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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
Per Shri D.S.Sunder Singh, Accountant Member : These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-2, Guntur in Appeal No.6/2015-16 dated 30.06.2016 for the Assessment Year (A.Y.) 2007-08 and against the order of the Ld.CIT(A)-1, Guntur in I.T.A.No.85/CIT(A-1)/GNT/2014-15 dated 30.10.2015 for the A.Y. 2011-12. Cross objections are filed by the assessee in support of the order of the Ld.CIT(A)-1 & 2, Guntur. For the sake of convenience, these appeals are clubbed, heard together and a common order is being passed for as under:
Brief facts of the case are that the assessee is a religious and charitable trust. For the A.Y.2007-08, the assessee filed the return of income declaring total income of Rs.Nil. Subsequently, the Assessing Officer(AO) found that there was an escapement of income chargeable to tax under the head ‘Capital Gains’, hence issued notice u/s 148 for reopening the assessment. During the reassessment proceedings, the AO found that the assessee had transferred the Trust properties to the persons interested in the Trust or to the members of the Society for a consideration less than the market consideration as per the details given under :
3 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur Market value Name of the Consideration S.No. Document No. as per the buyer received sub-registrar 1960/2007 of Gundiga 1. SRO, Guntur Rs.4,99,000 Rs.5,66,500 Jojappa dt.27.01.2007 1959/2007 of Malapati 2. SRO, Guntur Rs.17,09,000 Rs.33,79,000 Marreddy dt.27.12.2006 1958/2007 of Yerukala 3. SRO, Guntur Raghunatha Rs.0 Rs.3,74,000 dt.27.01.2007 Rao
The AO issued show cause notice to the assessee and assessee filed the reply to the show cause notice along with resolution of the Society, extract of the minutes and submitted that the Diocese intended to start engineering college, but , it was having scarcity of funds and hence decided to sell some of it’s lands owned by the Trust to raise funds for construction of the college. In the meantime, the President of the Diocese, Sri. Dr. Gall Bali during his interaction with the then Chief Minister of the State came to know that the State Government was planning to bring a legislation prohibiting sale of church lands in the state of Andhra Pradesh(AP). As the impending legislation would be a hindrance for the fund raising plans of the Diocese, the members of the governing body of the society felt that it would be prudent to immediately transfer the lands proposed to be sold in the name of the members of the society, so that even if any such law prohibiting sale of church lands comes into operation, the Diocese's plans would not get effected as the
4 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur transferees would be free to sell the lands and contribute the money so raised to the Diocese for constructing the Engineering College. Accordingly, the Diocese transferred the lands in the name of the members in the F.Y. 2006-07 without receiving any consideration as the transferees were Roman Catholic priests who had no means to pay. The intention of the Diocese in transferring the lands in the names of the society members was to bypass the impending legislation and not to benefit the members of the society. As things stood, thus, the anticipated legislation prohibiting the sale of church lands did not come through. Subsequently, as per the original plan of the Diocese, the members of the society in whose names the lands were transferred in the year 2006-07 sold these lands and deposited the sale proceeds with the diocese in the F.Ys. 2010-11 and 2011-12. The Diocese utilised the sale proceeds for the construction of Engineering College. Thus, no benefit accrued to the transferees and the Diocese also did not suffer any monetary loss. Hence, submitted that the provisions of section 13(1)(c) cannot be invoked to the facts of the case. 2.1. The AO examined the contentions of the assessee and did not find favour with the contentions due to the reasons that when a charitable entity transfers immovable property without receiving any consideration to the persons specified in Section 13(3) of the Act, it forgoes exemption u/s. 11 and 12 as per the provisions of section 13(1)(c) r.w.s 13(2)(g) of the I.T. Act. The
