TMI Blog2020 (1) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... the lands to the members of the Society to preempt the legislation, so that it can procure the funds without any difficulty. Though the Society had transferred the lands to the members of the Society, the lands were in possession of the Society and the Society did not receive any amount from the purchasers of the land which was evidenced from the order as well as the appellate order. As seen from the orders of the lower authorities, the purchasers were not in a position to make the payment even for stamp duty charges, hence the Society had to incur the stamp duty charges for registering the properties in the names of the purchasers. The assets continued to be held by the Society. It is apparent from the orders of the lower authorities and from the facts that though the lands were transferred in the name of G.Jojappa and others, they were holding the lands as custodians, but not as the owners. Subsequently, the lands were gifted back to the Society or the sale proceeds of the lands were directly deposited in the Society s account. The assets were removed from the Balance Sheet only in 2011-12 when the assets were sold. Till such time, the assets were continued to be held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Smt. U.Mini Chandran, DR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-2, Guntur in Appeal No.6/2015-16 dated 30.06.2016 for the Assessment Year (A.Y.) 2007-08 and against the order of the Ld.CIT(A)-1, Guntur in I.T.A.No.85/CIT(A-1)/GNT/2014-15 dated 30.10.2015 for the A.Y. 2011-12. Cross objections are filed by the assessee in support of the order of the Ld.CIT(A)-1 2, Guntur. For the sake of convenience, these appeals are clubbed, heard together and a common order is being passed for as under: 2. Brief facts of the case are that the assessee is a religious and charitable trust. For the A.Y.2007-08, the assessee filed the return of income declaring total income of Rs.Nil. Subsequently, the Assessing Officer(AO) found that there was an escapement of income chargeable to tax under the head Capital Gains , hence issued notice u/s 148 for reopening the assessment. During the reassessment proceedings, the AO found that the assessee had transferred the Trust properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07 without receiving any consideration as the transferees were Roman Catholic priests who had no means to pay. The intention of the Diocese in transferring the lands in the names of the society members was to bypass the impending legislation and not to benefit the members of the society. As things stood, thus, the anticipated legislation prohibiting the sale of church lands did not come through. Subsequently, as per the original plan of the Diocese, the members of the society in whose names the lands were transferred in the year 2006-07 sold these lands and deposited the sale proceeds with the diocese in the F.Ys. 2010-11 and 2011-12. The Diocese utilised the sale proceeds for the construction of Engineering College. Thus, no benefit accrued to the transferees and the Diocese also did not suffer any monetary loss. Hence, submitted that the provisions of section 13(1)(c) cannot be invoked to the facts of the case. 2.1. The AO examined the contentions of the assessee and did not find favour with the contentions due to the reasons that when a charitable entity transfers immovable property without receiving any consideration to the persons specified in Section 13(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the AO as well the CIT(A) that subsequent to the transfer of these lands, in the A.Y.2012-13 these lands were sold to third parties and the entire proceeds were credited to the bank accounts of the society itself. Some of the lands under reference were gifted / given back to the Diocese itself by way of gift deeds / cancellation of the earlier transfer deeds as per the details given under : Sl.No. Member of Society in whose name the land stands Document No. Market value when transferred in the name of member Document No. Market / SRO value when transferred from member to third partyq Notes 1. Gundiga Jojappa 19737/2006 of SRO, Guntur, dt.20.12.2006 22,00,000 3258/2011 dt.15.07.2011 40,00,000 2. Gundiga Jojappa 1960/2007 of SRO, Guntu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any substantial transfer of rights/interest/ownership of the said property to different members of the society. It goes to say that the interests of the society were in no way affected by the said transfer on paper. 3.3. The Ld.CIT(A) also considered the case of Sri V. Raghunatha Rao for the AY 2007-08 which was reopened u/s. 147 to examine the sources for the amount of ₹ 22.55 lakhs said to have been paid by Mr.Y. Raghunatha Rao to the society towards transfer of land to him. Vide order dated 25.03.2015, the AO concluded that the sale deed made in the favour of Mr.Y. Raghunatha Rao vide Doc No. 19736/06 dated 20.12.2006 was cancelled subsequently on 4-5-2010 vide Doc. No. 1717/2010 where the Diocese of Guntur Society and the assessee were the parties. In the said cancellation document, it was clearly mentioned that the consideration was written as paid in the said purchase document in 2006, but no consideration was paid to the Diocese of Guntur Society. Hence viewed that no investment need to be taxed accordingly assessed to nil income. 3.4. Based on the above findings, the Ld.CIT(A) considered that there was no diversion of income and invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Nil consideration. The society had transferred the lands to the members of the Society and they were holding the lands as a custodian but not as the owner. The Society did not receive a penny from the transferees of the land and the Society also did not give possession of the land to the vendees. They were simply holding the title of land in their name. The Society also did not remove the assets from the balance sheet of the Society. Once the lands were sold to third parties in the A.Y.2013-13, the entire sale consideration was deposited in the bank account of the Society, but not a penny was utilized by the title holders. The AO also did not assess the capital gains in the title holders. Apart from the above, some of the lands were gifted back to the Society. Therefore, the Ld.AR argued that though there was transfer of land, the intention is clear that the Society continues to hold properties in its hotchpotch and no member was benefited out of the transaction. The Ld.AR argued that substance over form prevails in this transaction. There was neither any benefit derived by the title holders nor there was loss to the Society, therefore argued that there is no violation of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd from the facts that though the lands were transferred in the name of G.Jojappa and others, they were holding the lands as custodians, but not as the owners. Subsequently, the lands were gifted back to the Society or the sale proceeds of the lands were directly deposited in the Society s account. The assets were removed from the Balance Sheet only in 2011-12 when the assets were sold. Till such time, the assets were continued to be held by the assessee society. From the above facts, we understand the contention of the Ld.AR that in the instant case, substance over form prevails is correct. Apart from the above, though the lands were sold in 2011-12, the department did not tax the capital gains in the hands of the transferors. In fact, the AO had accepted the contention of Y.Raghunadha Rao, one of the purchasers that no investment need to be taxed in his hands and the AO also had accepted the fact that the transaction was arrangement to hold the properties of the society in the hands of the purchasers as the custodian. On consideration of the entire issue, it appears that there is no diversion of income or violation of section 13(1) and no benefit was derived by the members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Syrian Bank 10,00,000 Total amount invested 3,40,01,000 8.1. The AO observed that the amounts were deposited in the bank accounts prior to its receipt, hence called for the source of the deposits made in the bank accounts. The assessee explained that the assessee had sold two properties at Takkellapadu village admeasuring 4.4 acres for a sale consideration of ₹ 70,12,000/- and deposited in the bank account against the consideration registered in the sale deed was ₹ 39,60,000/- as per the registered document. Similarly, the assessee submitted that the Society has 2.6 acres of land in D.No.386, 387, 388 389 Gorantla and D.No.56/C2/59, Gorantla. The Society intended to make lay out of 250 sq.yds plots and help 400 families of Christian population to construct houses and received ₹ 1.00 lakh each from various parishes through priests. The total amount of ₹ 1,80,00,000/- was received for various places was as under : Place Area Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urakapalem 2 02,00,000.00 Vinukonda 1 01,00,000.00 Vykuntapuram 1 01,00,000.00 Total 1,80,00,000.00 8.2. The AO conducted the enquiries and found that none of the parish priests have accepted that they have mobilized the funds. Therefore, held that the sum of ₹ 1,80,00,000/- was received by the assessee from unknown sources which were either anonymous donations or unexplained investments. 8.3. Similarly, the AO observed that the assessee has sold the land and properties situated at Takkelapadu Village for a registered consideration of ₹ 15,12,000/- and ₹ 24,48,000/- aggregating to ₹ 39,60,000/- and said to be received the sum of ₹ 15,12,000/- on 02.11.2010 and ₹ 55,00,000/- on 02.11.2010 aggregating to ₹ 70,12,000/- and deposited in Indian Overseas Bank. There was a difference in sale consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with the Anonymous donations to be taxed in certain cases- the sub-section 2 says the provisions of subsection (V shall not apply to any anonymous donation received by (a) any trust or institution created or established wholly for religious purposes; b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. For the purposes of this section, anonymous donation means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indication the name and address of the person making such contribution and such other particulars as may be prescribed. 1. Scope.- This section has been inserted by the finance Act, 2005, with effect from 1 April, 2007 Consequently, It has also emended section 13. The notes on Clauses appended to the finance Bill, 2006 elabor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name, address and such other particulars of the person as may be prescribed. This amendment will take effect from 1st April, 2007 and will accordingly apply in relation to the assessment year 2007-08 and subsequent years the Society is a religious institution from its objectives, constitution and other available evidences. The question of unanimous donations does not arise since it administering 598 Churches in the Guntur Diocese area. Also the sale consideration received in full is properly invested in fixed deposits and utilized to attain the objective of the Society and accepted the assessing officer as proper investment. Hence, there is no violation and misuse of funds. In view of the detailed description of the facts that the Diocese of Guntur Society is religious institution serving the needy since 1940, the Society has got 153 priests administering 598 Churches in the Guntur who are serving the needy as priests and Church Fathers. The beneficiaries are general public particularly for religious and other needs. The members of the society are Roman Catholic Priests who relinquish the worldly pleasures and follow celibate life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,000/- from unknown sources which was taxed by the AO u/s 69 r.w.s. 115BBC of the Act. As provided u/s 115BBC sub section 2 allows anonymous donations to be excluded from the purview of section 115BBC in the following circumstances. (i) Any anonymous donations received by any Trust or institution established only for religious purposes. (ii) In the second situation any Trust or Institution created or established only for religious and charitable purposes. (iii) Donations received other than any anonymous donations made with the specific direction or required to be excluded from the exemption. 12.1. In the instant case, the assessee had received anonymous donations without any specific purpose. There is no specific direction as far as the sum of ₹ 2,10,52,000/- is concerned. Therefore, as rightly held by the Ld.CIT(A), the donations received by the assessee society are covered by sub section 2 of section115BBC of the Act. Further, the Ld.CIT(A) has given a finding that there was no misappropriation of funds by the members of the Society. The assessee has sold the lands, received the consideration over and above the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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