Avvai Village Welfare Society, Nagapattinam V. ITO, Trichy

MA 221/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2773 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SUBASHRI
• Assessee Lawyers: S S ENTHAMARAI KANNAN
• Keywords: Charitable institution

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER M.P. NOS. 221 AND 222/CHNY/2018 [IN I T.A. NO. 09 & 36/CHNY/2017] / ASSESSMENT YEAR :2012-13 M/S. AVVAI VILLAGE WELFARE SOCIETY, 260, PUBLIC OFFICE ROAD, VELIPALAYAM, NAGAPATTINAM 611 001. [PAN: AAATA3067H] VS. THE INCOME TAX OFFICER, EXEMPTIONS WARD, THIRUCHIRAPALLI. ( /APPELLANT ) ( / RESPONDENT ) / ASSESSEE BY : SHRI S. SENTHAMARAI KANNAN, ADVOCATE / DEPARTMENT BY : MS. M. SUBASHRI, JCIT / DATE OF HEARING : 01.02.2019 /DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BY MEANS OF PRESENT MISCELLANEOUS PETITIONS, THE ASSESSEE SEEKS TO RECTIFY THE CONSOLIDATED ORDER PASSED BY THE TRIBUNAL DATED 08.10.2018 IN I.T.A. NO.09/CHNY/2017 FILED BY THE ASSESSEE AND I.T.A. NO. 36/CHNY/2017 FILED BY THE REVENUE PURELY BASED ON THE DISCUSSIONS HELD DURING THE COURSE OF HEARING. 2. PER CONTRA, AFTER CAREFULLY GOING THROUGH THE FACTS AND CIRCUMSTANCES, MATERIALS AVAILABLE ON RECORD, THE TRIBUNAL HAS ADJUDICATED THE CASES RAISED IN BOTH THE APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE AND THUS, THERE M.P. NOS.221 & 222/CHNY/18 2 IS NO MISTAKE APPARENT ON RECORD WARRANTING RECTIFICATION UNDER SECTION 254(2) OF THE ACT.. OTHERWISE, IT WOULD TANTAMOUNT TO REVIEW OF THE ORDER OF THE TRIBUNAL, WHICH IS NOT PERMISSIBLE UNDER SECTION 254(2) OF THE ACT. 3. WE HAVE HEARD BOTH THE SIDES, PERUSED THE ORDER OF THE TRIBUNAL. WITH REGARD TO THE GROUND OF WHETHER EXCESS SALARY WAS PAID TO THE SECRETARY OF THE SOCIETY IN TERMS OF SECTION 13(2)(C) OF THE ACT, AS AGITATED IN M.P. NO. 221/CHNY/2018, AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 8.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS WRITTEN SUBMISSIONS OF THE ASSESSEE INCLUDING PAPER BOOK. BY CONSIDERING THE QUALIFICATION, EXPERIENCE, ETC. AND SINCE THE ASSESSING OFFICER HAS NOT ALLOWED ANY REASONABLE PORTION OF SALARY CLAIMED TO HAVE PAID TO THE SECRETARY, THE LD. CIT(A) HAS REASONABLY ALLOWED 50% OF THE DISALLOWANCE OF SALARY PAID TO THE SECRETARY AND THE BALANCE WAS RIGHTLY SUSTAINED. THE ABOVE ALLOWANCE OF 50% OF SALARY TO THE SECRETARY BY THE LD. CIT(A) WAS NOT AT ALL DISPUTED BY THE DEPARTMENT IN ITS APPEAL BEFORE THE TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 4. THE ASSESSING OFFICER HAS ELABORATELY DISCUSSED THE ISSUE IN THE ASSESSMENT ORDER AT PARA 7.2, WHEREIN, THE SOLITARY QUESTION RAISED BY HIM IS THAT IF SALARY RECEIVED BY THE SECRETARY ALONE IS 10%, THE QUESTION WHERE IS CHARITY REMAINS TO BE ANSWERED. IT IS FURTHER STATED THAT AS PER SECTION 5 OF THE FCRA RULES 2011, WHAT CONSTITUTES ADMINISTRATIVE EXPENSES IS DEFINED. AS PER THE CHARTER FOR ASSOCIATIONS WHO HAVE BEEN GRANTED REGISTRATION OR PRIOR PERMISSION UNDER FCRA, 2010, IT HAS BEEN CLEARLY STATED THAT NOT M.P. NOS.221 & 222/CHNY/18 3 MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE ASSOCIATION. IN THIS CASE, THE POINT IS 10% OF THE AMOUNT EARMARKED FOR CHARITABLE PURPOSES WAS GIVEN TO SHRI M. KRISHNA KUMAR AS SALARY, WHO IS THE SECRETARY IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES AS DEFINED IN SECTION 13(2)(C) OF THE ACT. CONSIDERING THE QUALIFICATION, EXPERIENCE, ETC., THE LD. CIT(A) ALLOWED 50% OF THE DISALLOWANCE OF SALARY PAID TO THE SECRETARY, WHICH WAS CONFIRMED BY THE TRIBUNAL. THUS, WE FIND NO MISTAKE APPARENT ON THE FACE OF THE ORDER PASSED BY THE TRIBUNAL. THEREFORE, THE PETITION FILED BY THE ASSESSEE STANDS DISMISSED. 