Help a Child of India, CHENNAI V. DDIT, CHENNAI

ITA 969/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96014 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 29-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SANKARALINGAMCIT
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 969/MDS/2015 ( / ASSESSMENT YEAR: 2011-12) M/S. HELP A CHILD OF INDIA NO.10, 7 TH STREET, 1 ST BLOCK, VALLALAR KUDIYIRUPPU, ANNA NAGAR WEST, CHENNAI-600 040. VS DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-III, CHENNAI-34. PAN:AAAAH0598R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. K.BALASUBRAMANIAN, ADVOCATE /RESPONDENT BY : MR. S.SANKARALINGAM,CIT /DATE OF HEARING : 16 TH JULY, 2015 /DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-17, C HENNAI DATED 22.01.2015 FOR THE ASSESSMENT YEAR 2011-12. THE ONLY GRIEVANCE OF THE ASSESSEE IN ITS APPEAL IS THA T LOWER AUTHORITIES ERRED IN DENYING EXEMPTION UNDER SECTIO N 11(1)(A) OF THE ACT IN RESPECT OF EIGHT DONEES TO THE TUNE OF ` 10,98,64,287/- IGNORING THE FACT THAT ALL THE DONEE S WERE GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT. 2 ITA NO.969/MDS/2015 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT OUT OF THE EIGHT DONEES DENIAL OF EXEMPTION UNDER SECTION 11(1)(A) O N DONATIONS TO SEVEN DONEES IN THE ASSESSMENT YEAR 20 10-11 WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AN D IN ORDER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL DAT ED 31.03.2015, THE ASSESSING OFFICER AFTER DUE ENQUIRI ES ALLOWED EXEMPTION HOLDING THAT ASSESSEES CLAIM OF APPLICAT ION OF INCOME OF EIGHT CHANNEL PARTNERS IS FOUND TO BE IN ORDER. COUNSEL SUBMITS THAT EXEMPTION ALLOWED BY THE ASSES SING OFFICER IN THE ASSESSMENT YEAR 2010-11 ON THE DIREC TIONS OF THE TRIBUNAL IN RESPECT OF EIGHT CHANNELS ARE THE S AME DURING THIS ASSESSMENT YEAR ALSO WHERE EXEMPTION UNDER SEC TION 11 WAS DENIED WHICH WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). SINCE OUT OF EIGHT DONEES, SE VEN DONEES WERE EXAMINED BY THE ASSESSING OFFICER AND FOUND TO BE CORRECT FOR THE ASSESSMENT YEAR 2010-11, EXE MPTION IN RESPECT OF THE SAID DONEES CANNOT BE DENIED IN THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO. 3 ITA NO.969/MDS/2015 3. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT SIMILAR DIRECTION MAY BE GIVEN FOR VERIFICATION AS WAS DONE IN THE ASSESSMENT YEAR 2010-11 BY THE TRIBUNAL. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESS ING OFFICER DID NOT ALLOW APPLICATION OF INCOME UNDER SECTION 11(1)(A) IN RESPECT OF THE FOLLOWING SEVEN DONEES OBSERVING AS UNDER:- 1. BAL VIKAS KENDRA 2. BETHEL AGRICULTURAL FELLOWSHIP 3. DIOCESE OF CUTTACK, CHURCH OF NORTH INDIA 4. ORISSA EVANGELICAL TRUST ASSOCIATION 5. THE CHILDRENS HOME, SIALKOT 6. VACATION BIBLE SCHOOL 7. REFORMED PRESBYTERIAN 10.2 THE SOCIETY IS FORMED AFTER THE 01/04/1902 AND WHEN THE OBJECTS ARE CHARITABLE, AMOUNTS SPENT TOWARDS RELIGIOUS PURPOSES, EVEN REMOTELY OR INDIRECTLY CANNOT BE TREATED AS APPLICATION OF INCOME U/S 11 (1 )(A). THEREFORE, THE ENTITLED QUANTUM OF APPLICATION IS CONFINED TO SUCH PARTNERS WHICH HAVE THE SAME SET OF PURPOSE OR OBJECTS OR OBLIGATIONS AND HAVE SIMILAR NATURE OF CATEGORIZATION UNDER THE FCR ACT. THE TRANSACTIONS WITH DISQUALIFIED ENTITIES, IS PROVIDED BELOW. THE AMOUNTS DONATED TO THEM ARE AGAINST THE OBJECTS OF THE SOCIETY, PROVISIONS OF INCOME TAX LAW AND FCR ACT. THEY HAVE NOT BEEN UTILIZED FOR THE PURPOSE DECLARED UNDER FCR ACT. SECTION 11 (1 )(A) OF THE INCOME TAX AD, 1961 READS AS UNDER: 11. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN 4 ITA NO.969/MDS/2015 THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME- (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA 10.3 IT IS CLEAR FROM THIS PROVISION UNDER THE ACT, THAT THE CONTRIBUTIONS SHOULD BE APPLIED FOR SUCH PURPOSES. SUCH PURPOSES OF THE BELOW DETAILED ASSOCIATIONS IS NOT SIMILAR TO THE OBJECTS AND PURPOSE OF THE ASSESSEE TRUST. THESE PAYMENTS ARE NOT IN CONFORMITY WITH THE OBJECTS OF THE SOCIETY AND HENCE THE SAME IS NOT ALLOWED AS APPLICATION OF INCOME U/S.11(1)(A) AND TREATED AS TAXABLE INCOME OF THE SOCIETY. 5. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) AFFIRMED THE ORDER OF THE ASSESSING OFFICER . AS CO NTENDED BY THE COUNSEL FOR THE ASSESSEE, AN IDENTICAL ISSUE CA ME UP BEFORE THE TRIBUNAL FOR IMMEDIATELY PRECEDING ASSES SMENT YEAR AND THE TRIBUNAL REMITTED THE ISSUE BACK TO T HE ASSESSING OFFICER FOR FRESH ADJUDICATION GIVING ASS ESSEE AN OPPORTUNITY TO PRODUCE ALL THE RELEVANT RECORDS BEF ORE THE ASSESSING OFFICER TO CANVASS THE CONTENTIONS OF THE ASSESSEE THAT DONATIONS MADE BY THE ASSESSEE ARE APPLICATION OF INCOME. COUNSEL FOR THE ASSESSEE SUBMITS THAT ON VERIFICATION, THE ASSESSING OFFICER WHILE GIVING EF FECT TO THE ORDER OF THE TRIBUNAL FOUND THAT THE CLAIM OF THE A SSESSEE IN 5 ITA NO.969/MDS/2015 RESPECT OF DONATIONS TO EIGHT CHANNEL PARTNERS ARE IN ORDER AND ALLOWED AS APPLICATION OF INCOME. WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINATE BENCH WHEREIN THE TRIB UNAL REMITTED THE ISSUE BACK TO THE FILE OF THE ASSESSIN G OFFICER WITH THE FOLLOWING OBSERVATIONS:- 4. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFIC ER NOTICED THE ASSESSEE TO HAVE INDIRECTLY APPLIED INCOME OF ` 20,16,69,979/- THROUGH ITS 25 PARTNER AGENCIES BY WAY OF PAYMENTS MADE TO THE ULTIMATE BENEFICIARIES. THESE PARTNER AGENCIES SPR EAD THROUGHOUT INDIA. THE ASSESSING OFFICER SOUGHT FOR DETAILS OF THEIR REGISTRATION U/S 12AA OF THE ACT, COPIES OF TRUST DEEDS ETC. TO ASCERTAIN AS TO WHETHER OR NOT THEY WERE WHOLLY CHARITABLE AND WO RKING FOR ORPHAN CHILDRENS WELL BEING AS WELL AS TO FIND OUT UTILI ZATION OF FUNDS FOR THE SPECIFIED PURPOSES. HE OBSERVED IN ASSESSMENT ORDER DATED 7.3.2013 THAT THE ASSESSEE HAD ONLY FILED AN INCOM PLETE CHART WITHOUT PARTNERS TRUST DEEDS AND MEMORANDUMS OF AS SOCIATIONS. THE ASSESSING OFFICER VISITED WEBSITES OF THE ASS ESSEES PARTNER AGENCIES AND CONCLUDED THAT TWO ENTITIES WERE NOT REGISTERED UNDER THE FOREIGN CONTRIBUTION REGULATION ACT, 1976 . SEVEN OF THEM WERE HELD AS NOT CHARITABLE IN NATURE HAVING SIMILAR OBJECTS OR ACTIVITIES. HE OPINED THAT THE SAID ENTITIES WE RE INVOLVED IN RELIGIOUS ACTIVITIES ONLY. PROCEEDING ON THIS REAS ONING, THE ASSESSING OFFICER MADE IMPUGNED DISALLOWANCE OF ` 12,60,06,649/- QUA ASSESSEES CLAIM OF APPLICATION OF INCOME AS UNDER: S. NO. ASSOCIATION NAME FOREIGN CONTRIBUTION AS A SECOND RECIPIENT (IN ` ) 1. ALPHA CHILDREN MINISTRY 2,61,386 2. BAL VIKAS KENDRA 2,34,83,963 3. BETHEL AGRICULTURAL FELLOWSHIP 2,71,03,629 4. DIOCESE OF CUTTACK, CHURCH OF NORTH INDIA 20,16,499 5. ORISSA EVANGELICAL TRUST ASSOCIATION 21,87,232 6. THE CHILDRENS HOME, SIALKOT 2,42,30,311 7. VACATION BIBLE SCHOOL 16,58,634 6 ITA NO.969/MDS/2015 8. REFORMED PRESBYTERIAN 4,50,64,995 TOTAL QUANTUM OF INELIGIBLE APPLICATION OF INCOME 12,60,06,649 5. IN LOWER APPELLATE ORDER, THE CIT(A) HAS SUSTAINED THE AFORESAID DISALLOWANCE. THEREFORE, THE ASSESSEE IS IN APPEA L. 6. WE HAVE HEARD BOTH PARTIES AND PERUSED THE CASE FIL E. THE ASSESSEE HAS FILED A PAPER BOOK WHICH HAS ALSO BEEN GONE TH ROUGH. IN THE COURSE OF HEARING, IT REFERS TO THE INDEX OF THE PA PER BOOK READING AS FOLLOWS: SI. NO. PARTICULARS. PAGE NO. 1 12A(A) REGN.CERTIFICATE DT.23-3-2001 GRANTING REGN TO APPELLANT AS 'RELIGIOUS CUM CHARITABLE TRUST' 1 2 REGD.MEMORANDUM OF ASSOCIATION, BYE-LAWS & CERTIFICATE OF REGN OF SOCIETIES. 3-30 3 OVERVIEW OF APPELLANT TRUST-CHILD CARE, RESIDENTI AL CARE, CDP, DISASTERS & CALAMITIES ADDRESSED ETC., 43-69 4 ITR-7, STATEMENT OF TI AND FINANCIAL STATEMENTS F OR AY 10 - 11 71- 103 5 ASSESSMENT ORDERS FOR AY 2009-10, 2004-05, & 2003-04 ALLOWING EXEMPTION U/S 11(1)(A) FULLY 105- 109 6 PARTNER ORGANIZATIONS - OVERVIEW IN RESPECT OF 8 INSTITUTIONS-DONATIONS TO WHOM EXEMPTION U/S 11(1)( A) DENIED 6.(A ALPHA CHILDREN MINISTRY - CERTIFICATE OF UTILISATION OF FUNDS RECEIVED FROM APPELLANT 113 6(B) BAL VIKAS KENDRA DETAILS OF ACTIVITIES, ASST. ORDE RS FOR AYS 2007-08 & 2006- 07 AND CERTIFICATE OF UTILISATION OF FUNDS RECEIVED FROM APPELLANT 115- 129 6(C) BETHEL AGRICULTURAL FELLOWSHIP- DETAILS OF ACTIVITI ES, ASST. ORDER(FORM 7-NIL TAX) FOR AY 2010-11 131- 143 6(D) DIOCESE OF CUTTACK - DETAILS OF ACTIVITIES, ASST.ORDERS FOR AY 2010- 11 CERTIFICATE OF UTILISATION OF FU NDS RECEIVED FROM APPELLANT 157 6(E) ORISSA EVANGELICAL TRUST ASSOCIATION - DETAILS OF ACTIVITIES, ASST.ORDERS FOR AYS 2010-11 AND CERTIFI CATE OF UTILISATION OF FUNDS RECEIVED FROM APPELLANT 159 6(F) THE CHILDREN'S HOME SAIKOT - FCRA REGN CERTIFICATE ACTIVITIES-ASST.ORDER FOR AY 11-12-FUNDS UTILISED CERTIFICATE. 215 169- 177 6(G) VACATION BIBLE SCHOOL - UNIT: BEREA GIRLS HOME -DET AILS OF ACTIVITIES, ASST.ORDERS FOR AY 10-11 AND CERTIFI CATE OF UTILISATION OF FUNDS RECEIVED FROM APPELLANT 179- 187 7 ITA NO.969/MDS/2015 6(H) REFORMED PRESBYTERIAN CHURCH NE INDIA - DETAILS OF ACTIVITIES AND CERTIFICATE OF UTILISATION OF FUNDS RECEIVED FROM APPELLANT 189- 195 7 12AA REGN CERTIFICATES OF ALL THE 8 INSTITUTIONS RE FERRED TO IN THE ASST.ORDER 197- 213 IN VIEW THEREOF, THE ASSESSEE CONTENDS THAT THE AUT HORITIES BELOW COULD NOT HAVE HELD THAT ITS PARTNER AGENCIES (SUPRA) WERE PERFORMING RELIGIOUS ACTIVITIES ONLY OR THEIR OBJEC TS WERE NOT CHARITABLE. THE REVENUE SUPPORTS THE CIT(A)S ORDER. IT IS TO B E SEEN FROM THE ASSESSMENT ORDER THAT FIRST HEARING IN THE ASSESSME NT PROCEEDINGS TOOK PLACE ON 27.2.2013. THE ASSESSING OFFICER PASSED HIS ORDER ON 7.3.2013. MEANING THEREBY, THE ASSESSEE DOES NOT SEEM TO HAVE BEEN ABLE TO AVAIL SUFFICIENT TIME FOR PRODUCING NE CESSARY DETAILS OF ITS PARTNER AGENCIES OBJECTS AND ACTIVITIES. WE ALSO FIND FROM THE PAPER BOOK THAT SOME OF THE DETAILS FOR E.G. REGISTRATION CERTIFICATES U/S 12AA, MEMORANDUMS OF ASSOCIATIONS ETC. HAD BEEN PLA CED ON RECORD. THE REVENUE DOES NOT DISPUTE NECESSARY CERTIFICATIO N IN THIS REGARD QUA CONTENTS OF THE PAPER BOOK. THE LOWER AUTHORITIES FINDINGS DO NOT TAKE INTO ACCOUNT THE AFORESAID DOCUMENTARY EVIDENCE. I N THESE CIRCUMSTANCES, WE ACCEPT THE ASSESSEES CONTENTION S FOR STATISTICAL PURPOSES AND RESTORE THE ISSUE BACK TO THE ASSESSIN G OFFICER FOR FRESH ADJUDICATION AS PER LAW. THE ASSESSING OFFICER IS DIRECTED TO GIVE FIVE EFFECTIVE OPPORTUNITIES TO THE ASSESSEE FOR PLACIN G ON RECORD ALL OTHER RELEVANT EVIDENCE; WHATEVER REQUIRED AND PROCEED AS PER LAW. IT IS MADE CLEAR THAT IF THE ASSESSEE FAILS TO PRODUCE T HE AFORESAID NECESSARY DETAILS, OUR ORDER WILL STAND VACATED. ASSESSEES APPEAL I.T.A.NO.243/MDS/2014 IS ALLOWE D FOR STATISTICAL PURPOSES. 6. RESPECTFULLY FOLLOWING THE SAID ORDER, WE RESTOR E THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE OBSERVATIONS OF TH E TRIBUNAL IN ITA NO.243/MDS/2014 DATED 25.07.2014. 8 ITA NO.969/MDS/2015 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 11 TH SEPTEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .