Income Tax Appellate Tribunal - Hyderabad
Society For Integrated Development, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD " B " BENCH, HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI
SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.674/Hyd/2011
Assessment Year 2007-08.
DDIT(Exemp.)-II, -v- Society for Integrated Development
Hyderabad. In urban & Rural Areas (SIDDUR)
Hyderabad.
PAN:AAATS7428Q
(Appellant) (Respondent)
Appellant by Shri S.J.T.Kottaram
Respondent by Shri Ch.G.Krishnamurthy
Date of Hearing 25-11-2013
Date of pronouncement 03 -o1-2014
ORDER
PER SAKTIJIT DEY, J.M:
This appeal by the department is directed against the order dated 31-1-2011 passed in appeal No.569/DDIT(E)-II/CIT(A)- IV/2009-10 pertaining to the assessment year 2007-08.
2. The department has raised following grounds before us:-
1. The CIT (A) ought to have sustained the disallowance of Rs.2,90,154/- towards international conference and training.
2. The CIT (A) ought to have sustained the disallowance of Rs.10,33,000/-towards grants from HLF PPT.2
ITA no.674 of 2011 Society for Integrated Development, Hyd.
3. The CIT (A) ought to have considered that the Society is not registered u/s 43(1) of the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987.
4. The CIT (A) ought to have sustained amount spent for repairs to the houses (Tsunami ) Rs.50,65,125.
5. The CIT (A) ought to have sustained amount spent for support to women of Rs.12,69,629/-."
3. Briefly the facts are, the assessee is a charitable trust registered u/s 12A of the Act. It is engaged in activities of helping the dalits, women empowerment, uplifting the street children etc. In the impugned assessment year, the assessee filed its return of income declaring 'nil' income after claiming exemption u/s 11 of the Act. In course of scrutiny assessment proceedings, the Assessing Officer after examining the information submitted by the assessee found that the assessee has incurred expenditure of an amount of Rs.2,90,154/- for international conference or training. He considered this amount spent was not for the purpose of charitable activities u/s 11(1)(a) of the Act as it is not supported by special or general order of CBDT. He therefore held that the said amount cannot be treated as exempt u/s 11 of the Act.
4. The Assessing Officer noticed that there is refund of loan to the assessee namely SIDDUR of Rs.10,49,458/-. When asked to explain by the Assessing Officer, the assessee submitted that the assessee is engaged in implementing project relating to prevention and control of HIV/Aids amongst truckers through the Govt. of Andhra Pradesh. It was submitted that sometimes owing to delay in receipt of amount from the government the assessee society 3 ITA no.674 of 2011 Society for Integrated Development, Hyd.
incurred expenditure out of the amounts received from other agencies and the same was refunded to SIDDUR, the moment monies were received from the government. In support of such contention, the assessee also submitted two letters and copies of DD and cheques between SIDDUR and PSU (Project Support Unit) whose head office is Hindustan Latex Family Planning Promotion Trust (HLFPPT), 301-302, Hemkunt Chamber, 89, Nehru Place, New Delhi. The Assessing Officer however did not accept the contention of the assessee and treated it as income of the assessee. Further, on going through the MOU with MISEREOR (Tsunami Projects) felt that the main aim of the project was reconstruction and rehabilitation in three districts of Andhra Pradesh i.e., Nellore, Krishna and East Godavari towards Tsunami affected people. He further noted that under the MOU, the measures to be supported are mentioned as under:-
i) Repairing of 800 houses of dalit and fisher families by active involvement of the target group.
ii) Support of livelihood (accommodation, food and medical care) and of school attendance (materials, school uniforms, transport to school etc.,) for 200 children under the age of 14, who became half orphan and for their families lost by their livelihood caused by the Tasunami.
iii) Financial support for livelihood, basic training n income generating measures and psychosocial guidance of 300 women (80% are dalits) who mostly are single and/or older persons.
iv) Purchase of an ambulance (for East-Godavari District) and of motorboat (for the insular region of Krishna 4 ITA no.674 of 2011 Society for Integrated Development, Hyd.
District) for health care which was very insufficient in the isolated Tsunami affected regions even before the catastrophe.
5. The Assessing Officer further noted that another important condition laid down in the MOU is as under:-
" For the non-recurrent expenditures and the materials for the house repairs we would like to ask you for a solicitation of at least 3 quotations and to inform as about it before concluding a purchase contract with a supplier"
The Assessing Officer on further verification of facts and details submitted by the assessee noticed that as per the information submitted by the assessee contained in the project report dated 31-12-2006, the assessee had mentioned that repair of 109 houses was completed and 352 women were given livelihood support in Nellore District, 113 women were given livelihood support in Krishna District, repair of 102 houses was completed and 50 women were given livelihood support in East Godavari District. The Assessing Officer further noted that the expenditure incurred by the assessee could be broadly categorised in the following three types:-
i) Uniform distribution of cash
ii) Cost of materials
iii) Individual housing beneficiaries for carrying amounts.
6. The Assessing Officer on going through the facts available before him opined that the assessee instead of implementing the scheme of housing for victims of Tsunami 2004 had implemented the scheme of Indiramma. He therefore was of the view the expenditure incurred by the assessee cannot come under the terms 5 ITA no.674 of 2011 Society for Integrated Development, Hyd.
and conditions laid down in MOU between the assessee and MISEREOR. The Assessing Officer further observed that though the assessee furnished E-mail/correspondence in support of its claim that the deviations if any, for carrying out the programme was approved by the donor but the perusal of the correspondence indicates that the assessee failed to follow two important guidelines laid down by itself which the wealth ranking would be the indicator in selecting the poorest of the poor and the distribution of materials to the beneficiaries is the commitment of the assessee and not mere distribution of cash. The Assessing Officer therefore felt that the assessee having not utilised the tied up of grant for the purpose for which it was given, is not entitled for exemption. The Assessing Officer referred to an order passed by the ITAT dated 27-12-2008 for assessment year 1997-98 wherein the Tribunal held that the contributions received for specific purposes do not form corpus of the assessee and its income and the same is in the nature of tied up grants. Since according to the Assessing Officer the assessee has utilised the tied up grant according to its own discretion, the assessee is not entitled for exemption on the amount of Rs.50,65,125/- towards repairs to houses destroyed by Tsunami and Rs.12,69,821 towards support to women. The Assessing Officer further opined that the assessee having not been registered u/s 43(1) of AP Charitable and Hindu Endowment Act, 1987 it is not entitled for exemption u/s 11(1) of the Act. Accordingly the Assessing Officer completed the assessment by determining the total income at Rs.76,58,100/-Being aggrieved of such addition made, the assessee preferred an appeal before the CIT (A).
6ITA no.674 of 2011 Society for Integrated Development, Hyd.
7. The CIT (A) after considering the submissions of the assessee in the context of the materials placed before him was of the view that none of the grounds on which the Assessing Officer denied exemption u/s 11 of the Act are good grounds. So far as the addition of Rs.50,65,125/- on account of amounts spent for repairs to Tsunami affected house and support to women at Rs.12,69,820/- are concerned, the CIT (A) after going through the terms of the MOU between the assessee and Misereor (Tsunami Projects), held that as per the terms of the said MOU, the funds are to be utilised for specific purposes and a control mechanism for actual utilisation of fund was also provide under MOU. The CIT (A) noted that the Assessing Officer is not disputing the fact that the said funds are received in terms of specific MOU of the appellant with donor agencies. The CIT (A) therefore relied upon a decision of Income- tax Appellate Tribunal in the case of Nirmal Agricultural Society (71 ITD 152) wherein it was held that the grants which are for specific purpose do not belong to the society and hence do not form corpus of the assessee or its income and that those are not even donations to the assessee, so as to bring them under the purview of sec. 12 of the Act. The Tribunal making a distinction between the voluntary contributions covered u/s 12 of the Act held that voluntary contributions are those which are freely available to the assessee, without any stipulation, and which the assessee can utilise towards u its objectives according to its discretion and judgment.
8. The CIT (A) therefore taking a note of the aforesaid finding of the Income-tax Appellate Tribunal held that since the donors had provide the funds to the assessee with specific purposes only and the assessee was not supposed to utilise those at its own discretion 7 ITA no.674 of 2011 Society for Integrated Development, Hyd.
and judgment, it cannot be disputed that the funds received by the assessee during the year were indeed in the nature of tied up grants. The CIT (A) after considering the details of supply of materials and cash distribution for houses and providing livelihood support in four districts of Andhra Pradesh, was of the view that all the deviations and digressions in the programme had been duly approved by the donors. The CIT (A) further negated the finding of the Assessing Officer to the effect that the assessee has not utilised the fund for the public i.e., housing for victims of Tsunami 2004 and hence cannot be held to have done charitable activity, by observing that the Indiramma Housing Programme has indeed been introduced by the Government to assist the poorest of the poor and can even encompass the victims of the Tsunami. That besides such collaborative efforts had indeed been approved by the donor agencies. The CIT (A) further observed that the Assessing Officer's objection with regard to the fact that the assessee did not solicit the requisite three quotations for purchases, is also not a very vital point to deny exemption to the assessee since all the purchases were made with due approval of donors. The CIT (A) finally held that the Assessing Officer was not correct in making addition of the amounts spent by the assessee towards repair of house and support to women. So far as the expenditure incurred towards international seminars/conferences amounting to Rs.2,90,154/- is concerned, the CIT (A) also did not agree with the Assessing Officer by observing that the assessee receives grants from various donors for various charitable purposes and it is only logical that it has to stay abreast with the developments in the field globally. He further observed that in every project certain amount is provided towards attending conferences. The CIT (A) felt that the 8 ITA no.674 of 2011 Society for Integrated Development, Hyd.
Assessing Officer has not been able to prove that any personal benefit accrued to the Secretary by attending such seminar or that the expenditure incurred for this purpose was not for achievement of the objectives of the assessee society.
9. The CIT (A) therefore held that there is no justification to disallow the expenditure incurred towards international seminars and conferences and treated it as income of the assessee. As regards the refund of loan of Rs.10.33.000/- is concerned, the CIT (A) also accepted the assessee's contention by holding that the amount received subsequent to the incurring of expenditure for the project relating to Prevention and Control of HIV/Aids undertaken by the assessee in collaboration with the APSACS is in the nature of refund of the funds temporarily provided by the assessee on behalf of APSACS for the said activities. Hence, the amount of Rs.10,33,000/- received from HLFPPT could not have been considered as additional grants received by the assessee.
10. So far as the observation made by the Assessing Officer to the effect that since the assessee is not registered under AP Charitable and Hindu Religious Institutions and Endowments Act, 1987 and therefore is not eligible for exemption u/s 11 of the Act is concerned, the CIT (A) relying upon the decision of Income-tax Appellate Tribunal, Hyderabad Bench in case of M/s Kamalakar Memorial Charitable Trust vs. DIT (Exemptions) Hyderabad in ITA No.1145/Hyd/09 held that merely because the assessee-trust is not registered under the provisions of the said Act, would not render the assessee a non charitable one. On the aforesaid basis, the CIT (A) allowed the appeal of the assessee.
9ITA no.674 of 2011 Society for Integrated Development, Hyd.
11. We have considered the submissions of the parties and perused the material on record as well as the order of the authorities below. In ground No.1, the department has challenged the deletion of Rs.2,90,154/- by the CIT (A). As already stated, the aforesaid amount is expenditure incurred towards attendance of international conferences and training. As can be seen from para- 17 of the assessment order, the Assessing Officer has disallowed it simply observing that it is not a charitable activity u/s 11(1)(c) of the Act as it is not supported by special or general order of CBDT. In our view, the disallowance of expenditure on such plea is totally contrary to the statutory provisions. It is neither necessary nor required as per the statute that for availing exemption u/s 11 of the Act a particular charitable activity has to be notified in a circular issued by the CBDT. As has been rightly held by the CIT (A), the expenditure was incurred on behalf of the Society for attending international conferences and seminars and for the purpose of advancing the objects of the Society. It is not for the personal benefit of the Secretary, therefore it cannot be said that the expenditure incurred in that behalf is not for charitable purpose. On the aforesaid view of the matter, we do not find any infirmity in the order of the CIT (A) on this issue. Accordingly, the ground raised by the department is dismissed.
12. The next issue as raised in ground No.2 is with regard to the CIT (A) deleting the addition of Rs.10,33,000/- being refund of loan. It is the contention of the learned Departmental Representative before us that in the certificate issued by Hindustan Latex Family Planning Promotion Trust (HLFPPT) the amount has been clearly 10 ITA no.674 of 2011 Society for Integrated Development, Hyd.
mentioned to be a grant and hence the Assessing Officer has correctly treated it as donation received and not a refund of loan.
13. The learned AR, on the other hand, contended before us that one of the objects of the assessee trust is to educate the ill effect of having relationships with sex workers by the rivers and cleaners of the trucks travelling through the State. It is further contended that in the city of Hyderabad, there is heavy concentration of such groups in Autonagar and near Sanatnagar Railways Goods Shed area and these are technically called ' intervention areas' In this context also, assistance is taken from the local tradesmen, transport officials, police and peers and peer educators to identify the potential abuse of the facility. The ordinary role of the peers and peer educators is to highlight and enlighten the gullible truckers about the ill effects and also to provide education for prevention of AIDS/HIV. It was submitted that the normal expenditure incurred involves printing of pamphlets, brouchers, supply of good quality condoms, etc and it also includes the payment of remuneration to the peers and the peer educators. It was submitted that in the ordinary course generally sums are expended out of the monies received from APSACS. However, when there is delay in receipt of monies, then the funds from other agencies are utilised for the said purpose and on receipt of the same from the government, the amount is refunded to the agency from which the money has been borrowed. It was submitted that it is purely an internal matter of the assessee and at the end of the year, the account is squared up and no amount is carried forward to the subsequent financial year. It was submitted that National Aids Control Society (NACO) is a national funder for HIV/Aids programme and it was submitted that 11 ITA no.674 of 2011 Society for Integrated Development, Hyd.
for a better and effective implementation of the project, NACO utilises the services of all state units (APSACS) for the required activities. It was submitted that the assessee during the year had incurred certain expenditure on peer educators by borrowing some amounts from outside agencies. On receipt of amount from HLFPPT, it was adjusted by refunding the said amounts borrowed to the agencies. The learned AR submitted that the CIT (A) after considering all aspects of the matter thoroughly, deleted the said addition and there is no cause to interfere with the findings of the CIT (A) on this issue.
14. The learned DR, on the other hand, strongly supporting the view of the Assessing Officer submitted that since in the certificates of HLFPPT, the amount has been mentioned as grant and the Assessing Officer was justified in making the said addition.
15. Having heard the submissions of the parties and perused the materials on record, we do not find any infirmity in the order of the CIT (A). As can be seen from the observations made by the Assessing Officer, he has not disputed the fact that the assessee has incurred the expenditure towards implementation of the project relating to Prevention and Control of HIV/AIDS. It is also not disputed that the project is a Government promoted project and the grant has been specifically for implementing the said project. In the aforesaid circumstances, the conclusion arrived at by the Assessing Officer cannot be accepted, even otherwise also if at all the amount received is to be considered as a grant, then corresponding expenditure incurred by the assessee is also to be allowed. In aforesaid view of the matter, we do not find any reason to interfere 12 ITA no.674 of 2011 Society for Integrated Development, Hyd.
with the order passed by the CIT (A) which is accordingly confirmed. The ground raised by the department is dismissed.
16. In ground No.3, the department has raised the issue of non registration of the assessee society under A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987. Having considered the submissions of the parties and after perusing the materials on record as well as the decisions relied upon by the CIT (A), we are of the view that the exemption u/s 11 of the Act cannot be denied to the assessee merely because the assessee is not registered under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987. When there is no such restriction put u/s 11,12, and 13 of the Act or any other provision under the Act the Assessing Officer cannot deny exemption to the assessee on the ground that the assessee is not registered under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987.We therefore uphold the order of the CIT (A) on this issue by dismissing the ground raised by the revenue.
17. The last issue raised in ground Nos. 4 and 5 is with regard to grants received from donor agencies spent for repairs to the houses (Tsunami affected) and support to women at Rs.50,65,125/- and Rs.12,69,629/- respectively.
18. The learned DR submitted before us that as per the terms of the memorandum of understanding (MOU), the assessee was required to supply relief materials to the affected persons i.e., poorest of poor, selected on the basis of wealth ranking. However, the assessee has made cash distribution which is not at all transparent as the selection of beneficiaries have not been made by 13 ITA no.674 of 2011 Society for Integrated Development, Hyd.
considering the wealth ranking indicator. It was submitted by the learned Departmental Representative that as per the scheme the assessee was required to repair damaged houses and supply of material to the beneficiaries and not to distribute cash. The learned Departmental Representative further submitted that the assessee having not acted as per the terms of MOU in the approved project but having participated in another project i.e., Indiramma Housing Project, it has violated the terms of the MOU and therefore has not utilised the tied-up grants for the specified purposes. In the circumstances, the Assessing Officer was justified in making the addition.
19. The learned AR, on the other hand, submitted that during the year under dispute, the assessee received the amounts from the donor agency for disbursement to the flood victims in Nellore, Guntur and twin districts of Godavari on account of Tsunami for the purposes of construction/re-construction/repairs of the houses affected by the floods. The assessee has taken all necessary steps to identify the victims by seeking assistance of village elders, village officers, district officials and only then disbursed these amounts to the affected victims. It was submitted by the learned AR that the amounts disbursed were uniform amount which was the maximum amount allowed by the donor agency and this was also based on the requirement of the affected persons which also included the amounts given for support to women. The learned AR referring to auditor's report appearing at pages 15 and 16 of the paper book submitted that all the accounts of the assessee are audited and each and every expenditure is accounted for. The learned AR referring to the reply submitted before the Assessing 14 ITA no.674 of 2011 Society for Integrated Development, Hyd.
Officer during the assessment proceedings submitted that all the details with regard to quotations obtained from different suppliers were submitted during assessment proceeding. However, the Assessing Officer ignoring all the information submitted before him erroneously concluded that as the assessee had not identified the victims suo moto and relied upon others and their reports, the amounts did not reach the targeted victims and brought to tax the same. The learned AR submitted that when it is not disputed that the amount received by the assessee from the donor agency under MOU is a tied-up grant and the donor agencies have also approved the deviations made by the assessee. There is no justification on the part of the Assessing Officer to consider it as income of the assessee.
20. We have heard the submissions of the parties and perused the material on record. On going through the discussions made by the Assessing Officer, we are of the view that the Assessing Officer has made the addition purely on presumptions and surmises and irrelevant consideration. It is a fact on record that the grant received from the donor agency is to be utilised for a specific purpose i.e., repair of houses of Tsunami victims in three districts of Andhra Pradesh i.e., Nellore, Guntur and Godavari. The fact that the assessee has supplied relief materials for construction of houses as well as cash distribution under certain mechanism adopted by the assessee is not disputed by the Assessing Officer. The Assessing Officer has only entertained a doubt by observing that the cash distribution is not transparent and the method adopted by the assessee for identifying the poorest of poor beneficiaries is not correct. However, it cannot be denied that the assessee had 15 ITA no.674 of 2011 Society for Integrated Development, Hyd.
participated in a programme of government for the benefit of Tsunami victims by providing help for construction of their houses. Whether it is under Tsunami Project or Indiramma Project does not make any difference when ultimately the relief reaches the real beneficiaries. The Assessing Officer has not brought any material on record to show that the amount has not been actually distributed by the assessee to Tsunami victims. So far as the allegation of the Assessing Officer that the assessee has deviated from MOU, the materials on record clearly establish that such deviation has been made on the approval of the donor agency. In the aforesaid circumstances, the conclusion arrived at by the Assessing Officer cannot be supported. In view of the above, we uphold the order of the CIT (A) in this regard by dismissing the ground raised by the Revenue.
21. In the result, the appeal filed by the revenue stands dismissed.
Order pronounced in the court on 03 -01-2014.
Sd/- Sd/-
( B. RAMAKOTAIAH) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad,
Dated the 3 rd January, 2014.
Jmr*
Copy to:-
1) DDIT(E)-II,3 rd Floor, Aayakar Bhavan, Hyderabad.
2) Society for Integrated Development in Urban & Rural Areas (SIDUR), Vijayanagar Colony, Hyderabad.
3) CIT (A)-IV, Hyderabad.
4) DIT (E), Hyderabad.
5) The Departmental Representative, I.T.A.T., Hyderabad.
16ITA no.674 of 2011 Society for Integrated Development, Hyd.
17ITA no.674 of 2011 Society for Integrated Development, Hyd.