International Society for Krishna Consciousness, Bangalore V. DIT, Bangalore

ITA 1200/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5233 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-05-2010
• Assessment Year: misc
• Appeal Filed On: 16-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12A; 11

Judgement Text

PAGE 1 OF 6 ITA NO.1200/BANG/2009 1 IN THE INOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SMT. P MADHAVI DEVI, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NO.1200/BANG/2009 INTERNATIONAL SOCIETY FOR KRISHNA CONSCIOUSNESS, HARE KRISHNA HILL, CHORD ROAD, BANGALORE-10. -APPELLANT VS THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), BANGALORE. - RESPONDENT APPELLANT BY : SHRI S RAMA SUBRAMANIAN, C.A. RESPONDENT BY : SMT. SWATHI S PATIL, CIT-II O R D E R PER P MADHAVI DEVI : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF DIT(EXEMPTIONS), BANGALORE DATED 6.10.2009 IN HOLDI NG THAT THE ASSESSEE IS NOT ENTITLED TO RECOGNITION U/S 80G OF THE I T A CT. 2. THOUGH THE ASSESSEE HAS RAISED THE GROUND OF AP PEAL NO.3 STATING THAT THE ORDER DATED 6 TH OCTOBER, 2009 PASSED BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) IS TIME BARRED AS PER RULE 11B(6) OF THE INCOME TAX RULES, 1962, THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE IS NOT INTERESTED TO PURSUE THE SAME. THER EFORE, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. PAGE 2 OF 6 ITA NO.1200/BANG/2009 2 3. AS REGARDS THE MAIN GROUND OF APPEAL, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY ESTABLISHED BY WAY OF TRUST DEED DATED 8.5.1978 AND HAS BEEN REGISTERED U/S 12A ON 7.1.198 8 AND RECOGNIZED U/S 80G OF THE ACT UP TO 31.3.2009. THE ASSESSEE APPLI ED FOR GRANT OF RENEWAL OF RECOGNITION U/S 80G OF THE I T ACT ON 11.11.2008 . DURING THE COURSE OF PROCESSING THE APPLICATION FOR RENEWAL OF RECOGNITI ON AND TO VERIFY THE ELIGIBILITY OF THE SOCIETY IN TERMS OF SECTION 80G( 5)(I) TO 80G(5)(V) OF THE ACT, A LETTER WAS ISSUED TO THE ASSESSEE ON 3.12.20 08 CALLING FOR DETAILS OF DONORS, BANK ACCOUNTS, EVIDENCES OF ACTIVITY, TRANS ACTION IN IMMOVABLE PROPERTY, ETC. THE ASSESSEE FURNISHED THE DETAILS. 4. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) AFTER C ONSIDERING THE AIMS AND OBJECTS OF THE SOCIETY, CAME TO THE CO NCLUSION THAT THE ASSESSEE ALSO HAS RELIGIOUS OBJECTS IN THE MOA AND A HUGE SUM OF RECEIPTS ARE SHOWN AS RELIGIOUS DONATIONS/HUNDI COLLECTIONS IN THE ACCOUNTS. HE, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESS EE AS TO WHY THE APPLICATION FOR RENEWAL OF RECOGNITION SHOULD NOT B E REJECTED. 5. THE ASSESSEE SUBMITTED ITS REPLY STATING THAT T HE SOCIETY RECEIVES RELIGIOUS/HUNDI COLLECTIONS AS REFLECTED I N THE BOOKS OF ACCOUNTS WHICH ARE ANONYMOUS DONATIONS AND U/S 115BBC OF T HE I T ACT, ANONYMOUS DONATIONS ARE TAXABLE ONLY IN THE HANDS O F WHOLLY CHARITABLE INSTITUTIONS AND SECTION 115BBC IS NOT APPLICABLE TO ANY TRUST OR INSTITUTION CREATED OR ESTABLISHED WHOLLY FOR RELIG IOUS AND CHARITABLE PURPOSES. IT WAS FURTHER SUBMITTED THAT SINCE THE SOCIETY WAS ESTABLISHED WHOLLY FOR THE RELIGIOUS AND CHARITABLE PURPOSES, T HE SAID DONATIONS ARE PAGE 3 OF 6 ITA NO.1200/BANG/2009 3 EXEMPT U/S 115BBC AND IN TURN, ELIGIBLE FOR EXEMPTI ON U/S 11 OF THE I T ACT. 6. AFTER TAKING NOTE OF THESE SUBMISSION, THE DIR ECTOR OF INCOME- TAX (EXEMPTIONS) CAME TO THE CONCLUSION THAT THE AS SESSEE ADMITTED THE EXISTENCE OF THE RELIGIOUS ACTIVITY OF OWNING A TEM PLE. THEREAFTER, HE PLACED RELIANCE ON THE DECISION OF ANDHRA PRADESH H IGH COURT IN THE CASE OF ARSHA VIJNANA TRUST V D P SHARMA, DIRECTOR OF IN COME-TAX (EXEMPTIONS) AND OTHERS REPORTED IN 295 ITR 437 WHE REIN IT WAS HELD THAT THOUGH THE EXEMPTION HAD BEEN GRANTED TO THE PETITI ONER FOR A LONG PERIOD OF 20 YEARS BY MISCONSTRUING THE LAW, THAT WOULD NO T BE A BAR FOR THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) TO PASS AN ORDE R WHEN AN APPLICATION FOR EXTENSION OF GRANT OF EXEMPTION WAS MADE BEFORE HIM. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF RELIANCE MOTOR COMPANY PVT. LTD. V CIT (1995) 213 I TR 733 WHEREIN IT HAS BEEN HELD THAT IN ORDER TO GET THE BENEFIT U/S 80G OF THE ACT, ONE HAS TO SATISFY SUB-SECTION (5) OF THE I T ACT THAT THE TRU ST TO WHICH THE DONATION IS MADE SHOULD BE PURELY A CHARITABLE TRUST AND NO PAR T OF ITS INCOME SHOULD BE CAPABLE OF BEING TRANSFERRED OR APPLIED FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOSE AND IT IS SPECIFICALLY PROVIDED THAT THE INSTITUTION OR FUNDS SHOULD NOT BE EXPRESSED TO BE FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. HE ALSO REFERRED TO THE DECISION OF THE SUPREME COURT IN THE CASE OF UPPER GANGES SUGAR MIL LS LTD. V CIT 227 ITR 578 WHEREIN THE CONTENTION OF THE MADRAS HIGH C OURT WAS UPHELD AND IT WAS STATED THAT TO REITERATE, EXPLANATION 3 DOE S NOT REQUIRE THE ASCERTAINMENT OF WHETHER THE WHOLE OR SUBSTANTIALLY THE WHOLE OF THE INSTITUTION OR FUNDS CHARITABLE PURPOSE IS OF A RE LIGIOUS NATURE. IF IT DID, IT PAGE 4 OF 6 ITA NO.1200/BANG/2009 4 WOULD READ DIFFERENTLY. IT REQUIRES THE ASCERTAINM ENT OF WHETHER THERE IS ONE PURPOSE WITHIN THE INSTITUTION OR FUNDS OVERAL L CHARITABLE PURPOSE WHICH IS WHOLLY OR SUBSTANTIALLY WHOLLY, OF A RELIG IOUS NATURE. THUS, HE HELD THAT THE TRUST AND DONATION BY THE ASSESSEE TO IT FALL OUTSIDE THE SCOPE OF SECTION 80G. HE THEREFORE REJECTED THE ASSESSEE S APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G OF THE I T ACT. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REIT ERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE DIRECTO R OF INCOME-TAX (EXEMPTIONS), SUBMITTED THAT THE LEGISLATURE HAS IN SERTED SUB-SECTION (5B) TO SECTION 80G OF THE I T ACT TO THE EFFECT THAT NO TWITHSTANDING ANYTHING CONTAINED IN CLAUSE (II) OF SUB-SECTION 5 AND EXPLA NATION 3, AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE, DURING ANY PREVIOUS YEAR, WHICH IS OF A RELIGIOUS NATURE FOR AN AMOUNT NOT EXCEEDING FIVE P ER CENT OF ITS TOTAL INCOME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND TO WHICH THE PROVISIONS OF THIS SECTION APPLY. THUS, ACCORDING TO HIM, THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) CANNOT REJECT T HE APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G UNLESS HE IS SATISFI ED THAT THE ASSESSEES EXPENDITURE OF RELIGIOUS NATURE DOES EXCEED 5% OF I TS TOTAL INCOME IN THAT PREVIOUS YEAR. HE FURTHER SUBMITTED THAT THE APPLI CATION OF FUNDS CAN BE SEEN ONLY AFTER THE YEAR IS ENDED AND NOT DURING TH E PROGRESS OF THE RELEVANT PREVIOUS YEAR. AS REGARDS THE DECISION OF THE DIRE CTOR OF INCOME-TAX (EXEMPTIONS) AND HIS RELIANCE ON VARIOUS