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Income Tax Appellate Tribunal, DELHI BENCH : B : NEW DELHI
Before: SHRI R.K. PANDA & SHRI N.K. CHOUDHRY
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER Assessment Year: 2004-05 Church’s Auxiliary For Social Vs ITO, Action, Trust Ward-III, Rachna Building, New Delhi. 2, Rajendra Place, Pusa Road, New Delhi. PAN: AAAFC3693F (Appellant) (Respondent) Assessee by : Shri V.K. Tulsiyan, CA, Shri Anjani Kumar Sharma, CA & Shri Kanhaiya Lal, Advocate Revenue by : Ms Sangeeta Yadav, Sr. DR Date of Hearing : 22.12.2021 Date of Pronouncement : 09.02.2022 ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 29th September, 2010 of the CIT(A)-XII, New Delhi, relating to assessment year 2004- 05.
Facts of the case, in brief, are that the assessee is a registered society under the Societies Registration Act, 1860 and is registered u/s 12A of the IT act, 1961 and also approved u/s 80G of the IT Act. It filed its return of income on 20th October, 2004 declaring nil income. The return was supported by audit report in Form No.10B, balance sheet, income & expenditure account with relevant schedules. During the course of assessment proceedings, the AO noted that the Trust is registered under the society registration Act of 1860 and also u/s 12A of Income Tax Act, 1961 vide no. DLI©(I-696) dated 22.9.76 and granted exemption u/s. 80G vide DIT(E)/2005-X)6/C0141/76/376 dated 20.5.2005 exemption valid up to 31.3.2008. The Members of the CAS A society are 24 Protestants and Orthodox churches in India. These Churches are represented by various Church officials nominated by the respective Church Councils. If the members of Churches wish to change their nominee on the CAS A Society, they can do so as per constitution of the organization. The basic aim and object of the society is to undertake, promote and assist in development in the upliftment of the poor, needy, backward, under privileged and handicapped people irrespective of caste, creed or colour by itself or in collaboration with others and undertake to assist emergency relief make for the victims of flood, famine, earthquake and other disasters, assist in resettlement and rehabilitation, of displaced persons and repatriates.
During the course of assessment proceedings various details were filed as asked for by the AO. Books of account were also produced which were examined on test check basis. The AO noted that the assessee continues to function as in the past and in accordance with the objectives and aims as per Memorandum of Association. He noted that during the assessment year the assessee has received donations from local and foreign donors for relief of Gujarat Earthquake Victims.
4. The AO noted that as per section 12(3) of the Act any amount of donation received by a trust or institution in terms of clause (d) of sub-section (2) of section 80G shall be deemed to be the income in certain circumstances notwithstanding the provisions of section 11. He noted that section 80G(2)(d) shows that the amount of donation referred to in section 12(3) is any sum paid by an assessee, during the period beginning on the 26th day of January, 2001 and ending on the 30th day of September, 2001, to any trust, institution or fund to which section 80G applies for providing relief to the victims of earthquake in Gujarat
5. The AO analysed the circumstances laid down by section 12(3) according to which any amount of donation received by the Trust or institution in terms of clause (d) of sub-section (2) of section 80G as deemed to be income. Since during the period 26.01.2001 to 30.9.2001 the assessee had received donations of Rs.8,17,015/- from Local Donors and Rs. 24,43,41,176/-/- from foreign donors for relief of victims of Gujarat Earthquake but accounts in Form 10AA were filed before the DGIT(E) only on 27th March, 2006, i.e not on or before 30.06.2004, he asked the assessee to explain as to why the donation of Rs. Rs.8,17,015/- from Local Donors and Rs. 24,43,41,176/- from foreign donors may not be added to the income of the assessee.
6. The assessee submitted that donations of Rs, 24,43,41,176/- from foreign donors are not covered u/s. 80G(2) (d) because foreign donors are not assessees. So far as the donations received from local donors amounting to Rs.8,17,015/- is concerned, it was submitted that the same has been utilized for the Gujarat Earthquake relief and, therefore, the same is not taxable.
6.1 However, the AO was not satisfied with the arguments advanced by the assessee. According to him, since as per the provisions of section 5 of the Income Tax Act even a non resident may be liable to tax, therefore a person being a foreigner does not automatically mean that he is not an assessee. Mere statement that foreign donors are not assessees is not sufficient. The assessee has to show with evidence that any particular donor is not an assessee. The only evidence furnished by the assessee is affidavit sworn by Sh. Michael Masih, Head of Finance of the assessee Trust stating that foreign donors are not assessees. Since Sh. Michael Masih is not competent to swear on behalf of the foreign donors and no other evidence was furnished by the assessee trust to show that foreign donors are not assessees as per the Income Tax Act, therefore, this argument of assessee remains unsubstantiated.
