TaxTMI 
TaxTMI 
2014 (1) TMI 1685
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.... That both the ld. CIT(A) and ITO Ward 2(1) have failed to appreciate that "Voluntary Contributions" collected and deposited in Saving Accounts maintained with Citi Bank, HDFC Bank, Punjab & Sind Bank, State Bank of India were towards a specific project to donate a "Gold Chatter" to Gurudwara Shri Hazur Sahib" and to carry out other Charitable and Religious Activities involving free Langars, Marriages of Poor People, Religious Processions and Karsewa etc. 4. That both the ld. CIT(A) and ITO Ward 2(1) have grossly erred in conducting that benefit of set off of utilizations towards charitable/religious activities can only be given to trusts registered u/s 12AA of the Income Tax Act, 1961. 5. That both the ld. CIT(A) and ITO Ward 2(1) have failed to appreciate that even capital expenditure incurred for religious and charitable activities is allowable as application of income towards the objects of the Dera. 6. That both the ld. CIT(A) and ITO Ward 2(1) have grossly erred in disallowing expenses of Rs. 7,42,848/- u/s 40(a)(ia) of the Income Tax Act, 1961 on the ground that income of assessee was "Business Income & no TDS had been deducted. 7. That Worthy CIT(A) has grossly erred in....
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.... contrary with evidence. When specifically asked to explain as to why appellant's income may not be computed in accordance with provisions of section 28 to 43, the appellant's counsel filed supplementary submissions dt. 17.11.11 contending therein that since the appellant is not engaged in any business and also by placing reliance on the case of law of the Hon'ble Supreme Court in the case of CST vs. Sai Publication Fund, urged that since the Department could not be able to establish that any business activities care carried out by the appellant with profit motive and since the funds collected have been utilized for the purposes for which these are collected the benefit of set of total utilization/application of funds against the collection has to be allowed to the appellant. The appellant's explanation did not find favoaur with the AO. Thereafter, the appellant was confronted with the nomination made in the bank account opening form vide notice dt. 17.11.11 and in reply dt. 6.7.11 the counsel of the appellant explicitly expressed his unawareness to the above fact. It has all along been the stand of the appellant that since the funds of the so-called Dera are being utilized at his ....
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..... 742848/-(comprising of Rs. 264000 as advertisement, Rs. 264000 advertisement PTC channel and Rs. 211000 as job charges paid) added back u/s 40a(ia). iii) Rs. 511046 as insurance including Rs. 331575 paid to Birla Sun Life, Rs. 42895/- paid to LIC for purchase of personal insurance policies and in respect of the balance for want of relevant details, added back being not pertaining to the appellant's business or profession/vocation, subject to allowance of deduction u/s 80-C as per law. iv) Donation of Rs. 1,39,85,512/- representing donation of Gold Chattar weighing 12 K 670 gms to Sri Hazur Sahib supported by a certificate/receipt No.7302 dt. 2/11/2008 from Takhat Sachkhand Sri Hazur Abchainagar Sahib, Nanded, Maharashtra enjoying deduction u/s 80G, treating the same being not allowable expenditure on account of charity subject to deduction u/s 80G. v) Disallowances of Rs. 7091/-, Rs. 77597/- and Rs. 16,990/- on a/c of telephone, vehicle expenses and traveling expenses wherein the personal element on the part of the appellant cannot be ruled out. Taking into account the above additions/disallowances, the net assessable business income of Rs. 1,23,73,192/- has been determined as....
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.... welfare trust, children welfare trust, charity to poor, need handicapped, orphans , pingalwara, Gaushala etc. (4) It is also a well established fact that is accounts are admittedly never got audited and as to whether expenditure upto 85% of its income have been spent towards its specified aims and objects of larger public utility of charity or religious in order to qualify for the claimed exemption u/s 11. (5) In order to qualify its receipt of various donations/collections/contributions, no certificate from the prescribed authority u/s 80G(5) is forthcoming. (6) Entire collections of the Dera are solely managed and controlled by one Mukh Sewadar according to his own will and wish, and even the collection certificates/confirmations are stereo-typed without bearing any authentification, complete particulars like PAN etc. Even no attempt was made to produce any of the so-called donors categorically confirming the donations by indicating the source thereof, capacity, creditworthiness and genuineness of the transaction. (7) Even the various bank accounts are in the sole name of Mukh Sewadar, Makhan Singh without indicating any alternative bank holder or co-bank account holder in t....
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..... AR that the Hon'ble Allahabad High Court in the case of CT vs. Sant Baba Mohan Singh, reported at 118 ITR 1015 (All.) but in my opinion, the same is of little help to the appellant as the same is distinguishable and at variance than the peculiar facts & circumstances of the instant case, discussed supra. I find that the AO has passed the well-reasoned asstt. order by allowing reasonable opportunities of being heard (forthcoming from perusal of the AO's order) by taking into consideration various submissions and contentions raised before him, by assessing the appellant's income under the head 'income from business/profession' by accurately computing the appellant's business income by firstly adjusting the loss claim, allowing depreciation on its assets, allowing deduction u/s 80G of the Act and also making the following additions: a) Rs. 13,35,658/- on a/c of capital expenditure b) Rs. 7,42,848/- U/s 40(a)(ia) for non ded. of TDS u/s 194C c) Rs. 1,39,85,512/- Donations not forming business exp. d) Rs. 5,11,046/- Insurance Besides, the AO's above action, the above additions have been found to be made on sound footing requiring no interference therein and th....
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.... charging of interest u/s 234A, 234B and 234C of the IT Act, 1961, the same being consequential in nature, in my opinion, the same does not require any comments. 10. In the result, the appeal is partly allowed." 4. The Ld. counsel for the assessee, Mr. Padam Bahl, CA submitted the written submissions and argued on the same lines, which for the sake of convenience are reproduced as under: "It is submitted that the ITO Ward 2(1) , Amritsar had made an addition of Rs. 1,21,67,653/- in this case by treating the Bank deposits in the account of the assessee as his income from Profession & Vocation. The same has been confirmed by the worthy CIT(A), Amritsar. It is submitted that the AO and the Ld. CIT(A) had failed to appreciate that the dual capacity of the assessee, one as a Preacher and the other as "Mukh Sewadar" of "Dera Sant Amir Singh Taksal". It is submitted that the assessee is the Mukh Sewadar/Caretaker of an old Historic Dera of about 100 years old. The Dera namely "Dera Sant Amir Singh Taksal" ji is being managed under the spiritual guidance of "Mukh Sewadar Sant Makahan Singh Ji." It is submitted that the "Dera Sant Amir Singh Ji" is more than 100 years old Dera and inh....
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.... or charitable Trust. Your kind attention is also invited to the decision in the case of Vidyavaruthi Thirtha vs. Baluswani Ayyar AIR 1922 PC 123 where it was held that Property of the Math does not vest in the Mahant, he is only the manager and custodian thereof. The donations received by Sh. Makhan Singh as Mukh Sewadar/Caretaker of "Dera Sant Amir Singh Ji" have been separately deposited in separate Bank Accounts and the same have been utilized only towards Karsewa and other religious/charitable activities of the Dera. It is submitted that these donations from Sangat/General Public could not be treated as income from business, vocation and profession of the assessee, particularly when it was specifically pointed out to the AO that these donations were "Corpus Donations" in nature. In fact during that period of "project of donating a Gold Chhattar to Gurdwara Hazur Sahib" was being undertaken by the assessee in his capacity as Mukh Sewadar of the Dera. The assessee in his capacity as Mukh Sewadar of the Dera also carried out several religious and charitable activities such as religious processions, free langar, marriages of poor people and karsewa etc. It will be appreciated ....
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....ot registered u/s 12AA of the Act. It is submitted that these findings of the AO & CIT(A) are legally untenable. The provisions of Sec. 2(24) (iia) read as under: "voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes ( or by an association or institution referred to in clause (21) or clause (23) or by a fund or trust or institution referred to in sub-clause (iv) or sub clause (v) (or by a fund or trust or institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or clause (23c) or sec. 10( or by an electoral trust). Explanation - for the purposes of this sub-clause "trust" includes any other legal obligation. Your honour will kindly observed that the explanation to Sec. 2(24)Iiia) clearly provides that "trust" includes any other legal obligation. It is, therefore, submitted that where a legal obligation is cast on a person he becomes a trustee. The case of the assessee being "Mukh Sewadar" or "Dera Sant Amrit Singh Ji" was a position where he was under a "lega....
