Clarification on treatment & accounting of refund of TDS related to Foreign Contribution

Clarification regarding treatment & accounting of refund of TDS pertaining to Foreign Contribution

The Ministry of Home Affairs (FCRA Division) has issued a clarification regarding refund of TDS pertaining to Foreign Contribution.

The clarification has been issued in response to the repesentation received from Associations over the difficulties faced by them in transfer of FCRA component of funds out of the refund of tax deducted at source (TDS) received in their non-FCRA bank account.

The matter has been examined by the Ministry and its has been decided that in case of consolidated income tax refund is received in non-FCRA bank account, the proportionate income tax refund pertaining to FCRA account needs to be transferred back to FCRA bank account. Such transfer shall not be treated as violation of section 17 of the Foreign Contribution (Regulation) Act 2010 and are allowed as per spirit of the Act.

Further, with respect to the accounting treatment of the TDS and refund thereof, it has been clarified that at the time of deduction, such TDS may be accounted as utilisation of FC and upon proper  receipt of refund in the FCRA account, it may be considered as “other income” and to be reported in clause 2(i)(b)(iii) if Form FC-4.

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• Order u/s 69 of the CGST Act has to be communicated before arrest of person concerned– SC
• Refund can not be denied on the ground that it was claimed in a return filed u/s 148 – ITAT
• Distinction between religious & charitable purposes is determined by institution’s primary or dominant object
• Fit case to issue notice u/s 148 – Relevancy of material & application of mind to objections important
• AO is under an obligation to assign reasons for rejecting explanation of the assessee