6.2 So far as the argument that even the donations of Rs.8,17,015/- from local donors are not taxable because the amount has been utilized for the relief of 4 Gujarat Earthquake victims before 31.3.2003 is concerned, the AO held that this argument has no merit because notwithstanding the fact that donation has been utilized, non-furnishing of accounts to the prescribed authority in the prescribed manner, is in itself a sufficient condition u/s 12(3) for deeming the donation of Rs.8,17,015/- as taxable income.
6.3 The AO also rejected the contention of the assessee that the deeming provisions are effective and applicable only after 30.6.2004 which pertains to assessment year 2005-06 on the ground that a plain reading of section 12(3) shows that the only date mentioned in that section is 31st March 2004 and the reference to the previous year occurring in the same section can only pertain to the year ended 31.03.04 i.e., AY 2004-05.
6.4. Accordingly, the AO treated the donation of Rs.24,51,58,191/- as deemed taxable income of the assessee u/s 12(3) of the Act for the AY 2004-05.
7. In appeal, the ld.CIT(A) upheld the action of the AO by observing as under:- “5 The second, third, forth and fifth ground of appeal are against the facts that the Assessing Officer has treated an amount of Rs 24,45,15,405/- as the deemed income of the appellant. 5.1 The appellant has received an amount of Rs 24,43,41,176/- as mentioned from foreign parties and an amount of Rs 8,17,015/- as donation from local parties. However the appellant failed to furnished the accounts in From 10AA by 30th June 2004. The contention of the appellant was that the donations were received from foreign parties and the donation received from foreign parties amounting to Rs 24,43,41,176/- does not fall under clause (d) of sub section (2) of section 80G. Since the foreign parties are not assessee, therefore this addition was uncalled for. However the Assessing Officer was of the view that though donation were received from foreign parties it need nor
necessarily mean that the foreign parties are not assesses with in the meaning of the Income Tax Act. 5.2 The submission given by the appellant have been considered and I tend to disagree with its contention that any payment received by it from a foreign party ipso facto means that the foreign party is not an assessee. The word assessee has been defined in subsection (7) of section 2, while reads as: "assessee ” means a person by whom or any other sum of money is payable under this Act, and includes- (a) Every person in respect of whom any proceeding under this Act has been taken for the assessment of his income [or assessment of fringe benefits] or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act. ” From the above definition it is seen that the word assessee has a wide meaning and one fails to understand how the appellant can furnish an affidavit on behalf of the donors that they are not assessee. Such an affidavit has no relevance. 5.3 It is further seen that the appellant moved an application and had the account prepared the Form 10AA which were filed before the Director General of Income Tax(Exemption) on 27/03/2006. The Director General of Income Tax(Exemption) rejected the accounts which were produced in Form 10AA on the ground that the assessee had submitted the accounts after the due date i.e. 30/06/2004 and that he did not have any power to condone the delay. There after the assessee moved the Hon’ble High Court on this issue. The High Court in his order dated 22/01/2010 has restored the matter back to the file of Director General of Income Tax(Exemption) observing that the time limit for filing Form 10AA is only directory and not mandatory and hence it can be filed even beyond the stipulated date which in this case was 30/06/2004. 5.4 The Hon’ble Court has observed "In the present case, the petitioner has fulfilled all the condition except the one stipulated in Clause (v) of sub- section (5C) of section 80G of the Act. As mentioned above, it is not in dispute that the petitioner has the necessary registration under section 80G of the Act. It is also registered as charitable organisation. The donations received were from 26th January 2001 to 30th September 2001. Again, there is no dispute that the petitioner maintained separate accounts of income and expenditure for providing relief to the victims of earthquake in Gujarat. It is also claimed that the entire amount was spent only for providing relief to the earthquake victims of Gujarat by the specified date i.e. 31s' March 2004. However, it could not render the accounts of income and expenditure to the prescribed authority by 30th June 2004. Because of this failure on the part of the petitioner, in the income-tax return filed by the petitioner for the assessment year 2003-04 entire donation of Rs 24,51,58,192.08 has been treated as taxable income of the petitioner society, i.e. deemed taxable income under section 12(3) of the Act vide assessment order dated 20th December 2006. ” 5.5 Till today the assesse has not communicated the decision of Director General of Income Tax(Exemption). Hence it cannot be presumed that the DGIT(Exemption) has accepted the account in Form 10AA. As the appellant has failed to furnish the order of Director General of Income Tax(Exemption) the issue is decided against the appellant and the action of the Assessing Officer is upheld. 6 In result the appeal is dismissed.”
8. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following concise grounds of appeal:- “
1. Whether the Ld CIT(A) is justified by upholding the order of assessing officer (A.O.) who has denied the exemption as claimed by the organisation completely ignoring the fact that the Assessee society is a charitable organization since 1947 carrying out charitable activities and having an exemption under section 12A.
2. Whether the Ld CIT(A) is justified by upholding the Order of the A.O. who has not allowed the exemption of Rs.24,51,58,191/-inclusive of donation of Rs. 8,17,015/- (received from local donors) on a sole reason that form no 10AA read with Rule 18AAA was filed after the due date by sidetracking and ignoring the entire details and information of donors like affidavit, confirmation, and financials, etc. and completely ignoring the fact that the Donations were received for the purpose to give immediate relief, help, and rehabilitation of victims of Gujarat Earthquake and the same have been utilized for the said purpose.
3. Whether the Ld CIT(A) is justified in confirming the order of A.O, wherein the assessing officer has considered the foreign donors as assessees' under the Income Tax Act, 1961 by ignoring the admitted facts that the assessee society is already registered under FCRA and is entitled to receive the foreign 7 contribution for charitable activities and therefore it is out of the purview of section 2(7) /12(3) of the Income Tax Act, 1961.
4. Whether the Ld CIT(A) is justified for not considering the form FC-3 filed by the assessee society under the FCRA, 2010 which has been duly assessed with the Ministry of Home Affairs.
5. Whether the Ld CIT(A), as well as A.O., is justified by not granting exemption even without disputing the facts that the entire donation was neither unutilized nor there was a violation of the act by way of no charitable activities.
6. Whether the Ld CIT(A) was justified by confirming the order of the A.O. wherein there are no adverse findings in the remand report with respect to the foreign donors status under section 2(7).
7. Whether the Ld CIT(A), vide order dt.29.09.2010, is justified by not considering the order dt 22.01.2010 of Hon'ble Delhi High Court being the jurisdictional High Court wherein their lordship observed that the time limit is only directory and not mandatory and also ignoring the compliance Application Pending before CCIT (E). The assessee craves leave to add/alter any grounds of appeal on or before or either at the time of hearing.”
The ld. counsel for the assessee, at the outset, filed the copy of the order dated 04.09.2018 passed u/s 119(2)(b) of the Income-tax Act, 1961 in pursuance of the direction of Hon’ble Delhi High Court vide order dated 22.01.2010 in WP. No.1791 of 2007 wherein the CBDT has directed the DGIT(E) to admit Form No.10AA in the case of the assessee for AY 2004-05 as the form filed by the due date u/s 80G(5C)(v) r.w. section 80G(2)(d) of the Act and to deal with the return for that assessment year on merit in accordance with the provisions of law.
10. The ld. Counsel further submitted that the appeal filed by the Revenue against the decision of the Hon’ble High Court was dismissed by the Hon’ble Supreme Court vide SLP No.6686, order dated 15th April, 2011. He submitted that 8 after the order u/s 119(2)(b) of the IT Act passed by the CBDT, the PCIT (E), New Delhi has passed the order u/s 119(2)(b) of the IT Act condoning the delay in filing the form No.10AA for AY 2010-11 vide order dated 18/19.12.2019.
The ld. Counsel submitted that the only reason for which the addition was made by the AO and upheld by the CIT(A) was due to belated filing of Form No.10AA. He submitted that since the AO had examined the books of account at the time of assessment proceedings and now that the delay in filing of the Form No.10AA has been condoned by the PCIT (E), Delhi, vide order dated 18th/19th December, 2019, therefore, the addition made by the AO and sustained by the CIT(A) should be deleted. He further submitted that this being a very old matter relating to AY 2004-05, the matter should be decided here itself at the earliest. The ld. Counsel for the assessee submitted that during the course of argument before the Hon’ble High Court also minute details were given based on which the Hon’ble High Court directed the CBDT to decide the application for condonation on merit and the SLP filed by the Revenue against the order of the Hon’ble Delhi High Court was dismissed by the Hon’ble Supreme Court. Further, the society is registered under FCRA and is entitled to receive the foreign contribution for charitable activities and therefore out of the purview of section 2(7)/12(3) of the IT Act. He submitted that the requisite forms were filed before the Ministry of Home Affairs and they have accepted the same without any further query. He accordingly submitted that the order of the ld.CIT(A) be set aside and the grounds raised by the assessee be allowed.
The ld. DR, on the other hand, submitted that since the matter has not been examined, therefore, he has no objection if the matter is restored to the file of the AO for verification.
We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, is a trust registered under the Societies Registration Act of 1860 and also u/s 12A of the IT Act, 1961. The basic aim and object of the society is to undertake, promote and assist in development in the upliftment of the poor, needy, backward, under privileged and handicapped people irrespective of caste, creed or colour by itself or in collaboration with others and undertake to assist emergency relief make for the victims of flood, famine, earthquake and other disasters, assist in resettlement and rehabilitation, of displaced persons and repatriates. We find, the assessee, during the impugned assessment year received donation from local and foreign donors for relief of the Gujarat earth quake victims. Since the assessee trust filed form No.10AA belatedly i.e., on 27th March, 2006, but, not on or before 30th June, 2004 and further, the assessee filed the sworn affidavit of one Mr. Michael Masih, who is the Head of Finance of the assessee Trust stating that foreign donors are not assessees instead of any of the trustees of the trust, the AO determined the total income of the assessee at Rs.24,45,15,405/- by treating the donation of Rs.24,51,58,191/- as deemed taxable income of the assessee u/s 12(3) of the IT Act. We find, the ld.CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel that the delay in furnishing Form No.10AA has already been condoned by the competent authority after the matter travelled upto the Hon’ble Supreme Court and since the AO, during the course of assessment proceedings has verified the books of account and other details, therefore, the order of the CIT(A) should be reversed and the grounds raised by the assessee should be allowed.
We find sufficient force in the above submissions made by the ld. Counsel for the assessee. We find, the CBDT, vide order dated 4th September, 2018, authorized the DGIT (Exemption) to admit the form No.10AA in the case of the assessee for AY 2004-05 by giving the following direction:-
We find, the PCIT (E), Delhi, vide order dated 18th/19th December, 2019, 15. has condoned the delay in filing intimation of details of accounts u/s 80G(5C)(v) of the IT Act for providing relief to the victims of the earth quake of Gujarat in Form No.10AA by passing the following order:- “ An application was filed by the applicant, Church Auxiliary for Social Action, in the office of the then Director General of Income-Tax (Exemptions),Delhi on 10.07.2015 for condonation of delay in filing Form 10AA for the A.Y 2004-05. The Form.l0AA was filed on 31.03.2006 as against due date 30.06.2004.
2. The assessed society is a charitable society registered u/s 12A and 80G of the I.T Act, 1961. The main objectives of the society are to undertake, promote and assist in the uplift of the poor, needy, backward, underprivileged and handicapped people and to assist emergency relief work for victims of flood, fire, earthquake and other disasters.
3. The society had received donations for Gujarat Earthquake Relief Fund during the period from 26.01.2001 to 30.09.2001 and the entire amount was spent on or before 31.03.2003. Form 10AA was submitted on 31.03.2006 and subsequently revised Form 10AA was filed on 29.09.2006.
The assessee society, then filed an application before the DGIT (Exemptions) seeking condonation of delay in filing of Form 10AA. The application was rejected by ADIT (Exemptions) vide letter dated 08.08.2006 stating that the application cannot be entertained since there is no provision for Condonation of delay as per section 80G(5C)(v) of the IT Act. Consequently, the amount claimed as per Form 10AA was treated as deemed income of the society for A.Y 2004-05.
Subsequently, the assesses filed the application u/s 119(2)(b) before the CBDT. The CBDT also rejected the application of the assessee vide order dated 13.02.2008 stating that Form 10AA cannot be termed as an application or claim for any exemption, deduction, refund or any other relief and that the case does not come under the purview of section 119(2)(b) of the Act.