5 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur AO submitted that there is no provision in the statute to look into the intentions or motives before invoking the provisions of section 13(1)(c) r.w.s 13(2)(g) of the I.T. Act. No discretionary power has been conferred by the statute on the AO to look into the intentions of the trust for invoking the provisions of section 13(1)(c) r.w.s 13(2)(g) of the Act. Therefore, on occurring the events specified in those sections of the statute, the provisions would come into play and the trust forfeits exemption in respect of the income or property applied directly or indirectly for the benefit of the persons specified in section 13(3) of the I.T. Act. Therefore, the AO viewed that the assessee society had forfeited the exemption for the A.Y. 2007-08 and hence the provisions of section 11 and 12 are not applicable for computing the income of the Trust for the A.Y. 2007-08. Accordingly, assessment was completed denying exemption. Further, it was a case of non filing the return of income in response to notice u/s. 148 of the I.T. Act, the AO completed the assessment u/s. 144 of the I.T. Act. The AO viewed that the assessee is not entitled for exemption u/s 11 and 12 since, the assessee had transferred the properties directly or indirectly to the persons specified in section 13(3), therefore invoked the provisions of section 13(1)(c) and 13(2)(g) of the Act and held that the assessee forfeited the exemption as per the provisions of section 164(2) of the Act and the income required to be taxed at the maximum marginal rate. The AO followed the Circular No.387 dated 06.07.1984 and accordingly taxed the market value as per Sub Registrar Office for
6 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur
an amount of Rs.1,09,74,500/- and stamp duty charges of Rs.15 lakhs totaling to Rs.1,24,74,500/- at the maximum marginal rate. The AO also denied exemption u/s 11 for other income of Rs.1,97,19,356/- as discussed in para No.9 of the assessment order. Accordingly, the AO assessed the total income and raised the demand of Rs.1,89,42,963/-.
Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) held that there was no diversion of income and invoking the provisions u/s 13(1)(c) and 13(2)(g) are not valid. The assessee submitted before the AO as well the CIT(A) that subsequent to the transfer of these lands, in the A.Y.2012-13 these lands were sold to third parties and the entire proceeds were credited to the bank accounts of the society itself. Some of the lands under reference were gifted / given back to the Diocese itself by way of gift deeds / cancellation of the earlier transfer deeds as per the details given under :
Market / SRO value Member of Market when Society in value when Document Document transferred Sl.No. whose transferred Notes No. No. from name the in the name member to land stands of member third partyq 19737/2006 Gundiga of SRO, 3258/2011 1. 22,00,000 40,00,000 Jojappa Guntur, dt.15.07.2011 dt.20.12.2006 Gundiga 1960/2007 Gifted 2. 5,66,500 2278/2011 Jojappa of SRO, back to
7 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur
Guntur, diocese dt.27.01.2007 1959/2007 Gifted Malapati of SRO, 3. 33.79 lakhs 5860/2012 back to Marreddy Guntur Diocese dt.27.01.2007 19738/2006 Malapati of SRO, 3259/2011 4. 22 lakhs 40,00,000 Marreddy Guntur Dt.15.07.2011 dt.27.01.2006 1958/2007 Earlier Yerukula of SRO, transfer 5. Raghunatha 3,74,000 5579/2010 Guntur, deed Rao dt.27.01.2007 cancelled 19736/2006 Yerukula of SRO, Sale deed 6. Raghunatha 22,55,000 1717/2010 Guntur cancelled Rao dt.20.12.2006
The Ld.CIT(A) found that out of the six properties under reference, four properties were come back to the Diocese at a later date by way of gift deeds or by way of cancellation of earlier transfer deeds and left were only two properties which were sold to third parties and the sale proceeds in entirety were credited to the account of the Diocese.
3.1. From the said two sale deeds the assessee received total sale consideration of Rs. 295.15 lakhs shown in the receipts and payments account for the A.Y 2012-13. The assessment proceedings for the AY 2012-13 were concluded by the AO on 12-03-2015 accepting the income returned without making any adjustments to the taxable/exempt income.
8 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur 3.2. The Ld.CIT(A) viewed that by accepting the amount of Rs. 295.15 lakhs to be proceeds from sale of land, which includes the land that was already transferred by the assessee to the members of the society in AY 2007-08, the department or the AO, had accepted that the transfer affected in AY 2007-08 was only a paper transfer without any substantial transfer of rights/interest/ownership of the said property to different members of the society. It goes to say that the interests of the society were in no way affected by the said transfer on paper.
3.3. The Ld.CIT(A) also considered the case of Sri V. Raghunatha Rao for the AY 2007-08 which was reopened u/s. 147 to examine the sources for the amount of Rs. 22.55 lakhs said to have been paid by Mr.Y. Raghunatha Rao to the society towards transfer of land to him. Vide order dated 25.03.2015, the AO concluded that the sale deed made in the favour of Mr.Y. Raghunatha Rao vide Doc No. 19736/06 dated 20.12.2006 was cancelled subsequently on 4-5-2010 vide Doc. No. 1717/2010 where the Diocese of Guntur Society and the assessee were the parties. In the said cancellation document, it was clearly mentioned that the consideration was written as paid in the said purchase document in 2006, but no consideration was paid to the Diocese of Guntur Society. Hence viewed that no investment
9 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur need to be taxed accordingly assessed to nil income.
3.4. Based on the above findings, the Ld.CIT(A) considered that there was no diversion of income and invoking of provisions u/s. 13(1)(c)& 13(2)(g) were not valid. Whatever the transfer of properties took place it was only on paper and in reality there was no diversion of income / properties from the assessee to any party whether they are covered u/s 13(3) or otherwise. Accordingly, the Ld.CIT(A) allowed the appeal of the assessee.
Against which the revenue filed appeal before this Tribunal. During the appeal hearing, the Ld.DR argued that the assessee had transferred the properties to the members of the Society for a consideration less than the market value, in violation of section 11 and 12 thus the provisions section 13(1)(c) of the Act are applicable in the case of the assessee. Hence, argued that the assessment required to be done invoking the provisions of section 13(1) or 13(2) of the Act and the assessee foregoes the exemption allowed u/s 11 and 12 of the Act. The Ld.DR relied on the decision of Hon’ble Madras High Court in the case of 174 ITR 58 in the case of M.A. Namazie Endowment. v. Commissioner of Income-tax and argued that the assessee had diverted
10 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur the trust funds for other than the objects by transferring the properties to the members of the society, therefore, the assessee is not entitled for exemption u/s 11 and 12. The Ld.DR further submitted that though the assessee stated that the property in question was gifted back to the Society or the sale consideration is deposited back to the Society’s account, subsequent actions are immaterial, hence argued that the Ld.CIT(A)’s order required to be set aside and the revenue’s appeal to be allowed.
On the other hand, the Ld.AR submitted that the assessee is a Christian institution with religious and charitable objectives and the assessee intended to start engineering college for the benefit of the whole community and impart education to the public at large. Since the Society was having scarcity of funds, Society intended to sell the lands to mobilize the funds. At this juncture, the Society’s President during the discussion with the Hon’ble Chief Minister, had an impression that the Govt. of Andhra Pradesh is intending to bring a legislation to prohibit the Christian Institutions for transfer of the lands. Therefore, to prevent the situation, the assessee had pre- empted by transferring the lands to the Trust and the members of the
11 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur Society for Nil consideration. The society had transferred the lands to the members of the Society and they were holding the lands as a custodian but not as the owner. The Society did not receive a penny from the transferees of the land and the Society also did not give possession of the land to the vendees. They were simply holding the title of land in their name. The Society also did not remove the assets from the balance sheet of the Society. Once the lands were sold to third parties in the A.Y.2013-13, the entire sale consideration was deposited in the bank account of the Society, but not a penny was utilized by the title holders. The AO also did not assess the capital gains in the title holders. Apart from the above, some of the lands were gifted back to the Society. Therefore, the Ld.AR argued that though there was transfer of land, the intention is clear that the Society continues to hold properties in its hotchpotch and no member was benefited out of the transaction. The Ld.AR argued that substance over form prevails in this transaction. There was neither any benefit derived by the title holders nor there was loss to the Society, therefore argued that there is no violation of section 13(1) or 13(1)(c) and requested to uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
12 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur 6. Responding to the argument of the Ld.AR, the Ld.DR submitted that in the instant case, each year is independent and literal interpretation is required in this case. When the law is clear, literal rule of interpretation has to be applied and no interpretation is required. The assessee has transferred the lands, hence, the assessee has clearly violated the provisions of section 13(1)(c) and argued that the AO has rightly taxed the income withdrawing the exemption u/s 11 and 12, hence requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue.
We have heard both the parties and perused the material placed on record. In the instant case, during the previous year, relevant to the A.Y. 2007-08, the assessee had transferred the lands to G.Jojappa, Y.Bala Reddy, M.Marreddy and others for a consideration less than the market consideration or for no consideration. The transfer of lands was mainly done due to the impression that Govt. of Andhra Pradesh was intending to bring a legislation, prohibiting the Christian churches to transfer the land without the approval of Govt.of Andhra Pradesh. At the same time, the Society was intending to start Engineering College for which the Society was searching the funds. For
13 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur procurement of funds for engineering college the society planned to sell it’s lands. Due to the impression given by the Govt. of Andhra Pradesh that the churches would be barred from selling the immovable properties, the Society had transferred the lands to the members of the Society to preempt the legislation, so that it can procure the funds without any difficulty. Though the Society had transferred the lands to the members of the Society, the lands were in possession of the Society and the Society did not receive any amount from the purchasers of the land which was evidenced from the order as well as the appellate order. As seen from the orders of the lower authorities, the purchasers were not in a position to make the payment even for stamp duty charges, hence the Society had to incur the stamp duty charges for registering the properties in the names of the purchasers. The assets continued to be held by the Society. It is apparent from the orders of the lower authorities and from the facts that though the lands were transferred in the name of G.Jojappa and others, they were holding the lands as custodians, but not as the owners. Subsequently, the lands were gifted back to the Society or the sale proceeds of the lands were directly deposited in the Society’s account. The assets were removed from the Balance Sheet only in
14 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur 2011-12 when the assets were sold. Till such time, the assets were continued to be held by the assessee society. From the above facts, we understand the contention of the Ld.AR that in the instant case, substance over form prevails is correct. Apart from the above, though the lands were sold in 2011-12, the department did not tax the capital gains in the hands of the transferors. In fact, the AO had accepted the contention of Y.Raghunadha Rao, one of the purchasers that no investment need to be taxed in his hands and the AO also had accepted the fact that the transaction was arrangement to hold the properties of the society in the hands of the purchasers as the custodian. On consideration of the entire issue, it appears that there is no diversion of income or violation of section 13(1) and no benefit was derived by the members of the society. Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue is dismissed. I.T.A.No.151/Viz/2016, A.Y.2011-12 8. For the A.Y.2011-12, the assessee filed the return of income on 30.09.2011 declaring income of Rs. Nil after claiming the exemption u/s11. The case was taken up for scrutiny and during the course of
15 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur scrutiny, the AO found that the assessee had sold the properties relating to the land for an amount of Rs.3,61,36,800/- which was shown under the head ‘deletions’. The AO called for the explanation and the assessee explained that in the F.Y.2006-07, the Society of Guntur had anticipated some problem in transfer of the land, hence, transferred the property to the members of the Society. The said properties were sold during the year F.Y.2010-11 and the sale proceeds were deposited in the bank account. Accordingly, submitted that details of the lands sold and deposits made in the bank account was as under : Sale Price 29,124,800 Market & Document value 12,317,000 12317 sq. yards * 1000 Sale price shown 29,124,800 Purchase of land in 2004- 11,50,000 05 (purchase of land 2.5 acres 11,50,000 at Gorantla including stamp duty Index price of land 17,03,438 11,50,000 * 711/480 Capital gains 2,79,74,800
16 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur Total Fixed Deposits made from the sale proceeds Date Name of the Bank Amount (Rs.) 10.12.2010 South Indian Bank 1,80,01,000 19.03.2011 Indian Overseas Bank 1,00,00,000 10.03.2011 Catholic Syrian Bank 50,00,000 21.03.2011 Catholic Syrian Bank 10,00,000 Total amount invested 3,40,01,000
8.1. The AO observed that the amounts were deposited in the bank accounts prior to its receipt, hence called for the source of the deposits made in the bank accounts. The assessee explained that the assessee had sold two properties at Takkellapadu village admeasuring 4.4 acres for a sale consideration of Rs.70,12,000/- and deposited in the bank account against the consideration registered in the sale deed was Rs.39,60,000/- as per the registered document. Similarly, the assessee submitted that the Society has 2.6 acres of land in D.No.386, 387, 388 & 389 Gorantla and D.No.56/C2/59, Gorantla. The Society intended to make lay out of 250 sq.yds plots and help 400 families of Christian population to construct houses and received Rs.1.00 lakh each from various parishes through priests. The total amount of Rs.1,80,00,000/- was received for various places was as under :
17 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur
Place Area Amount Phirangipuram 25 plots 25,00,000.00 Durgi 10 * 10 10,00,000.00 Edlapadu 08 * 10 08,00,000.00 Emani 07 * 10 07,00,000.00 Karempudi 25 * 10 25,00,000.00 Kolakalur 4 plots 04,00,000.00 Kollipara 3 plots 03,00,000.00 Macherla 5 plots 05,00,000.00 Rajupalem 4 plots 04,00,000.00 Pathareddipalem 11 plots 11,00,000.00 Patibanda 20 29,00,000.00 Perecherla 12 12,00,000.00 Piduguralla 8 08,00,000.00 Ponnur 2 02,00,000.00 Prathipadu 1 03,00,000.00 Ravipadu 3 03,00,000.00 Rayavaram 1 01,00,000.00 Rentichintala 11 11,00,000.00 Thallacheruvu 4 04,00,000.00 Thubada 2 02,00,000.00 Thullur 1 01,00,000.00 Thurakapalem 2 02,00,000.00 Vinukonda 1 01,00,000.00 Vykuntapuram 1 01,00,000.00 Total 1,80,00,000.00
8.2. The AO conducted the enquiries and found that none of the parish priests have accepted that they have mobilized the funds. Therefore, held that the sum of Rs.1,80,00,000/- was received by the
18 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur assessee from unknown sources which were either anonymous donations or unexplained investments. 8.3. Similarly, the AO observed that the assessee has sold the land and properties situated at Takkelapadu Village for a registered consideration of Rs.15,12,000/- and Rs.24,48,000/- aggregating to Rs.39,60,000/- and said to be received the sum of Rs.15,12,000/- on 02.11.2010 and Rs.55,00,000/- on 02.11.2010 aggregating to Rs.70,12,000/- and deposited in Indian Overseas Bank. There was a difference in sale consideration and deposit made in the bank to the extent of Rs.30,52,000/-, but none of these amounts were accounted for in the books of accounts on the dates mentioned. Hence, the AO treated the sum of Rs.30,52,000/- also as the amount received from unknown sources. 8.4. Since the Society is having mixed objectives of religious and charitable purposes, the AO held that the sum received by the assessee required to be taxed u/s 115BBC r.w.s. 69 of the Act. Accordingly assessed the income of Rs.2,10,52,000/- u/s 115BBC r.w.s. 69 of the Act as unexplained investment.
19 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur 9. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee. The Ld.CIT(A) found that the AO has not brought on record any misappropriation of funds by the members of the Society and whatever funds received were deposited in different banks and sub section 2 of section 115BBC says that the anonymous donations received by Trust or Society for religious purposes shall not be taxed. For the sake of clarity we, extract the relevant part of the order of the Ld.CIT(A) extracted as under: “I have gone through the facts of the case, contents of the assessment order, written submissions filed by the assessee and the case laws relied by the assessee. AO has computed the total income the assessee at Rs.2,10,52,000/- against the ROl at Rs. Nil. While doing so the AO has added an amount Rs.2,10,52,000/- on the plea that the assessee has not produced proper explanations and evidences nor correlated the sale of lands. It has also not produced Minute's Register to verify that these transactions are duly authorised by board and the consolidated depreciation schedule annexed to the financial, statements filed along with the return of income, that against the head 'land Rs.4,80,29,765.21/- shown under the column balance as on 01.04.2010' and an amount of Rs.3,61,36,800/- was shown under the head 'deletions' and an amount of Rs2,10,52,000/- (land advance of Rs.1,80,00,00+Rs.30,52,000/- explained amount in sale of land at TakkeIla padu) is added to the returned income of the assessee's society as unexplained cash investments/anonymous donations u/s.115BBC r.w.s.69 of the IT Act. The section 115BBC. 1) Deals with the Anonymous donations to be taxed in certain cases- the sub-section 2 says the provisions of sub- section (V shall not apply to any anonymous donation received by-
20 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur (a) any trust or institution created or established wholly for religious purposes; b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.
For the purposes of this section, “anonymous donation" means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indication the name and address of the person making such contribution and such other particulars as may be prescribed.
Scope.- This section has been inserted by the finance Act, 2005, with effect from 1 April, 2007 Consequently, It has also emended section 13. The notes on Clauses appended to the finance Bill, 2006 elaborate on the pro visions as under:
"Clause 22 of the Bill proposes to insert a new section 115B8C in the Income- tax Act which provides that anonymous donations referred to in that section shall be taxed in certain cases.
It is proposed to insert a new sub-section (7) in the said section 13, so as to, inter alia, provide that nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof any anonymous donation referred to in the new section 115BBC on which tax is payable in accordance with the pro visions of that section.
This amendment will take effect from 1st April, 2007 and will accordingly apply in relation to the assessment year 2007-2008 and subsequent years.
Clause 22 of the Bill seeks to insert a new section 115BBC relating to anonymous donations to be taxed in certain cases. The proposed new section seeks to provide that on any income comprising of any anonymous donation
21 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur received by any assessee on behalf of any university or other educational institution referred to in sub-clause (7/ad) or sub-clause (v) or any hospital or other institution referred to in sub-clause (iiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of sect/on 10 or any trust or Institution referred to in section 11, included 4, the total income of such assessee, Income- tax shall be payable at the rate of thirty per cent.
It is further proposed to provide that the pro visions of said new section 115BBC shall not apply to any anonymous donation received by (a) any trust or institution created or established wholly for religious purposes and (b) any trust or institution created or established wholly for religious and charitable purposes, other than any anonymous donation is for any university or other educational institution or any hospital or other medical institution run by the trust or institution.
It is also proposed to provide that the anonymous donation shall mean any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity of the person making such contribution indicating the name, address and such other particulars of the person as may be prescribed.
This amendment will take effect from 1st April, 2007 and will accordingly apply in relation to the assessment year 2007-08 and subsequent years the Society is a religious institution from its objectives, constitution and other available evidences. The question of unanimous donations does not arise since it administering 598 Churches in the Guntur Diocese area. Also the sale consideration received in full is properly invested in fixed deposits and utilized to attain the objective of the Society and accepted the assessing officer as proper investment. Hence, there is no violation and misuse of funds. In view of the detailed description of the facts that the Diocese of Guntur Society is religious institution serving the needy since 1940, the Society has got 153 priests administering 598 Churches in the Guntur who are serving the needy as priests and Church Fathers. The beneficiaries are general public particularly for religious and
22 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur other needs. The members of the society are Roman Catholic Priests who relinquish the worldly pleasures and follow celibate life. Landed property was transferred in the names of some of its members of the society with a misapprehension that Government of Andhra Pradesh proposed to bring a legislation to restrain the Christian Institution selling the lands without the permission of Government adopting the mode of Karnataka Land Reforms Act. AO has not brought on record that there was a misappropriation of funds by the members of the society and what are funds they have received they have deposited in different banks to the extent of Rs.3,40,01,000/- and the sub-section 2 of section 115BBC clearly says that anonymous donations received by a trust or society establish wholly for religious purpose shall not be taxed. Hence the addition made by the AO is dismissed and the assessee's grounds of appeal are allowed.” 10. Against the order of the Ld.CIT(A), the department filed appeal before this Tribunal. During the appeal hearing, the Ld.DR submitted that the assessee is not only having religious purposes but also having other purposes and as seen from the CIT(A)’s order, beneficiaries are general public for religious and other needs. Inviting our attention to MoA, the Ld.DR argued that the assessee society is having objectives other than religious and charitable purposes. Therefore, the Ld.DR contended that as per section 115BBC, the anonymous donations received by religious, charitable Trust which includes other purposes, not entitled for exemption. Therefore, argued that the Ld.CIT(A) has erred in deleting the addition, hence, requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue.
23 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur 11. On the other hand, the Ld.AR relied on the order of the Ld.CIT(A) and argued that as per sub section 2 of section 115BBC, sub clause (b), anonymous donations received by any Trust or institution created or established only for religious and charitable purposes were also excluded from taxing the same u/s 115BBC r.w.s.69 of the Act. Therefore, argued that the Ld.CIT(A) rightly deleted the addition and no interference is called for. 12. We have heard both the parties and perused the material placed on record. The assessee is religious charitable Trust having religious as well as objects of charitable in nature. For the year under consideration, the assessee had received a sum of Rs.2,10,52,000/- from unknown sources which was taxed by the AO u/s 69 r.w.s. 115BBC of the Act. As provided u/s 115BBC sub section 2 allows anonymous donations to be excluded from the purview of section 115BBC in the following circumstances. (i) Any anonymous donations received by any Trust or institution established only for religious purposes. (ii) In the second situation any Trust or Institution created or established only for religious and charitable purposes.
24 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur (iii) Donations received other than any anonymous donations made with the specific direction or required to be excluded from the exemption. 12.1. In the instant case, the assessee had received anonymous donations without any specific purpose. There is no specific direction as far as the sum of Rs.2,10,52,000/- is concerned. Therefore, as rightly held by the Ld.CIT(A), the donations received by the assessee society are covered by sub section 2 of section115BBC of the Act. Further, the Ld.CIT(A) has given a finding that there was no misappropriation of funds by the members of the Society. The assessee has sold the lands, received the consideration over and above the registered document, which was deposited in the bank account without any diversion or misappropriation of funds. Similarly, the assessee had received anonymous amounts from various intending buyers. Since the priests did not support the contention, the amount of Rs.1,80,00,000/- was treated as anonymous donations. The said amount was deposited in the bank and the AO did not give any finding that the funds were misappropriated. Since sub section 2 of section115 BBC allows religious and charitable institution to receive anonymous donations, the case of the assessee is squarely covered by sub section 2 of section 115BBC
25 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur of the Act and we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. Accordingly, appeal of the revenue is dismissed.
The assessee filed cross objections in support of the order of the Ld.CIT(A) with the delay of 824 days, but not filed the condonation petition. Since the assessee did not file condonation petition, the cross objections filed by the assessee are dismissed in limine.
In the result, appeals of the revenue as well as the cross objections of the assessee are dismissed. Order pronounced in the open court on 18th December, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 18.12.2019 L.Rama, SPS
26 I.T.A. No. 390/Viz/2016 & 151/Viz/2016, CO No.32/Viz/2019 and 31/Viz/2019, A.Y.2007-08 & 2011-12 M/s Diocese of Guntur Society, Guntur
आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue - Asst.Commissioner of Income Tax (Exemptions), Circle(i/c), Vijayawada 2. निर्धाऩरती/ The Assessee – M/s Diocese of Guntur Society, Bishop’s House, Chandramouli Nagar, Guntur 3. The Principal Commissioner of Income Tax (Exemptions), Hyderabad 4. The Commissioner of Income Tax (Appeals)-1, Guntur 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam