DDIT (Exemption)-II, Hyderabad V. Indian Red Cross Society, Hyderabad

ITA 694/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59146 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Charitable institution
• Section: 12AA; 10B; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 694/HYD/2011 ASSESSMENT YEAR : 2005-06 DEPUTY DIRECTOR OF INCOME - TAX (EXEMPTIONS)-II, HYDERABAD V S. THE INDIAN RED CROSS SOCIETY HYDERABAD PAN: AAATI4525L APPELLANT RESPONDENT APPELLANT BY: SHRI V. SRINIVAS RESPONDENT BY: SHRI A.V. RAGHU RAM DATE OF HEARING: 19 . 0 1.201 2 DATE OF PRONOUNCEMENT: 19.01.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 31.1.2011 FOR A.Y. 2 005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF RS. 2,94,08,733/- TOWARDS TSUNAMI DONATIONS RECEIVED. THE TSUNAMI CALAMITY OCCURRED ON 26.12.2004 AND THESE AMOUNTS WERE LEFT UNSPENT TILL THE FY 31.3.2005. THE CLAIM OF THE ASSESSEE TO THE HUMANITARIAN SERVICE APPEARS TO HAVE BEEN PUT TO SEVERE TEST THIS MOMENT OF CRISIS AND AT LEAST IT I S NOT APPARENTLY REFLECTED IN THE NATURAL CALAMITIES RELI EF FUND ACCOUNT. 2. THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF RS. 45,00,000 TOWARDS GRANTS RECEIVED FROM GOVERNMENT OF ANDHRA PRADESH. THESE GRANTS WERE SHOWN ONLY IN THE BALANCE SHEET BUT NOT IN THE INCOME & EXPENDITURE STATEMENT, UNLESS IT IS OF CORPUS NATURE IT MUST HAVE BEEN SHOWN AS ORDINARY INCOME. I.T.A. NO. 694/HYD/2011 THE INDIAN RED CROSS SOCIETY ======================= 2 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THAT THE TRUST HAS BEEN REGISTERED U/S. 12AA FOR THE ASSESSMENT YEAR 2008-09 ONWARDS AND NO REGISTRATION WAS AVAILABLE TO THE TRUST FOR THE A.Y. 2005-06. 4. THE CIT(A) OUGHT TO HAVE CONSIDERED THAT THE AO HAS RIGHTLY DENIED THE EXEMPTION U/S. 11 IN THE ABSENCE OF REGISTRATION U/S. 12A. 5. THE CIT(A) OUGHT TO HAVE CONSIDERED THE BOARD'S DIRECTIONS ISSUED IN THEIR LETTER DATED 19.5.2010 T HAT ALL BRANCH COMMITTEES OF INDIAN RED CROSS SOCIETY MAY BE TREATED AS SEPARATE ENTITIES UNDER THE I.T. ACT AND THEY SEEK REGISTRATION U/S. 12A. 6. THE CIT(A) OUGHT TO HAVE TAKEN INTO ACCOUNT THAT TH E TRUST HAS NOT REGISTERED U/S. 43(1) OF THE A.P. CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS AND ENDOWMENTS ACT, 1987. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE FIRST TIME ON 18.2.2008 SH OWING 'NIL' INCOME. A VERIFICATION OF THE APPLICATION OF THE A SSESSEE U/S 35AC FILED ON 2.6.2008 REVEALED THAT THE REGISTRATION U/ S 12AA WAS EFFECTIVE ONLY FROM THE A.Y. 2008-09. HOWEVER, THE PRINTED ANNUAL REPORT DATED 12.6.2006 FOR THE YEAR ENDED 31.3.2005 , SHOWED THAT THE SOCIETY HAD RECEIVED RS. 2,94,08,733 FROM PUBLI C. CONSIDERING THAT THERE WAS AN ESCAPEMENT OF INCOME, A NOTICE US . 148 WAS ISSUED BY THE ASSESSING OFFICER. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE PLE ADED THAT 'THE ASSESSEE SOCIETY HAS BEEN UNDER THE BONA-FIDE BELIEF THAT THERE IS NO REQUIREMENT OF THE IRCS TO FILE ONLY RE TURN OF INCOME AT HYDERABAD. THUS, IT DID NOT FILE ANY RETURN OF INC OME SINCE INCEPTION FOR MORE THAN 50 YEARS. IT IS SEEN FROM T HE ACCOUNT AND PUBLISHED ANNUAL REPORTS THAT THE SOCIETY CARRIES O UT SEVERAL HUMANITARIAN SERVICE ACTIVITIES FOR THE BENEFIT OF THE PUBLIC'. THE ASSESSEE FILED A COPY OF THE ORDER U/S 80G(5)(VI) O F THE ACT DATED 124.10.2005 PASSED BY THE DIT(E), DELHI, VALID FOR THE PERIOD FROM I.T.A. NO. 694/HYD/2011 THE INDIAN RED CROSS SOCIETY ======================= 3 1.4.2005 TO 31.3.2008. THE LAST CONDITIONS OF THE SAID ORDER WAS TO THE EFFECT THAT THE RETURN OF INCOME OF THE FUND OR INSTITUTION MUST BE FILED U/S. 139(1)/(4) OF THE ACT. THE ASSE SSING OFFICER NOTED THAT THE ITO, NEW DELHI HAD ADVISED THE INDIA N RED CROSS SOCIETY, NEW DELHI, AS FAR BACK AS 2 ND JANUARY 2003 ITSELF, TO APPROACH THE CONCERNED ASSESSING OFFICER, EVEN FOR THE CERTIFICATE U/S 197, FOR THE REASON THAT THE ACCOUNTS OF THE BR ANCHES WERE KEPT AND MAINTAINED INDEPENDENTLY OF THE NATIONAL H EADQUARTERS. 5. IN THE LIGHT OF THE ABOVE THE ASSESSING OFFICER CON CLUDED THAT IT WAS INCUMBENT UPON THE ASSESSEE TO FILE RETURNS WITH THE JURISDICTIONAL ASSESSING OFFICER, AT LEAST FROM THE A.Y. 2003-04 ONWARDS. HE OPINED THAT THE NON-FILING OF THE RETU RN ENTAILS NON- COMPLIANCE TO THE VARIOUS CONDIONALITIES, LIKE FILI NG OF STATUTORY AUDIT REPORTS ON TIME, NEED TO APPLY 85% OF THE INC OME FOR CHARITABLE PURPOSES, FILING OF FORM NO. 10 IN THE A BSENCE OF SUCH APPLICATION, ADHERENCE TO THE CONDITIONS OF SECTION S 11, 12 AND 13, ETC. HE NOTED THAT FOR THE ASSESSMENT YEAR 2005-06 ITSELF, THE ASSESSEE HAD BROUGHT OUT THE ANNUAL REPORT CONTAINI NG THE AUDIT REPORT ONLY ON 12.6.2006, WHICH WAS LONG AFTER THE DUE DATE FOR COMPLETION OF STATUTORY AUDIT, COUPLED WITH FAILURE TO FILE THE AUDIT REPORT IN FORM NO. 10B REQUIRED U/S. 12A(B), WHICH WAS DULY MENTIONED IN THE ORDER U/S. 80G(5)(VI) MENTIONED AB OVE. AS A LAST RESORT, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO AT LEAST FILE A COPY OF THE RETURN FILED BY THE INDIAN RED CROSS SO CIETY, NEW DELHI, WHICH THE ASSESSEE PROMISED TO FILE. THE AS SESSING OFFICER FELT THAT IN ANY CASE, EVEN THE SAME CANNOT BE CONS IDERED AS THE RETURN FILED BY THE ASSESSEE, AS MANDATED BY SECTIO N 139(4A). 6. DURING THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE APPEARED TO HAVE MAINTAINED VARIOUS ACCOUNTS, LIKE GENERAL FUND ACCOUNT, TRUST FUND ACC OUNT, RED CROSS CYCLONE RELIEF AND RECONSTRUCTION CORPUS FUND ACCOUNT I.T.A. NO. 694/HYD/2011 THE INDIAN RED CROSS SOCIETY ======================= 4 AND NATURAL CALAMITY RELIEF FUND ACCOUNT. GENERAL FUND ACCOUNT SHOWED AN INCOME OF RS. 1,39,80,896 AND EXPENDITURE OF RS. 67,01,698 ON ESTABLISHMENTS, RS. 18,60,153 ON OTHER EXPENDITURE, WITH SURPLUS OF RS. 41,63,196. WE NOTED THAT THE G RANT OF RS. 45 LAKHS FROM ANDHRA PRADESH HAD BEEN SHOWN BY THE ASS ESSEE IN THE BALANCE SHEET ONLY, BUT NOT IN THE INCOME AND E XPENDITURE STATEMENT. HE OPINED THAT UNLESS IT WAS OF THE COR PUS NATURE, IT MUST HAVE BEEN SHOWN AS ORDINARY INCOME. SIMILARLY , THE TRUST FUND ACCOUNT SHOWED EXPENDITURE OF RS. 17,434, WHIL E CYCLONE RELIEF AND RECONSTRUCTION CORPUS FUND ACCOUNT SHOWE D INCOME OF RS. 9,497. 7. THE ASSESSING OFFICER NOTED THAT THE NATURAL CALAMI TIES RELIEF FUND ACCOUNT, WHICH HE CONSIDERED AS MOST IM PORTANT OF ALL THE FOUR, SHOWED 'ZERO' DONATIONS, INTEREST OF RS. 10,68,232, 'ZERO' RELIEF EXPENDITURE, DEPRECIATION OF RS. 53,167, SAL ARIES OF RS. 96,993 AND SURPLUS OF RS. 9,18,073. HOWEVER, THE B ALANCE SHEET REPORTED A HUGE FIGURE OF RS. 2,94,08,733 AS AMOUNT RECEIVED FOR TSUNAMI VICTIMS. SINCE THE TSUNAMI CALAMITY HAD OC CURRED ON 26.12.2004 ITSELF, THE ASSESSING OFFICER WONDERED A S TO HOW SUCH A HUGE AMOUNT HAD BEEN LEFT UNSPENT FOR 3 MONTHS TILL THE END OF 31.3.2005, SHOWING 'ZERO' RELIEF. HE OPINED THAT T HE CLAIM OF THE ASSESSEE REGARDING HUMANITARIAN SERVICES THEREBY WA S PUT TO A SEVERE TEST, AS TIME IS OF GREAT ESSENCE IN SUCH SI TUATIONS. 8. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE BEING A CHARITABLE INSTITUTIONS, SHOULD HAVE GOT REGISTERED U/S 43(1) OF THE A.P. CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS AN D ENDOWMENT ACT, 1987. ITS FAILURE TO GET SUCH REGISTRATION WA S CONSIDERED BY HIM AS BEING AGAINST THE PUBLIC POLICY IN VIEW OF T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BIHARILAL JAIS WAL VS. CIT (217 ITR 746). I.T.A. NO. 694/HYD/2011 THE INDIAN RED CROSS SOCIETY ======================= 5 9. FINALLY, THE ASSESSING OFFICER CONCLUDED THAT IGNOR ANCE OF LAW IS NO EXCUSE AND THEREFORE, THERE BEING NO EXEM PTION FROM FILING OF RETURN FOR A SOCIETY REGISTERED U/S 12AA, THE BENEFIT OF SECTION 11 WAS TO BE DENIED TO A NON-FILER. ACCORD INGLY, THE EXCESS OF INCOME AS ALSO THE TSUNAMI DONATIONS AND THE GRA NT RECEIVED FROM THE A.P. GOVERNMENT WERE BROUGHT TO TAX. 10. ON APPEAL, THE CIT(A), INTER ALIA, GAVE A DIRECTION TO THE ASSESSING OFFICER THAT IF THE ASSESSEE CONSOLIDATED ITS FINAL RESULTS WITH THE RESULTS OF NATIONAL HEADQUARTERS AND IN TH E EVENT OF FILING OF CONSOLIDATED RETURN OF INCOME AT DELHI, THE ASSE SSING OFFICER FINALISING THE ASSESSMENT IN RESPECT OF THE TRANSAC TIONS OF THIS BRANCH WITHOUT ASCERTAINING THE POSITION OF CONSOLI DATION AT HEADQUARTERS LEVEL, THE ASSESSING OFFICER IS NOT JU STIFIED. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO E XAMINE WHETHER THE ASSESSEE IS HAVING INDIVIDUAL STATUS OR ASSESSE E'S TRANSACTIONS ARE CONSOLIDATED AT HEAD OFFICE LEVEL AT DELHI AND DECIDE THE ISSUE ACCORDING TO THE LAW. 11. IN THIS DIRECTION OF THE CIT(A), WE DO NOT FIND ANY INFIRMITY. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO EXAM INE WHETHER THE ASSESSEE IS HAVING ANY INDIVIDUAL STATUS AS AN INCO ME-TAX ASSESSEE OR ASSESSEE'S ACCOUNTS ARE CONSOLIDATED AT NATIONAL LEVEL AND ASSESSEE'S TRANSACTIONS ARE REFLECTED IN THE RE TURN OF INCOME OF HEAD OFFICE AND DECIDE ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2012. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 19 TH JANUARY, 2012 I.T.A. NO. 694/HYD/2011 THE INDIAN RED CROSS SOCIETY ======================= 6 COPY FORWARDED TO: 1. THE DY. DIRECTOR OF INCOME - TAX (EXEMPTIONS) - II, ROOM NO. 307A, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD- 500 004. 2. THE INDIAN RED CROSS S O CI E TY, A.P. STATE BRANCH, 3 - 6 - 212, ST. NO. 15, HIMAYATHNAGAR, HYDERABAD. 3. THE CIT(A) - IV, HYDERABAD. 4. THE DIT(E), HYDERABAD. 5 . THE DR A BENCH, ITAT, HYDERABAD TPRAO