DCIT, CHENNAI vs OM SAKTHI NARAYANI SIDDAR PEEDAM CHARITABLE TRUST, VELLORE

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR

For Respondent: Shri. A.V. Sreekanth, IRS, JCIT

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The appeal filed by the Department is directed against order of the Commissioner of Income-tax (Appeals)-VII, Chennai in dt 10.10.2014 for the assessment year 2006-2007

ITA No. 107/Mds/2015. :- 2 -: passed u/s.143(3) r.w.s.147 and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).

The Revenue has raised the following grounds:- 2.

2.1 The Id. CIT (A) erred in deleting the addition of ₹1, 54,66,312/- holding that the amount was expended wholly for charitable activities and in accordance with the purpose for which it was given by the donor; 2.2 The Id. CIT (A) failed to observe that as per the agency agreement entered between the assessee and the donor M/s. Sri Narayani Charitable Foundation, Calgary, Canada (Annexure 'A'), the donation requires to be spend towards nine specific tasks and duties mentioned in the Schedule HA" to the said agency agreement; 2.3 The Id. CIT (A) failed to take note that the assessee trust utilised the donation received during the year for the following non-mandate expenses, thereby become ineligible for claiming such expenses as 'application of income:- ₹23,63,566/- School Running : ₹51,41,573/- Hospital/Clinic running : Creation of School/ ₹79,60,873/- Hospital asset : ₹1,54,66,312/- Total :

3.1 The Id. CIT (A) erred in holding that the "Amended and Restated Agency Agreement" dated 1.4.2006 has made clear scope of the charitable activities carried on by the Trust out of the contribution made by the donor. 3.2 The ld. CIT(A) failed to take note that the ‘Amended and Restated Agency Agreement’ does not bear any date and it does not make any mention of School/Hospital running. 3.3 The ld. CIT(A) ought to have appreciated the fact that the said Agreement only speaks about improvement on Sripuram Spiritual Park.

ITA No. 107/Mds/2015. :- 3 -:

4.1 The ld. CIT(A) erred in allowing new evidence produced by the assessee in the form of a letter from the President of the donor agency M/s. Sri Narayani Chariable Foundation, Calagary, Canada dated 15.04.2014 and allowing relief to the assessee. 4.2 The ld. CIT(A) failed to appreciate that the said letter has been prepared after the passing of the assessment order and this letter cannot form a basis for allowance of the expenditure incurred towards school/hospital.

The Brief facts of the case the assessee is a registered public charitable Trust and filed return of income on 10.10.2006 declaring Nil income. The trust was constituted on 06.11.1995 and registered u/s.12AA of the Act with the DIT (Exemptions) Chennai, vide order in DIT(E) no.2(310)98-99, dated 21.12.1999. Subsequently the case was selected for scrutiny and assessment was completed u/s.143(3) of the Act. Further Assessing Officer issued notice u/s.148 of the Act based on the information of form FC-3 on foreign contributions as their FCRA provisions, foreign donation /contribution as directed should be utilized for specific purpose and specified activities. In compliance to notice u/s.148 of the Act, the ld. Authorised Representative of the assessee filed letter to treat original return filed u/s.139(1) of the Act to be treated as valid return and appeared from time to time and produced copy of agency agreements entered by the assessee with donor Sri Narayani Charitable Foundation (SNCF), Canada. The agreements consists of two parts, agreement one relates to ITA No. 107/Mds/2015. :- 4 -:

construction of Sripuram temple and other being charitable activities engaged by the assessee as referred at page 2 of the order as under:-

SCHEDULE ‘’A’’. Scope of Agency Contract.

‘’Feed the people (Narayani Seva) Program (See Exhibit ‘’A’ for further description of programme) 2. Prayer ceremony (pua) program (See Exhibit ‘’A’ for further description of programme) 3. Temple Revival (Jyothi Swaroopini) Program (See Exhibit ‘’A’ for further description of programme) 4. Basic Health (Ayogya) Program (See Exhibit ‘’A’ for further description of programme) 5. Education (Vidya Netram) Program (See Exhibit ‘’A’ for further description of programme) 6. Drinking water (mathru Ganga) Program (See Exhibit ‘’A’ for further description of programme 7. Family oriented (Kalyani) Program (See Exhibit ‘’A’ for further description of programme) 8. New Lease of life (Punarjanma ) Prorgram (See Exhibit ‘’A’ for further description of programme) 9. Any other programs which provide the necessities for Personal and spiritual growth’’.

The assessee was further issued a show cause notice for application of foreign contribution towards creation of hospitals/school assets, and they are not covered under specific direction of donor SNCF, Canada. As per the programmes mentioned in agreement 2, the welfare measures activities are carried on by assessee trust. The ld. Assessing Officer based on the data of the Canadian resource agency website, is of the opinion that expenditure of activities incurred by the assessee are against the directions of SNCG Canada and assessed

ITA No. 107/Mds/2015. :- 5 -: the difference as income and raised demand. Aggrieved by the order, the assessee filed an appeal with the Commissioner of Income Tax (Appeals).

In the appellate proceedings, the ld. Authorised Representative of the assessee appeared and argued the grounds and filed written submissions alongwith information of FCRA account. The ld. Commissioner of Income Tax (Appeals) considered the submissions and dealt with details and facts and accepted the reasons on spending the contribution on activities of trust referred exhaustively at page 3 to 12 and observed at page 12 of the order were the assessee trust has submitted a letter from President of donor agency (SNCF) dated 15.04.2014 confirming the scope of agency agreement covering the expenditure towards the construction & maintenance of the Sri Narayani Hospital & Research Centre and construction and maintenance of the Narayani Vidyalaya Matric School. The ld. Commissioner of Income Tax (Appeals) considered the facts, at para 4.3 on disputed issues of addition of �5,56,47,742/- and allowed the appeal at para 4.4 of his order as under:-

‘’4.4 Regarding the addition of Rs.5,56,47,742/- is concerned, the AO found that the sum was not accounted for by the trust based on the Canadian Resource Agency Website and hence of the view that it should be added as unaccounted income. Apart from the extract of the website which is not an admissible evidence either as a primary

ITA No. 107/Mds/2015. :- 6 -: evidence or secondary evidence, no other evidence is available on the file of the Assessinq officer to come to the conclusion regarding the receipt of RS.5,56,47,742/- by the assessee. On the other hand, it is not disputed that all the funds were received only through proper banking channels and it is also proved that the said .sum of Rs.5,56,47,742/- was not received during the year under appeal by the assessee’’..

Aggrieved by the Commissioner of Income Tax (Appeals) order, the Revenue has assailed an appeal before Tribunal.

Before us, the ld. Departmental Representative vehemently argued that Commissioner of Income Tax (Appeals) has erred in deleting the addition as the amount was not utilized wholly and exclusively for charitable activities as per the directions of the donor.

The amount has to be spent on nine specific tasks as per Schedule ‘’A’’ of agreement and does not bear any date of agreement. The ld. Commissioner of Income Tax (Appeals) admitted new evidence produced by assessee in nature of letter from President of Sri Narayani Charitable Foundation , Canada and prayed for set aside the order of the Commissioner of Income Tax (Appeals).

On the other hand, ld. Authorised Representative relied on 6. the order of Commissioner of Income Tax (Appeals) and filed voluminous paper book in hearing proceedings and vehemently opposed the grounds.

ITA No. 107/Mds/2015. :- 7 -:

We heard the rival submissions and perused the material on record. The only contention of the ld. Departmental Representative being that Commissioner of Income Tax (Appeals) has considered the new evidence produced by way of letter from Donor agency M/s. Sri Narayani Charitable Foundation, Canada dated 15.04.2014 and the donation amount received was not utilized for the activities mandated by the Canadian donor and further the agency agreement does not bear signature. The ld. Authorised Representative drew our attention to the page 15 of paper book evidencing the amended agency agreement which contains terms of engagement and activities requirements to be followed as per Schedule ‘A’ and ‘B’ and this specific agreement was entered on 1st April , 2006. The contention of the ld. Departmental Representative that agreement was not signed is incorrect and on reference to page 19 of the paper book, the agreement is signed by Sri Narayani Charitable Foundation, Canada and Om Sakthi Narayani Siddar Peedam Charitable Trust, Tamil Nadu.

So for as the issues on agreement is concerned it is in accordance with terms and there are no defects as alleged by the Revenue.

Further, the ld. Authorised Representative demonstrated significance of communication letter, assessment order and trust deed of the institution and the trust activities are conducted as per the conditions agreed with Canadian donor. The ld. Authorised Representative drew

ITA No. 107/Mds/2015. :- 8 -: attention to the letter dated 15th April, 2014 received from the Canda donor intimating directly to Dy. Director (Exemptions), Chennai with clarifications on the expenditure and scope of agency agreements at page 56 of paper book as under:-

“The General Agency Agreement executed on 1st Fe. 2002 contains in Schedule A –Scope of Agency Contract, Clause 4: Health Program- This contemplates various forms of medical assistance to the poor and needy, which includes the construction and maintenance of the Amma Child Care Hospital, currently known as the Sri Narayani Hospital & Research Centre.

Clause5: Education Program: This contemplates and facilitates various forms of educational assistance to the poor and needy students which includes the construction and maintenance of the Sri Narayani Vidyalaya Matric School’’.

The basic purpose of foreign contributions for activities on Health and education. The agreement was entered in Canada on 1st April, 2006 referred at page 28 of paper book and there is no fresh evidence filed as its forming part of assessment record and in the nature of clarifactory explanations. We find the activities and arguments of the ld. Authorised Representative are supported with documentary evidence with duly signed and dated credential agreements alognwtih photographs. The assessee has complied FCRA provisions for donations received for the purpose of Health and educational programme as per the mandate of Canadian donor and assessee

ITA No. 107/Mds/2015. :- 9 -: claimed such expenses as Application of income for School and Hospitals. Considering the apparent facts, evidence, activities and FCRA provisions and clarificatory explanation of ld. Authorised Representative and duly signed documentary proof , we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) who has dealt exhaustively viz-a-viz explanations and clarification and we confirm the same.

In the result, the appeal of the Department in ITA 8. No.107/Mds/2015 is dismissed.

Order pronounced on Wednesday, the 27th day of April, 2016, at Chennai.

DCIT, CHENNAI vs. OM SAKTHI NARAYANI SIDDAR PEEDAM CHARITABLE TRUST, VELLORE