ITO, CHENNAI V. The Trust Association of the Advent Christian Conference of India Private Ltd., CHENNAI

ITA 1784/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9210 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 17-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: MRS PUSHYA SITARAMAN; MRS J SREE VIDYA A
• Keywords: Capital asset
• Section: 143(3); 142(1); 12AA; 12

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 784/MDS/2015 / ASSESSMENT YEAR :20 1 0 - 11 THE INCOME TAX OFFICER (EXEMPTIONS), WARD 3, ANNEXE BUILDING, III FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 34. VS. M/S. THE TRUST ASSOCIATION OF THE ADVENT CHRISTIAN CONFERENCE OF INDIA PVT. LTD., OLD NO.13, NEW NO. 6, II STREET, ABIRAMI NAGAR, VIRUGAMBAKKAM,CHENNAI 92. [PAN: AACCT4029K] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.B.K OLI, JCIT / RESPONDENT BY : MRS. PUSHYA SITARAMAN, SR.ADVOCATE & MRS. J. SREE VIDYA, ADVOCATE / DATE OF HEARING : 1 7 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 15 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 7 , CHENNAI , DATED 09 . 03 .20 15 RELEVANT TO THE ASSESSMENT YEAR 20 1 0 - 11 . THE FIRST GROUND RAISED IN THE APPEAL OF THE REVENUE IS WHETHER, THE ASSESSEE TRUST IS QUALI F Y FOR APPLICATION OF INCOME AND ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 11 OF I.T.A. NO . 1 784 /M/ 15 2 THE ACT WHEN THE RECIPIENT SOCIETY IS NOT REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . 2. B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956. IT ALSO GOT REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT VIDE ORDER OF THE DIT(E), CHENNAI DATED 28.03.2007. IT FILED ITS RETURN OF I NCOME FOR THE ASSESSMENT YEAR 2010 - 11 ADMITTING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED. NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETA ILS AND AFTER EXAMINING THE DETAILS, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 28.03.2013 DETERMINING THE TOTAL INCOME AT .71,92,780/ - . 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS FOUND TH AT THE ASSES SEE SOLD A LAND AT P ALUR FOR .23,50,000/ - . BUT ONLY THE CAPITAL GAIN OF .3,38,900/ - WAS TAKEN TO INCOME AND EXPENDITURE ACCOUNT. THE ASSESSING OFFICER BROUGHT TO TAX THE CAPITAL GAIN OF .3,38,000/ - SINCE THE ASSESSEE DID NOT INVEST THE SALE PROCEEDS IN ACQUIRING A NEW CAPITAL ASSET. 4. THE ASSESSING OFFICER FURTHER FOUND THAT THE APPLICATION OF INCOME WAS CHURCH EXPENSES AMOUNTING TO .66,53,877/ - . THE SUM WAS PAID TO M/S. ADVENT CHRISTIAN CONFERENCE [A SOCIETY] IN ORDER TO MAINTAIN 60 CHURCHES IN I.T.A. NO . 1 784 /M/ 15 3 TAM IL NADU, ANDHRA PRADESH AND BIHAR. THE ASSESSING OFFICER FOUND THAT M/S. ADVENT CHRISTIAN CONFERENCE IS A SOCIETY AND APPLIED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT ON 12.03.2012, WHICH WAS REJECTED DUE TO TECHNICAL REASONS AND RETURNS FOR THE ASSE SSMENT YEARS 2009 - 10 AND 2010 - 11 WERE NOT FILED BY THE SOCIETY. SINCE THE SOCIETY WAS NOT REGISTERED, THE ASSESSING OFFICER HAS HELD THAT THE PAYMENT TO IT CANNOT BE REGARDED AS APPLICATION OF INCOME BY RELYING ON VARIOUS DECISIONS. THE ASSESSING OFFICER H AS ALSO HELD THAT THE CONTRIBUTION MADE BY THE ASSESSEE TO THE UNREGISTERED SOCIETY CANNOT BE CONSTRUED TO HAVE BEEN UNDERTAKEN TO ACHIEVE THE OBJECTS OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO FOUND DISCREPANCY IN THE SUM PAID TO M/S. ADVENT CHRISTIA N CONFERENCE OF INDIA BY THE ASSESSEE. HENCE, THE ASSESSING OFFICER ADOPTED THE FIGURE OF .68,53,877/ - ADMITTED BY RECIPIENT AS INELIGIBLE APPLICATION UNDER SECTION 11(1)(A) OF THE ACT. THUS, THE ASSESSING OFFICER ASSESSED THE FOLLOWING TO TAX: 1. INELIGIBLE APPLICATION UNDER SECTION 11(1)(A) .68,53,877 2. SHORT TERM CAPITAL GAIN .3,38,900 TOTAL INCOME .71,92,777 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE INCOME OF THE INSTITUTION IS APPLIED TOWARDS THE PAYMENT OF SALARY TO PASTORS AND FOR MEETING THE EXPENSES IN CONDUCTING UNINTERRUPTED SERVICES IN ABOUT 60 CHURCHES TO THE MEMBERS OF ADVENT CHRISTIAN COMMUNITY IN AND AROUND CHENNAI. IT WAS ALSO SUBMITTED THAT AGAINST THE INCOME OF .50,13,487/ - , A SUM OF .66,53,877/ - WAS INCURRED AND I.T.A. NO . 1 784 /M/ 15 4 CHANNELLED THROUGH ADVENT CHRISTIAN CONFERENCE AND THE ENTIRE PAYMENTS WERE EFFECTED FOR THE INTENDED PURPOSES. THEREFORE, THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) THAT THE SUM PAID FOR RELIGIOUS ACTIVITIES TO RECIPIENT SOCIETY SHOULD REGARDED AS APPLICATION OF INCOME AND THE ASSESSEE SHOULD BE ALLOWED EXEM PTION UNDER SECTION 11 OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AND ALSO CONSIDERING THE NATURE OF ACTIVITIES OF THE ASSESSEE TRUST AS WELL AS RECIPIENT SOCIETY, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEM PTION UNDER SECTION 11 OF THE ACT. 6. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL. THE LD. DR STRONGLY ARGUED THAT THE ASSESSEE SHALL NOT QUALIFY FOR APPLICATION OF INCOME AND ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT SINCE THE SUM PAID T O THE RECIPIENT SOCIETY IS NOT REGISTERED UNDER SECTION 12AA OF THE ACT. THE DEPARTMENT ALSO CHALLENGED IN ALLOWING THE ASSESSEE S CLAIM ON CAPITAL GAIN BY HOLDING THAT THE ASSESSEE HAS INVESTED THE SALE PROCEEDS OF THE LAND AT PALUR IN ACQUIRING NEW CAPIT AL ASSET. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE LD. CIT(A) AND SUBMITTED THAT BOTH THE ASSESSEE AND THE RECIPIENT SOCIETY ARE INVOLVED IN RELIGIOUS ACTIVITIES AND JUST BECAUSE THE RECIPIENT SOCIETY WAS NOT REGISTERED, THE BENEFIT UNDER SECTION 11 OF THE ACT SHOULD NOT BE DENIED TO THE ASSESSEE WHEN THE MONEY PAID FOR CARRYING OUT RELIGIOUS ACTIVITY WAS NOT DISPUTED BY THE DEPARTMENT. I.T.A. NO . 1 784 /M/ 15 5 8. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS A REGISTERED RELIGIOUS TRUST UNDER SECTION 12AA OF THE ACT AND IT IS ALSO NOT IN DISPUTE THE SUM WAS PAID TO M/S. ADVENT CHRISTIAN CONFERENCE IN ORDER TO MAINTAIN 60 CHURCHE S IN TAMIL NADU, ANDHRA PRADESH AND BIHAR. THE ASSESSING OFFICER FOUND THAT M/S. ADVENT CHRISTIAN CONFERENCE IS A SOCIETY AND APPLIED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT ON 12.03.2012, WHICH WAS REJECTED DUE TO TECHNICAL REASONS AND RETURNS FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 WERE NOT FILED BY THE SAID SOCIETY. SINCE THE SOCIETY WAS NOT REGISTERED UNDER SECTION 12 AA OF THE ACT , THE ASSESSING OFFICER HAS HELD THAT THE PAYMENT TO IT FOR DISBURSING AMONG 60 CHURCHES CANNOT BE REGARDED AS AP PLICATION OF INCOME. WHEN THE RECIPIENT SOCIETY IS NOT A REGISTERED TRUST UNDER SECTION 12AA OF THE ACT AS TO WHY THE ASSESSEE TRUST HAS CHOSEN THEM TO DISBURSE THE HUGE AMOUNT TO VARIOUS CHURCHES AND WHAT PREVENTED THE ASSESSEE TRUST THEMSELVES TO DISBURS E THE SAME DIRECTLY INSTEAD OF ROUTING THE MONEY THROUGH AN UNREGISTERED TRUST . NO REASON IN THIS REGARD IS FOUND TO HAVE BEEN FURNISHED BY THE ASSESSEE NOR THE LD. CIT(A) BOTHERED ABOUT ITS LEGAL VALIDITY . THE LD. CIT(A) HAS NOT GIVEN ANY FINDING W HEN THE RECIPIENT SOCIETY WAS NOT A REGISTERED TRUS T UNDER SECTION 12AA OF THE ACT AND APPLIED FOR REGISTRATION ON 12.03.2012 , WHICH WAS REJECTED BY THE LD. CIT, HOW THE DISBURSEMENT OF HUGE AMOUNT THROUGH THE UNREGISTERED TRUST IS LEGALLY VALID WHEN THE RECIPIEN T SOCIETY HAS BEEN FOUND DEFAULT IN FILING I.T.A. NO . 1 784 /M/ 15 6 RETURN S OF INCOME FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. WHEN THE RECIPIENT SOCIETY HAS NOT FILED THEIR RETURNS FOR THE ABOVE ASSESSMENT YEARS BEFORE THE ASSESSING OFFICER FOR ITS ASSESSMENT S , CONSIDERING T HE BALANCE SHEET OF THE RECIPIENT SOCIETY IS NOT WITHIN THE JURISDICTION OF THE LD. CIT(A) . THE QUESTION IS NOT WHETHER THE SOCIETY HAS SPENT THE MONEY OR THE MONEY WAS USED FOR RELIGIOUS PURPOSES IS NOT THE POINT AT ISSUE. WITHOUT VALID REASON, THE DEPART MENT WOULD NOT HAVE REJECTED THE GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT TO THE RECIPIENT SOCIETY. EVEN OTHERWISE ALSO, WHEN THE RECIPIENT SOCIETY IS FOUND TO BE DEFAULT IN NOT FILING THE RETURNS FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 FOR ASSESSMENT , ROUTING THE MONEY THROUGH AN UNREGISTERED TRUST IS LEGALLY NOT VIABLE. APART FROM THIS, THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED IN HIS ORDER AT PARA 7 THAT 7. APPLICATION OF INCOME IS ALLOWABLE ONLY WHEN IT IS EFFECTUATED TO REACH THE BENEFICIARIES OF THE TRUST. ANOTHER RELIGIOUS INSTITUTION CANNOT BE A BENEFICIARY AND WHEN THE OBJECTS OF THE DONOR - DONEE TRUSTS ARE SIMILAR, THE RECIPIENT TRUST ONLY ACTS AS A VEHICLE TO CARRY FORWARD THE RELIGIOUS ACTIVITY, THROUGH IT. WHEN THIS VEHICLE IS NOT REGISTERED U/S 12AA, CHARITY BREAKS DOWN. THE SUPREME COURT IN THE CASE OF CIT V. U.P. FOREST CORPORATION REPORTED IN 220 ITR 945 HAS HELD THAT IN ORDER TO TAKE ADVANTAGE OF TH PROVISIONS OF SECTION 11 OF THE ACT, A TRUST OR INSTITUTI ON HAS TO GET ITSELF REGISTERED. SO WHEN THE DONEE INSTITUTION IS NOT A REGISTERED PUBLIC RELIGIOUS INSTITUTION, IT IS PROHIBITED TO APPLY THE INCOME. THEREFORE, IN EFFECT THE CONTRIBUTION MADE BY THE ASSESSEE TRUST TO THE UNREGISTERED SOCIETY CANNOT BE C ONSTRUED TO HAVE BEEN UNDERTAKEN TO ACHIEVE THE OBJECTS OF THE ASSESSEE TRUST. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE REVERSE THE ORDER PASSED BY THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND RAISED BY THE REVENU E IS ALLOWED. I.T.A. NO . 1 784 /M/ 15 7 9. WITH REGARD TO SHORT TERM CAPITAL GAINS, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS CLARIFIED HAVING PURCHASED LAND FOR .6,74,000/ - , SPENT .1,61,118 TOWARDS CONSTRUCTION OF BUILDING AND ALSO SPENT .1,50,000/ - TOWARDS CONSTRUCTIO N OF SCHOOL BUILDING, WHEREAS, THE ASSESSING OFFICER HAS HELD THAT THE SALE PROCEEDS ARE NOT UTILIZED IN ACQUIRING CAPITAL ASSET AT PARA 4 OF THE ASSESSMENT ORDER. IN THE APPELLATE ORDER, THE LD. CIT(A) HAS NOT GIVEN ANY DETAILS OF CLARIFICATION GIVEN BY T HE ASSESSEE. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REMIT THE MATTER BACK TO THE ASSESSING OFFICER TO DECIDE A FRESH. THE ASSESSEE IS DIRECTED TO FILE THE DETAILS BEFORE THE ASSESSING OFFICER FOR VERIFICATION. IN CASE, THE ASS ESSEE COULD NOT FURNISH ANY RELIABLE EVIDENCE BEFORE THE ASSESSING OFFICER, THE ADDITION ALREADY MADE BY THE ASSESSING OFFICER STANDS SUSTAINED. BETWEEN PA GES 6 AND 7 OF CIT(A) S ORDER, WITH REGARD TO THE COST OF PURCHASE OF LAND IS VARYING TO THE EXTENT O F .40,000/ - I.E. AT PAGE 6 IT IS MENTIONED AT .6,34,000/ - WHEREAS, IN PAGE 7, IT IS MENTIONED AT .6,74,000/ - . 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 15 TH JUNE , 201 6 AT CHEN NAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 15 . 0 6 .201 6 VM/ - I.T.A. NO . 1 784 /M/ 15 8 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.