Foreign Payments for Charitable Work in India Counted as Application of Income Within India: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that the expenses made to foreign entities for carrying out the charitable work in India are considered an application of funds within India.

The assessee, The Advertising Standards Council of India, had applied for regular approval under Section 80G. However, the CIT (Exemptions) rejected the application, saying it was late with a delay of 18 months and that the assessee had made foreign expenses, violating Section 11(1)(c) of the Income Tax Act. This was challenged before the ITAT, Mumbai.

The assessee explained that the delay occurred because their long-standing Chartered Accountant had passed away, and a new firm had to review the company’s past income-tax records. The assessee said that this all took time in filing the application under Section 80G.

The assessee further informed that it is eligible for the renewal of registration under section 80G, as it had already held a valid 80G registration before the amendments to the Finance Act 2020.

During the hearing before ITAT, the assessee submitted new evidence showing that it had already held a proper approval under section 80G of the Act, which makes the council eligible for renewal. The tribunal concluded that these new submissions and evidence must be examined by the CIT(E). Therefore, the matter was sent back to CIT (E) for fresh consideration.

Regarding the second issue of foreign expenses, the assessee said that these were for membership fees, affiliation fees and software used for charitable work in India, like education, healthcare, administration and governance.

The ITAT agreed with the assessee on the foreign expenditure issue, saying that it did not violate Section 11(1)(c) of the Income Tax Act. The Tribunal referred to a previous ruling and upheld that the payments made to foreign entities for carrying out charitable activities in India are not considered application of Income outside India, and the same does not violate section 11(1)(c) of the act. Therefore, this issue was decided in favour of the assessee.