Bequest received in foreign bank account cannot be treated as Income of Assessee for that AY, if its transfer request to India is pending

Facts of the Case:

1. The assessee was a charitable trust registered under section 12AA of the act,
2. The assessee had operations in the multiple countries to promote education, hospital and dispensary.
3. During Financial year 2006-07 assessee had received 1,75,000 UK Pounds (Rs. 1,51,09,500/- as per prevailing rate of exchange of RBI on date of transfer) in its Sri Lanka’s bank account in the capacity of beneficiary of a deceased person of London (UK).
4. Assessee has applied for bringing the money in India with the appropriate authorities but the approval for the same had pending till the date of filling of his return of income, so assessee has filled his ITR without considering the amount received in Sri-Lanka’s bank account.
5. The Assessing Officer (AO) issued reopening notice under section 148 by stating that bequest amounting to 175,000 pounds was allegedly credited in the assessee’s Sri Lanka based bank account which was to be treated as the assessee’s income.
6. Further AO concluded that assessee had neither claimed any exemption under section 11(1) nor had it set apart the bequest under section 11(2). All this resulted in the impugned addition of UK based fund 175,000 pounds.

Held by the Hon’ble ITAT of Kolkata:

1. Refer to sec. 2(24)(iia) of the Act, treating a voluntary contribution received by a charitable/religious trust as income. The Assessee had inherited the funds in the capacity of a beneficiary and all due permission thereof is still pending. therefore, the above sum wrongly treated as having the colour of its taxable income.
2. Further ITAT states that principle of conservative and prudence in accounting treatment, require that no anticipated profits are treated as income till realization, however anticipated losses should be deducted from commercial profits at the first sign its reasonable probability.
3. The assessee could not have recognized the London based bequest transfer to Sri Lanka as its income, since the said amount is yet to be received as per the detailed procedure pending as on date seeking repatriated of trend to India.

Conclusion:

The aid judgement shall gives a huge relief to the asssessees operating the multinational boundaries, as now Assessing officer can’t make any adjustments in the income of assessee, in the mere case that it received any fund in one of its foreign operative bank; if the request to repatriation of fund to India is pending at the end of appropriate authorities.

[2019] 110 taxmann.com 459 (Kolkata – Trib.)