Most Rev. Dr. Joseph Marthoma, ... vs Department Of Income Tax

1 ITA No.278 to 281/Coch/2014

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN

Before Shri N.R.S. Ganesan (JM) and Shri Chandra Poojari (AM)

I.T.A No. 278 to 281/Coch/2014 (Assessment years 2004-05 to 2007-08)

ITO, Wd.2 vs Most Rev Dr Joseph Marthoma Thiruvalla Poolatheen, Thiruvalla PAN : ALRPJ4198A (Appellant) (Respondent)

Appellant by : Shri M Anil Kumar, CIT Respondent by : Shri K.I. John

Date of hearing : 11-02-2015 Date of pronouncement : 06-03-2015

ORDER

Per N.R.S. Ganesan (JM)

All the four appeals of the assessee are directed against the

common order passed by the CIT(A)-V, Kochi for the assessment years

2004-05 to 2007-08. Since common issue arises for consideration, all the

four appeals were heard together and are disposed of by this common

order.

2

ITA No.278 to 281/Coch/2014

2. The only issue arises for consideration in all these appeals is

addition made by the assessing officer u/s 69 of the Income-tax Act and in

respect of investment / deposit found in the bank deposits.

3. Shri M Anil Kumar, the ld.DR submitted that the assessing officer

found a deposit of Rs.4,40,352 in the bank account maintained in the

name of the assessee for the assessment year 2004-05. Similarly, for the

assessment year 2005-06 the assessing officer found the deposit to the

extent of Rs.19,28,264. For the assessment year 2006-07 a deposit of

Rs.11,80,407 and for the assessment year 2007-08 deposit of

Rs.30,42,728 was found. According to the ld.DR, the bank account stands

in the individual name of the assessee. The assessee is the bishop /

metropolitan of Marthoma Syrian Church of Malabar. According to the

ld.DR, the original name of the assessee was Joseph Mar Iranius and after

he became metropolitan, the name was changed to Most. Rev.Dr.Joseph

Marthoma. The department found a bank account in Federal Bank,

Kozhencherry Branch. The account was opened in the name of the

assessee during the financial year 2003-04. According to the ld.DR, the

assessee also purchased land in his name. The assessee claimed before

the assessing officer that the bank account was opened in fiduciary

capacity as bishop of the church and all the deposits were accounted in

the books of Marthoma Syrian Church of Malabar and the church of Adoor. 3

ITA No.278 to 281/Coch/2014

However, the assessing officer found that the money said to be collected

by the assessee and deposited in the bank account was not accounted

either in the books of account of the church or the diocese. Therefore,

according to the ld.DR, since the deposits were made in the bank account

which stands in the name of the assessee was not accounted in the books

of account of the church or diocese and it was treated as his income,

therefore, the assessing officer made addition. However, the CIT(A) based

upon the constitution of the diocese found that the assessee cannot own

any property or money except patrimony and all properties / money

belongs to assessee would automatically go to the church or the diocese.

Therefore, the money deposited in the bank account of the assessee

cannot be treated as income of the assessee. According to the ld.DR,

when the bank account stands in the name of the assessee and the money

deposited in the bank account was not accounted in the books of account

of the diocese or the church it cannot be presumed that the money

deposited in the bank account was not belonging to the assessee.

According to the ld.DR, it is for the assessee to establish that the money

belongs to the church / diocese was deposited in his bank account.

Therefore, the ld.DR submitted that the matter may be remanded back to

the file of the assessing officer so that the matter can be verified whether

the money deposited in the bank account belongs to the assessee or the

church / diocese.

4

ITA No.278 to 281/Coch/2014

4. On the contrary, Shri K.I. John the ld.representative for the assessee

submitted that the addition made by the assessing officer for the

assessment year 2004-05 is only Rs.4 lakhs and the tax payable is less

than Rs.4 lakhs. Similarly for the assessment year 2006-07 the addition

was only Rs.11,84,000 and the tax effect is less than Rs.4 lakhs. Hence,

according to the CBDT circular, the department cannot file appeals for

assessment year 2004-05 and 2006-07.

5. Coming to the merit of the addition, Shri K.K. John, the ld.

representative submitted that the entire issue was because of a complaint

made by one Prof Mathew C Varghese. The ld.representative submitted

that the said Prof Mathew C Varghese made a complaint against the

Chartered Account (the present representative, who is appearing before

this Tribunal) alleging that the property in the individual name of the bishop

(asessee) was shown as asset of the church in the balance-sheet. The

ld.representative submitted that the complaint made to Institute of

Chartered Accounts was examined by the disciplinary committee

constituted u/s 21B of the Chartered Accountant's Act, 1949. The

disciplinary committee found that the land was purchased from church fund

in the name of the bishop and head of the Adoor Mavelikkara Diocese. It

was further found by the Disciplinary Committee that the land was entered

in the asset register in the books of account of the headquarters. The 5 ITA No.278 to 281/Coch/2014

addition to land and building was further approved by the Headquarters in

the year 2006-07. Therefore, the disciplinary committee found that there is

no guilt of professional conduct in showing the land as asset in the

balance-sheet of the church. According to the ld.representative, this

shows that even though the land stands in the name of the assessee being

the bishop / metropolitan of the diocese it does not belong to him. He is

holding the same in fiduciary capacity as head of the religious institution.

Referring to the Marthoma Syrian Church of Malabar Constitution, the

ld.representative clarified that a person becoming metropolitan / bishop of

the diocese has to execute an oath of fidelity, copy of which is available at

pages 15 & 16 of the Marthoma Syrian Church of Malabar Constitution.

Referring to the clauses in the oath of affirmation, the ld.representative

clarified that the metropolitan / bishop shall not sell or encumber or make

gift of any property belonging to the church or in custody of this church or

in trust, or act in any manner prejudicial to any right or privilege now

possessed by or may hereafter accrue to the Church. The further clause

in the oath of affirmation is that of movable and immovable properties,

assets, bank deposits and investments, whether presently held by the

metropolitan / bishop or coming to be held by him hereafter, other than my

patrimony and so also any part interests becoming vested in him, in any

assets or investments, other than patrimony, after induction into this

position, shall belong to Mar Thoma Syrian Church. According to the 6 ITA No.278 to 281/Coch/2014

ld.representative, unless the present assessee takes oath of affirmation in

this format he cannot become bishop / metropolitan. According to the

ld.representative, in fact, the assessee took oath of fidelity. Therefore, he

cannot possess any asset / money etc other than his patrimony.

According to the ld.representative, therefore, even though the property and

bank account stands in his name it does not belong to him. It is property of

the church or diocese. Therefore, the contention of the assessing officer

that the money belongs to the assessee does not merit consideration. The

ld.representative further submitted that the deposit made in the bank

accounts was received from the member of the church for construction of

building in the property purchased in the year 2002. The bank account

was opened in the name of the assessee. Referring to copy of the bank

statement, copy of which is filed by the assessee, the ld.representative

submitted that the account itself shows that Joseph Mar Iranium

Hermitage. Therefore, the account itself was opened for construction of

hermitage for old age people. The ld.representative further submitted that

having executed an oath of affirmation to act in fiduciary capacity on behalf

of the church, the bank account de facto belongs to the church. The

donors, who contributed for the cause have credited the money into the

hermitage account in the name of the assessee. The very credit in the

account is the credit to the church for the hermitage for old age people of

the church, who lost their spouse. The construction account was given to 7 ITA No.278 to 281/Coch/2014

the church and it was incorporated in the church account which was

approved by the supreme body of the church, viz. mandala. Therefore,

according to the ld.representative, when the money was credited in the

bank account its character is a receipt by the church. Therefore, it goes to

the church by oveririding title as found by the apex court in Radhasoami

Satsang vs CIT (1992) 193 ITR 321 (SC). The ld.representative has also

placed reliance on the judgment of the Apex Court in CIT vs Imperial

Chemical Industries (India)(P) Ltd 1969) 74 ITR 17 (SC). Referring to the

decision of this Tribunal in Loknete Balaswaheb Desai Sahakari Sakhar

Karkhana Ltd vs DCIT (2014) 148 ITD 372 (Pune-Trib), the

ld.representative submitted that when the assessee's role is only a trustee,

the amount collected in his capacity as trustee cannot be taxed as his

income. The ld.representative submitted that the Tribunal apparently

followed the judgment of the Apex Court in CIT vs Bijli Cotton Mills (P) Ltd

(1979) 116 ITR 60 (SC).

6. Referring to the bank account, the ld.representative submitted that

the credit entry on 01-10-2003 is Rs.2,93,343. It is a transfer from the

diocese of Adoor to the church. In view of the above, according to the

ld.representative, the assessing officer is not justified in reopening the

assessment u/s 147 of the Act.

8

ITA No.278 to 281/Coch/2014

7. Referring to the judgment of the Apex Court in Radhasoami Satsang

(supra), the ld.representative submitted that in such circumstances

reopening of the assessment was not justified. The ld.representative has

also referred to the administration of the church as found in the constitution

of Marthoma Syrian Church of Malabar.

8. We have considered the rival submissions on either side and also

perused the material available on record. The only issue arises for

consideration is whether deposit made in the bank account which stands in

the name of the assessee is the income of the assessee or it is an income

of the church. The assessee claims that the moment he became the

metropolitan / bishop of the diocese, he cannot own any property, money

etc. other than his patrimony.

9. We have carefully gone through the constitution of Marthoma Syrian

Church of Malabar. In the oath of affirmation said to be made by the

assessee on fidelity, the following clauses are available:

"All movable and immovable properties, assets, bank deposits and investments, whether presently held by me or coming to be held by me hereafter, other than my patrimony and so also any part-interests becoming vested in me, in any assets or 9 ITA No.278 to 281/Coch/2014

investments, other than my patrimony, after my induction into this position, shall belong to Mar Thoma Syrian Chuirch."

Therefore, the moment he executed this oath of affirmation all movable

and immovable properties, assets, bank deposits held by him on the date

of such affirmation and which may go into his possession at a later stage

would belong to Marthoma Syrian Church and not to him. We are

conscious that the constitution of Marthoma Syrian Church of Malabar is

not a statutory provision. At the very same time, when the assessee

willingly executed oath of affirmation in favour of the church / religious

institution it is binding on him as a contract under the Indian Contract Act.

The assessee cannot go beyond his oath of affirmation executed on the

date of assuming of the office of bishop or metropolitan. It is not in dispute

that during the assessment years under consideration, the assessee is the

metropolitan / bishop of the diocese. The oath of affirmation executed by

the assessee can be enforced by the church / diocese against the

assessee. Therefore, whatever movable and immovable properties,

assets, bank deposits possessed by him would automatically go to

Marthoma Syrian Church. He cannot own anything except his patrimony.

Under the Indian Contract Act, this oath of affirmation can be enforced

against the assessee by the church. Therfore, this Tribunal is of the

considered opinion that all landed properties, bank accounts, assets 10 ITA No.278 to 281/Coch/2014

possessed by the assessee in his individual capacity would be the property

of the church. As rightly submitted by the ld.representative for the

assessee, the money received by the assessee as metropolitan / bishop

would go to the church by way of overriding title. Therefore, no part of the

income would arise or accrue to the assessee.

10. We have also carefully gone through the finding recorded by the

disciplinary committee of Institute of Chartered Accountants of India under

Chartered Accountants' Act, 1949. The allegation was made by one Prof.

Mathew C Varghese against the Chartered Accountant for showing the

property in the balance-sheet of the church which stands in the name of

the present assessee. The disciplinary committee found that the land was

purchased from the funds of the church in the individual name of the

bishop. The building and land was duly approved by the headquarter in

the year 2006-07. Therefore, the committee found that there was no

professional misconduct on the part of the Chartered Accountant for

showing the property in the balance-sheet of the church. This finding of

the disciplinary committee would go to show that the church is the owner of

the property as disclosed in the balance-sheet even though the lands

stands in the name of the assessee.

11

ITA No.278 to 281/Coch/2014

11. The next contention of the ld.DR is that the money deposited in the

bank account of the assessee was not accounted in the books of account

of the diocese or the church. The ld.representative claims that all the

monies deposited and withdrawn was accounted in the diocese of Adoor

and Marthoma Syrian Church of Malabar. The ld.DR submitted that the

matter needs to be remitted back to the file of the assessing officer for

verification to find out whether the money was accounted in the books of

account of the church or diocese. This Tribunal is of the considered

opinion the bank account stands in the name of the assessee does not

belong to the assessee in his individual capacity and he was holding the

account in his fiduciary capacity as metropolitan / bishop of the church.

Therefore, all the money credited in the bank account which stands in the

name of the assessee belong to the church. If the money credited in the

bank account of the assessee is not accounted in the books of account of

the church or diocese addition could be made only in the hands of the

church or diocese and not in the hands of the individual, who is the

metropolitan / bishop of the church. By executing oath of affirmation under

the constitution of Marthoma Syrian Church of Malabar, the assessee

renounced his all movable and immovable properties, assets, bank

deposits held by him and he does not own anything except his patrimony.

Therefore, the property / money which stands in the name of the assessee

has to be considered only in the hands of the church, if at all an addition 12 ITA No.278 to 281/Coch/2014

has to be made. There cannot be any addition in the hands of the present

assessee. This Tribunal is of the considered opinion that the CIT(A) has

rightly deleted the addition. Therefore, we do not see any reason to

interfere with the order of the lower authority. Accordingly, the order of

CIT(A) is confirmed and all the appeals of the revenue stand dismissed.

Order pronounced in the open court on this 06th March, 2015.

Sd/- sd/- (Chandra Poojari) (N.R.S. Ganesan) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cochin, Dt : 06th March, 2015 pk/- copy to: 1. The ITO, Wd.2, Thiruvalla

2. Most rev. Dr. Joseph Marthoma, Poolatheen, Thiruvalla

3. The Commissioner of Income-tax

4. The Commissioner of Income-tax(A)-V, Kochi

5. The DR (True copy) By order

Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench