Income Tax Appellate Tribunal - Chennai
Reformed Welfare Foundation, Salem vs Assessee
IN THE INCOMETAX APPELLATE TRIBUNAL: C - BENCH:CHENNAI
(Before Shri Abraham P. George. Accountant Member
and Shri George Mathan, Judicial Member)
ITA No. 105/Mds/10
M/s Reformed Welfare Vs. The ITO,
Foundation, Ward III(1), Salem
2/92, Kandasamy Nagar,
Sanniyasigundu PO.
Salem 636015
PAN AABTR1519E
(Appellant) (Respondent)
Appellant by Shri. G.Baskar
Respondent by: Shri Tapas Kumar
Dutta,CIT(DR)
ORDER
PER SHRI ABRAHAM P.GEORGE, A.M:
In this appeal filed by the assessee, it assails the 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 and 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, granted registration to the assessee. But nevertheless, did not accept assessee's petition for condonation of delay. Thus, though assessee had applied for registration from the date of its' inception viz.29-01-2003, registration 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 this 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 opportunity to present its case before the CIT in so far as condonation of delay was concerned. The matter was remitted back to the CIT accordingly.
4. In the proceedings initiated pursuant to the above order of this Tribunal, the CIT issued a notice on 17-08-2009 posting the case for hearing and also requiring assessee to explain the delay. Explanation of the assessee was that being a non-profit making charitable 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 and objectives of the trust, which rendered the trust invalid. As per the CIT, some of the object clause were vague. Though assessee gave a detailed reply on 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 powers was not a trustee and there were payments of salary to such chairman. CIT also noted that salary payment acknowledged by the chairman and accounted in the books were at variance. As per the CIT, the delay could also not be condoned since assessee had only pleaded ignorance of law. As per the CIT, the accounts of the assessee were regularly audited 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 namely, M/s Indian Gospel Fellowship Trust and M/s Nesam Charitable Trust 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 order of CIT, submitted that the matter remitted by this Tribunal to the CIT was limited to condonation of delay. According to him, instead of limiting himself to this, CIT went further ahead and cancelled the registration. Ld. counsel submitted that in the earlier order dated 22-11-2007 of the predecessor ITA NO. 105/Mds /10 4 CIT there was a clear finding that the trust was eligible for registration under Sec. 12AA of the Act and such registration was granted. According to him, assessee's appeal was only regarding non-condonation 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 delegation of powers. According to him, the variance in the salaries given to the Paster Mohanraj was negligible and in any case it was not a matter to be considered at the time of registration. Vis-à-vis the issue of non-condonation of delay, submission of the ld. AR was that two other cases where audit was conducted by same auditor Shri Nelson Jayakumar namely, M/s Indian Gospel Fellowship Trust and M/s Nesam Charitable Trust, for which also delay was not condoned by the CIT, the matter was carried in appeal by the respective assessees before this Tribunal, which allowed such appeals.
6. Per contra, ld. DR supported the order of the CiT.
7. We have perused the orders and heard both the parties. 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 granted it registration only from 01-04-2007, though assessee had sought for 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 trust the registration is hereby granted as religious trust u/s 12AA. I find that the application has not been furnished within the prescribed time. It is noticed that Authorized Representative of the appellant 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 Income-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 availing professional help. In other words, the managing trustee was fully aware of the nuances of the various provisions of law 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 granted to the applicant trust with effect from 01-04-2007 i.e. the first day of the financial year in which the application has been filed."
8. Against non-condonation of delay assessee had moved in appeal before the Tribunal and para-5 of the order dated 29-12-2008 of the Tribunal in ITA No.151/Mds/08 is reproduced hereunder:
"5. We are of the opinion, that in the interest of justice, the assessee deserves to be given one more opportunity to present its case ITA NO. 105/Mds /10 6 before the CIT relating to condonation of delay. The matter is accordingly remitted back to the file of the CIT with 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 but went further and cancelled the registration under sec.12AA of the Act. Para-1 of the order dated 30-11-2009 of the CIT is clear that he was considering the matter afresh in accordance with the directions given by the Tribunal on 29-12- 2008. That being so, in our opinion, he was circumscribed 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 cl. (c) of the objects of the assessee being ambiguous and vague, it read as under:
"(b) To conduct and promote research by theologians and students in Philosophy, Religious and cultural studies in India.
(c) To bring revival in the church and in Christian community."
10. In our opinion there is nothing ambiguous either in the spiritual advancement of Gospel nor in bringing revival to Christian community and churches. As per CIT, cl. (o) which was regarding maintenance 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 profit making. There is ITA NO. 105/Mds /10 7 nothing unambiguous in these objects also which would render the trust vague for its objects. CIT relied on the decision of Hon'ble 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 chairman to exercise and perform functions required to be exercised and performed. 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 by 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, admittedly, the chairman was not a trustee and even otherwise we cannot say that such amounts were excessive or such that would result in misappropriation of the trust fund. Variations in accounting was a matter to be considered 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 cancellation of registration under sec.12AA of the Act neither has any leg to stand on merits or in law. Regarding the issue of condonation, we find that this Tribunal in appeals filed by M/s. Indian Gospel Fellowship 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 dated 06-08-2010, had ITA NO. 105/Mds /10 8 condoned the delay and held that registration was to be given from the date of inception of the respective trusts. Here, the 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 Charitable Trust for giving an adverse decision against the assessee. We are, therefore, of the considered opinion that the auditor of all these trusts 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 Trust, here also the delay was to be condoned. In the result, we allow the 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 such 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) (ABRAHAM P.GEOPRGE)
Judicial Member Accountant Member
Chennai: 11th February, 2011.
Nbr"
Cc: Assessee/ Assessing Officer/ CIT(A)/ CIT/ D.R/ Guard File.
ITA NO. 105/Mds /10 9