The Income Tax Appellate Tribunal (ITAT), New Delhi Bench ruled that approval under Section 10(23C) of the Income Tax Act, 1961 cannot be revoked when objects of Society have remained same.
The assessee, M/s. Population Services International was granted registration under section 12A of the Act and under section 80G of the Income Tax Act. The assessee was granted approval under section 10(23C)(iv) by the Central Board of Direct Taxes (CBDT) and such approval was renewed in subsequent assessment years.
In course of scrutiny assessment for assessment year 2016-17, the Assessing Officer while verifying the information gathered and available on record, was of the view that the assessee has violated the conditions of approval granted under section 10(23C)(iv) of the Income Tax Act.
The Assessing Officer sent a proposal for withdrawal of approval granted under section 10(23C)(iv) of the Act. Accepting the proposal of the Assessing Officer, the CIT (Exemption) granted approval for special audit and the special audit was entrusted to a chartered accountant firm.
As regards the first allegation relating to the alleged difference in foreign contribution shown in the income and expenditure account and the FCRA return in Form FC-4, from the stage of Assessing Officer itself, the assessee has explained that as per the FCRA Regulations, the assessee has to show the actual receipts received during the year.
The only requirement in law is, the assessee must maintain separate bank accounts for foreign contribution, which the assessee has complied and was successful in proving that there is no necessity of maintaining separate books of account, once the accounts are maintained in ERP system.
In the 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. 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.
A Bench comprising GS Pannu, President and Saktijit Dey, Judicial Member observed that “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 the Act.”
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