Hon'ble Madhrai Bench of the Madras High Court set aside the assessment order passed u/s 153A of the Income Tax Act, 1961. The issue, inter-alia, include non compliance of mandatory requirements of Section 65B of Indian Evidence Act, 1872 in respect of electronic records.
 
The counsel of petitioner contend that, when the entire assessment has been framed only on the basis of the so-called electronic record which are said to be copies of Excel Sheet, Excel work note book etc., non compliance of Section 65B of the Indian Evidence Act renders the document inadmissible in the eye of law as held by the Supreme Court in the judgment reported in Anvar P. V. vs. P.K.Basheer and others reported in (2014) 10 SCC 473.
 
Following the above judgement, the HC directed as under:
 
<blockquote class="wp-block-quote">
c)the respondent should strictly comply with Section 65-B of the Indian Evidence Act if the respondent wants to use the electronic document by way of secondary evidence;
</blockquote>
 
Citation:
 
W.P(MD)Nos.11261, 11271, 11272, 11273 and 11765 of 2021 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

HC set aside assessment framed on the basis of electronic record in violation of requirements of Section 65B of Indian Evidence Act, 1872

65B of evidence act, income tax search, electronic evidence, 65B

Government has decided to provide income-tax exemption to ex-gratia payment received by family members of a person- - From the employer of such person (or) - From other person on the death of the person on account of COVID-19 during FY 2019-20 and subsequent years. Exemption is as under: &bull; Received from Employer - No limit &bull; Received from any other person - Rs. 10 Lakhs (in aggregate from all persons)
 
Author's Note: The death of the person should be on account of COVID-19. So, all the treatment related papers, hospital bills, medicine prescriptions etc. should be preserved in order prove cause of death. However, this depends upon what provisions are to be proposed in the Act.
 
Necessary legislative amendments for the above decisions shall be proposed in due course of time.
 
Source: PIB dated 25-06-2021

Government announces tax exemption for expenditure on COVID-19 treatment and ex-gratia received on death due to COVID-19.

COVID19 relief in income tax, tax exemption for COVID-19 expenditure, 

Due to technical issues, several valid returns (upto assessment year 2017-18) were not processed within the time limit stipulated under section 143(1) of the Income tax Act, 1961. This led to denial of legitimated income tax refund of the taxpayers.
 
Therefore, To mitigate genuine hardship being faced by the taxpayers on this issue, the CBDT, by virtue of its powers under section 119 of the Act, relaxed the time-frame u/s 143(1) and directs that all validly filed returns upto AY 2017-18 with refund claims which could not be processed u/s 143(1) can be processed now with the prior approval of Principal CCIT / CCIT Concerned. The intimation to such processing can be sent to assessee concern by 30th September 2021.
 
For more details, please refer <a href="https://1drv.ms/b/s!ApU2N0J4rEzogasG7_CzrAudHsAr1A?e=ubplo0" target="_blank" rel="noreferrer noopener">CBDT circular dated 5th July 2021.</a>

CBDT extended time for processing income tax refunds for the AY 2017-18 and earlier years

procession of return, ITR intimation u/s 143(1), income tax demand 

Merely suspecting on borrowing capacity cannot be ground for addition u/s 68

section 68 addition, addition based on suspicious, income tax survey 

Mumbai ITAT in its very short judgement but made very important observations and held that section 195, is a vicarious liability and its survival entirely depends on survival of the primary tax liability of income, embedded in the related payments, in the hands of the recipient. Once that primary liability stands quashed, as in this case, the very foundation of tax withholding demands under section 195 ceases to hold good in law.
 
In this case the counsel of the assessee pointed out that the very taxability of payments, in respect of which impugned tax withholding demands are raised, have been negated in the hands of the recipient, i.e. Braitrim UK Ltd., by a coordinate bench. A copy of the related order dated 21st August 2019 (in Braitrim UK Ltd. vs. DCIT; ITA Nos. 1750 to 1753/Mum/2015).
 
The full judgment is reproduced as under:
 
Judgment / Order
 
Pramod Kumar, Vice President And Ravish Sood, Member (J)
 
For the Appellant : Vasanti Patel
 
For the Respondents : S.S. Iyangar
 
ORDER
 
Pramod Kumar, Vice President
 
1. By way of these appeals, the assessee appellant has challenged corrections of consolidated order dated 30th January 2014 in the matter of tax withholding demands under section 201 r.w.s. 195 of the Income Tax Act 1961, for the assessment years 2005-06 to 2012-13
 
2. When these appeals came up for hearing, learned counsel for the assessee pointed out that the very taxability of payments, in respect of which impugned tax withholding demands are raised, have been negated in the hands of the recipient, i.e. Braitrim UK Ltd., by a coordinate bench. A copy of the related order dated 21st August 2019 (in Braitrim UK Ltd. vs. DCIT; ITA Nos. 1750 to 1753/Mum/2015) was also placed before us. In this order, the coordinate bench has, inter alia, observed as follows:-
 
13. We have carefully considered the rival submissions and perused the material on record. We find that the assessee is required to give a rebate/discount to the retailers based on the volume/units of sales to garment suppliers achieved by the Braitrim group. Subsequently, the proportionate share of rebate/discount is recovered by the assessee from its group companies, including BIPL, based on the relative sales of those group companies to the respective retailers. The assessee has, accordingly entered into a reimbursement agreement with BIPL, whereby BIPL has acknowledged its obligation to reimburse its proportionate share of the discount/rebate to the assessee based on sale volumes/units achieved by it. As per the Cost Reimbursement Agreement (CRA), such reimbursements are depicted as 'Administration charges' by BIPL in its books of account.
 
14. We find it relevant to refer to the following clauses of the Cost Reimbursement Agreement (CRA) in order to appreciate the nature and characterisation of the amount of reimbursements:-
 
i) that the title to the agreement is described as 'Cost Reimbursement Agreement';
 
ii) that the preamble to the agreement mentions the fact of payment of administration charges by the Assessee to the customer companies in respect of goods supplied by worldwide entities of Braitrim group including BIPL and the purpose of the agreement is to recover such charges by the assessee from BIPL;
 
iii) that Article 3 requires BIPL to compensate the assessee towards the proportionate administration charges in respect of goods supplied to the customer companies/suppliers;
 
iv) that Article 4 prescribes the method of computation of the proportionate share of the administration charges to be borne by BIPL determined as proportion of its sale to customer companies to the total worldwide sales of the Braitrim group; and,
 
v) that Article 5 stipulates that the payments made under the agreement represent reimbursement of administration charges borne by the assessee.
 
15. Therefore, so far as the understanding of the parties to the CRA is concerned, the same has been understood to be in the nature of reimbursement of the rebate/discount passed on by the assessee to the retailers. Factually speaking, it has also been established that there is no mark-up retained by the assessee while recovering from BIPL the rebate/discount given to the retailers. It is also clear that BIPL has also made sales to other independent parties for which no discount/rebate or administrative charges are payable to the assessee company. The aforesaid undisputed features of the arrangement clearly bring out that the transaction in question cannot be construed to be 'royalty' as understood by the income-tax authorities. This becomes even more pertinent once the nature of such payments by BIPL to the assessee has been admitted as such in the assessment of BIPL for assessment year 2007-08
 
16. Pertinently, the assessee stated that the transaction for reimbursement of administrative charges by BIPL to the assessee was subject to transfer pricing proceedings during the assessment year 2007-08, wherein the TPO questioned the commercial expediency of the transaction of payment for administration charges and determined the arm's length price as 'Nil', which was effectuated accordingly by Assessing Officer in the draft assessment order.
 
17. Before the DRP, BIPL raised objections against the draft assessment order, which was based on the order of the Transfer Pricing Officer. The DRP held as under:-
 
"The DRP has carefully considered the order of the TPO, submissions of the taxpayer and objections of the taxpayer. The main issue here is that the assessee has paid to its AEs an amount of ₹ 1,87,30,339 slating that these charges are paid as administration charges. However, as accepted by the taxpayer, these expenses are nothing but reimbursement of expenses incurred by the AE for the discounts to be passed on to the retailers by Braitrim UK. After considering the arguments of the assessee it can be inferred that Braitrim UK negotiates globally with various garment retailers to use the hangers manufactured by Braitrim group companies all over the world. As part of these arrangements/agreements Braitrim UK agreed to pass on the discount at the rate 1% of sale of hangers by Braitrim group of companies to the retailers. As rightly stated by the assessee because of this arrangement the taxpayer is getting business without much effort on advertisement and marketing as evidenced by no expenses on marketing or advertisement debited in the profit and loss account for the FY 2006-07. The Braitrim group companies supply the hangers to the garment manufacturers, which in turn supply to the ultimate retailers in the form of pre-hanged clothes. The assessee also supplied hangers to garment manufacturers within and outside India. Based on the sale of these hangers by the assessee Braitrim UK has to pay to the retailers at the rate of 1% on these sales made by the taxpayer to retailers through garment manufacturers. Before the DRP, the taxpayer also produced invoices raised by third party retailers against Braitrim UK to show that the said discount @ 1% on sale of hangers by the Indian entity was passed on to the retailers.....In view of the above discussion, we are satisfied that the discount given by the AE, Braitrim UK to the retailers is helping the tax payer to get the business without much marketing effort, for which the taxpayer is reimbursing the AE at the rate of 1% of sale of hangers in India, which was ultimately passed on to the retailers by the AE."
 
However, the DRP revised the arm's length price as computed by the TPO on account of the timing difference between the recognition of administration charges/rebate in the books of account of BIPL, vis-&agrave;-vis the amount recognized by the assessee in its accounts; and, accordingly, the assessment was finalised. When BIPL filed appeal before the Tribunal, the Tribunal, while accepting the payments to be reimbursements, restored the issue to the file of the DRP for examination of the reconciliation of invoices raised by the assessee and the invoices recorded by BIPL. The TPO, in response to the remand report called for by the DRP, as directed by this Tribunal, had accepted the contentions of BIPL and found the same to be in order.
 
18. From the aforesaid, it follows that for the assessment year 2007-08 there is a concurrent acceptance of the claim of BIPL that the payments are in the nature of reimbursement by all the authorities, viz. the TPO, the DRP and the Tribunal. Therefore, in the face of such concurrent acceptance of the nature of payment as being a mere reimbursement, it is untenable for the Revenue to contend in the captioned cases that the nature of the amount is otherwise. Therefore, what follows is that the expenses have been incurred by the assessee on behalf of BIPL and the same were merely reimbursed to the assessee. Ostensibly, the contractual responsibility of the rebates to be paid to retailers lies with the assessee. However, since the sales are made by BIPL, the commercial prudence postulates that BIPL bears the ultimate responsibility of such rebates in respect of India sales, and thus the payment of such reimbursements. Admittedly, the liability is definite and crystallised in the books of BIPL, and it merely represents normal discount. Thus, we are inclined to uphold the grievance of the assessee that the payments qualify as a pure reimbursement of expenses and accordingly, not taxable in India. The reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark-up and the assessee has furnished sufficient evidence to demonstrate the incurrence of expenses. There is thus no good reason to make any addition to income in respect of these reimbursements of expenses. The action of the Assessing Officer, as the learned counsel rightly contends, is on pure surmises and conjectures.
 
19. Here, we would also like to refer to the judgment in the case of AP Moller (supra). Facts of that case were that the assessee was a foreign company engaged in shipping business and was a tax resident of Denmark; that it had agents working for it, who booked cargo and acted as clearing agents for the assessee; and, that in order to help all its agents across the globe, the assessee had set up and maintained a global telecommunication facility called Maersk net system which was a vertically integrated communication system. The agents would pay for the system on pro rata basis. According to the assessee, it was merely a system of cost sharing and the payments received by the assessee from its agents in India were in the nature of reimbursement of expenses. The Assessing Officer, however, did not accept this contention and held that the amount paid by these three agents to the assessee were FTS rendered by the assessee and held them taxable in India under Article 13(4) of the Double Taxation Avoidance Agreement (DTAA) between India and Denmark and brought them to tax at 20% u/s. 115A of the Act. The CIT(A) dismissed the assessee's appeal, but the Tribunal allowed its further appeal. The Hon'ble High Court dismissed the Department's appeal holding that the Tribunal had rightly observed that the Maersknet-communication-system was an automated software based communication system which did not require the assessee to render any technical services; that it was merely a cost sharing arrangement between the assessee and its agents to efficiently conduct its shipping business; and, that it was part of the shipping business and could not be captured under any other provisions except under the DTAA. The Hon'ble Supreme Court, dismissing the appeal held as under:-
 
"....... the facts that the assessee had its information technology system, that the assessee had appointed agents in various countries for booking of cargo and servicing customers in those countries, preparing documentation, etc., through these agents, that for the sake of convenience of all these agents, a centralised system was maintained to avoid unnecessary cost, that the system comprised booking and communication software, hardware and a data communications network and was, thus, an integral part of the international shipping business of the assessee and ran on a combination of mainframe and non-mainframe servers located in Denmark, that the expenditure incurred for running this business was shared by all the agents and that the systems enabled the agents to co-ordinate cargos and ports of call for its fleet were findings of fact. Once these were accepted, by no stretch of imagination, could the payments made by the agents be treated as fees for technical services. The payments were in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. Neither the Assessing Officer nor the Commissioner (Appeals) had stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Once the character of the payment was in the nature of reimbursement of the expenses, it could not be income chargeable to tax. Moreover, freight income generated by the assessee in the assessment years in question was accepted as not chargeable to tax as it arose from the operation of ships in international waters in terms of article 9 of the DTAA. Once that was accepted and it was also found that the Maersk net system was an integral part of the shipping business which was allowed to be used by the agents of the assessee as well in order to enable them to discharge their role more effectively as agents, and the business could not be conducted without it, it could not be treated as any technical services provided to the agents."
 
20. Quite clearly, payments by way of reimbursement of expenses incurred on behalf of the payer cannot be construed as income chargeable to tax in the hands of the payee, a proposition which is approved by the Hon'ble Bombay High Court in the case of Siemens Aktiengesellschaft (supra). In view of the above discussion, we direct the Assessing Officer not to treat any part of reimbursement of expenses received by the assessee as income of the assessee. The assessee gets the relief accordingly on Ground No. 2 of the aforesaid appeal.
 
3. It is thus submitted that once the primary liability of the recipient has come to an end, vicarious liability of the payer cannot survive. We are urged to quash the impugned demands for this short reason alone.
 
4. Learned Departmental Representative does not dispute the facts stated by the learned counsel, but relies on the orders of the authorities below nevertheless.
 
5. The plea of the learned counsel is indeed well taken. A tax withholding liability, particularly under section 195, is a vicarious liability and its survival entirely depends on survival of the primary tax liability of income, embedded in the related payments, in the hands of the recipient. Once that primary liability stands quashed, as in this case, the very foundation of tax withholding demands under section 195 ceases to hold good in law. We, therefore, quash the impugned demands under section 201(1) r.w.s. 195 as well. The assessee gets the relief accordingly.
 
6. As we part with the matter, we make it clear that the present appeals are disposed of for short reasons discussed above. All other issues raised by the assessee have become infructuous, and are, therefore, dismissed as such.
 
7. In the result, all the appeals are allowed in the terms indicated above. Pronounced in the open court today on the 21st May, 2021.

Once the primary liability of the recipient has come to an end, vicarious liability of the payer cannot survive

section 195 tds, tax on non resident, tds on non resident NRI Taxation

<h2>Facts of the Case</h2>
 
The assessee company is engaged in the business of manufacturing machine tools, textile machines, air conditioning and refrigeration work, casting and job work for air conditioning and humidification, air control equipment and trading in engineering. The original return of income was filed by the assessee on 26/09/2013 and revised return was filed on 14/05/2014 declaring loss of Rs.4,65,01,710/- under the normal provisions of the Act and book profit of Rs.61,77,000/- u/s.115JB of the Act.
 
The assessee company owned a constructed building on a plot of land in the city of Coimbatore. The said land along with the super structure was acquired by the company vide sale deed dated 15.04.1967. During the Financial Year 2012-13 relevant to Asst Year 2013-14, the assessee company proposed to sell the said land along with its super structure and therefore entered into negotiations with various parties. During the negotiations, the company became aware of the fact that post acquisition of the land and the constructed building, the Development Control Regulations Rules (DCR) in the city of Coimbatore had undergone a change. Consequently, the company engaged the services of Dadbhawala Architects, Engineers and Valuers Pvt. Ltd., to examine the amendments in the DCR and furnish a report giving the fair market value of the land, the constructed building and the additional FSI, if any.
 
In the meanwhile, the negotiations for sale of the immovable property in Coimbatore, culminated in an understanding on 15.09.2012 when the prospective purchasers visited the premises of the company. A letter of understanding was executed on the said date by the purchasers. The purchasers agreed on a total consideration of Rs.11,14,00,000/-. Further, the said consideration based on discussions and negotiations was broken up as Rs.5,72,84,600/- for the land, Rs.64,90,400/- for the constructed building and Rs.4,76,25,000/- for the additional FSI. The valuers also submitted three reports giving the fair market value of the land constructed building and the additional FSI on 21.09.2012. As per the report submitted by the valuers, the company had obtained an additional benefit of 0.8 by way of additional FSI. The valuers arrived at a fair market value of Rs. 5,01,79,800/- in respect of additional FSI of 0.8 whereas, the company had arrived at a negotiated price with prospective purchasers‟ for the additional FSI of Rs.4,76,25,000/-.
 
While filing the return of income, the company excluded the sum of Rs.4,76,25,000/- received towards additional FSI from its total income computed under normal provisions of the Act, treating the same as a capital receipt. However, while computing its book profit u/s.115JB of the Act, the said sum of Rs.4,76,25,000/- was included in the book profit.
 
<h2>During the assessment proceeding</h2>
 
The AO observed that FSI attached to the land is neither separable from the said land nor could be treated independently;
 
The availability of increase in FSI is merely a value addition to the land provided by the Government; that any buyer, while purchasing the land will also take over the FSI and that the purchase price is determined by the benefits attached to the land 
 
He further observed that the assessee has neither maintained the land with it and transferred the FSI to a third party nor has transferred the land and FSI to different people.
 
He also observed that FSI is fastened to the land and is not separable there from, except in circumstances where only the FSI is permitted to be sold out by maintaining the title of land with the owner.
 
Accordingly, the AO brought the amount of Rs.4,76,25,000/- shown under the head "transfer of FSI" to tax under the head long term capital gain.
 
<h2>Before the CIT(A)</h2>
 
The ld. CIT(A) observed that assessee had sold the land, super structure situated in the said land and the FSI in lock, stock and barrel to only one purchaser for a total consideration of Rs.11,14,00,000/-. However, taking the help of the valuer, the same was broken into three parts and thereafter, sale consideration to the extent of Rs.4,76,25,000/- has been attributed on account of sale of additional FSI by the assessee.
 
The said additional FSI has not been sold separately as TDR and there has been no separate document for the same.
 
The inseparable FSI had been sold in one single deal by the assessee to the same party.
 
CIT(A) Distinguished the reliance placed on the decision of the Hon'ble Jurisdictional High Court in 370 ITR 325 supra by stating that in that case, the TDR was sold separately by the society after completion of construction as per the available FSI.
 
CIT(A) also observed that in that case, the land and building earlier in possession of the assessee continued to remain with it and even after the transfer of the right or additional FSI, the position did not undergo any change. Whereas, in the instant case, the land and building have been transferred together with additional FSI within a single deal to a single purchaser. 
 
With these observations, the ld. CIT(A) upheld the action of the ld. AO.
 
<h2>Before the ITAT</h2>
 
The Tribunal Observed that &ldquo;the bifurcation of the total sale consideration into land, building and additional FSI is not in dispute. What is in dispute before us is only whether the said sum of Rs.4,76,25,000/- received by the assessee on sale of additional FSI could be treated as a capital receipt and thereby making it nonexigible to tax both under normal provisions as well as in the computation of book profits u/s.115JB of the Act&rdquo;
 
In the instant case, we find that the Development Control Regulations in the city of Coimbatore had undergone a change which had admittedly conferred a benefit or by virtue of which the assessee got vested with additional benefit of 0.8 by way of additional FSI.
 
Hence, the issue now boils down to the fact that when there is no cost incurred by the assessee for obtaining any additional benefit of 0.8 by way of additional FSI, then, whether any sum received by the assessee pursuant to a sale of such additional FSI could be brought to tax under the head &ldquo;income from capital gains&rdquo;. We hold that assessee could not have pre-empted any change in the Development Control Regulation Rules in the city of Coimbatore at the time of purchase or before the sale.
 
Admittedly no cost was incurred by the assessee for getting such benefit by way of additional FSI. Hence, it could be safely concluded that the additional benefit derived by the assessee by way of getting vested with additional FSI on the land and building owned by the assessee is only a wind fall gain by operation of law, and which had not costed the assessee any money.
 
The tribunal followed the judgment of Jurisdictional High Court in the case of Commissioner of Income Tax vs. Kailash Jyoti No.2 CHS Ltd., in Income Tax Appeal No.1607 of 2013 and held that the sum received by the assessee in the sum of Rs.4,76,25,000/- on sale of additional FSI, is not exigible for long term capital gains.
 
The tribunal also held that the sum of Rs.4,76,25,000/- being a capital receipt from its inception, is to be excluded while computing book profits u/s.115JB of the Act and also on the ground that it does not form part of operational working results of the company by relying assessee&rsquo;s own case in ITA No.5428/Mum/2015 for A.Y.2011- 12.
 
<h2>Citation</h2>
 
ITA No.6228/Mum/2017, Dated 21/05/2021

Neither capital gain tax nor MAT on sum received towards Additional FSI

MAT, additional fsi, tax on capital gain additional fsi

<h2>Facts of the Case</h2>
 
The A.O. noticed that during the year under consideration, the assessee society had deposited a sum of Rs. 83,95,000/- in its bank account maintained with Axis bank Ltd., Sikar. The assessee society has not filed its return of income for the year under consideration. Notice U/s 148 of the Act was issued to the assessee.
 
In compliance of the notices issued, the assessee filed its return of income on 28/09/2017 declaring NIL income.
 
Assessing Officer completed the assessment after due consideration and examination of allthe issues specifically related to the corpus donation and he was satisfied with the evidences andsubmissions of the assessee as well as the manner in which it was shown in the accounts of theassessee. He mentioned his satisfaction in the office note attached with the assessment order, which isthe part of the assessment order. The copy of the certified copy of office note is attached herewith forready reference at Page No. 12 of Paper book. The relevant portion of the office note is reproducedhere under-
 
<blockquote class="wp-block-quote">
"(ii) Issue of Corpus donation has been examined carefully and satisfying with evidence produced by the assessee during the course of hearing, no adverse inference has beendrawn on this issue."
</blockquote>
 
<h2>Findings of the CIT(E)</h2>
 
The ld. CIT(E) in his order has observed that the assessee has no details of donors and whenever this detail is sought, it comes up with a story to avoid it.
 
The ld. CIT(E) further observed that in the order sheet, the A.O. has noted that corpus donations have been examined, he has not made any of requisite inquiries regarding identity and address of the claimed donors, particularly when all these donations were received in cash, therefore, the ld. CIT(A) has held that the order passed by the A.O. is deemed to be erroneous in so far as it is prejudicial to the interest of revenue within the meaning of Explanation 2(a) r.w. Section 263 of the Act.
 
Against the order of the ld. CIT(E), the assessee is in further appeal before the ITAT..
 
<h2>Grounds of the Assessee</h2>
 
<blockquote class="wp-block-quote">
the order of CIT(E) is illegal and against the law because the Ld. Assessing officer has examined and considered the matter involved in this order. 
the donation so received was received for a specific purpose and use, hence it was Corpus Donation. The corpus donation cannot be treated as part of Income and Expenditure account.
the order of the CIT(E) is otherwise unjustified because the assessee submitted the sufficient and proper explanation during the course of assessment proceedings and accepted by the Ld. Assessing officer
</blockquote>
 
<h2>ITAT held</h2>
 
The tribunal held that assessment order under consideration does not fall in any of the limb mentioned in the explanation 2 of the Section 263(2) of the Act, therefore the assessment is proper and cannot be said as erroneous and prejudicial to the interest of the revenue.
 
The assessee replied the queries raised by the assessing officer during the course of assessment _proceedings. After examination of the records and submissions found him satisfied and complete the assessment. Therefore, it could not be said the assessing officer has not examined the issue raised in the show cause notice under consideration. It is also reveals from the certified copies of the order sheet that the issue which is limited issue related to the cash deposited into bank, in spite of that he went beyond mandate and examined the entire issues, which is also without getting permission of the Commissioner. Hence it cannot be said that the assessment was without any enquiry or investigation.
 
The issue was already examined, discussed and considered by the then Assessing officer and issue of show cause notice by the CIT(E) on the very same issue is amounts to change of opinion
 
The ld AR of the assessee apart from the other grounds as discussed by us in detail, has also submitted before us that the notice issued by the ld. CIT(E) was on the basis of proposal of subsequent ITO, therefore, this act does not provide such powers to the ITO U/s 263 of the Act. The ld AR also submitted that as per provisions of Section 263 of the Act, the Pr.CIT/CIT may call for and examine the proceedings under this Act if he considers that any order passed therein by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue but in the present case, the proposal was sent by the subsequent A.O. to the CIT(E) on the basis of which a show cause notice was issued which is against the provisions of the Act. However, on this proposition, our view is not in favour of the ld AR as we convinced with the arguments of the ld. CIT-DR who had submitted that there is no prohibition U/s 263 of the Act for the Commissioner to act on the basis of proposal by the A.O. if other conditions under the said Section are satisfied. In this regard, the ld. CIT-DR has relied on the decision in the case of Apollo Tyres Ltd. Vs ACIT (1998) 65 ITD 263 (Delhi) and Stewarts and Lloyds of India Ltd. Vs CIT (2016) 67 taxmann.com 41, therefore, we reject this contention raised by the assessee.
 
<h2>Conclusion</h2>
 
The Tribunal allowed the appeal of the assessee and quash the revisionary proceedings u/s 263 initiated by issuing impugned show cause notice.
 
<h2>Citation</h2>
 
Swami Keshwanand Sikshan Sansthan Versus C.I.T. (Exemption) , Jaipur (Rajasthan) ITA No. 273/JP/2020 (Assessment Year: 2010-11) Dated 18 January 2021

No revision u/s 263 on Change of Opinion even though proposal was sent by the subsequent AO to the CIT

Hon'ble Madras HC in its recent decision upheld the findings of Tribunal and observe that the only expenditure, which was proved to be incurred in relation to earning of tax free income, could be disallowed and such provision could not be extended to disallow the expenditure, which was assumed to have been incurred for earning tax free income.
 
The AO found that the assessee had invested in SBI Magnum Insta Cash Fund to the tune of Rs.7.25 Crores and secured loans, which were outstanding as on 31.3.2011. The Assessing Officer also found that the assessee incurred finance cost, out of which, a sum of Rs. 12.93 Crores was towards interest on term loan and working capital facilities, that the assessee company made investments in mutual funds, out of which, there was a POSSIBILITY OF EARNING DIVIDEND INCOME. Accordingly, a notice was issued to show cause as to why the disallowance should not be made under Section 14A of the Act.
 
The assessee sent a reply stating that they had not incurred any expenditure for making such investment and that in the absence of any expenditure incurred, the question of disallowance did not arise. However, AO rejected the stand taken by the assessee and made disallowance u/s 14A.
 