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....tion 12 goes one step further and deems such revenue contribution to be income derived from property held under trust. It thereby makes applicable to such contributions all the conditions and restrictions under sections 11 and 13 for claiming exemptions. Section 11(1)(d) specifically grants exemption to capital contributions to make the fact of non-taxability clear beyond doubt. But it proceeds on the erroneous assumption that such contributions are of income nature - "income in the form of voluntary contributions". This assumption should be disregarded". Your kind attention is also invited to the decision of Calcutta High Court in the case of Director of Income Tax vs. Girdhari Lal Shownarain Tantia Trust 199 ITR 215 (Cal.) where it was held that Income Computed u/s 11 must be in accordance with the real Income concept and not under the Income Tax Act. The following decisions relied upon in the submissions earlier are reiterated again: 1) Mahant Indersh Charan Dass vs. State of U.P. 81 ITR 435 (All.) 2) CIT vs. Baba Avtar Singh 83 ITR 738 (Del.) 3) CIT vs. Baba Mohan Singh 118 ITR 1015 (All) In other words, it is the net income which has to be computed and considered. It i....
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....ons of the assessee on account of carrying out of "Profession or vocation" as these were saddled with a "legal obligation" and he was bound to spend these for Project of Gold Chhatar. It is further submitted that no distinction is to be made between revenue expenditure and capital expenditure while dealing with the Income applied by a trust (legal obligation) towards its objects. As such the expenditure incurred by the assessee as Mukh Sewadar of the Dera towards Capital expenditure amounting to Rs. 13,35,658/- on Car A/c , TV & Generator etc. has to be allowed as Income applied. These Assets were used for augmenting collections for the project and for use of Sangat at the Dera. Your kind attention is invited to the following decisions where capital expenditure incurred by a trust towards its purposes was allowed as "Income applied". 1. Satya Vijay Patel Hindu Dharamshala Trust vs. CIT 86 ITR 683 (Guj.) 2. CIT vs. Geroge Forana Church 170 ITR 62 (Ker.) 3. CT. M Tiruppani Trust vs. CIT 230 ITR 636 (SC) It is, therefore, submitted that the sum of Rs. 13,35,658/- is also amount applied/utilized towards the purposes of the trust/legal obligation & the same is allowable as a dedu....
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....ht here. Thousands of students have been taught here the true meaning of Guru Granth's Sahib bani and they have served the Sikh Panth and are still serving. Panth Rattan Bhai Sahib, Bhai Veer Singh Ji was also a student of this taksal. Sikhs & Shrimoni Gurudswara Prabhandak Committee are proud of this place. Presently, this place is being managed by Sant Makhan Singh Ji. Sd/- Gurbachan Singh Jathedar, Sri Akal Takhat Sahib, Amritsar." 6. In this regard, the ld. counsel for the assessee submitted as under: "Enclosed please find herewith a Certificate No.3551 dated 31.12.2013 issued by Sh. Gurbachan Singh, Jathedar Sri Akal Takhat Sahib, Sri Amritsar, Punjab India alongwith a copy of English translation. The above certificate has been issued by Jathedar Sri Akal Takhat Sahib on the request of the assessee to confirm that Dera Sant Amir Singh Ji is a GURUDWARA" because Prakash of "Sri Guru Granth Sahib Ji" is there at the Dera. The certificate is self explanatory. Your honour will kindly appreciate that this certificate establishes an important fact which goes to the root of this case. This particular fact has been omitted to be considered at all as it never came on record. ....
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....aken as his arguments for deciding the grounds of appeal of the assessee. 8. The Ld. JCIT (DR), Mr. Mahavir Singh, on the other hand, relied upon the orders of both the authorities below and written submissions which are reproduced hereunder: "It is considered imperative to delineate the factual matrix of the case before making counter submissions on the assessee's written submission filed before the Hon'ble Bench on 16.07.2013. The factual matrix is like that the assessee has confronted during the course of assessment proceedings with the saving bank account of the assessee with HDFC Bank, Golden Temple, Amritsar where huge cash had been deposited and the assessee was asked to explain the source of deposit of the same.The assessee declined the ownership of any personal saving bank account in his name. The assessee declined the ownership of any personal saving bank account in his name. It was stated that the assessee is a religious preacher and Head Sewadar of old historic dera and is engaged in charitable and religious activities. Such activities are being carried out with the help of funds/donations collected from general public and are deposited in the bank account. The asses....
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....sions and karsewa etc. by utilizing the donations contributed by general public/sangat at large. c) The banks accounts in the name of Sant Makhan Singh, Mukh Sewadar are in fact bank accounts of Dera Sant Amir Singh. d) The assessee is only performing the role of a caretaker of the said Dera. e) The assessee has filed his personal income tax return separately wherein he has declared his personal income from Katha as a preacher. f) The donations received were 'corpus donations'. The assessee as Mukh Sewadar of the Dera also carried out several religious and charitable activities such as religious processions, fee langar, marriages of poor people and karsewa etc. g) The entire money withdrawn from the bank accounts under consideration was uitilized for the objects enumerated above. This is evident from the Receipts and Payments A/c filed by the assessee before the AO. h) The assessee had donated Gold Chhattar to Takhat Sachkhand Sri Hazur Abchalngar Sahib, Nanded, Maharashtra and furnished a receipt in token of having made the donations. i) The assessee had made appeal to the Sangat to make donations for donation of Gold Chhattar. A sum of Rs. 2,67,848/- was paid to PTC Channe....
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.... and in the event of demise of the Gaddi Nashin, the mantle of operating such account, falls on the incoming Gaddi Nashin. No such document has been furnished to the Bank at the time of opening of the bank accounts. The bank accounts clearly show that the same have been opened in the personal name of the assessee.The assessee's has not said even a syllabale as to why the nominee in the bank account is his own son and not any subsequent Gaddi Nashin of the said Dera. Therefore, this demolishes the whole theory of dual capacity of the assessee. d) It is self serving claim of the assessee that he is performing the role of a caretaker of the said Dera. The assessee has brought on record no document of his being appointed as Caretaker of the said Dera. Therefore, this self serving claim cannot be accepted. e) The income assessed by the AO is assessee's personal income earned from the profession of preacher. f) Since the assessee's contention that it was acting as caretaker of Dera Sant Amir Singh Ji is absolutely without any evidence and as such the assessee's claim that the donations received were 'corpus donations' is completely irrelevant and no cognizance of the same can be taken....
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....come. Any exemption even under legal obligation has to pass the rest of section 12AA of the Act. It is further submitted that none of the judgments relied upon by the assessee is applicable to the facts of the case which are discussed hereunder: Matant Inderash Charan Dass vs. State of UP 81 ITR 435 In this case, the management of the endowment had devolved upon the Mahant in the tradition from Guru to Chela and no accession to the Gaddi the Mahant severed his relations and connections with the family. The Mahant was elected by Sikh Chiefs in Panchayat from among the Chelas of the last Guru. The property belonged to the institution and the Mahant was merely its administrator. In the case of the assessee, no such devolving of Gaddi has been claimed. No evidence has been brought on record that he had been appointed as a Mahant/Mukh Sewadar and further the assessee had been using the alleged property as his own property.In fact, donations were made to the Mukh Sewadar in the exercise of his vocation and are assable in his own hands as per the judgments relied upon by the AO in his order at page 4 of the assessment order. CIT vs. Baba Avtar Singh 83 ITR 738 (Del) In this case, do....
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....nds No.1,4,6,7 11 & 12 which clearly shows that the assessee admits that the issues raised in these grounds are the ones which he cannot prove before the Hon'ble Bench and which impacts the whole subject matter of appeal. Therefore, the assessee has clearly no merit in his case." 9. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the assessee has not produced any Trust- Deed before any of the authorities below or even before us and the assessee has admitted before the authorities below that it is an unregistered institution. Though, it is 100 years old but not even registered as Registered Society or not registered as charitable or religious trust under section 12AA of the Income Tax Act, 1961. There is no certificate under section 10(23C)(iv) before any of the authorities below or even before us. The accounts have been admitted, not to have been audited under any law. No 80G(5) approval from the prescribed authority has been taken and has not been placed on record. 9.1. We concur with the findings of the ld. CIT(A) that the entire collections of Dera are solely managed and controlled by one Mukh Sewadar according to hi....
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....e Ld. CIT(A) is further justified and has passed a reasonable order due to undenying personal element, who has rightly restricted the disallowance to 1/6th as claimed by the assessee on account of telephone, vehicle and traveling expenses. The AO has rightly been directed to allow deduction under section 80C under Chapter VI of the Act. 9.4. As regards the arguments made and the written submissions of the assessee keeping into consideration the arguments made by the Ld. DR and written submissions submitted by the Ld. DR, we are convinced with the arguments made by the Ld. DR that the assessee has not produced any document being appointed as 'Mukh Sewadar' of the said Dera and therefore, the claim of the assessee in dual capacity remained wholly unsubstantiated. As mentioned hereinabove, no charitable activity has been substantiated by the assessee and there is no registration u/s 12AA, u/s 10 and u/s 80G or any other provisions of the Act. It has not been substantiated before any of the authorities below or even before us that these bank accounts in the name of the assessee were, in fact, the bank accounts of Dera Sant Amir Singh Ji or these were opened on the basis of some docume....