DCIT, CHENNAI V. Om Sakthi Narayani Siddar Peedam Charitable Trust, Vellore

ITA 107/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9507 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MURALI KUMARAN
• Assessee Lawyers: A V SREEKANTH IRS
• Keywords: Income from undisclosed sources; Charitable institution; Assessment record
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.107/MDS/2015 ' $ %$ / ASSESSMENT YEAR : 2006-2007 THE DEPUTY COMMISSIONER OF INCOME TAX, (EXEMPTIONS), ANNEXURE BUILDING, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. OM SAKTHI NARAYANI SIDDAR PEEDAM CHARITABLE TRUST, THIRUMALAIKODI, AIYUR, VELLORE 632 055. [PAN AAATO 0034G ] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. MURALI KUMARAN, ADVOCATE *+&' ( ) /RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. ( , / DATE OF HEARING : 15-02-2016 -.% ( , / DATE OF PRONOUNCEMENT : 27-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V II, CHENNAI IN ITA NO.201/14-15, DT 10.10.2014 FOR THE ASSESSMENT YEAR 2006-2007 ITA NO. 107/MDS/2015. :- 2 -: PASSED U/S.143(3) R.W.S.147 AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE ID. CIT (A) ERRED IN DELETING THE ADDITION OF 1, 54,66,312/- HOLDING THAT THE AMOUNT WAS EXPENDED WHOLLY FOR CHARITABLE ACTIVITIES AND IN ACCORDANCE WITH THE PURPOSE FOR WHICH IT WAS GIVEN BY THE DONOR; 2.2 THE ID. CIT (A) FAILED TO OBSERVE THAT AS PER THE AGENCY AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE DONOR M/S. SRI NARAYANI CHARITABLE FOUNDATION, CALGARY, CANADA (ANNEXURE 'A'), THE DONATION REQUIRES TO BE SPEND TOWARDS NINE SPECIFIC TASKS AND DUTIES MENTIONED IN THE SCHEDULE HA' TO THE SAID AGENCY AGREEMENT; 2.3 THE ID. CIT (A) FAILED TO TAKE NOTE THAT THE ASSESSEE TRUST UTILISED THE DONATION RECEIVED DURIN G THE YEAR FOR THE FOLLOWING NON-MANDATE EXPENSES, THEREBY BECOME INELIGIBLE FOR CLAIMING SUCH EXPENSE S AS 'APPLICATION OF INCOME:- SCHOOL RUNNING : 23,63,566/- HOSPITAL/CLINIC RUNNING : 51,41,573/- CREATION OF SCHOOL/ HOSPITAL ASSET : 79,60,873/- TOTAL : 1,54,66,312/- 3.1 THE ID. CIT (A) ERRED IN HOLDING THAT THE 'AMENDED AND RESTATED AGENCY AGREEMENT' DATED 1.4.2006 HAS MADE CLEAR SCOPE OF THE CHARITABLE ACTIVITIES CARRI ED ON BY THE TRUST OUT OF THE CONTRIBUTION MADE BY THE DONOR. 3.2 THE LD. CIT(A) FAILED TO TAKE NOTE THAT THE AMENDED AND RESTATED AGENCY AGREEMENT DOES NOT BEAR ANY DATE AND IT DOES NOT MAKE ANY MENTION OF SCHOOL/HOSPITAL RUNNING. 3.3 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE F ACT THAT THE SAID AGREEMENT ONLY SPEAKS ABOUT IMPROVEMENT ON SRIPURAM SPIRITUAL PARK. ITA NO. 107/MDS/2015. :- 3 -: 4.1 THE LD. CIT(A) ERRED IN ALLOWING NEW EVIDENCE PRODUCED BY THE ASSESSEE IN THE FORM OF A LETTER FR OM THE PRESIDENT OF THE DONOR AGENCY M/S. SRI NARAYANI CHARIABLE FOUNDATION, CALAGARY, CANADA DATED 15.04.2014 AND ALLOWING RELIEF TO THE ASSESSEE. 4.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SA ID LETTER HAS BEEN PREPARED AFTER THE PASSING OF THE ASSESSMENT ORDER AND THIS LETTER CANNOT FORM A BASI S FOR ALLOWANCE OF THE EXPENDITURE INCURRED TOWARDS SCHOOL/HOSPITAL. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE IS A REGIS TERED PUBLIC CHARITABLE TRUST AND FILED RETURN OF INCOME ON 10. 10.2006 DECLARING NIL INCOME. THE TRUST WAS CONSTITUTED ON 06.11.1995 AND REGISTERED U/S.12AA OF THE ACT WITH THE DIT (EXEMPTIONS) CHENN AI, VIDE ORDER IN DIT(E) NO.2(310)98-99, DATED 21.12.1999. SUBSEQUENT LY THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. FURTHER ASSESSING OFFICER ISSUED NOTICE U/S.1 48 OF THE ACT BASED ON THE INFORMATION OF FORM FC-3 ON FOREIGN CONTRIB UTIONS AS THEIR FCRA PROVISIONS, FOREIGN DONATION /CONTRIBUTION AS DIRECTED SHOULD BE UTILIZED FOR SPECIFIC PURPOSE AND SPECIFIED ACTIVIT IES. IN COMPLIANCE TO NOTICE U/S.148 OF THE ACT, THE LD. AUTHORISED REPRE SENTATIVE OF THE ASSESSEE FILED LETTER TO TREAT ORIGINAL RETURN FILE D U/S.139(1) OF THE ACT TO BE TREATED AS VALID RETURN AND APPEARED FROM TIM E TO TIME AND PRODUCED COPY OF AGENCY AGREEMENTS ENTERED BY THE A SSESSEE WITH DONOR SRI NARAYANI CHARITABLE FOUNDATION (SNCF), CA NADA. THE AGREEMENTS CONSISTS OF TWO PARTS, AGREEMENT ONE RE LATES TO ITA NO. 107/MDS/2015. :- 4 -: CONSTRUCTION OF SRIPURAM TEMPLE AND OTHER BEING CHA RITABLE ACTIVITIES ENGAGED BY THE ASSESSEE AS REFERRED AT PAGE 2 OF TH E ORDER AS UNDER:- SCHEDULE A. SCOPE OF AGENCY CONTRACT. 1. FEED THE PEOPLE (NARAYANI SEVA) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 2. PRAYER CEREMONY (PUA) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 3. TEMPLE REVIVAL (JYOTHI SWAROOPINI) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 4. BASIC HEALTH (AYOGYA) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 5. EDUCATION (VIDYA NETRAM) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 6. DRINKING WATER (MATHRU GANGA) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME 7. FAMILY ORIENTED (KALYANI) PROGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 8. NEW LEASE OF LIFE (PUNARJANMA ) PRORGRAM (SEE EXHIBIT A FOR FURTHER DESCRIPTION OF PROGRA MME) 9. ANY OTHER PROGRAMS WHICH PROVIDE THE NECESSITIES F OR PERSONAL AND SPIRITUAL GROWTH. THE ASSESSEE WAS FURTHER ISSUED A SHOW CAUSE NOTIC E FOR APPLICATION OF FOREIGN CONTRIBUTION TOWARDS CREATION OF HOSPIT ALS/SCHOOL ASSETS, AND THEY ARE NOT COVERED UNDER SPECIFIC DIRECTION O F DONOR SNCF, CANADA. AS PER THE PROGRAMMES MENTIONED IN AGREEME NT 2, THE WELFARE MEASURES ACTIVITIES ARE CARRIED ON BY ASSE SSEE TRUST. THE LD. ASSESSING OFFICER BASED ON THE DATA OF THE CANADIA N RESOURCE AGENCY WEBSITE, IS OF THE OPINION THAT EXPENDITURE OF AC TIVITIES INCURRED BY THE ASSESSEE ARE AGAINST THE DIRECTIONS OF SNCG CA NADA AND ASSESSED ITA NO. 107/MDS/2015. :- 5 -: THE DIFFERENCE AS INCOME AND RAISED DEMAND. AGGRIE VED BY THE ORDER, THE ASSESSEE FILED AN APPEAL WITH THE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED AND ARGUED THE GROUNDS AND FILED WRITTEN SUBMISSIONS ALONGWITH INFORMATION OF FCRA ACCOUNT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS AND DEALT WITH DETAILS AND FACTS AND ACCEPTED THE REASONS ON SPENDING THE CONTRIBUTION ON ACTIVITIES OF TRUST REFERRED EX HAUSTIVELY AT PAGE 3 TO 12 AND OBSERVED AT PAGE 12 OF THE ORDER WERE THE ASSESSEE TRUST HAS SUBMITTED A LETTER FROM PRESIDENT OF DONOR AGEN CY (SNCF) DATED 15.04.2014 CONFIRMING THE SCOPE OF AGENCY AGREEMENT COVERING THE EXPENDITURE TOWARDS THE CONSTRUCTION & MAINTENANCE OF THE SRI NARAYANI HOSPITAL & RESEARCH CENTRE AND CONSTRUCTI ON AND MAINTENANCE OF THE NARAYANI VIDYALAYA MATRIC SCHOOL . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE FACTS, AT PARA 4.3 ON DISPUTED ISSUES OF ADDITION OF E5,56,47,742/ - AND ALLOWED THE APPEAL AT PARA 4.4 OF HIS ORDER AS UNDER:- 4.4 REGARDING THE ADDITION OF RS.5,56,47,742/- IS CONCERNED, THE AO FOUND THAT THE SUM WAS NOT ACCOUNTED FOR BY THE TRUST BASED ON THE CANADIAN RESOURCE AGENCY WEBSITE AND HENCE OF THE VIEW THAT IT SHOULD BE ADDED AS UNACCOUNTED INCOME. APART FROM THE EXTRACT OF THE WEBSITE WHICH IS NOT AN ADMISSIBLE EVIDENCE EITHER AS A PRIMARY ITA NO. 107/MDS/2015. :- 6 -: EVIDENCE OR SECONDARY EVIDENCE, NO OTHER EVIDENCE IS AVAILABLE ON THE FILE OF THE ASSESSINQ OFFICER TO COME TO THE CONCLUSION REGARDING THE RECEIPT OF RS.5,56,47,742/- BY THE ASSESSEE. ON THE OTHER HAND, IT IS NOT DISPUTED THAT ALL THE FUNDS WERE RECEIVED ONLY THROUGH PROPER BANKING CHANNELS AND IT IS ALSO PROVED THAT THE SAID .SUM OF RS.5,56,47,742/- WAS NOT RECEIVED DURING THE YEAR UNDER APPEAL BY THE ASSESSEE.. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) ORDER, THE REVENUE HAS ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE VEH EMENTLY ARGUED THAT COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN DELETING THE ADDITION AS THE AMOUNT WAS NOT UTILIZE D WHOLLY AND EXCLUSIVELY FOR CHARITABLE ACTIVITIES AS PER THE DI RECTIONS OF THE DONOR. THE AMOUNT HAS TO BE SPENT ON NINE SPECIFIC TASKS A S PER SCHEDULE A OF AGREEMENT AND DOES NOT BEAR ANY DATE OF AGREEMEN T. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ADMITTED NEW E VIDENCE PRODUCED BY ASSESSEE IN NATURE OF LETTER FROM PRESI DENT OF SRI NARAYANI CHARITABLE FOUNDATION , CANADA AND PRAYED FOR SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 6. ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIVE RE LIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) A ND FILED VOLUMINOUS PAPER BOOK IN HEARING PROCEEDINGS AND VE HEMENTLY OPPOSED THE GROUNDS. ITA NO. 107/MDS/2015. :- 7 -: 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY CONTENTION OF THE LD. DEPARTMENTA L REPRESENTATIVE BEING THAT COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE NEW EVIDENCE PRODUCED BY WAY OF LETTER FROM DONOR A GENCY M/S. SRI NARAYANI CHARITABLE FOUNDATION, CANADA DATED 15.04. 2014 AND THE DONATION AMOUNT RECEIVED WAS NOT UTILIZED FOR THE ACTIVITIES MANDATED BY THE CANADIAN DONOR AND FURTHER THE AGENCY AGREE MENT DOES NOT BEAR SIGNATURE. THE LD. AUTHORISED REPRESENTATIVE D REW OUR ATTENTION TO THE PAGE 15 OF PAPER BOOK EVIDENCING THE AMENDED AGENCY AGREEMENT WHICH CONTAINS TERMS OF ENGAGEMENT AND AC TIVITIES REQUIREMENTS TO BE FOLLOWED AS PER SCHEDULE A AN D B AND THIS SPECIFIC AGREEMENT WAS ENTERED ON 1 ST APRIL , 2006. THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT AGREEMEN T WAS NOT SIGNED IS INCORRECT AND ON REFERENCE TO PAGE 19 OF THE PA PER BOOK, THE AGREEMENT IS SIGNED BY SRI NARAYANI CHARITABLE FOUN DATION, CANADA AND OM SAKTHI NARAYANI SIDDAR PEEDAM CHARITABLE TRU ST, TAMIL NADU. SO FOR AS THE ISSUES ON AGREEMENT IS CONCERNED IT IS IN ACCORDANCE WITH TERMS AND THERE ARE NO DEFECTS AS ALLEGED BY THE REVENUE. FURTHER, THE LD. AUTHORISED REPRESENTATIVE DEMONSTR ATED SIGNIFICANCE OF COMMUNICATION LETTER, ASSESSMENT ORDER AND TRUST DEED OF THE INSTITUTION AND THE TRUST ACTIVITIES ARE CONDUCTED AS PER THE CONDITIONS AGREED WITH CANADIAN DONOR. THE LD. AUTHORISED REP RESENTATIVE DREW ITA NO. 107/MDS/2015. :- 8 -: ATTENTION TO THE LETTER DATED 15 TH APRIL, 2014 RECEIVED FROM THE CANDA DONOR INTIMATING DIRECTLY TO DY. DIRECTOR (EXEMPTIO NS), CHENNAI WITH CLARIFICATIONS ON THE EXPENDITURE AND SCOPE OF AGEN CY AGREEMENTS AT PAGE 56 OF PAPER BOOK AS UNDER:- THE GENERAL AGENCY AGREEMENT EXECUTED ON 1 ST FE. 2002 CONTAINS IN SCHEDULE A SCOPE OF AGENCY CONTRACT, C LAUSE 4: HEALTH PROGRAM- THIS CONTEMPLATES VARIOUS FORMS OF MEDICAL ASSISTANCE TO THE POOR AND NEEDY, WHICH INC LUDES THE CONSTRUCTION AND MAINTENANCE OF THE AMMA CHILD CARE HOSPITAL, CURRENTLY KNOWN AS THE SRI NARAYANI HOSPI TAL & RESEARCH CENTRE. CLAUSE5: EDUCATION PROGRAM: THIS CONTEMPLATES AND FACILITATES VARIOUS FORMS OF EDUCATIONAL ASSISTANCE TO THE POOR AND NEEDY STUDENTS WHICH INCLUDES THE CONSTRUC TION AND MAINTENANCE OF THE SRI NARAYANI VIDYALAYA MATRI C SCHOOL. THE BASIC PURPOSE OF FOREIGN CONTRIBUTIONS FOR ACTI VITIES ON HEALTH AND EDUCATION. THE AGREEMENT WAS ENTERED IN CANADA ON 1 ST APRIL, 2006 REFERRED AT PAGE 28 OF PAPER BOOK AND THERE IS NO FRESH EVIDENCE FILED AS ITS FORMING PART OF ASSESSMENT RECORD AND IN T HE NATURE OF CLARIFACTORY EXPLANATIONS. WE FIND THE ACTIVITIES A ND ARGUMENTS OF THE LD. AUTHORISED REPRESENTATIVE ARE SUPPORTED WITH D OCUMENTARY EVIDENCE WITH DULY SIGNED AND DATED CREDENTIAL AGR EEMENTS ALOGNWTIH PHOTOGRAPHS. THE ASSESSEE HAS COMPLIED FCRA PROVI SIONS FOR DONATIONS RECEIVED FOR THE PURPOSE OF HEALTH AND ED UCATIONAL PROGRAMME AS PER THE MANDATE OF CANADIAN DONOR AND ASSESSEE ITA NO. 107/MDS/2015. :- 9 -: CLAIMED SUCH EXPENSES AS APPLICATION OF INCOME FOR SCHOOL AND HOSPITALS. CONSIDERING THE APPARENT FACTS, EVIDENC E, ACTIVITIES AND FCRA PROVISIONS AND CLARIFICATORY EXPLANATION OF LD . AUTHORISED REPRESENTATIVE AND DULY SIGNED DOCUMENTARY PROOF , WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF COMMISSIONE R OF INCOME TAX (APPEALS) WHO HAS DEALT EXHAUSTIVELY VIZ-A-VIZ EXPL ANATIONS AND CLARIFICATION AND WE CONFIRM THE SAME. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IN ITA NO.107/MDS/2015 IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 27TH DAY OF APRIL, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 0 / DATED:27 .04.2016 KV 1 ( *',23 43%, / COPY TO: 1 . &' / APPELLANT 3. 5, () / CIT(A) 5. 389 *',' / DR 2. *+&' / RESPONDENT 4. 5, / CIT 6. 9:$ ; / GF