The assessee preferred an appeal before the CIT(A) who allowed the appeal by order dated 16.6.2016. The CIT(A) accepted the stand taken by the assessee that the investments were in growth funds and not dividend funds and therefore, did not constitute tax free income. In this regard, the CIT(A) referred to the decision of the Delhi High Court in the case of Cheminvest Ltd. Vs. CIT [reported in (2015) 378 ITR 33] as well as the decision of the Chennai Tribunal in the case of ACIT Vs. M.Baskaran [ITA.No.1717/Mds/2013 dated 31.7.2014] and accordingly set aside the finding rendered by the Assessing Officer. The Tribunal took note of the decision of this Court in the case of Redington India Ltd. Vs. CIT [reported in (2017) 77 Taxmann.com 257] and dismissed the appeal filed by the Revenue.
 
The Hon'ble Madras HC held that "we find that the Tribunal rightly understood the scope of the transaction done by the assessee. The consistent case of the assessee was that they invested a sum of Rs.7.25 crores in SBI Magnum Insta Cash Fund, that the amount was invested on 30.3.2011, that they had not incurred any expenditure in making such investment and that at the year end, the assessee did not earn tax free income from such investments. In terms of Section 14A of the Act, the only expenditure, which was proved to be incurred in relation to earning of tax free income, could be disallowed and such provision could not be extended to disallow the expenditure, which was assumed to have been incurred for earning tax free income."
 
Hon'ble HC also observed that "to apply the provisions of Section 14A of the Act, the Assessing Officer should have recorded a finding as to how SubSection (1) of Section 14A of the Act would stand attracted. In the absence of any such finding, the disallowance made was not justifiable. In fact, the Assessing Officer straightaway proceeded to the second limb of Section 14(2) of the Act, which is impermissible. The Tribunal rightly took note of the decision in the case of Redington India Ltd., wherein it was held that the provisions of Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 cannot be made applicable in vacuum i.e in the absence of exempt income. Therefore, we find that the Tribunal was right in deciding the issue against the Revenue and in favour of the assessee."
 
Citation: Tax Case Appeal No.26 of 2018, Madras HC.

Investment in Growth Fund does not attract 14A disallowance

Mutual fund taxation, growth fund, 14A deduction, income tax

Get the insight of important judicial precedent on Section 36(1)(iii) by clicking on the following link-
 
<h2><a href="https://public.tableau.com/shared/BMY3C6KS7?:display_count=y&amp;:origin=viz_share_link&amp;:showVizHome=no" target="_blank" rel="noreferrer noopener">Tableau Public (Link)</a></h2>
 
Just hover over the chart area, you will get the citation and head note of the case law.
 
Author, Manish Harchandani, CA

Insight of important judicial precedent on Section 36(1)(iii).

judgments on section 36(1)(iii) interest deduction, tax benefit 

A formal Memorandum of Understanding (MoU) was signed today between the CBDT) and the SEBI for data exchange. This will facilitate the sharing of data and information between SEBI and CBDT on an automatic and regular basis. The information will also be shared on request and&nbsp;suo moto&nbsp;basis for the purpose of carrying out their functions under various laws. The formal press release is as under:
https://www.sebi.gov.in/media/press-releases/jul-2020/sebi-signs-mou-with-cbdt_47030.html

CBDT and SEBI sign MoU for data sharing

CBDT Income tax MoU with SEBI, data sharing MoU

Hon'ble Kolkata ITAT allowed the appeal of the assessee and directed the AO to re-compute the disallowance under Rule 8D(2)(iii) by taking into consideration only the value of investment in shares which actually fetched exempt dividend income to the assessee during the year under consideration.
 
The learned counsel for the assessee had contended that the disallowance u/s 14A read with rule 8D is required to be worked out by taking into consideration only the value of investment in shares which actually fetched the exempt dividend income to the assessee and not the value of entire investment as done by the AO. This contention of the learned counsel for the assessee was duly supported by the decision of Hon'ble Kolkata High Court in the case of REI Agro Ltd. GA No. 3022 of 2013 (ITAT No. 161 of 2013).
 
Citation: ITA No. 2061/Kol/2019
 
Author, Manish Harchandani, CA
 
Disclaimer: The contents of this article are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Harchandani &amp; Associates does not accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.

Disallowance u/s 14A r.w. rule 8D to be made by taking into consideration only the value of investment in shares which actually fetched exempt income and not the all investments

14A disallowance, Rule 8D, investment in shares 14A disallowance

Delhi ITAT delete the addition made on account of agency commission paid to Foreign Party (Non Resident) - relied on assessee's own case, wherein it was held that
 
<blockquote class="wp-block-quote">
"the assessee-firm&nbsp; made&nbsp; payments&nbsp; of commission&nbsp; to&nbsp; those&nbsp; agents,&nbsp; since&nbsp; those agents had&nbsp; their&nbsp; offices&nbsp; situated&nbsp; abroad&nbsp; and, moreover, services&nbsp; were&nbsp; also&nbsp; rendered&nbsp; by them&nbsp; outside&nbsp; India, assessee&nbsp; was&nbsp; not required&nbsp; to&nbsp; deduct&nbsp; tax&nbsp; at&nbsp; source while making&nbsp; payments&nbsp; in&nbsp; question.&rdquo;
</blockquote>
 
Citation: ITA.No.5959/Del./2017
 
Author,
 
Manish Harchandani, CA
 
https://harchandani.in/

Agency commission paid to non resident - not taxable in India

TDS on commission, commission payment to non resident, tds on NRI

The Ministry of Home Affairs issued a notification vide G.S.R. 506(E) dated 1st July, 2022 and amended certain rules of the Foreign Contribution (Regulation) Rules, 2011. The main amendments are discussed as under:
&nbsp;
<h2>1. Increase the monetary limit of Foreign Contribution received from relative - Rule 6 of the FC Rules</h2>
Earlier, any person receiving foreign contribution in excess of Rs. 1 Lakhs or equivalent thereto in a financial year from any of his relatives shall inform the Central Government regarding the details of the foreign contribution received by him in electronic form in Form FC-1 within 30 days from the date of receipt of such contribution.
Now by virtue of the amendment, the monetary limit of Rs. 1 Lakh increased to Rs. 10 Lakhs and the time limit for reporting of such FC also increased from 15 days to 45 days.
<h2>2. Increase the limit for intimation of the Bank Account - Rule 9(1)(e) &amp; 9(2)(e) of the FC Rules</h2>
Earlier, the person may open one or more accounts in one or more banks for the purpose of utilising the foreign contribution after it has been received and, in all such cases, intimation in electronic form in Form FC-6D shall be furnished to the Secretary, MHA, New Delhi within 15 days of the opening of any account.
In a same way, a person seeking prior permission under this rule may open one or more accounts in one or more banks for the purpose of utilising the foreign contribution after it has been received and in all such cases intimation in electronic form in Form FC-6D shall be furnished to the Secretary, Ministry of Home Affairs, New Delhi within 15 days of the opening of any account.
Now by virtue of the amendment, the limit for intimation for the both rules increased from 15 days to 45 days.
<h2>3. Declaration of Quarterly Foreign Contribution on the official website is no longer required - Rule 13(b)</h2>
Earlier, a person receiving foreign contribution in a quarter of the financial year shall place details of foreign contribution received on its official website or on the website as specified by the Central Government within fifteen days following the last day of the quarter in which it has been received clearly indicating the details of donors, amount received and date of receipt.
Now, the said clause has been omitted and consequently, the requirement to place details of foreign contribution received in a quarter on its official website is no longer required.
However, it may kindly be noted that the placing of the annual audited accounts on official website of the NGO is still mandatory
<h2>4. Other Miscellaneous Amendments</h2>
Earlier, any change in the bank account, name, address, aim, objectives or key members were required to be intimated with 15 days from the date of such changes, however, by the amendment, the said time limit are also increased to 45 days. (Rule 17A)
Further, Rule 20 provides that the application for revision of order passed by the competent authority under section 32 of the FCRA Act shall be made on plain paper, however, by amendment, the Government may prescribe form and manner for making such revision application.

Important FCRA Amendments (Applicable from 1st July 2022)

FCRA amendment relating to gift from relative and quarterly report

<h2>FCRA Registration - Overview</h2>
Any association such as Charitable Trusts, Societies, Section 8 Company, NGO etc. having a definite cultural, economic, educational religious or social program can accept foreign contribution. However, such association should not be of a political nature. For accepting such contribution, the association must have been registered with Central Government under section 12(1) of Foreign Contribution Regulation Act (FCRA) read with section 11(1) of the FCRA.
Alternatively, it can accept foreign contribution with prior permission of Central Government, even if not registered as discussed above. The prior permission is for specific donor and specific purpose.
Thus, for accepting Foreign Contribution, there are two kinds of permissions:
1. Regular registration is required if the foreign contribution is or will be obtained on regular basis,
2. Prior permission (without registration) is required to be obtained when such foreign contribution is one time and not on a regular basis.
<h2>Eligibility and condition for granting FCRA Registration or FCRA Prior Permission</h2>
Section 12(4) of the FCRA contain various conditions and eligibility criteria for the purposes of obtaining registration under the FCRA or obtaining prior permission. These are discussed as under:
(a) the person making an application for registration or grant of prior permission
(i) is not fictitious or benami; 
(ii) has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another; 
(iii) has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country; 
(iv) has not been found guilty of diversion or mis-utilisation of its funds; 
(v) is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends; 
(vi) is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes; 
(vii) has not contravened any of the provisions of this Act; 
(viii) has not been prohibited from accepting foreign contribution;
(b) the person making an application for registration under sub-section (1) has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilised;
In this context, Rule 9(1)(f) of the Foreign Contribution (Regulation) Rules, 2011 (FCRA Rules) provides that A person seeking registration under clause (b) of sub-section (4) of section 12 of the Act shall meet the following conditions, namely:
(i) it shall be in existence for three years and have spent a minimum amount of rupees fifteen lakh on its core activities for the benefit of society during the last three financial years:
Provided that the Central Government, in exceptional cases or in cases where a person is controlled by the Central Government or a State Government may waive the conditions;
(ii) if the person wants inclusion of its existing capital investment in assets like land, building, other permanent structures, vehicles, equipment in the computation of its spending during last three years, then the chief functionary shall give an undertaking that the assets shall be vested henceforth with the person till the validity of the certificate and they shall be utilised only for the activities covered under the Act and the rules made thereunder and shall not be diverted for any other purpose till the validity of its certificate of registration remains valid.
(c) the person making an application for giving prior permission under sub-section (1) has prepared a reasonable project for the benefit of the society for which the foreign contribution is proposed to be utilised;
(d) in case the person being an individual, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him; 
(e) in case the person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him; 
(f) the acceptance of foreign contribution by the person referred to in sub-section (1) is not likely to affect prejudicially&mdash;
(i) the sovereignty and integrity of India; or 
(ii) the security, strategic, scientific or economic interest of the State; or 
(iii) the public interest; or 
(iv) freedom or fairness of election to any Legislature; or 
(v) friendly relation with any foreign State; or 
(vi) harmony between religious, racial, social, linguistic, regional groups, castes or communities; 
(g) the acceptance of foreign contribution referred to in sub-section (1),&mdash; 
(i) shall not lead to incitement of an offence; 
(ii) shall not endanger the life or physical safety of any person.
Other Conditions
1. No person shall prefer a second application for registration or prior permission within a period of six months after submitting an application either for the grant of prior permission for the same project or for registration. (Rule 9(3) of the FCRA Rules)
2. Any person making an application for obtaining prior permission under clause (a) of sub-rule (1) shall have an FCRA Account. (Section 12(1A) and Rule 9(2)(d) of the FCRA Rules)
3. A person seeking prior permission for receipt of specific amount from a specific donor for carrying out specific activities or projects mentioned in clause (c) of sub section (4) of section 12 of the Act shall meet the following criteria, namely:
(i) submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given;
(ii) for the Indian recipient persons and foreign donor organisations having common members, prior permission shall be granted to the person subject to it satisfying the following conditions, namely:
(A) the chief functionary of the recipient person shall not be a part of the donor organisation;
(B) seventy-five per cent of the office-bearers or members of the governing body of the person shall not be members or employees of the foreign donor organisation;
(C) in case of foreign donor organisation being a single individual that individual shall not be the chief functionary or office bearer of the recipient person; and
(D) in case of a single foreign donor, seventy-five per cent of the office bearers or members of the governing body of the recipient person shall not be the family members or close relatives of the donor.
&nbsp;
<h2>Government Fees for FCRA Registration or Prior Approval</h2>
Rule 9(4) provides the Fees for the FCRA Registration or Prior Approval. The same is mentioned as under:
- Rs. 5,000 for application of grant of prior permission
- Rs. 10,000 for application of grant of registration
(the above fees is subject to change from time to time)
&nbsp;
<h2>AADHAAR or passport (in case of foreigner) to be mandatory for the purpose of FCRA Registration or Prior Approval</h2>
Section 12A empower the Central Government to require Aadhaar number, etc., as identification document and provides that Notwithstanding anything contained in this Act, the Central Government may require that any person who seeks prior permission or prior approval under section 11, or makes an application for grant of certificate under section 12, or, as the case may be, for renewal of certificate under section 16, shall provide as identification document, the Aadhaar number of all its office bearers or Directors or other key functionaries, by whatever name called, issued under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016), or a copy of the Passport or Overseas Citizen of India Card, in case of a foreigner.
&nbsp;
<h2>Documents required for FCRA Registration or Prior Approval</h2>
- Self-certified copy of registration certificate/Trust deed etc., of the association
-Self-certified copy of relevant pages of Memorandum of Association/ Article of Association showing aim and objects of the association.
- Activity Report indicating details of activities during the last three years;
- Copies of relevant audited statement of accounts for the past three years (Assets and Liabilities, Receipt and Payment, Income and Expenditure) clearly reflecting expenditure incurred on aims and objects of the association and on administrative expenditure;
- Affidavit of each key functionary
- Seal of the Association
- Statement on Project and Activities
- A true copy of the resolution passed by the Governing Body of the NGO.
- A Copy of certificate issued by the Income Tax Authority under 80G &amp; 12A of the Income Tax Act. (if any)
- Jpg file of signature of the chief functionary.
- Passport size of all members of Governing Body
- Detail about the current and past management of the trust.
<h2>FCRA Act having overriding effect over the FEMA and other general Acts</h2>
Since the FCRA is a special Act, its provisions will prevail over provisions of Foreing Exchange Management Act, 1999 (FEMA). Thus, even if there is permission for certain transactions (like donation, gift etc.) under FEMA, restrictions under FCRA will be applicable if the transaction is covered under provisions of the FCRA.
<h2>Conclusion</h2>
The above article for information purpose only and does not consider as professional advise.
&nbsp;

All about FCRA Registration or Prior Approval - Eligibility, Procedure and Documents Required for FCRA Registration 

FCRA Registration, FCRA Prior Approval, Registration under FCRA

<h2>Extension of FCRA Registration Due for Renewal</h2>
The Ministry of Home Affairs on 22-June-2022 issues a Public Notice and extended the validity of the registrations till 30-Sept-2022.
Section 12(6) of the FCRA Act provides that The certificate granted under sub-section (3) shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be. Further, section 16 of the Act provides that Every person who has been granted a certificate under section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.
This is sixth public notice regarding extension of the FCRA Registrations since amendment of FCRA Act in the year 2020. The summary of the said public notices are under:
&nbsp;
<table>
<tbody>
<tr>
<td width="85">
<h2>Sr. No.</h2>
</td>
<td width="378">
<h2>Description</h2>
</td>
<td width="161">
<h2>Date</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>1</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_12012021.pdf" target="_blank" rel="noopener">Extension of the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 expiring during the period between 29th September, 2020 and 31st May, 2021 upto 31st May, 2021.</a></h2>
</td>
<td width="161">
<h2>12-Jan-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>2</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_19052021.pdf" target="_blank" rel="noopener">Extension of the validity of registration certificates issued Under The Foreign Contribution (Regulation) Act, 2010 expiring/ expired during the period between 29th September, 2020 and 30th September, 2021 up to 30th September, 20.</a></h2>
</td>
<td width="161">
<h2>18-May-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>3</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_30092021.pdf" target="_blank" rel="noopener">Extension of the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 expiring during the period betwe 29th September, 2020 and 31st December, 2021 upto 31st December, 2021.</a></h2>
</td>
<td width="161">
<h2>30-Sept-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>4</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_31122021.pdf" target="_blank" rel="noopener">Extension of the validity of FCRA registration certificates expiring between the period 29th September, 2020 and 31st March, 2022 of those entities who have applied for renewal on FCRA portal in accordance with rule 12 of the Foreign Contribution (Regulation) Rules, 2011 before expiry of the validity of their certificates of registration.</a></h2>
</td>
<td width="161">
<h2>31-Dec-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>5</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_24032022.pdf" target="_blank" rel="noopener">Extension of the validity of the FCRA registration certificates-Extended till 30-June-2022</a></h2>
<h2>This Public Notice is in continuation of the Public Notice Dated 31-Dec-2021</h2>
</td>
<td width="161">
<h2>24-Mar-2022</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>6</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_22062022.pdf" target="_blank" rel="noopener">Extension of the validity of the FCRA registration certificates-Extended till 30-Sept-2022</a></h2>
<h2>This Public Notice is in continuation of the Public Notice Dated 24-Mar-2022</h2>
</td>
<td width="161">
<h2>22-June-2022</h2>
</td>
</tr>
</tbody>
</table>
&nbsp;
The latest public notice dated 22-June-2022 is reproduced as under:
&nbsp;
Ministry of Home Affairs
(Foreigners Division-FCRA)
First Floor, Major Dhyan Chand National Stadium, India Gate Circle, New Delhi-110001
&nbsp;
Dated: the 22nd June, 2022
PUBLIC NOTICE
Subject: Extension of the validity of FCRA registration certificates
In continuation of Ministry of Home Affairs' Public Notice No. II/21022/23(22)/2020 FCRA-III, Dated 24th March, 2022, the Central Government, in public interest, has decided to extend the validity of FCRA registration certificates of certain categories of FCRA registered entities, as follows:
(i) The validity of registration certificates of such entities whose validity was extended till 30.06.2022 in terms of the Public Notice dated 24th March, 2022 and whose renewal application is pending will stand extended till 30.09.2022 or till the date of disposal of renewal application, whichever is earlier.
(ii) The validity of those FCRA entities whose 5 years validity period is expiring during 01.07.2022 to 30.09.2022 and who have applied/apply for renewal before expiry of 5 years validity period will stand extended upto 30.09.2022 or till the date of disposal of renewal application, whichever is earlier.
2. All FCRA registered associations are therefore advised to take note that in case of refusal of the application for renewal of certificate of registration, the validity of the certificate shall be deemed to have expired on the date of refusal of the application of renewal and the association shall not be eligible either to receive the foreign contribution or utilise the foreign contribution received.
3. This issues with the approval of the Competent Authority. All concerned may take note of the above decision and take appropriate action in the matter.
&nbsp;
SD/-
VS Rana
Director (FCRA)
Tele. 011-23077512

MHA Extend the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 

FCRA Renewal of Registration, FCRA Extension for renewal 

The Ministry of Home Affairs extends the due date of FC-4 (Annual return under the FCRA) for the FY 2020-21 to 30-June-2022.
The relevant notification is as under:
<img src="https://res.cloudinary.com/netd/image/upload/v1648751258/post-img/wlimugkrnqoyygdapsrp.jpg" alt="FCRA Due Date Extension Notification " width="779" height="925" />

Due date of FCRA annual return in Form FC-4 for the FY 2020-21 extended to 30-June-2022

FCRA, Annual Return, FC-4 due date, penalty for late filing of FC-4 

Various penalties under the FCRA are provided under the Notification S.O. 2291(E) dated 5th June, 2018 and same is reproduced as under;
MINISTRY OF HOME AFFAIRS
NOTIFICATION
New Delhi, the 5th June, 2018
S.O. 2291(E).&mdash;In exercise of the powers conferred by sub-section (1) of Section 41 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010) and in supersession of the notifications of the Government of India in the Ministry of Home Affairs numbers S.O. 1976(E), dated the 26th August, 2011 and S.O. 2133(E), dated the 16th June, 2016, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies the officer in column (4) of the table, who may, before institution of any prosecution under the Act, compound the offences specified in column (2), on payment of the amount specified in column (3), of the said table, namely:-
TABLE
<table>
<tbody>
<tr>
<td style="text-align: center;" width="156">
Sr. No.
</td>
<td style="text-align: center;" width="156">
Offence
</td>
<td style="text-align: center;" width="156">
Amount of Penalty
</td>
<td style="text-align: center;" width="156">
Officer competent for compounding
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
(1)
</td>
<td style="text-align: center;" width="156">
(2)
</td>
<td style="text-align: center;" width="156">
(3)
</td>
<td style="text-align: center;" width="156">
(4)
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
1.
</td>
<td width="156">
Offence punishable under section 35 for accepting any hospitality in contravention of section 6 of the Act.
</td>
<td width="156">
Rs. 10,000/-
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
2.
</td>
<td width="156">
Offence punishable under section 37 for transferring any foreign contribution to any other person in contravention of section 7 of the Act or any rule made thereunder.
</td>
<td width="156">
Rs. 1,00,000/- or 10% of such transferred foreign contribution, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
3.
</td>
<td width="156">
Offence punishable under section 37 for defraying of foreign contribution beyond fifty per cent of the contribution received for administrative expenses in contravention of section 8 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of such foreign contribution so defrayed beyond the permissible limit, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
4.
</td>
<td width="156">
Offence punishable under section 35 for accepting foreign contribution in contravention of section 11 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 10% of the foreign contribution received, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
5.
</td>
<td width="156">
Offences punishable under section 37 read with section 17 of the Act for- (a) receiving foreign contribution in any account other than specified account in his application for grant of certificate;
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution received in such account, whichever is higher;
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
&nbsp;
</td>
<td width="156">
(b) non-reporting the prescribed amount of foreign remittance or source and manner of such remittance by banks and authorised persons.
</td>
<td width="156">
Rs. 1,00,000/- or 3% of the foreign contribution received or deposited in such account, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
&nbsp;
</td>
<td width="156">
(c) receiving &amp; depositing any fund other than foreign contribution in the account or accounts opened for receiving foreign contribution or for utilizing the foreign contribution.
</td>
<td width="156">
Rs. 1,00,000/- or 2% of such deposit, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
6.
</td>
<td width="156">
Offence punishable under section 37 for non-furnishing of intimation of the amount of each foreign contribution received and the source from which and in the manner in which, such foreign contribution is received as required under section 18 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution received during the period of non submission, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
7.
</td>
<td width="156">
Offence punishable under section 37 for not maintaining the account and records of foreign contribution received and manner of its utilisation on required section 19 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution during the relevant period of nonmaintenance of accounts, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
</tbody>
</table>
&nbsp;
<ol start="2">
<li>In case more than one offence has been committed by a person, the total amount of compounding for such offences shall not be more than the value of the foreign contribution involved.</li>
</ol>
--
Reader may also download above notification from the official website. Link is as follows:
<a href="https://www.mha.gov.in/sites/default/files/Compoundingnotification06062018.pdf">https://www.mha.gov.in/sites/default/files/Compoundingnotification06062018.pdf</a>
<h2>CONNECT WITH US</h2>
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Various Penalties under the  FCRA - Foreign Contribution (Regulations) Act, 2010

FCRA, FCRA Return, FC-4 due date, penalty for late filing of FC-4 

<h2>Mandatory to file Annual Return in Form FC-4 and time limit to file Form FC-4 return</h2>
 
Rule 17(1) of Foreign Contribution (Regulation) Rules, 2011 mandates that every person who receives foreign contribution under the Act, shall submit a signed or digitally signed report in electronic form in Form FC-4 with scanned copies of income and expenditure statement, receipt and payment account and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year.
 
Therefore, the Form FC-4 are required to be filed on or before 31st December for the previous financial year.
 
For the FY 2019-20, the original due date for filing of FC-4 was 31st December 2020 (as per rule 17(1)). However, the same was extended to 30th June 2021 through vide <a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_24112020.pdf" target="_blank" rel="noreferrer noopener">Public Notice dated 23rd November, 2020</a>.
 
Rule 17(8) also mandate that NIL report shall be furnished even if Foreign Contribution was received during a financial year.
 
<h2>Documents to be submitted with Annual Return in Form FC-4</h2>
 
<ol>
<li>Certificate from the Chartered Accountant (not required if no Foreign Contribution received or utilised during the financial year)</li>
<li>Audited Accounts includes Balance Sheet, income &amp; expenditure account and receipt &amp; payment account (not required if no Foreign Contribution received or utilised during the financial year)</li>
<li>Declaration by chief functionary (Chairperson/President/Secretary/CEO/MD) - this declaration is part of Form FC-4</li>
<li>Copy of statement of account from the bank - where exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank.
<h2>Late Filing Fees / Penalty of Form FC-4</h2>
 
<a href="https://fcraonline.nic.in/home/PDF_Doc/doc%206-7.pdf" target="_blank" rel="noreferrer noopener">Notification SO 2133(E)</a> dated 16-June-2016 provide the amount of penalty as under.
 
<figure class="wp-block-table">
<table>
<tbody>
<tr>
<th>S.N</th>
<th>Offence</th>
<th>Amount of Penalty</th>
<th>Officer competent for compounding</th>
</tr>
<tr>
<td>1</td>
<td>Non-furnishing of return up to three months after the 31st December every year.</td>
<td>Penalty of 2% of the amount of foreign contribution received during the financial year or Rs. 10,000, Whichever is less.</td>
<td>The Director or the Deputy Secretary in Charge of the Foreign Contribution (Regulation) Act Wing of Foreign Division in the Ministry of Home Affairs.</td>
</tr>
<tr>
<td>2</td>
<td>Non-furnishing of return after three months up to six months after the 31 December every year.</td>
<td>Penalty of 3% of the amount of foreign contribution received during the financial year or Rs. 50,000, Whichever is less.</td>
<td>The Director or the Deputy Secretary in Charge of the Foreign Contribution (Regulation) Act Wing of Foreign Division in the Ministry of Home Affairs</td>
</tr>
<tr>
<td>3</td>
<td>Non-furnishing of return after six months up to one year after the 31 st December every year</td>
<td>Penalty of 4% of the amount of foreign contribution received during the financial year or Rs. 2 Lakh, Whichever is less.</td>
<td>The Director or the Deputy Secretary in Charge of the Foreign Contribution (Regulation) Act Wing of Foreign Division in the Ministry of Home Affairs.</td>
</tr>
<tr>
<td>4</td>
<td>Non-furnishing of return after one year up to two years after the 31 December every year</td>
<td>Penalty of 5% of the amount of foreign contribution received during the financial year or Rs. 5 Lakh, Whichever is less.</td>
<td>The Director or the Deputy Secretary in Charge of the Foreign Contribution (Regulation) Act Wing of Foreign Division in the Ministry of Home Affairs.</td>
</tr>
<tr>
<td>5</td>
<td>Non-furnishing of return after two years up to three years after the 31st December every year.</td>
<td>Penalty of 10% of the amount of foreign contribution received during the financial year or Rs. 10 Lakh, Whichever is less.</td>
<td>The Director or the Deputy Secretary in Charge of the Foreign Contribution (Regulation) Act Wing of Foreign Division in the Ministry of Home Affairs.</td>
</tr>
</tbody>
</table>

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Have any query? Connect with us at harchandanica@gmail.com or Mobile Number +91 9909880111

</figure>
</li>
</ol>

Articles on Income Tax and FCRA