DECISIONS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE DECISIONS RELATE TO THE PROVISIONS THAT WERE THERE PRIOR TO THE INTRODUCTION OF SUB-SECTION (5B) TO SECTION 80G OF PAGE 5 OF 6 ITA NO.1200/BANG/2009 5 THE ACT, WHICH HAS BEEN INTRODUCED W.E.F. 1/4/2000 AND THEREFORE, THOSE DECISIONS ARE NOT RELEVANT TO THE CASE BEFORE US. 7.1 HE FURTHER SUBMITTED THAT THE PROVISO TO CLAUS E (VI) OF SUB- SECTION 5 OF SECTION 80G HAS BEEN OMITTED W.E.F. 1/ 10/2009 AND IT IS EVIDENT FROM THE EXPLANATORY NOTE TO THE FINANCE BILL REPRO DUCED IN 314 ITR 194 (ST.) THAT THE PURPOSE IS TO GIVE 80G PERMISSION IN PERPETUITY. 8. THE LEARNED DR ON THE OTHER HAND PLACED RELIANC E ON THE ORDER OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) AND SUBMITTE D THAT THE ASSESSEE HAS NOT MADE ANY SUBMISSIONS ABOUT THE APPLICATION OF SUB-SECTION (5B) TO SECTION 80G BEFORE THE DIRECTOR OF INCOME-TAX (EXEM PTIONS). SHE SUBMITTED THAT IF THE SAID PROVISION IS TO BE APPLI ED TO THE CASE ON HAND, THEN THE MATTER NEEDS TO BE REMITTED TO THE FILE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) FOR DENOVO CONSIDERATION IN ACCORDANCE WITH THE SAID PROVISION. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THIS IS THE CASE OF RENEWAL OF RECOGNITION U/S 80G OF THE ACT AND NOT FOR THE INITIAL GRANT. IN S UCH A CASE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SUB-SECTION (5B) OF SECTION 80G ARE APPLICABLE AND THE DIRECTOR OF INCOME-TAX (EXEMPTIO NS) HAS TO CONSIDER THE SAME BEFORE TAKING A DECISION. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE DECISIONS RELIED ON B Y THE DIRECTOR OF INCOME- TAX (EXEMPTIONS) RELATE TO THE POSITION OF LAW PRIO R TO INSERTION OF SUB- SECTION (5B) W.E.F. 1/4/2000 AND ARE THEREFORE, NOT APPLICABLE TO THE CASE BEFORE US. THE LEARNED DR HAS REQUESTED THAT THE M ATTER BE REMANDED TO PAGE 6 OF 6 ITA NO.1200/BANG/2009 6 DIRECTOR OF INCOME-TAX (EXEMPTIONS) FOR DENOVO CONS IDERATION, BUT WE FIND THAT THE ASSESSEE HAS FILED BEFORE US THE BALANCE S HEET, INCOME AND EXPENDITURE ACCOUNT AND THE RELEVANT SCHEDULES AND THEREFORE, WE DO NOT SEE ANY REASON TO REMIT THE MATTER TO DIRECTOR OF I NCOME-TAX (EXEMPTIONS). AS SEEN FROM THE INCOME AND EXPENDITURE A/C FILED A T PAGE 29 OF THE PAPER BOOK, WE FIND THAT THE TOTAL INCOME OF THE ASSESSEE AS ON 31.3.2007 IS RS.81,001,223/-, WHILE THE RELIGIOUS EXPENSES ARE R S.30,29,282/- WHICH IS AROUND 3.73% OF THE TOTAL INCOME. IT IS FURTHER SE EN THAT THE TOTAL INCOME OF THE ASSESSEE AS ON 31.3.2008 IS RS.8,59,48,956/- WH ILE THE RELIGIOUS EXPENSES ARE RS.18,81,016/-, WHICH IS AROUND 2.18% OF THE TOTAL INCOME. THUS, IT CAN BE SEEN THAT APPLYING THE PROVISION OF CLAUSE (II) OF SUB-SECTION (5B) OF SECTION 80G, THE ASSESSEE SHALL BE DEEMED T O BE AN INSTITUTION OR FUND TO WHICH THE PROVISIONS OF SECTION 80G APPLY. IN VIEW OF THE SAME, WE ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) TO GRANT THE CERTIFICATE U/S 80G TO TH E ASSESSEE AS PRAYED FOR. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED ON THURSDAY, THE 20 TH DAY OF MAY, 2010 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL ME MBER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) TH E CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. (7) GUARD FILE, NEW DELHI. MSP/4.5/17.5 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.