2014 (1) TMI 1685 - AT - Income Tax

Nature of donations received - whether donation received were corpus donations ? - whether the assessee had dual status, one being his Professional Status as a Religious Preacher/Katha Vachak and other as a Caretaker/Mukh Sewadar of Dera Sant Amir Singh Ji a Taksal under the aegis of Guru Gobind Singh Ji? - CIT(A) treating the Voluntary Contributions made by the general public/devotees to Dera Sant Amir Singh as Professional Income of the assessee - registration u/s 12AA not taken - Held that - There is no dispute to the fact that the assessee has not produced any Trust- Deed before any of the authorities below or even before us and the assessee has admitted before the authorities 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. 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.e. Charitable Trust is functioning for the charitable purpose and no activities as prescribed under section 2(15) of the Act are being carried on by the assessee, has been placed on record. The Dera or Trust as claimed is not affiliated to any charitable institution. It is pertinent to mention, as mentioned in the orders of the authorities below that the funds of the Dera are being diverted for meeting out the personal expenses of Mukh Sewadar as is evident from the numerous personal withdrawals. The furnishing of pedictree history of the Dera has failed to furnish any order of the Income Tax Authority whereby the Dera has ever been allowed exemption under the Income Tax Act, 1961. The purchasing of LIC, gas connection, cylinders etc. clearly indicate that the funds of the so-claimed trust are being diverted for meeting out the personal expenses of the assessee. The AO time and again has given sufficient opportunities of being heard to the assessee and therefore, there cannot be any case of the assessee for not providing any opportunity. The Ld. CIT(A) has therefore, rightly confirmed various disallowances made by the A.O. on account of capital expenditure, under section 40(a)(ia) for no deduction of TDS u/s 194C and being donations not forming part of business expenses. We also confirm the action of the AO in not allowing set off of declared loss accordingly. The Ld. CIT(A) is further justified and has passed a reasonable order due to undenying personal element, who has rightly restricted the disallowance to 1/6th as claimed by the assessee on account of telephone, vehicle and traveling expenses. The AO has rightly been directed to allow deduction under section 80C under Chapter VI of the Act. As regards the arguments made and the written submissions of the assessee keeping into consideration the arguments made by the Ld. DR and written submissions submitted 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 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

Issues Involved:
1. Dual Status of the Assessee
2. Treatment of Voluntary Contributions
3. Utilization of Contributions for Specific Projects
4. Set-off of Utilizations towards Charitable/Religious Activities
5. Allowability of Capital Expenditure for Charitable/Religious Activities
6. Disallowance of Expenses under Section 40(a)(ia)
7. Charging of Interest under Sections 234A, 234B, and 234C

Detailed Analysis:

1. Dual Status of the Assessee:
The assessee claimed dual status as a Religious Preacher/Katha Vachak and as a Caretaker/Mukh Sewadar of "Dera Sant Amir Singh Ji." The Tribunal found no evidence supporting the claim of dual status. The assessee failed to provide any trust deed or registration under Section 12AA, nor did he produce any document appointing him as Mukh Sewadar. The bank accounts were in the personal name of the assessee, with nominations in favor of his son, indicating personal control over the funds.

2. Treatment of Voluntary Contributions:
The assessee argued that the voluntary contributions received were for the Dera and should not be treated as his professional income. The Tribunal noted that the assessee did not provide any evidence of the Dera being a registered trust or society. The contributions were deposited in personal bank accounts, and there was no documentation proving that these were corpus donations for specific charitable purposes.

3. Utilization of Contributions for Specific Projects:
The assessee claimed that the contributions were for a specific project to donate a "Gold Chatter" to Gurudwara Shri Hazur Sahib and other charitable activities. The Tribunal observed that the funds were diverted for personal expenses, including purchasing life insurance policies and other personal items. The assessee failed to substantiate that the funds were used exclusively for charitable purposes.

4. Set-off of Utilizations towards Charitable/Religious Activities:
The Tribunal upheld the AO's and CIT(A)'s decision that the benefit of set-off of utilizations towards charitable/religious activities could only be given to trusts registered under Section 12AA. Since the Dera was not registered, the set-off was disallowed.

5. Allowability of Capital Expenditure for Charitable/Religious Activities:
The assessee argued that capital expenditure incurred for religious and charitable activities should be allowable. The Tribunal noted that the assessee did not provide evidence of the Dera being a registered charitable trust. Consequently, the capital expenditure was not allowable as a deduction.

6. Disallowance of Expenses under Section 40(a)(ia):
The AO disallowed expenses of Rs. 7,42,848 under Section 40(a)(ia) on the ground that no TDS had been deducted. The Tribunal confirmed this disallowance, noting that the assessee was not registered as a charitable trust and thus, the provisions of Section 28 to 43 were applicable to the assessee.

7. Charging of Interest under Sections 234A, 234B, and 234C:
The Tribunal noted that the charging of interest under Sections 234A, 234B, and 234C was consequential and did not require separate comments. The interest was upheld as per the provisions of the Income Tax Act.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the actions of the AO and CIT(A). The assessee's claims regarding dual status, voluntary contributions, and utilization of funds for charitable purposes were found to be unsubstantiated. The disallowances and additions made by the AO were upheld, and the assessee's appeal was dismissed.

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