2015 (12) TMI 1064 - HC - Income Tax

Donation of gold chhabba - whether in light of explanation to Section 2(24) (iia) of the Act, the Dera is not a deemed trust? - Held that - There is no force in the argument of learned counsel for the appellant that entire activities done by the appellant were of charitable and religious in nature and were being done in the name of Dera. It is completely devoid of any merit, because the Dera, Sant Amir Singh Ji, of whom, the appellant-assessee is claiming himself to be a Mukh Sevadar, is admittedly, not registered under Section 12AA of the Act or under the Societies Registration Act, 1860. There is also no trust deed of it, showing its activities as charitable or religious nature. It has also not obtained any certificate under Section 10 (23C) (iv) of the Act. Its account were never audited under any law. Even no approval under Section 80G(5) of the Act was ever obtained from any prescribed authority. It was evident before the Revenue Authorities that the entire affairs of the Dera, i.e donations/collections were solely managed and controlled by the appellant-assessee, according to his own whims and fancies in his individual capacity. The Tribunal has rightly observed that the collection certificates were also stereo-typed without any PAN etc. Even no effort was made to produce any so called donation affirming the same. Bank accounts were found in the sole name of the appellant-assessee without indicating any adverse eventuality. The nomination of his son by him in the bank accounts, clearly required to draw an inference that all the bank accounts were his personal accounts and not of the Dera. The appellant has miserably failed to show before the authorities that any charitable activities was ever been carried out by him as prescribed under Section 2(15) of the Act. Its affiliation with any other charitable institution was also not proved. The Assessing Officer, the CIT(A) and the Tribunal as well have found on the basis of material before them that the appellantassessee had purchased LIC policy, gas connection, cylinder etc. from the so called funds of the Dera, which were indicative of the fact that the bank account was being operated by him for his personal use. The cumulative effect of all these factors shows that all the transactions done by the appellant-assessee, were in his individual capacity and thus, no case to differ with any of the findings of the Tribunal upholding the decision of the CIT(A) and that of the Assessing Officer has been made out. - Decided against assessee

Summary

Issues:
1. Whether donation collected for a specific project could be added to the personal income of the appellant?
2. Whether the Dera is a deemed trust under Section 2(24) (iia) of the Act?
3. Whether corpus donation received by the appellant is a legal obligation giving a dual capacity to the appellant?
4. Whether disallowance of expenses to the extent of one-sixth is sustainable in law?
5. Whether adding back of specific amounts is sustainable in law?
6. Whether disallowance of expenditure and adding back the same amount is sustainable in law?

Analysis:
1. The appellant claimed donations for a specific project should not be added to personal income. The appellant argued the donations were for the Dera managed by him, not personal income. However, authorities found the appellant operated bank accounts in his name without evidence of charitable activities by the Dera. The Tribunal upheld the decision.

2. The appellant claimed the Dera should be considered a deemed trust. However, the Dera was not registered as a charitable institution, lacked trust deeds, and had no approvals under relevant sections. The Tribunal found all transactions were done by the appellant individually, not on behalf of a trust.

3. The appellant argued corpus donations received were not a legal obligation, giving him a dual capacity. However, authorities found the appellant failed to prove charitable activities and managed all affairs individually. The Tribunal upheld the decision based on lack of evidence.

4. Disallowance of expenses and adding back specific amounts were challenged by the appellant. However, authorities found evidence of personal use of funds, such as purchasing personal items from Dera funds. The Tribunal upheld the decision based on lack of charitable activities.

5. The appellant challenged the disallowance and adding back of specific amounts. The Tribunal found no evidence of charitable or religious activities by the appellant, supporting the decision to disallow and add back the amounts.

6. The appellant's arguments based on legal precedents were considered but found inapplicable due to lack of evidence of charitable activities. The Tribunal's decision was upheld, as no substantial question of law was found. The appeal was dismissed for lack of merit.