5. IN THE MP NO. 222/CHNY/2018, FILED AGAINST THE APPEAL FILED BY THE REVENUE IN ITA NO. 36/CHNY/2017, THE MAIN CONTENTION IS THAT THE FOREIGN CONTRIBUTION (REGULATION) RULES 2011 ARE GUIDELINES FOR DECLARATION OF AN ORGANIZATION TO BE A POLITICAL IN NATURE, NOT BEING A POLITICAL PARTY AND THEREFORE, THOSE RULES DO NOT APPLY TO OUR SOCIETY AND MOREOVER, DOES NOT APPEAR TO BE ANY MENTION IN THOSE RULES THAT NOT MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE ASSOCIATION AND MOREOVER, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MADDI VENKATRAMAN AND CO. PVT. LTD. RELIED ON THE ORDER OF THE TRIBUNAL IS NOT APPLICABLE, THUS, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS A CLEAR MISTAKE APPARENT FROM THE RECORD IN TERMS OF M.P. NOS.221 & 222/CHNY/18 4 SECTION 254(2) OF THE ACT AND PRAYED FOR RECTIFYING THE MISTAKE. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AGAINST WE WOULD LIKE TO RECALL THE OBSERVATIONS OF THE ASSESSING OFFICER IN PARA 7.2 OF THE ASSESSMENT ORDER, WHEREIN, IT WAS STATED THAT AS PER SECTION 5 OF THE FCRA RULES 2011, WHAT CONSTITUTES ADMINISTRATIVE EXPENSES IS DEFINED. AS PER THE CHARTER FOR ASSOCIATIONS WHO HAVE BEEN GRANTED REGISTRATION OR PRIOR PERMISSION UNDER FCRA, 2010, IT HAS BEEN CLEARLY STATED THAT NOT MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE ASSOCIATION . WHEREAS, IN THE APPELLATE ORDER AT PARA 4.23, BY OVERSIGHT, IT WAS MENTIONED THAT THE ADMINISTRATIVE EXPENSES WORK OUT TO 95.4% WHICH IS A CLEAR VIOLATION OF FOREIGN CONTRIBUTION REGULATION RULES 2011, WHEREIN IT IS DEFINED THAT NOT MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE ASSOCIATION, WHICH WAS REPEATED IN TRIBUNAL ORDER AT PAGE 6 PARA 6, WHICH IS A RECTIFIABLE MISTAKE. ACCORDINGLY, WE REPLACE THE SENTENCE WITH SAME TERMINOLOGIES THAT THE ABOVE CLAIM OF THE ASSESSEE IS A CLEAR VIOLATION AS PER THE CHARTER FOR ASSOCIATIONS, WHO HAVE BEEN GRANTED REGISTRATION OR PRIOR PERMISSION UNDER FCRA,2010 THAT NOT MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE M.P. NOS.221 & 222/CHNY/18 5 ASSOCIATION. NOT MORE THAN 50% OF THE FOREIGN CONTRIBUTION SHALL BE DEFRAYED TO MEET ADMINISTRATIVE EXPENSES OF THE ASSOCIATION. WHAT CONSTITUTES 'ADMINISTRATIVE EXPENSES' HAS BEEN DEFINED IN RULE 5 OF THE FOREIGN CONTRIBUTION (REGULATION) RULES, 2011 (FCRR, 2011). ONCE THESE FACTS ARE NOT IN DISPUTE, WE ARE OF THE CONSIDERED OPINION THAT THE TRIBUNAL HAS RIGHTLY FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MADDI VENKATRAMAN AND CO. PVT. LTD. (SUPRA) TO REVERSE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. THUS, THE PETITION FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE M.P. NO. 221/CHNY/2018 IS DISMISSED AND M.P. NO. 222/CHNY/2018 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 27 TH FEBRUARY, 2019 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 27.02.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.