Church of Christ , Hyderabad V. Income Tax Officer, Exemptions-4, Hyderabad

ITA 1688/Hyd/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6307 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 16-06-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 03-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D J PRABHAKAR ANAND
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Diversion of income
• Section: 143(3); 12A; 12AA; 143(1); 13; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1688/HYD/2017 A.Y. 2012 - 13 CHURCH OF CHRIST, HYDERABAD. PAN: AABTC 3506 E VS. INCOME TAX OFFICER (EXEMPTIONS) - 4, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SRI A.V. RAGHURAM REVENUE BY SRI D.J. PRABHAKAR ANAND, DR DATE OF HEARING: 16/06/2021 DATE OF PRONOUNCEMENT: 2 6 /07/2021 ORDER PER A. MOHAN ALANKAMONY , A.M: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 9, HYDERABAD IN APPEAL NO. 0018/ITO(EXE) - 4/2015 - 16, DATED 29/05/2017 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE A.Y. 2012 - 13. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT : THE LD. CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD. AO WHO HAD MADE ADDITION OF RS. 77,96,563/ - BY TREATING 2 THE DONATION RECEIVED BY THE ASSESSEE AS ITS INCOME BECAUSE THE ASSESSEE IS NO T REGIST ERE D U/S. 12 AA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED SOCIETY ENGAGED IN RELIGIOUS ACTIVITIES FILED ITS RETURN OF INCOME ADMITTING NIL INCOME FOR THE RELEVANT AY 2012 - 13 BY CLAIMING EXEMPTION U/S. 11 OF THE ACT. INITIALLY, THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT AND THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 31/03/2015 WHEREIN THE LD. AO MADE AN ADDITION OF RS. 77,96,563/ - BY TREATING THE DONATION RECEIVED AS ITS INCOME ALONG WITH ANOTHER DISALLOWANCE TOWARDS DEPRECIATION. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD RECEIVED RS. 77,96,563/ - TOWARDS DONATION FOR CONSTRUCTION OF CHURCH RS. 62,90,085/ - , REPAIRS AND MAINTENANCE RS. 4,52,012/ - , BOREWELLS RS. 2,66,666/ - , BURIAL GROUNDS RS. 5,13,680 AND TWO WHEELERS RS. 2,57,120/ - . THE AFORESAID AMOUNTS WERE STATED TO BE RECEIVED FROM CHURCH OF CHRIST INDIA, TEXAS AND USA. THE LD. AO TREATED THE DONATION RECEIVED AS THE INCOME OF THE ASSESSEE BECAUSE THE ASSESSEE WAS NOT REGISTERED UNDER SECTION 12A A OF THE ACT AND THEREFORE IT WAS NOT ENTITLED FOR EXEMPTION U/S. 11 OF THE ACT. THE PRAYER OF THE ASSESSEE WAS THAT IT HAD NOT CREATED THESE ASSETS FOR ITSELF BUT DISTRIBUTED THE AMOUNT RECEIVED AS PER THE INSTRUCTIONS OF THE DONORS AND HENCE THE SAME CANNOT BE TREATED AS THE INCOME OF T HE 3 ASSESSEE. ON APPEAL THE LD. CIT (A) ALSO UPHELD THE ORDER OF THE LD. AO BY OBSERVING AS UNDER: 6. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND HAVE GONE THROUGH THE DETAILS SUBMITTED. ASSESSEE SUBMITTED COPIES OF LETTERS ISSUED BY CH URCH OF CHRIST INDIA, TEXAS, USA, ACCORDING TO WHICH AN AMOUNT OF 136740 USD WAS RECEIVED BY THE ASSESSEE FOR VARIOUS PURPOSES SUCH AS DIGGING OF BOREWELLS, CONSTRUCTION OF CHURCHES, BURIAL GROUNDS ETC HOWEVER. AS SEEN FROM THE RECEIPTS AND PAYMENTS ACCOUN T. THESE AMOUNTS ARE PAID AS DONATIONS / HELP TO VARIOUS PERSONS BUT ARE NOT UTILISED / SPENT BY THE ASSESSEE SOCIETY. AS PER THE FCRA APPROVAL GIVEN BY THE GOVERNMENT OF INDIA, IT IS CLEARLY SPECIFIED THAT BEFORE ANY FUNDS ARE PASSED ON TO ANY PERSON / AS SOCIATION, IT SHOULD BE ENSURED THAT SUCH RECIPIENT IS ELIGIBLE TO ACCEPT FOREIGN CONTRIBUTIONS. FROM THE DETAILS FURNISHED BY THE ASSESSEE, IT IS NOT CLEAR WHETHER SUCH SPECIFIC REQUIREMENT IS FULFILLED BY THE ASSESSEE SOCIETY. IT IS ALSO NOT CLEAR FROM T HE DETAILS FURNISHED WHETHER THE AMOUNTS DONATED TO VARIOUS PERSONS FOR THE SPECIFIC PURPOSES WERE UTILISED BY THE PERSONS OR NOT. THE AUTHENTICITY OF THE COPIES OF DONATION LETTERS IS ALSO NOT PROVED BY THE ASSESSEE. IN ABSENCE OF ALL THESE DETAILS, IT IS NOT POSSIBLE TO EXAMINE WHETHER THE DONATIONS MADE ARE UTILISED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, I UPHOLD THE ADDITION MADE BY THE ASSESSING OFFICER WITH REGARD TO THE DONATIONS MADE TO VARIOUS PERSONS / FOR VARIOUS PURPOSES. THEREFORE, THE ADDITION MADE IS SUSTAINED. 5. BEFORE US, THE LD. AR VEHEMENTLY ARGUED STATING THAT THE ASSESSEE RECEIVED THE MONEY FROM VARIOUS INSTITUTIONS WHICH WAS HANDED OVER TO VARIOUS PARTIES WHO EXPENDED THE MONEY ACCORDING TO THE WISHES OF THE DONOR. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE SOCIETY IS A REGISTERED SOCIETY WHICH HAD THE FOLLOWING OBJECTS: 1. TO ASSEMBLE EACH LORDS DAY TO PARTAKE OF HOLY COMMUNION AND TO WORSHIP GOD ACCORDING TO THE COMMANDMENTS SET FORTH IN THE BIBLE TO CONDUCT BIBLE SERVICES ACCORDING TO THE NEW TESTAMENT. 2. TO SECURE AND PROVIDE ADEQUATE MEETING PLACE FOR THE MEMBERS O F THE CHURCH OF CHRIST RESIDING IN INDIA. 3. TO PREACH THE WORD OF GOD AND BAPTIZE ALL WHO WILLINGLY COME FORTH WITH ALL THEIR HEART. 4 4. TO PREACH, PUBLISH OR EXHIBIT ANY BOOKS, PAMPHLETS, PICTURES OR POSTERS THAT MAY BE CONSIDERED DESIRABLE FOR THE PROM OTION OF THE OBJECTS OF THE CHURCH 5. TO ESTABLISH, PROMOTE, ORGANIZE ANY CENTRES OF THE CHURCH OR TO PROMOTE AND CARRY OUT THE AFFILIATION OR AMALGAMATION OF SUCH OTHER CHURCH WITH THIS CHURCH. PROVIDED HOWEVER THAT THIS CONGREGATION SHALL ASSIST IN ESTA BLISHMENT OF RENDER NECESSARY HELP TO SUCH OTHER CONGREGATIONS WHICH ADOPT THE PROVISIONS OF THE CONSTITUTION HEREIN SUBJECTS ONLY TO SUCH MODIFICATIONS AS ARE EXPEDIENT TO MEET THE LOCAL REQUIREMENTS. 6. TO DO ALL SUCH OTHER LAWFUL ACTS, DEED OR THINGS A S ARE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF ANY OF THE ABOVE OBJECTS. 6. THE LD. AR ALSO REFERRED TO PAGE NO.4 OF THE PAPER BOOK TO ESTABLISH THAT THE ASSESSEE HAD OBTAINED FCRA REGISTRATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF HOME AFFAIRS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT RETAINED THE DONATIONS RECEIVED FOR ITSELF BUT HAD EXPENDED THE SAME AS PER THE WISHES OF THE DONORS. IT WAS THEREFORE PLEADED THAT THE DONATION RECEIVED MAY NOT BE TREATED AS ITS INCOME. THE LD. DR ON T HE OTHER HAND VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS EVIDENT THAT THE ASSESSEE IS NOT REGISTERED U/S. 12A OF THE ACT. I N SUCH CIRCUMSTANCES, THE ASSESSEE WOULD BE DISENTITLED TO ENJOY THE BE NEFIT OF SECTION 11 OF THE ACT. FURTHER, THE ASSESSEE HAD CLAIMED THAT IT HAD OBTAINED FCRA CERTIFICATE FROM THE MINISTRY OF HOME AFFAIRS. HOWEVER, ON PERUSING THE PAPER BOOK PAGE NO.4, WE FIND THAT THE CERTIFICATE WAS ISSUED ON 5 22/12/1995 AND ONLY THE F IRST PAGE OF THE CERTIFICATE IS FILED BEFORE US. THE REST OF THE PAGES ARE MISSING. FROM THE FIRST PAGE OF THE FCRA CERTIFICATE ITSELF IT IS EVIDENT THAT THE ASSESSEE IS BOUND TO FILE A RETURN DISCLOSING THE PARTICULARS OF FOREIGN DONA TION RECEIVED AN D HO W IT WAS APPLIED AND EVEN WHEN THE RE IS NO TRANSACTION A NIL RETURN IS TO BE FILED . THERE ARE ALSO VARIOUS OTHER STATUTORY COMPLIANCES THAT HAS TO BE FULFILLED BY THE ASSESSEE IN ORDER TO ENJOY THE BENEFIT OF FCRA CERTIFICATE AND THOSE COMPLIANCES ARE NOT PRODUCED BEFORE US. THE CURRENT STATUS OF THE FCRA REGISTRATION IS ALSO NOT DISCLOSED BEFORE US. FURTHER THE ACTIVITY OF THE ASSESSEE CANNOT BE TREATED AS BUSINESS BECAUSE TH E ASSESSEE HAD NOT RENDERED TO ANY SERVICES TO THE ENTITIES FROM WHOM THE PAYMENTS ARE RECEIVED. THE CONCEPT OF DIVERSION OF INCOME BY OVERRIDING TITLE WILL ALSO NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE THE AMOUNT COLLECTED BY THE ASSESSEE IS FOR THE PURPOSE OF THE RELIGIOUS ACTIVITIES OF THE ASSESSEE AND FOR SUCH FUND REGISTRATION U/S. 12A IS MANDATORY TO CLAIM THE BENEFIT U/S.11 OF THE ACT . FURTHER, THE CONCEPT OF DIVERSION OF INCOME BY OVERRIDING TITLE IS WELL EXPLAINED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE PCIT VS. M/S. CHAMUNDI WINERY & DISTILLERY IN APPEAL ITA NO. 155/2016, DATED 25/09/2018 FOR THE AY 2010 - 11 . THE RELEVANT PORTION OF THE HONBLE KARNATAKA HIGH COURT JUDGMENT IS EXTRACTED HEREIN BELOW FOR REFERENCE: 75. WHAT WE FURTHER FEEL IS THAT THE DIVERSION OF INCOME BY TRANSFER OF OVERRIDING TITLE AT SOURCE SHOULD NORMALLY HAVE THE SUPPORT OF THE STATUTORY REQUIREMEN TS OR SOME DECRETAL BINDING CHARACTER OF COURT OF LAW AND EVEN THOUGH THE PRIVATE CONTRACTUAL OBLIGATIONS CAN ALSO BRING ABOUT 6 SUCH DIVERSION OF INCOME AT SOURCE BUT IN THIS LAST SPHERE OF PRIVATE CONTRACTUAL OBLIGATIONS, THE COURT AND THE INCOME TAX AUT HORITIES HAVE TO EXAMINE SUCH ASPECTS CAREFULLY IN COMPARISON TO THE ABOVE TWO OTHER CATEGORIES OF STATUTORY REQUIREMENTS AND THE COURT DECREES AND THEN EXAMINE THE REAL PURPORT AND OBJECT OF SUCH PRIVATE ARRANGEMENTS AND CONTRACTS. 76. BESIDES THE ISSUES OF THE LEGALITY OF THE AGREEMENT, THE REAL INTENTION OF THE PARTIES SHOULD BE ASCERTAINED AS TO SEE WHETHER SUCH ARRANGEMENTS AND CONTRACTS HAVE BEEN ENTERED INTO TO DEFLECT AND DIVERT THE APPLICABILITY OF INCOME TAX LAWS ON THE ASSESSEE WHO HAS REA LLY EARNED THE REAL INCOME, PROFITS AND GAINS UNDER SUCH CONTRACT OR WHETHER SUCH DIVERSION IS ONLY AN ARRANGEMENT TO SUIT THE PURPOSES OF TAX AVOIDANCE IN SUCH CASES. 77. THEREFORE, WE REITERATE THAT IT WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF S UCH AND INDIVIDUAL CASE WHETHER IN THOSE CIRCUMSTANCES, IT WOULD AMOUNT TO A DIVERSION OF INCOME BY OVERRIDING TITLE AT SOURCE OR AN ARRANGEMENT TO SERVE THE PURPOSE OF TAX AVOIDANCE, AS IS THE CASE BEFORE US. WHILE HOLDING SO, THE HONBLE HIGH COURT HAD CONSIDERED THE DECISION OF THE HONBLE PRIVY COUNCIL IN THE CASE RAJA BEJOY SINGH BUDHURIA VS. COMMISSIONER OF INCOME TAX, BENGAL REPORTED IN [1993] 1 ITR 135 ; COMMISSIONER OF INCOME TAX VS. SITALDAS TIRATHDAS 4 1 ITR 367 (SC); DEPUTY COMMISSIONER OF INCOME - TAX VS. T. JAYACHANDRAN [2018] 406 ITR 1 (SC) AND COMMISSIONER OF INCOME TAX VS. MADRAS RACE CLUB [1996] 219 ITR 39 (MAD.) . IT IS PERTINENT TO MENTION THAT THE HONBLE KARNATAKA HIGH COURT HAS ENLIGHTENED THE CONCEPT OF DIVERSION OF INCOME BY OVERRIDING TITLE KEEPING IN VIEW OF THE DECISIONS OF THE HIGHER JUDICIARIES CITED HEREINABOVE AND IF THOSE PRINCIPLES ARE NOT ADHERED THE PROVISIONS OF SECTION 11, 12, 12A AND 12AA OF THE ACT WILL BECOME REDUNDANT . CONSIDERING THESE FACTS AND THE DECISIONS OF THE HONBLE HIGHER JUDICIARIES, WE ARE OF THE VIEW THAT THE ACTION TAKEN BY THE LD. 7 REVENUE AUTHORITIES ARE AS PER THE PROVISIONS OF THE ACT AND THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THEIR ORDERS . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE 26 TH JULY, 2021. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 26 TH JULY , 2021. OKK COPY TO: - 1) CHURCH OF CHRIST, D.NO.4 - 9/4/5/A, CHURCH BUILDING, MALLAPUR MAIN ROAD, HYDERABAD 500 076. 2) INCOME TAX OFFICER, EXEMPTIONS - 4, HYDERABAD. 3) CIT (A) - 9, HYDERABAD. 4) THE CIT (EXEMPTIONS), HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE