TMI Blog2014 (1) TMI 1685X X X X Extracts X X X X X X X X Extracts X X X X ..... audited under any law. No 80G(5) approval from the prescribed authority has been taken and has not been placed on record. 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 his own will and wish and even the collection certificates are stereo-typed without bearing any authentication, complete particulars like PAN etc. No attempt has been made to produce any of the so-called donors confirming the donations. The pertinent point which is on record before both the authorities below and as pointed out by the Ld. DR that various bank accounts are in the sole name of Mukh Sewadar, Mr, Makhan Singh, without indicating any adverse eventuality and even the nominations are executed in favour of his own son by Mr. Makhan Singh leading to the clear indication and safe presumption that due to any unforeseen unpleasant mishap with the assessee, the credit balance balances will go to assessee s own son being legal successor and not to the DERA. Nothing has been brought on record and nothing has been proved before any of the authorities below or even before us that the Dera so claimed as Trust i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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 documents of Gaddi Nashin. The Bank accounts clearly show that the same have been opened in the personal name of the assessee. Moreover, the ld. counsel for the assessee throughout the arguments has not made any submission as to why the son of the assessee has been appointed as the nominee in the Bank account opened in the name of the assessee. Simply arguing that the Bank account is being operated to undertake and perform the duty of the Dera as Care-taker will not suffice and cannot prove the dual status of the assessee, as claimed. As regards the explanation to section 2(24)(iia) regarding deemed trust under a legal obligation , the assessee has not proved any of its claim. - Decided against assessee - I.T.A. No.440(Asr)/2012 - - - Dated:- 28-1-2014 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER For the Appellant : Sh.Padam Bahl, CA For the Respondent : Sh. Mahavir Singh, DR ORDER PER BENCH ; This appeal of the assessee arises from the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 28.8.10 the same was followed by notices u/s 139C(1)/139(D)(C) of the Act and in response to it, the assessee categorically filed copy of his income expenditure a/c other documents but stated that no bank account is maintained by him in his own name. In response to subsequent notices u/s 142(1)/142(2), the AO considered assessee s reply dt. 15.6.11 with declaration, by incorporating the same in his asstt. order. Assessee s representative was confronted with SB A/c with HDFC Bank, Golden Temple, Amritsar, in which huge cash was deposited and was asked to explain the source of such cash deposits and in response thereto, the assessee replied vide his letter dt. 29.7.11 stating therein that the assessee is a Sewadar of old historic dera and is engaged in charitable and religious activities which care being carried with the help of funds/donations collected from general public and are deposited in the bank account. Vide supplementary reply dated 25.6.2011 it was stated that the bank account of Sant Baba Makhan Singh as Sewadar of Dera Sant Amir Singh Ji are maintained with City Bank, HDFC Bank, P S Bank and SBI. During the year under consideration, he had undertaken a project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim benefits u/s 11. Further, as regards the so called corpus the same has not been fully substantiated. No certificate u/s 80G(5) produced so as to establish its donations eligible for deduction u/s 80G. Nor it is the appellant s case that the appellant has spent 85% of the corpus funds and as such qualify for deduction u/s 11 etc. The collection of the Dera exceeded the limit prescribed u/s 44AB but the accounts are neither got audited nor supported by any audit report. Even various confirmations furnished before the AO are stereo-type ones indicating cash donataions ranging from ₹ 100, ₹ 2000, ₹ 3100, ₹ 5000, ₹ 5100, ₹ 10,000/-, ₹ 11,000, ₹ 15,000, ₹ 21,000. Further, it is not the appellant s case that its annua The appellant s plea that he is a preacher performing katha/kirtan darbar/religious celebrations and funds were collected from time to time by pursuing the public, participants, audience to make donations/contributions did not find favour with the AO as he was of the confirmed view that it constitutes income from business profession or vocation as defined in section2 (36) of the Act by rebutting the case laws rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given to the assessee for comments. The Ld. CIT(A) after considering the remand report of the AO and the comments of the assessee confirmed the action of the AO and the relevant findings for the sake of convenience are reproduced as under: 7. I have carefully considered the appellant s written submissions, rebuttals to AO s remand report and have gone into AO s assessment order under appeal as well as comments given in the remand report of the present AO. The present appeal is hereby disposed by giving ground of appeal wise adjudication as under: 8. Grounds of appeal No. 1 to 12 except ground of appeal No.10 being inter-connected, co-related with each other are taken up together for the sake of convenience. The first and primary question to be decided as to whether the 100 year s old institution under the name style of Dera Sant Amir Singh managed by a Mukh Sewadar/Caretaker can be treated as regarded as purely charitable or religious trust. This office is only concerned with the relevant provisions of Section allowing the benefit of exemption for the purely charitable/religious trusts. It is a matter of record that neither any trust deed, specifying its constitution, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dera but in the individual hands of Mukh Sewadar s son, legal successor. 8. During the appellant proceedings, the ld. counsel failed to substantiate the claim that the Dera was virtually functioning for the betterment of poor, needy, in general and that Dera is carrying out various charitable religious activities like religious processions, karsewa etc. by utilizing the donations contributed by general public/sangat at large, which are its specified aims and objectives laid down in any articles of association etc. It is not the case that the Dera is affiliated with respectable Hon ble SGPC; Sri Harminder Sahib, Sri Takhat Hazur Sahib, Sri Hem Kund Sahib and son on. 8 Even the AO has established the fact that the funds of the Dera are man times have been diverted for meeting the personal ends of Mukh Sewadar as evident from numerous personal withdrawals. The Ld. AR except furnishing the pedictree history of the Dera has failed to furnish any order of any IT authority whereby the Dera has ever been allowed exemption under the Act. 9) Even as held by the AO, bank withdrawals also represented appellants investment in purchasing his personal life insurance policies and towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d additions amounting to ₹ 13,35,656/-, ₹ 7,42,848/-, ₹ 1,39,85,512/-, stand fully confirmed. Accordingly grounds of appeal No. 1 to 12 (except gr. of appeal No.10) are hereby rejected. 8.1.1. It would be quite pertinent to hold that while computing the appellant s taxable income, the AO s action adding back declared in the receipt payment account amounting to ₹ 37,09,090/- is also liable to be confirmed, since the appellant s entire income is taxable, therefore, the question of allowing set off of declared loss of ₹ 37,09,090/- as claimed by the appellant becomes irrelevant and question in this regard does not arise and as such the ground of appeal No.2 is hereby rejected accordingly. 8.2. However, as far as disallowance made @ 1/5th of certain heads of expenses for undenying personal element involved therein, it would be in the fitness of things, in all fairness and in order to meet the ends of justice, it would suffice by restricting the rate of disallowance from 20% to 1/6th as the deduction made by the AO @ 1/th seems to be somewhat on the higher side. In this way, the appellant would be entitled to a relief as worked out below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ksal . 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 inherits its significance from Guru Gobind Singh Ji, the tenth Guru. The history of the Dera as down loaded from the internet is enclosed for your kind perusal (pages 3 4 of PB) it originated from Sh. Mani Singh Ji Taksal. This Dera is carrying out various charitable and religious activities such as religious processions and karsewa etc. by utilizing the donations contributed by general public/sangat at large. The donations received by Sant Makhan Singh Mukh Sewadar are also deposited in Bank Accounts. Although these Bank Accounts are in the name of Sant Makhan Singh but the same are in fact bank accounts of Dera Sant Amir Singh . This fact is also mentioned in the Bank Account itself. The assessee, Sant Makhan Singh is merely operating the Bank account to undertake and perform the duties of the Dera as a Caretaker. This is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject 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 that the entire money withdrawn from the Bank Accounts under consideration was utilized for the objects enumerated above. This is evident from the Receipts and Payments A/c filed by the assessee before the A.O. A copy of the same is also attached at page 1 2 paper book. The AO had recorded the statement of M/s. Salig Ram Kishan Chand Katra Mohar Singh, Amritsar u/s 131 of the Act who had charged labour for making the gold chatter. The assessee had also filed a certificate from Takhat Sachkhand Sri Hazur Abchalangar Sahib, Nanded, Maharashtra in which it was confirmed that the assessee had donated one big Chabba of Gold approx. weight 12K 670 Gms. Vide Receipt No.7302 dated 02.11.2008 ( page 35 of the paper book). The value of this gold chatter was ₹ 1,39,85,812/-. The donee trust was registered u/s 80G of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 legal obligation . Such a legal obligation need not be in writing. It is to be inferred from the conduct of the parties. It is submitted that the conduct of the assessee clearly establishes beyond any doubt that he had been collecting Corpus Donations towards the fulfillment of the Project for Donation of Gold Chattar at Hazur Sahib which in itself was a legal obligation . It is further submitted that the donations were received by the assessee for a specific project with a specific direction to use the same for the Project for donation of gold chatter at Hazur Sahib . It is, therefore, submitted that the assessee was a Deemed trust being under a legal obligation to utilize the Corpus Donations towards the specific object . Your kind attention is also invited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is therefore, submitted that the assessee has to be treated as a trust being a legal obligation though unregistered u/s 12AA of the Act. However, even for trusts where exemption u/s 11 to 13 is not allowed, the entire application of Income has to be allowed as a deduction. The corpus donations which are in the nature of tied up funds cannot be treated as income. This principle has been accepted by the Hyderabad Bench of ITAT in the decision relied upon above. Your kind attention is also invited to the decision of Rajasthan High Court in the case of Sukhdeo Charity Estate 149 ITR 470 (Raj) where it was held that a Project grant could not be treated as Voluntary Contribution . It is therefore submitted that since the assessee was also a deemed tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions 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 ₹ 13,35,658/- is also amount applied/utilized towards the purposes of the trust/legal obligation the same is allowable as a deduction against the receipts. It is further submitted that since the assessee was a deemed trust/legal obligation the religious activities carried out by him could not be termed as a business profession . He was under no obligation to get its accounts audited u/s 44AB of the Act. Again, the provisions of sec. 40(a)(ia) were also not applicable to the assessee and the expenses incurred on Advertisement at ₹ 2,67,848/- and ₹ 2,64,000/- expenses incurred on job charges at ₹ 2,10,000/- could not be disallowed, because this is the first year in which Accounts could be said to subject of Audit. The disallowance could not made u/s 40a(ia). It is submitted that since he was carrying out religious/charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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. However, the fact remains that Dera Sant Amir Singh was always a Gurudwara because of the Prakash of Guru Granth Sahib Ji there all the time. Your honour are requested to kindly admit this certificate as additional evidence as it goes to the root of this case while adjudicating the appeal. Your kind attention is also invited to the decision of Hon ble Supreme Court in the case of Shrimoni Gurudwara Prabandhak Committee vs. Som Nath Dass Others where the Hon ble Supreme Court has held that the Shri Guru Granth Sahib is the central object of worship in all gurudwaras and have further held Sri Guru Granth Sahib to be a juristic persons . While deciding this issue the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 assessee had further informed that the bank accounts as Mukh Sewadar of Dera Sant Amir Singh Ji are maintained with City Bank, Punjab Sind Bank and State Bank of India and that during the year under consideration he had undertaken a project to donate the Gold Chhatter to Gurdwara Shri Hazur Sahib. It was thus claimed that the deposits in the said accounts were donations received by Dera Sant Amir Singh and the deposits were not his personal income. In proof of this fact, the assessee furnished a certificate from one S. Daljit Singh Randhawa who has confirmed in his certificate that the loaned amounts to Dera Sant Amrit Singh and those amount are deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 2,67,848/- was paid to PTC Channel for advertisement and ₹ 2,64,000 on other advertisement. j) Donations confirmation had been filed to the effect that the donations to the assessee were as Mukh Sewadar of the Dera for the aforesaid project. k) The donations received have not necessarily to be by a trust as definition of trust includes any other legal obligation as per section 2(24)(iia) of the Act. l) The assessee was a deemed trust/legal obligation the religious activities carried out by him could not be termed as a business profession and he was under no obligation to get its accounts audited u/s 44AB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. g), h),(i) (k) Carrying of charitable activities by any individual is application of income. So it is not relevant as to whether the assessee has engaged himself in any such activity or not. In the written submissions, it has been admitted that no trust, fund, institution as contemplated in section 2(24)(iia) is in existence but has claimed that as per the Explanation to said section trust includes any other legal obligation . The assessee s claim of their being a legal obligation is that he had been receiving corpus donations for gold chhattar to be offered at Haz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, donations were made to Nirankari Mandal and the receipts for the offerings were issued by the said Mandal but in the case of the assessee no such claim has been made much less substantiating the same. Therefore, this judgment is not relevant to the facts of the case. Sant Baba Mohan Singh 118 ITR 1015 In this case, all income had been spent for religious and charitable purposes and the income was of Gurudwara and the attached shops. But this is not so in the case of the assessee as he had made the several withdrawals for the personal purposes as estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities 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 his own will and wish and even the collection certificates are stereo-typed without bearing any authentication, complete particulars like PAN etc. No attempt has been made to produce any of the so-called donors confirming the donations. The pertinent point which is on record before both the authorities below and as pointed out by the Ld. DR that various bank accounts are in the sole name of Mukh Sewadar, Mr, Makhan Singh, without indicating any adverse eventuality and even the nominations are executed in favour of his own son by Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 documents of Gaddi Nashin. The Bank accounts clearly show that the same have been opened in the personal name of the assessee. Moreover, the ld. counsel for the assessee throughout the arguments has not made any submission as to why the son of the assessee has been appointed as the nominee in the Bank account opened in the name of the assessee. Simply arguing that the Bank account is being operated to undertake and perform the duty of the Dera as Care-taker will not suffice and cannot prove the dual status of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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