ASSISTANT COMMISSIONER OF INCOME TAX(EXEMPTIONS), CIRCLE-2, CHANDIGARH, CR BUILDING, CHANDIGARH V. HIMACHAL SHIKSHA VIKAS DHARMARTH SANSTHA, VILL. KHALTU, SUBATHU, HP

ITA 625/CHANDI/2023

AI Insights

The case involves the Income Tax Department appealing against the decision of the CIT(A), which had granted exemption under sections 11 and 12 of the Income Tax Act to Himachal Shiksha Vikas Dharmarth Sanstha for the assessment year 2014-15. The Revenue challenged the CIT(A)'s decision on several grounds, including the improper allowance of exemptions and the incorrect treatment of various financial transactions as income. The Tribunal examined the submissions and evidence, including the timely filing of Form 10B and the actual use of the assets purchased by the society, and concluded that the CIT(A)'s decision was correct and justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712318 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANAV BANSAL
• Assessee Lawyers: A.K.SOOD
• Keywords: Capital expenditure; Benefit of exemption
• Section: 143(3); 11; 12A; 12; 10B

Judgement Text

" आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT & SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 625/CHD/2023 Ǔनधा[रण वष[ / Assessment Year : 2014-15 The ACIT (Exemptions), Circle -2, CR Building, Chandigarh Vs. बनाम Himachal Shiksha Vikas Dharmarth Sanstha, Vill. Khaltu, Subathu, H.P. èथायी लेखा सं./PAN No: AAATH1783K अपीलाथȸ/ APPELLANT Ĥ×यथȸ/ REPSONDENT ( PHYSICAL HEARING ) Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri A.K. Sood, CA राजèव कȧ ओर से/ Revenue by : Shri Manav Bansal, CIT DR सुनवाई कȧ तारȣख/Date of Hearing : 05.05.2025 उदघोषणा कȧ तारȣख/Date of Pronouncement : 29.07.2025 आदेश/Order Per Krinwant Sahay, A.M.: Appeal in this case has been filed by the Revenue against the order of the ld. CIT(A) NFAC, Delhi dated 19.08.2023 pertaining to assessment year 2014-15. 2. Grounds of appeal are as under: Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 2 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in allowing the exemption u/s 11/12 of the Income Tax Act, 1961 to the assessee? II. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition of Rs.1,50,00,000/- made on account of loan received back during the FY 2013-14 relevant to AY 2014-15 as the surplus funds of the trust were given on loan, interest fee and without any security deposit and in violation of section 11(5) of Income Tax Act, 1961? III. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition of Rs.1,53,44,734/- made on account of advance fee received during the FY 2013- 14 relevant to AY 2014-15 as in the case of a trust allowing exemption, all amount received during any financial year have to be taken as receipts of that particular year. IV. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition of Rs.15,00,000/- made on account of funds received in building fund during the FY 2013-14 relevant to AY 2014-15 as in the case of a trust claiming exemption, all amount received during any financial year have to be taken as receipts of that particular year. Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 3 V. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition of Rs.9,80,000/- made on account of Students fee received during the FY 2013-14 relevant to AY 2014-15 as in the case of a trust claiming exemption, all amount received during any financial year have to be taken as receipts of that particular year. 3. As per the order of the CIT(A), brief facts of the case are as under: - 2. The appellant filed its income tax return for the assessment year 2014-15 on 29.09.2014 declaring a nil income after claiming exemption u/s 11 and 12 of the Income Tax Act 1961. The case was selected for scrutiny. The assessee is a charitable society registered with the Registrar of Societies, Shimla under the Societies Registration Act. 1860. The society is an educational society and exclusively running a residential school by the name of Pinegrove School at Kuthar Road, Subathu. The society has been granted registration u/s 12A of the Income Tax Act 1961 by the Commissioner of Income Tax, Shimla vide order dated 07-9-1998 entered at Sr. No 11-12 in the register of applications u/s 12-A w.e.f. 01.07.1997. During the year under reference the society filed income tax return along with balance sheet and income and expenditure account. The assessee society uploaded Form 108 on 29. 09.2014 Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 4 which is available with the department. There is no statutory requirement of making receipt and payment account as such the society is not making any receipt and payment account and all the expenses were verified by the assessing officer with reference to the income and expenditure account and books of accounts produced before the assessing officer. The assessing officer has also pointed out that the school is being run as per the aims and objects narrated in the memorandum of association of the society. As per the main objects of the society the society has been providing financial assistance in the form of interest free loan to other societies with similar objects of imparting education. During the A/Y 2014-15 financial assistance of Rs 1.5 crores was given in the form of interest free loan in the earlier year to another society with similar objects imparting education was received back and accounted for in the books of accounts. During the start of the session, the society receives advance fee from the students pertaining to the next year. As per accounting principles advance fee collected by the school is shown as a liability and is transferred to school fee account as income in the next year and this principle is being uniformly followed from year to year. Refundable security is being collected from the students, which is accounted for as a liability in the balance sheet as the same is refundable and refunded to the students as and when they leave the school. The society has been spending amount on the purchase of fixed assets for the purposes of being used by the students and staff of the society for the Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 5 objects of the society. The fixed assets purchased during the year includes Innova car for the dignitaries visiting the school for official works, school children and staff, furniture and fixture for students and staff, music system audio video system for the school auditorium. All the assets are purchased in the name of the school and are being used by visiting dignitaries, students and staff as per the objects of the school and none of the assets are for any personal use of the society members. The society has collected Rs 15 Lacs from the students as building fund which has been duly accounted for in the books and has been spend for the construction of building as confirmed by the assessing officer. As per accounting principles the said utilization of fund is never reduced from the building fund. On the basis of above the assessing officer concluded that the assessment of the assessee society is completed without allowing exemption u/s 11/12 as the assessee is running the school on purely commercial basis is where the assets are being purchased for the personal benefits of the society members/employees and not for the public at large. There is a huge transfer of accumulated fund to sister concern/society and there is a procedural short coming in the form of not filing of the audit report. The assessing officer passed orders u/s 143(3) at an income of Rs. 4,63,09,024/- after making addition on account of difference between current year and last year figures in balance sheet. In Building Fund of Rs 15,00,000/- Loan received back of Rs 1,50,000/ and advance Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 6 fees of Rs 1,53,44,734/- and student's security of Rs. 9,80,000/- as income of the assessee without allowing capital expenditure of Rs 91,05,562/- incurred during the year on purchase of fixed assets as application of Income and not allowing the assessee the benefit of registration u/s 12A subjecting to tax the total surplus. The cases of the assessee for the last so many years are being assessed u/s 143(3) by different assessing officers without any adverse implication on the above issues and by the same assessing officer in the assessment year 2013-14. 4. Though the Assessee has taken five grounds of appeal but the main issue involved in this case is related to the rejection of exemption u/s 11/12 of the Income Tax Act, 1961 (in short 'the Act') to the Assessee. The rejection of this exemption lead to all the additions made by the Assessing Officer. The Ld. CIT(A) has given his finding in the Appeal order which is on this issue and other issues arising out of it are as under;- “6.1. I have carefully considered the order of the Ld. AO passed u/s 143(3) dated 21.12.2016 as well as grounds of appeal and written submission filed by the appellant. In essence, all the substantial grounds in grounds of appeal filed by the appellant relate to the action of Ld. AO in withdrawing the benefit of Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 7 exemptions allowed u/s 11/12 of the I.T. Act, 1961. I find that the appellant society was granted registration u/s 12A of the Income Tax Act 1961 by the Commissioner of Income Tax. Shimla vide order dated 07-09-1998. There was no dispute that the appellant society was granted exemption on same facts from the beginning of the year it filed its return of income. The Ld AO has observed the assessee has not filed audit report in Form 10B for F.Y 2013-14(A.Y 2014-15) and uploaded in the system. But the manual copy of Audit report filed during the course of scrutiny he observed that the total utilization of Rs.8,81,37,515/- was for the purpose of its objective, i.e. running of school. The Ld AO for want of uploading copy of Form 10B for F.Y 2013-14(Α.Υ 2014-15) denied the claim of exemption u/s 11/12 of the Act. His finding that the society purchased assets in the names of Head Master and other persons and reached to the conclusion that assessee is running the school on purely commercial basis where the assets are being purchased for the personnel benefit of the society members/employees and not for the public at large. There is a huge transfer of the accumulated fund to sister concerned/society and there is a procedural shortcoming in form of non-filing of the audit report. However, from the submission of the appellant it is noticed that they have filed Form 10B on 29.9.2014. On perusal of CPC 2.0 portal, I observed that the contention of the appellant is true. They indeed filed Form 10B dated 23.9.2014 for the year ending 31.03.2014 on 29.09.2014. Thus, Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 8 the observation of the Ld AO does not hold good. 6.2 Further, the finding of the Ld. AO regarding utilization of fund for personal use of the members/employees of the society/school and not for the public at large do not indicate that the funds were utilised for running the school on purely commercial basis is unfounded. The school is run for the students for their education and not for public at large. He could have disallowed the application of fund to the extent not utilised for running of the school, if the assets were not used for in course of running of the school. The Car and other assets so purchased in different names cannot be said that they are not used for the purpose of running of the school unless otherwise it is specifically established that they are located outside the school campus. Thus, I decline to hold that the assets were not used for running of the school. 6.3 Thus, it becomes evident from the discussion made above that the appellant has fulfilled its objective and obligation of filing Form 108 in time and it is eligible for deduction u/s 11/12 of the Act and I hold the same accordingly. The grounds of appeal, thus, allowed.” 5. During proceedings before us, the Ld. DR argued that the findings given by the Ld. CIT(A) was not as per the provisions of the Income Tax, and therefore, he supported Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 9 the action of the AO in withdrawing of benefit of exemption allowed u/s 11 & 12 of the Income Tax Act, 1961. 6. The ld. Counsel for the Assessee relied on the order of the Ld. CIT(A). 7. We have considered the findings given by the Assessing Officer in the assessment order and the detailed reasoning given by Ld. CIT(A) in the appellate order for rejecting the additions made by the Assessing Officer. The main contention of the Assessing Officer was that the Assessee had not filed Form No.10B, as required for claiming exemption u/s 11 & 12 of the I.T. Act but the Ld. CIT(A) has given a very categorical findings that the Assessee has filed form 10B on 29.9.2014. The Ld. CIT(A) also observed that on perusal of the CPC Portal, form No. 10B was filed on 23.9.2024 for the year ending 31.3.2014. Thus, he has given a very categorical finding that the observation of the Assessing Officer in the assessment order is not correct. We find that this clear and categorical finding given by the Ld. CIT(A) is very much balanced, logical and judicious. Therefore, in our considered view, the findings given by the Ld. CIT(A) do not require any interference. Accordingly, Printed from counselvise.com 625-Chd-2023 Himachal Shiksha Vikas Dharmarth Sanstha, Subathu, HP 10 Revenue’s appeal against the order of the Ld. CIT(A) is dismissed. 8. In the result, Revenue’s appeal is dismissed. Order pronounced on 29.07.2025. Sd/- Sd/- ( RAJPAL YADAV ) ( KRINWANT SAHAY) Vice President Accountant Member “आर.क े.” आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "