract and the assessee had to invoke the arbitration clause and the Arbitrator passed an award in favour of assessee. Thus, short supply of De....
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....s a charitable institution subsists. In fact, approval granted under section 80G of the Act is still continuing. These facts reflect the dichotomy in the stand of the revenue. For the purpose of section 12A and 80G of the Act the assessee is recognized as charitable institution, whereas, for the purpose of section 10(23C)(iv) assessee loses its charitable status. This approach of the revenue is unacceptable. 25. In the aforesaid scenario, the approval under section 10(23C) of the Act cannot be revoked, more so, when the objects of the assessee have remained same. We, for a moment, do not say that the competent authority under no circumstances can revoke the approval granted under section 10(23C)(iv) of Act. However, for doing so, the revenue must bring on record cogent material to demonstrate that the assessee has deviated from the core objects based on which approval under section 10(23C) (iv) was initially granted to the assessee. It is also a fact on record that the activities of the assessee are in the category of medical relief to the poor. Thus, if we interpret the provision of section 2(15) of the Act strictly, the proviso would not apply . That being the case, by r....
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....roval granted under section 10(23C)(iv) of the Act is unsustainable and set it aside by observing and recording the following findings:- "19. We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon. No doubt, the issue arising for consideration before us is the validity of the order passed by learned CIT (Exemption) withdrawing the approval granted under section 10(230)(iv) of the Act, that too, with retrospective effect Undisputedly, the assessee is a registered society created for the purpose of promotion of charitable objects, including, to promote, distribute and sale contraceptives, family welfare and/or family planning devices and drugs through social marketing techniques and to make them more popular for the Indian masses. The targeted population amongst whom these charitable objects have to be applied is the low income group people who are vulnerable and affected by malnutrition and lack of proper health care etc. It is a fact on record that the assessee has been registered as a charitable institution under section 12A of the Act since 20.03.1989 and registration under section 80G of the A....
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....pected 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. 21. The allegation of the Special Auditor that the assessee has not maintained separate books of account for the purpose of foreign contribution under the Foreign Contribution Regulation Act, 2010, is equally unacceptable. As brought to our notice by learned counsel for the assessee, there is no mandate under the Foreign Contribution Regulation Act, 2010 to maintain separate books of account for foreign contribution and business activities. The only requirement in law is, the assessee must maintain separate bank accoun....
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....he donation received has been diverted to other business activities of the assessee. It is observed, for the "Pehel Project' the assessee has entered into an agreement with its parent organization, a copy of which is at page 115 of the paper-book. As per the terms of the agreement. the assessee has to utilize the donation received for the purpose of promoting/educating the cause of unintended pregnancy which ultimately leads to improvement in nutrition and health of the low income group women. Towards this objective, the assessee has sold Freedom 5 and Freedom 10 at a price fixed by National Pharmaceutical Pricing Authority. It is observed, while alleging that the assessee earned profit from sale of these products, the departmental authorities have not taken note of the various costs incurred by the assessee, such as, distribution cost, advertisement cost, warehousing cost and other administrative cost. The departmental authorities have also ignored the fact that a substantial part of the contribution received was utilized for promotion and spreading awareness and increasing acceptance of an alternative method of family planning alien to the target population it is a fact on re....
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....23C)(iv) of the Act, the competent authority was satisfied that the assessee has fulfilled the threshold conditions for approval under section 10/23C)(iv) of the Act. 24. It is a fact on record that thereafter the authorities have renewed the approval year-after-year. In fact, learned Br. Counsel appearing for the assessee has placed on record scrutiny assessment orders passed for assessment years 2004-05 10 2013-14, wherein, the Assessing officer has allowed exemption under section 10(23)(iv) of the Act. Therefore, once the assessee satisfies the threshold conditions of section 10(23C) (iv) of the Act. The approval granted cannot be withdrawn, that too, with retrospective effect, alleging violation of certain compliance conditions. The Departmental Authorities have failed to differentiate between the threshold conditions and compliance conditions. The compliance conditions have to be examined in each assessment year and, in case, there is any violation in compliance conditions in any assessment year, assessee's claim of exemption for the said assessment year can be rejected. However, that cannot be a reason to revoke the approval granted under section 10(23C)(iv) of t....