ADIT, CHENNAI V. M/s. Human Care League, CHENNAI

ITA 881/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64195 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 12-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M N MURTH Y NAIK IRS
• Assessee Lawyers: ANAND DEVKUMAR
• Keywords: Gift; Charitable institution; Capital receipt
• Section: 12A; 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.732, 733 & 881(MDS)/2011 ASSESSMENT YEARS : 2000-01, 2002-03 & 1999-2000 THE ASSISTANT DIRECTOR OF INCOME-TAX (EXEMPTIONS)-IV, CHENNAI. VS. M/S. HUMAN CARE LEAGUE, NO.1, KULASEKARAN STREET, SUNDARAM COLONY, TAMBARAM EAST, CHENNAI-600 059. PAN AAATH3939D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.N.MURTHY NAIK, I RS, CIT. RESPONDENT BY : SHRI ANANDDEVKUMAR, C.A. DATE OF HEARING : 27 TH AUGUST, 2012 DATE OF PRONOUNCEMENT : 27 TH AUGUST, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE THREE APPEALS ARE FILED BY THE REVENUE. TH E RELEVANT ASSESSMENT YEARS ARE 1999-2000, 2000-01 AN D 2002-03. THE APPEALS ARE DIRECTED AGAINST THE ORDE RS OF THE - - ITA 732, 733 & 881 OF 2011 2 COMMISSIONER OF INCOME-TAX(APPEALS)-XII AT CHENNAI, DATED 24-1-2011 AND 24-2-2011. 2. THE ASSESSEE CLAIMED THE STATUS OF CHARITABLE T RUST ENTITLED FOR THE BENEFITS OF SECTION 11 OF THE INCO ME-TAX ACT, 1961. THIS IS ON THE BASIS OF THE REGISTRATION GRA NTED UNDER SECTION 12A OF THE ACT. IN FACT THE REGISTRATION W AS GRANTED BY THE COMMISSIONER OF INCOME-TAX ONLY WITH EFFECT FRO M 1 ST APRIL, 2002, RELEVANT FOR THE ASSESSMENT YEAR 2003-04. 3. BUT THE COMMISSIONER OF INCOME-TAX(APPEALS) IN THIS CASE GRANTED THE DEEMED STATUS OF REGISTRATION TO THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS 1999-200 0, 2000-01 AND 2002-03. THIS ORDER OF THE COMMISSIONE R OF INCOME-TAX(APPEALS) GRANTING REGISTRATION ON THE DE EMED BASIS IS THE MOST IMPORTANT OBJECTION RAISED BY THE REVEN UE IN ALL THESE APPEALS. 4. THE APPLICATIONS FILED BY THE ASSESSEE FOR REGISTRATION UNDER SECTION 12A FOR THESE THREE ASSE SSMENT YEARS - - ITA 732, 733 & 881 OF 2011 3 HAVE NOT BEEN DISPOSED OF BY THE COMMISSIONER OF IN COME-TAX WITHIN A PERIOD OF SIX MONTHS, AS PRESCRIBED IN LAW . ACCORDING TO THE REVENUE, DECISION COULD NOT BE TAKEN BY THE COM MISSIONER OF INCOME-TAX WITHIN THE PRESCRIBED PERIOD OF SIX M ONTHS FOR THE FAULT OF THE ASSESSEE ON ITS PART IN SUBMITTING THE NECESSARY DETAILS CALLED FOR BY THE COMMISSIONER OF INCOME-TA X. 5. IT IS TO BE SEEN THAT THESE APPEALS ARISE OUT O F THE ASSESSMENTS PASSED UNDER SECTION 143(3), READ WITH SECTION 147 OF THE INCOME-TAX ACT, 1961. THE APPEALS ARE FILED BY THE REVENUE AND NATURALLY SO. IN THESE ASSESSMENTS THE CONTENTION OF THE ASSESSEE IS THAT IT IS A CHARITABLE INSTITUT ION, WHICH WAS REJECTED BY THE ASSESSING OFFICER FOR THE REASON TH AT NO REGISTRATION WAS GRANTED TO THE ASSESSEE UNDER SECT ION 12A OF THE ACT. IN FIRST APPEAL, THE COMMISSIONER OF INCO ME- TAX(APPEALS) HELD THAT THE COMMISSIONER OF INCOME-T AX WAS BOUND TO PASS THE ORDER WITHIN A PERIOD OF SIX MONT HS AND IF NO ORDER WAS PASSED WITHIN A PERIOD OF SIX MONTHS, IT IS TO BE DEEMED THAT REGISTRATION HAS BEEN GRANTED TO THE AS SESSEE UNDER SECTION 12A. ON THE BASIS OF THAT DEEMING PR ESUMPTION, - - ITA 732, 733 & 881 OF 2011 4 THE COMMISSIONER OF INCOME-TAX(APPEALS) GRANTED THE STATUS OF A REGISTERED CHARITABLE INSTITUTION AND DIRECTED TH E ASSESSING OFFICER TO DO THE ASSESSMENTS ACCORDINGLY. 6. IN MANY CASES THE TRIBUNAL AND HONBLE COURTS H AVE HELD THAT ASSESSEES NEED TO BE TREATED AS REGISTERE D CHARITABLE INSTITUTIONS FOR THE REASON THAT THE APPROPRIATE AU THORITIES HAVE NOT PASSED ORDERS UNDER SECTION 12A WITHIN THE PERI OD OF SIX MONTHS. THEREFORE, IT IS TRUE THAT REGISTRATION CA N BE DEEMED IN SUCH CIRCUMSTANCES. BUT, SUCH A DEEMING IS NOT POS SIBLE WITHOUT THE ORDER OF A COMPETENT APPELLATE AUTHORITY. WHEN THE COMMISSIONER OF INCOME-TAX HAS NOT PASSED AN ORDER UNDER SECTION 12A WITHIN THE PRESCRIBED PERIOD OF SIX MON THS, THE REMEDY AVAILABLE BEFORE THE ASSESSEE WAS TO FILE AN APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL OR FILE A WRIT PETITION BEFORE THE HONBLE HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION. EVEN IF THE COMMISSIONER OF INCOME-T AX HAS NOT PASSED A FORMAL ORDER UNDER SECTION 12A, THE ASSESS EE COULD BE DEEMED AS A REGISTERED INSTITUTION ONLY IF THE TRIB UNAL OR THE HONBLE HIGH COURT PASSES AN APPROPRIATE ORDER IN T HIS REGARD. - - ITA 732, 733 & 881 OF 2011 5 IN THE ABSENCE OF ANY SUCH ORDER, EVEN THOUGH THE G RIEVANCE OF THE ASSESSEE IS WELL JUSTIFIED, THERE IS NO GROUND FOR ANYBODY TO HOLD THAT THE ASSESSEE IS TO BE DEEMED AS REGISTERE D UNDER SECTION 12A OF THE INCOME-TAX ACT, 1961. IN THE PR ESENT CASE, THE ASSESSEE HAS NEVER FILED AN APPEAL BEFORE THE I NCOME-TAX APPELLATE TRIBUNAL NOR APPROACHED THE HONBLE HIGH COURT FOR CONSTITUTIONAL REMEDY. THEREFORE, IT IS NOT POSSIB LE TO GRANT REGISTRATION TO THE ASSESSEE EVEN ON A DEEMED BASIS FOR THE IMPUGNED ASSESSMENT YEARS. 7. THEREFORE, THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS GROSSLY ERRED IN HOLDING THAT THE ASSESSEE NEEDS TO BE DEEMED AS REGISTERED UNDER SECTION 12A FOR THE PURPOSE OF AVAILING THE BENEFITS UNDER SECTION 11. THEREFORE, WE SET ASIDE THE ORDERS OF THE COMMISSIONER OF INCOME- TAX(APPEALS) ON THIS POINT AND HOLD THAT THE ASSESS EE IS NOT A REGISTERED CHARITABLE INSTITUTION FOR THESE IMPUGNE D ASSESSMENT YEARS. 8. THIS GROUND RAISED BY THE REVENUE IS ALLOWED. - - ITA 732, 733 & 881 OF 2011 6 9. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FURTHER ALLOWED THE CONTENTION OF THE ASSESSEE THAT THE FOREIGN DONATIONS RECEIVED BY THE ASSESSEE TOWARDS BUILDING FUND SHOULD BE TREATED AS CAPITAL FUND AMOUNTING TO CORP US FUND AND, THEREFORE, THE SAME SHOULD NOT BE BROUGHT TO TAX. THE DISTINCTION BETWEEN VOLUNTARY CONTRIBUTION AND CORPUS DONATION ARE RELEVANT ONLY IN A CASE WHERE THE ASSESSEE IS REGISTERED AS A CHARITABLE INSTITUTION UNDER SECTION 12A. IF NO SUCH REGISTRA TION IS AVAILABLE, THE STATUS OF THE ASSESSEE IS AN ASSOCIATION OF PER SONS. AN ASSOCIATION OF PERSONS DOES NOT HAVE ANY MANDATE IN LAW TO HOLD THAT CERTAIN RECEIPTS ARE NOT TAXABLE FOR THE REASO N THAT THEY ARE CAPITAL IN NATURE. THE NATURE OF CAPITAL RECEIPT O R REVENUE RECEIPT IS NOT DETERMINED ON THE BASIS OF STATUS IN THE CAS E OF ASSESSEES OTHER THAN REGISTERED CHARITABLE INSTITUTIONS. WHE THER A RECEIPT IS CAPITAL OR REVENUE IS TO BE DETERMINED ON THE BASIS OF NATURE OF THAT RECEIPT. THEREFORE, THE COMMISSIONER OF INCOM E- TAX(APPEALS) HAS ERRED IN GIVING EXEMPTION TO CERTA IN RECEIPTS HOLDING THAT THOSE RECEIPTS ARE CAPITAL IN NATURE. THEREFORE, THE DIRECTION GIVEN BY THE COMMISSIONER OF INCOME-TAX(A PPEALS) WITH - - ITA 732, 733 & 881 OF 2011 7 REFERENCE TO THE DONATIONS RECEIVED BY THE ASSESSEE TOWARDS BUILDING FUND IS HEREBY SET ASIDE. 10. THIS GROUND IS ALSO DECIDED IN FAVOUR OF THE REVENUE. 11. IN THE COURSE OF ARGUMENTS THE LEARNED CHARTER ED ACCOUNTANT APPEARING FOR THE ASSESSEE HAS RAISED AN ALTERNATIVE GROUND THAT THE FOREIGN REMITTANCES WERE MADE BY NO N RESIDENTS AND THEY DO NOT PARTAKE THE CHARACTER OF RECEIPTS A ND THOSE REMITTANCES SHOULD BE TREATED AS GIFTS IN THE HANDS OF THE ASSESSEE AND THEREFORE NOT LIABLE FOR TAXATION. 12. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, MAINLY FOR THE REASON THAT THIS GROUND WAS NOT RAISED BEFORE HIM. BUT THIS IS A VALID GROUND WHIC H SHOULD BE ADJUDICATED. THEREFORE, THIS ISSUE IS REMITTED BAC K TO THE ASSESSING OFFICER TO DECIDE THE TAXABILITY OR OTHER WISE OF THE RECEIPTS IN ACCORDANCE WITH LAW. IF THEY ARE FOREI GN GIFTS MADE BY NRIS, NATURALLY THE ASSESSEE MAY CLAIM IT AS A GIFT WHICH IS NOT - - ITA 732, 733 & 881 OF 2011 8 TAXABLE. ANYHOW THESE MATTERS HAVE TO BE LOOKED IN TO BY THE ASSESSING OFFICER AND COME TO A LAWFUL FINDING. 13. WITH THE ABOVE OBSERVATIONS, THESE THREE APPEA LS ARE ALLOWED AND DISPOSED OFF. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 27 TH OF AUGUST, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 27 TH AUGUST, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.