M/s. Reformed Welfare Foundation, Salem v. ITO, Salem

IN THE INCOMETAX APPELLATE TRIBUNAL: C - BENCH:CHEN NAI (BEFORE SHRI ABRAHAM P. GEORGE. ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEM BER) ITA NO. 105/MDS/10 M/S REFORMED WELFARE FOUNDATION 2/92 KANDASAMY NAGAR SANNIYASIGUNDU PO. SALEM 636015 PAN AABTR1519E VS. THE ITO WARD III(1) SALEM (APPELLANT) (RESPONDENT) APPELLANT BY RESPONDENT BY: SHRI. G.BASKAR SHRI TAPAS KUMAR DUTTA CIT(DR) ORDER PER SHRI ABRAHAM P.GEORGE A.M: IN THIS APPEAL FILED BY THE ASSESSEE IT ASSAILS T HE ORDER DATED 30-11- 2009 OF THE CIT WHEREBY ITS REGISTRATION UNDER SEC .12AA OF THE INCOME- TAX ACT 1961 (THE ACT FOR SHORT) WAS CANCELLED A ND DELAY IN MAKING THE APPLICATION NOT CONDONED. ITA NO. 105/MDS /10 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD VIDE ITS APPLICATION DATED 30-05-2007 APPLIED FOR REGISTRATION UNDER SEC .12AA OF THE ACT. THE CIT INITIALLY BY HIS ORDER DATED 22-11-2007 GRANT ED REGISTRATION TO THE ASSESSEE. BUT NEVERTHELESS DID NOT ACCEPT ASSESSEE S PETITION FOR CONDONATION OF DELAY. THUS THOUGH ASSESSEE HAD APP LIED FOR REGISTRATION FROM THE DATE OF ITS INCEPTION VIZ.29-01-2003 REG ISTRATION WAS GRANTED W.E.F. 01-04-2007 ONLY. 3. AGGRIEVED IN NOT BEING GRANTED IT REGISTRATION W .E.F. 29-01-2003 DATE OF ITS CREATION ASSESSEE MOVED IN APPEAL BEFORE TH IS TRIBUNAL. THIS TRIBUNAL; VIDE ITS ORDER DATED 29-12-2008 IN ITA NO .151/MDS/08 WAS OF THE OPINION THAT ASSESSEE HAD TO BE GIVEN ONE MORE OPPO RTUNITY TO PRESENT ITS CASE BEFORE THE CIT IN SO FAR AS CONDONATION OF D ELAY WAS CONCERNED. THE MATTER WAS REMITTED BACK TO THE CIT ACCORDINGLY . 4. IN THE PROCEEDINGS INITIATED PURSUANT TO THE ABO VE ORDER OF THIS TRIBUNAL THE CIT ISSUED A NOTICE ON 17-08-2009 POS TING THE CASE FOR HEARING AND ALSO REQUIRING ASSESSEE TO EXPLAIN THE DELAY. EXPLANATION OF THE ASSESSEE WAS THAT BEING A NON-PROFIT MAKING CHA RITABLE TRUST IT WAS UNDER A BONAFIDE IMPRESSION THAT IT WAS NOT LIABLE FOR INCOME-TAX WHICH RESULTED IN THE DELAY IN APPLYING FOR REGISTRATION UNDER SEC.12AA OF THE ACT. HOWEVER THE CIT IN HIS FRESH ROUND OF PROCEEDINGS WENT A STEPFURTHER AND ISSUED ANOTHER NOTICE TO THE ASSESSEE ON 11-09-2009 WHEREIN HE STATED ITA NO. 105/MDS /10 3 THAT THERE WAERE CERTAIN DEFICIENCIES IN THE AIMS A ND OBJECTIVES OF THE TRUST WHICH RENDERED THE TRUST INVALID. AS PER THE CIT S OME OF THE OBJECT CLAUSE WERE VAGUE. THOUGH ASSESSEE GAVE A DETAILED REPLY O N 28-09-2009 CIT WAS OF THE OPINION THAT CL. (B) (C) AND (O) OF ITS OBJECTS WERE VAGUE AND NO ACTIVITY FOR ANY CHARITABLE PURPOSE WAS CARRIED ON. FURTHER AS PER CIT THE CHAIRMAN OF THE TRUST WHO WAS EXERCISING THE POWER S WAS NOT A TRUSTEE AND THERE WERE PAYMENTS OF SALARY TO SUCH CHAIRMAN. CIT ALSO NOTED THAT SALARY PAYMENT ACKNOWLEDGED BY THE CHAIRMAN AND ACC OUNTED IN THE BOOKS WERE AT VARIANCE. AS PER THE CIT THE DELAY C OULD ALSO NOT BE CONDONED SINCE ASSESSEE HAD ONLY PLEADED IGNORANCE OF LAW. AS PER THE CIT THE ACCOUNTS OF THE ASSESSEE WERE REGULARLY AU DITED BY ONE SHRI NELSON JAYAKUMAR F.C.A. FROM F.Y 2002-03 ONWARDS AND IN TWO OTHER CASES WHERE SHRI NELSON JAYAKUMAR WAS THE AUDITOR N AMELY M/S INDIAN GOSPEL FELLOWSHIP TRUST AND M/S NESAM CHARITABLE TR UST ALSO SIMILAR REASONS WERE ADDUCED FOR CONDONATION OF DELAY. HE THEREFORE REFUSED TO CONDONE THE DELAY. 5. NOW BEFORE US LD. AR STRONGLY ASSAILING THE ORD ER OF CIT SUBMITTED THAT THE MATTER REMITTED BY THIS TRIBUNAL TO THE CI T WAS LIMITED TO CONDONATION OF DELAY. ACCORDING TO HIM INSTEAD OF LIMITING HIMSELF TO THIS CIT WENT FURTHER AHEAD AND CANCELLED THE REGISTRATI ON. LD. COUNSEL SUBMITTED THAT IN THE EARLIER ORDER DATED 22-11-200 7 OF THE PREDECESSOR ITA NO. 105/MDS /10 4 CIT THERE WAS A CLEAR FINDING THAT THE TRUST WAS EL IGIBLE FOR REGISTRATION UNDER SEC. 12AA OF THE ACT AND SUCH REGISTRATION WA S GRANTED. ACCORDING TO HIM ASSESSEES APPEAL WAS ONLY REGARDING NON-CO NDONATION OF THE DELAY. EVEN ON MERITS ACCORDING TO THE LD. AR CIT WAS ENTIRELY WRONG IN CONSIDERING THE OBJECTS TO BE VAGUE. FURTHER IT WAS ARGUED BY THE LD. AR THAT THE POWER OF THE CHAIRMAN WAS ONLY TO EXERCISE FUNCTIONS REQUIRED TO BE EXERCISED BY THE TRUSTEES AND THERE WAS NO DELE GATION OF POWERS. ACCORDING TO HIM THE VARIANCE IN THE SALARIES GIVE N TO THE PASTER MOHANRAJ WAS NEGLIGIBLE AND IN ANY CASE IT WAS NOT A MATTER TO BE CONSIDERED AT THE TIME OF REGISTRATION. VIS--VIS THE ISSUE OF NON-CO NDONATION OF DELAY SUBMISSION OF THE LD. AR WAS THAT TWO OTHER CASES W HERE AUDIT WAS CONDUCTED BY SAME AUDITOR SHRI NELSON JAYAKUMAR NAM ELY M/S INDIAN GOSPEL FELLOWSHIP TRUST AND M/S NESAM CHARITABLE TR UST FOR WHICH ALSO DELAY WAS NOT CONDONED BY THE CIT THE MATTER WAS C ARRIED IN APPEAL BY THE RESPECTIVE ASSESSEES BEFORE THIS TRIBUNAL WHIC H ALLOWED SUCH APPEALS. 6. PER CONTRA LD. DR SUPPORTED THE ORDER OF THE CI T. 7. WE HAVE PERUSED THE ORDERS AND HEARD BOTH THE PA RTIES. WHAT WE NOTICE IS THAT THE ASSESSEE WAS ORIGINALLY GRANTED REGISTRATION UNDER SEC. 12AA OF THE ACT BY THE CIT VIDE HIS ORDER DATED 22- 11-2007. LD. CIT IN THAT ITA NO. 105/MDS /10 5 ORDER HOWEVER REFUSED TO CONDONE THE DELAY AND GRA NTED IT REGISTRATION ONLY FROM 01-04-2007 THOUGH ASSESSEE HAD SOUGHT FO R THE REGISTRATION FROM 29-01-2003 I.E. DATE OF ITS CREATION. RELEVANT PARA-3 OF THE ORDER DATED 22-11-2007 OF THE CIT IS REPRODUCED HEREUNDER : 3. AFTER DUE CONSIDERATION OF THE OBJECTS OF THE TRUST THE GENUINENESS OF THE ACTIVITIES CARRIED OUT BY THE TR UST THE REGISTRATION IS HEREBY GRANTED AS RELIGIOUS TRUST U/S 12AA. I F IND THAT THE APPLICATION HAS NOT BEEN FURNISHED WITHIN THE PRESC RIBED TIME. IT IS NOTICED THAT AUTHORIZED REPRESENTATIVE OF THE APPEL LANT HAS SUBMITTED THAT THE APPLICANT WAS UNDER THE BONAFIDE IMPRESSION THAT CHARITABLE TRUSTS ARE NOT LIABLE TO PAY INCOME-TAX AND CONSEQUENTLY THEY HAVE NOT FILED APPLICATION U/S 12A(A) OF THE I NCOME-TAX ACT. THE EXPLANATION IS NOT CONVINCING AT ALL. THE TRUST HAS BEEN RECEIVING FOREIGN AID AND HAS DULY RECEIVED PERMISSION UNDER THE FOREIGN CONTRIBUTION (REGULATION) ACT 1976 AND HAS BEEN AV AILING PROFESSIONAL HELP. IN OTHER WORDS THE MANAGING TRU STEE WAS FULLY AWARE OF THE NUANCES OF THE VARIOUS PROVISIONS OF L AW PERTAINING TO TRUST. MOREOVER THE ACCEPTED MAXIM OF LAW IS THAT IGNORANCE OF LAW IS NO EXCUSE. I AM OF THE VIEW THAT EXPLANATION OF THE AUTHORIZED REPRESENTATIVE FOR DELAY IN FOILING APPLICATION U/S 12A(A) IS WITHOUT SUBSTANCE. I HOLD THAT THE REASONS GIVEN FOR DELAY DO NOT EXPLAIN SATISFACTORILY THAT THE APPLICANT WAS PREVENTED BY SUFFICIENT AND BONAFIDE REASONS IN FILING 5HE APPLICATION IN TIME. CONSEQUENTLY I AM OF THE VIEW THAT DELAY IN FILING THE APPLICATION DOES NOT DESERVE TO BE CONDONE. HENCE THE REGISTRATION IS HEREBY GRANT ED TO THE APPLICANT TRUST WITH EFFECT FROM 01-04-2007 I.E. TH E FIRST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION HAS BEEN FI LED. 8. AGAINST NON-CONDONATION OF DELAY ASSESSEE HAD MO VED IN APPEAL BEFORE THE TRIBUNAL AND PARA-5 OF THE ORDER DATED 2 9-12-2008 OF THE TRIBUNAL IN ITA NO.151/MDS/08 IS REPRODUCED HEREUND ER: 5. WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE THE ASSESSEE DESERVES TO BE GIVEN ONE MORE OPPORTUNITY TO PRESEN T ITS CASE ITA NO. 105/MDS /10 6 BEFORE THE CIT RELATING TO CONDONATION OF DELAY. TH E MATTER IS ACCORDINGLY REMITTED BACK TO THE FILE OF THE CIT WI TH A DIRECTION THAT HE SHOULD PASS A FRESH ORDER AFTER GIVING ONE MORE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. WHAT WAS REMITTED TO THE CIT WAS ONLY THE ISSUE REGARDING CONDONATION OF DELAY. NEVERTHELESS LD. CIT IN THE ORDER NOW IN APPEAL BEFORE US NOT ONLY REFUSED TO CONDONE THE DELAY BU T WENT FURTHER AND CANCELLED THE REGISTRATION UNDER SEC.12AA OF THE AC T. PARA-1 OF THE ORDER DATED 30-11-2009 OF THE CIT IS CLEAR THAT HE WAS CO NSIDERING THE MATTER AFRESH IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY T HE TRIBUNAL ON 29-12- 2008. THAT BEING SO IN OUR OPINION HE WAS CIRCUMS CRIBED BY SUCH DIRECTION AND HAD NO REASON TO GO BEYOND THAT. EVEN OTHERWISE IF WE LOOK AT THE REASONS GIVEN BY THE CIT VIZ. CL. (B) AND C L. (C) OF THE OBJECTS OF THE ASSESSEE BEING AMBIGUOUS AND VAGUE IT READ AS UNDE R: (B) TO CONDUCT AND PROMOTE RESEARCH BY THEOLOGIANS AND STUDENTS IN PHILOSOPHY RELIGIOUS AND CULTURAL STUDIES IN IN DIA. (C) TO BRING REVIVAL IN THE CHURCH AND IN CHRIST IAN COMMUNITY. 10. IN OUR OPINION THERE IS NOTHING AMBIGUOUS EITHE R IN THE SPIRITUAL ADVANCEMENT OF GOSPEL NOR IN BRINGING REVIVAL TO CH RISTIAN COMMUNITY AND CHURCHES. AS PER CIT CL. (O) WHICH WAS REGARDING M AINTENANCE OF COTTAGE INDUSTRY PLANTING AND REARING FRUIT BEARING TREES WERE NON CHARITABLE. IN OUR OPINION THERE IS NOTHING IN THIS CLAUSE WHICH COULD WARRANT A VIEW THAT THESE ACTIVITIES WERE NOT CHARITABLE BUT FOR ANY PR OFIT MAKING. THERE IS ITA NO. 105/MDS /10 7 NOTHING UNAMBIGUOUS IN THESE OBJECTS ALSO WHICH WOU LD RENDER THE TRUST VAGUE FOR ITS OBJECTS. CIT RELIED ON THE DECISION O F HONBLE APEX COURT IN THE CASE OF SURAT ART SILK CLOTH MFRS. ASSOCIATION BUT THERE SOME OF THE OBJECTS WERE DISTINCTLY NON CHARITABLE WHICH IS NOT THE CASE HERE. INSOFAR AS THE ISSUE OF CHAIRMAN BEING VESTED WITH THE POWERS OF THE TRUSTEES THE INSTRUMENT CREATING THE TRUST ONLY EMPOWERED THE CH AIRMAN TO EXERCISE AND PERFORM FUNCTIONS REQUIRED TO BE EXERCISED AND PERF ORMED. THIS CANNOT BE CONSIDERED AS A DELEGATION OF POWER BY THE TRUSTEES FOR WHAT WAS REQUIRED TO BE EXERCISED AND PERFORMED WOULD NECESSARILY BE WHAT WAS DECIDED BY THE BOARD OF THE TRUSTEES AND THERE IS NO FINDING B Y THE CIT THAT ANY POWERS OF TRUSTEES WERE DELEGATED IN THIS MANNER. INSOFAR AS THE RECEIPT OF ` 2000/- PER MONTH BY THE CHAIRMAN FROM THE TRUST ADMITTEDL Y THE CHAIRMAN WAS NOT A TRUSTEE AND EVEN OTHERWISE WE CANNOT SAY THAT SUCH AMOUNTS WERE EXCESSIVE OR SUCH THAT WOULD RESULT IN MISAPPROPRIA TION OF THE TRUST FUND. VARIATIONS IN ACCOUNTING WAS A MATTER TO BE CONSIDE RED AT THE ASSESSMENT STAGE AND CIT HAS NOT POINTED OUT ANY ADVERSE VIEW TAKEN BY AO IN THIS REGARD AT THE ASSESSMENT STAGE THUS IN OUR VIEW C ANCELLATION OF REGISTRATION UNDER SEC.12AA OF THE ACT NEITHER HAS ANY LEG TO STAND ON MERITS OR IN LAW. REGARDING THE ISSUE OF CONDONATIO N WE FIND THAT THIS TRIBUNAL IN APPEALS FILED BY M/S. INDIAN GOSPEL FEL LOWSHIP TRUST IN ITA NO.1417/MDS/09 VIDE ITS ORDER DATED 27-11-2009 AND BY M/S NESAM CHARITABLE TRUST IN ITA NO.14/MDS/10 BY ITS ORDER D ATED 06-08-2010 HAD ITA NO. 105/MDS /10 8 CONDONED THE DELAY AND HELD THAT REGISTRATION WAS T O BE GIVEN FROM THE DATE OF INCEPTION OF THE RESPECTIVE TRUSTS. HERE T HE CIT HAD RELIED ON HIS DECISIONS WHEREBY HE HAD REFUSED TO CONDONE THE DELAY IN THE CASE OF M/S INDIA GOSPEL FELLOWSHIP TRUST AND M/S NESAM CHA RITABLE TRUST FOR GIVING AN ADVERSE DECISION AGAINST THE ASSESSEE. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE AUDITOR OF ALL THESE TR USTS BEING THE SAME AND REASONS FOR DELAY BEING THE SAME AS PLEADED IN THE CASES OF M/S INDIA GOSPEL FELLOWSHIP TRUST AND M/S NESAM CHARITABLE TR UST HERE ALSO THE DELAY WAS TO BE CONDONED. IN THE RESULT WE ALLOW T HE APPEAL OF THE ASSESSEE AND QUASH THE ORDER OF THE CIT CANCELING REGISTRATION GRANTED TO IT UNDER SEC.12AA OF THE ACT AND ALSO DIRECT THAT S UCH REGISTRATION SHALL BE EFFECTIVE FROM THE DATE OF ITS INCEPTION. 11. APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 02-2011. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (ABRAHAM P.GEOPRGE) ACCOUNTANT MEMBER CHENNAI: 11TH FEBRUARY 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE. ITA NO. 105/MDS /10 9