Aggrieved with the above orders, the assessee filed a Writ Petition before the Hon’ble High Court of Delhi in WP(C) No. 1791/2007 challenging the rejection letter d08.08.2006 and CM Application No.2192/2011 challenging the rejection order dated 13.02.2008 passed by the Board. Hon’ble High Court vide order dated 22.01.2010 held that the application for condonation of delay should not have been rejected on the ground that there is no power to condone. The rejection order dated 08.08.2008 was set aside and the case was remitted 13 back to the Competent Authority to decide the application on merits after giving an opportunity of being heard to the petitioner. Similarly, in CM Application, 2192/2011, Hon’ble High Court vide order dated 18.02.2011 set aside the order passed by the Board and held that the matter is now to be considered afresh on the merits. SLP filed by department against the order of the Hon’ble High Court dated 18.02.2011 was dismissed by the Hon’ble Supreme Court in combined order dated 15.04.2011 in SLP (C) No. CC 6686 of 2011.
Thereafter, in pursuance of the directions of Hon’ble High Court of Delhi’s order dated 22.01.2010 and in the exercise of the powers vested with it u/sll9(2)(b) of the Act, the CBDT vide order dated 04.09.2018 authorised the DGIT (e), New Delhi to admit the Form No. 10AA in the case of the assessee for A.Y 2004-05. Subsequently, vide letter dated 12.06.2019 CBDT has also clarified that in the instant case to admit Form 10AA, the prescribed authority is the Pr.CCIT(E).
In compliance with direction of the Hon'ble High Court, the application of the assessee is considered in the light of extant provisions of law and also the authorization to the Pr.CCIT(E) to admit the belated Form 10AA by the CBDT vide order dated 04.09.2018 and the case of the applicant is considered fit for grant of Condonation of delay in filing of Form 10AA for AY 2004-05.
9. In view of the above, the delay of the assessee in submission of revised Form 10AA for AY 2004-05 on 29.09.2006 is hereby condoned u/s 119(2)(b) of the Income Tax Act, 1961.
This order is only, for the purpose of Condonation of delay in filing intimation of details of accounts u/s 80G (5C) (v) of the I.T Act for providing relief to the victims of the earthquake in Gujarat in Form 10AA. The acceptance of the contents of Form 10 AA is the subject matter of the examination of the Assessing Officer concerned. Sd/- (Sunita Puri) Pr.Chief Commissioner of Income Tax (Exemptions), New Delhi.”
We find, the AO, at page 1 of the assessment order, has mentioned that the AR of the assessee attended from time to time and filed the details as asked for. Similarly, at page 2 of the assessment order, the AO has mentioned as under:- “During the course of assessment proceedings various details have been filed and the same have been placed on record. Books of account have been produced and examined on test check basis. The assessee continues to function as in the past and in accordance with the objectives and aims as per Memorandum of Association.”
Thus, a perusal of the above shows that the assessee, during the course of assessment proceedings, has filed the requisite details as asked for by the AO and also produced the books of accounts which were gone through by him on test check basis. The AO has not pointed out any other defect other than (a) the belated filing of Form No.10AA and (b) the sworn affidavit filed by Mr. Michael Masih, Head of Finance of the assessee Trust stating that foreign donors are not assessees instead of any of the trustees. Other than the above two objections, there is no other objection by the AO regarding any defect or any diversion of funds by the trust for the benefit of the trustees. As mentioned earlier, the trust is functioning in accordance with the aims and objectives as per its Memorandum of Association. The provisions of section 12(3) which has been invoked by the AO for denying the exemption reads as under:-
“Section 12 [(3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or which has been utilised for purposes other than providing relief to the 15 victims of earthquake in Gujarat or which remains unutilised in terms of sub- section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax.”
A perusal of the above shows that there is no allegation of the AO that the assessee has violated in any manner regarding the non-fulfillment of the conditions prescribed u/s 12(3) of the Act after the application was accepted by the competent authority. The submission of the ld. Counsel that the assessee society is already registered under FCRA and is entitled to receive the foreign contribution for charitable activities and, therefore, it is out of the purview of section 2(7)/12(3) of the IT Act, 1961 could not be controverted by the ld. DR. We further find the assessee has filed Form No.FC-III-FCRA-2010 which has been duly assessed with the Ministry of Home Affairs, Government of India. Under these circumstances and considering the fact that since the assessee, during the course of assessment proceedings, has produced the relevant details and produced the books of account which have been gone through by the AO and no other defects were pointed out, therefore, considering the totality of the facts of the case and this being a very old matter relating to AY 2004-05, the argument of the ld. DR that the matter should be remanded back to the AO for verification, in our opinion, is not justified. We, therefore, set aside the order of the CIT(A) and direct the AO to allow the exemption.