Appeal Details
Counselvise Citation
[2010] 122 COUNSELVISE.COM (IT) 5259 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
22-10-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2005-2006
Appeal Filed On
28-11-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA 900/CHD/2008 ASSESSMENT YEAR : 2005-06 THE D.C.I.T., CIRCLE-VI, VS. THE LUDHIANA AG GARWAL CO-OP. LUDHIANA. HOUSE BUILDING SOCIETY LTD, LUDHIANA. PAN : AAAAT2729G & C.O. NO.60/CHD/2008 (IN ITA 900/CHD/2008) ASSESSMENT YEAR : 2005-06 THE LUDHIANA AGGARWAL CO-OP. VS. THE ACIT. HOUSE BUILDING SOCIETY LTD, CIRCLE VI, LUDHIANA. LUDHIANA PAN : AAAAT-2729G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: SHRI S.R.CHHABRA ORDER PER SUSHMA CHOWLA, JM THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-II LUDHIANA, DATED 12.08.2008 RELATING TO ASSESSMENT Y EAR 2005-06 AGAINST THE ORDER PASSED U/S 143(3) OF THE I.T.ACT. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE APPEAL FILED BY T HE REVENUE. BOTH THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE AS SESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(APPEALS)-II, LUDHIANA HAS ERRED IN DIRECTING THE A.O. TO ADJUST THE DEFICIT OF SOCIETY AGAINST THE SURPLUS OF SCHOOL AS CLAIMED BY THE ASSESSEE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED CIT(APPEALS)-II LUDHIANA HAS ERRED IN ALLOWING RELIEF OF RS.30,02,121/- HOLDING THAT 50% OF INCOME OF SCHOOL IS EXEMPT ON THE PRINCIPLE OF MUTUALITY. 3. SHRI N.K.SAINI APPEARED FOR THE REVENUE AND SHRI S.R.CHHABRA APPEARED FOR THE ASSESSEE AND PUT FORWARD THEIR CON TENTIONS. 4. THE ISSUE IN GROUND NO.1 RAISED BY THE REVENUE I S AGAINST THE DEFICIT OF SOCIETY BEING ADJUSTED AGAINST THE SURPL US OF THE SCHOOL. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSE SSEE SOCIETY IS CARRYING ON MAINTENANCE OF AGGAR NAGAR COLONY AT LUDHIANA AN D IS ALSO RUNNING A SCHOOL I.E. TAGORE PUBLIC SCHOOL. THE ASSESSEE IN THE RETURN OF INCOME HAD CLAIMED LOSS I.E. EXCESS OF EXPENDITURE OVER RECEIPTS OF THE SOCIETY FROM ITS NORMAL ACTIVITIES OF MAINTAINING A GGAR NAGAR COLONY OF RS. 6,29,272/- TO BE SET OFF AGAINST THE INCOME OF THE SCHOOL. THE ASSESSING OFFICER WAS OF THE VIEW WAS THAT THE SAID LOSS CANNOT BE SET OFF AGAINST THE INCOME FROM THE SCHOOL. AS PER THE ASSESSING OFFICER, IF THE INCOME OF THE SOCIETY FROM THE SERVICES REND ERED TO THE MEMBERS, IS CLAIMED EXEMPT ON THE PRINCIPLE OF MUTUALITY, ON THE SAME REASONING AND PRINCIPLES OF MUTUALITY, THE LOSS FROM SUCH ACT IVITY WOULD NOT BE ALLOWABLE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE LOSS CANNOT BE SET OFF AGAINST THE INCOME OF THE ASSESSEE FROM ANY COMMERCIAL ACTIVITY. THE ASSESSING OFFICER HOWEVER, COMPUTED THE INCOME OF THE 3 SOCIETY FROM ACTIVITIES OTHER THAN SCHOOL AT A POSI TIVE FIGURE OF RS. 4,02,725/- AND AS PER HIM, THE QUESTION OF SETTING OFF OF ANY LOSS WITH THE INCOME FROM SCHOOL DID NOT ARISE. THE CIT(A) A LLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT AS THE INCOME OF THE SOCI ETY OTHER THAN SCHOOL INCOME DOES NOT FALL UNDER ANY OF THE CLAUSES OF SE CTION 10, BUT IS EXEMPT ON THE PRINCIPLE OF MUTUALITY, THE LOSSES FR OM SUCH SOCIETY WERE REQUIRED TO BE CLUBBED WITH THE INCOME OF THE SCHOO L OF THE SOCIETY. THE CIT(A) ALSO NOTED THAT SUCH CLUBBING WAS ALLOW ED IN ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04 WHERE THE ASSESS MENTS WERE COMPLETED U/S 143(3) OF THE ACT. KEEPING IN VIEW T HE CONSISTENT STAND OF THE DEPARTMENT IN EARLIER YEARS AND ALSO THE CLA IM OF THE ASSESSEE IN RESPECT OF THIS GROUND, THE CIT(A) DIRECTED THE ASS ESSING OFFICER TO ADJUST THE DEFICIT, IF ANY, OF THE SOCIETY AGAINST THE INCOME OF THE SCHOOL. REVENUE IS IN APPEAL AGAINST THE SAID ORD ER OF THE CIT(A). 5. THE LD. DR POINTED OUT THAT THE LOSS FROM OTHER ACTIVITIES OF THE ASSESSEE SOCIETY, IF ARE COVERED BY THE PRINCIPLE O F MUTUALITY, THEN THE SAME CANNOT BE SET OFF AS THE PROVISIONS OF SECTION 70 OF INCOME TAX ACT DO NOT COVER SUCH SET OFF. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE SIMILAR ADJUSTMENTS WERE ACCEPTED IN THE E ARLIER YEARS AND EVEN IN THE SUCCEEDING YEAR I.E. 2006-07, THE CIT(A) AL LOWED THE CLAIM OF THE ASSESSEE AND THE REVENUE HAS ACCEPTED THE SAID ORDER OF CIT(A). OUR ATTENTION WAS DRAWN TO THE OBSERVATION OF THE C IT(A) IN THE APPELLATE ORDER PLACED AT PAGE 42 OF THE PAPER BOOK . FOLLOWING THE PRINCIPLE OF CONSISTENCY PROPOUNDED BY VARIOUS COUR TS, THE LD. AR SUBMITTED THAT THERE IS NO MERIT IN THE GROUND OF A PPEAL RAISED BY THE REVENUE. FURTHER, IT WAS POINTED OUT THAT EVEN ON THE MERITS OF THE CASE, EVEN WHERE INCOME WHICH ARE NOT TAXABLE AS PE R SECTION 10 OF THE ACT, LOSSES FROM SUCH INCOME CAN BE SET OFF. RE LIANCE WAS PLACED ON 4 VARIOUS CASE LAWS INCLUDING THE RATIO LAID DOWN BY THE HON'BLE MUMBAI BENCH OF TRIBUNAL IN SOVIKA INFOTEK LTD V ITO [23 SOT 271 (MUMBAI)]. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS SHOW N LOSSES FROM THE ACTIVITIES OF THE SOCIETY WHICH WERE SET OFF AGAIN ST THE INCOME OF THE SCHOOL RUN BY THE ASSESSEE SOCIETY. SIMILAR ADJUS TMENT OF THE INCOME / LOSS OF THE SOCIETY AGAINST THE INCOME FROM SCHOOL WAS BEING ALLOWED TO THE ASSESSEE IN THE PRECEDING YEARS VIDE ASSESSMENT S FRAMED U/S 143(3) OF THE ACT AND HAS ALSO BEEN ALLOWED IN SUCCEEDING YEAR I.E. IN ASSESSMENT YEAR 2006-07 BY CIT(A) AGAINST WHICH THE RE IS NO APPEAL BY THE REVENUE. FURTHER, THE INCOME OF THE SOCIETY DO ES NOT FALL UNDER ANY OF THE CLAUSES OF SECTION 10 BUT IS CLAIMED EXEMPT ON THE PRINCIPLE OF MUTUALITY AND THE LOSSES FROM SUCH SOCIETY ARE TO B E SET OFF AGAINST THE INCOME OF THE SCHOOL OF THE SOCIETY. WE ARE IN CO NFORMITY WITH THE ORDER OF THE CIT(A) IN THIS REGARD. WE FURTHER FIN D NO MERIT IN THE STAND OF THE REVENUE IN VIEW OF THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN SOVIKA INFOTECH LTD (SUPRA ) WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 70 OR 71 A RE APPLICABLE IN RESPECT OF LOSS AS INCURRED IN THE BUSINESS ELIGIBL E FOR EXEMPTION U/S 10B OR 10E OF THE ACT. UPHOLDING THE ORDER OF CIT (A), WE DISMISS THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE. 7. THE REVENUE BY WAY OF GROUND NO.2 HAS RAISED THE ISSUE AGAINST THE RELIEF ALLOWED BY CIT(A) IN HOLDING THAT 50% OF THE INCOME OF SCHOOL IS EXEMPT ON THE PRINCIPLE OF MUTUALITY. BOTH THE LD. AR FOR THE ASSESSEE AND LD. DR FOR THE REVENUE ADMITTED TH AT THE ISSUE IN THE PRESENT GROUND STANDS COVERED BY THE ORDER OF THE T RIBUNAL IN ASSESSEES 5 OWN CASE. WE FIND THAT THE ISSUE IN THE PRESENT GR OUND RAISED BY REVENUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ITA NOS. 171 & 285/CHANDI/2008 RELATING TO ASSESSMENT YEARS 2002- 03 AND 2001-02 WHEREIN VIDE ORDER DATED 24.9.2008 THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO DETERMINE THE INC OME ELIGIBLE FOR RELIEF AS PER THE OBSERVATIONS OF THE TRIBUNAL IN PARAS 4 TO 7, IN TURN RELYING ON THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSMEN T YEAR 2003-04(ITA NO. 717/CHANDI/2006 DATED 31.1.2008). THE ORDER OF CIT(A) IN ESTIMATING THE ELIGIBLE INCOME AT 50% WAS HELD TO B E NOT JUSTIFIED BY THE TRIBUNAL. FOLLOWING THE SAME, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME IN LINE WITH DIRECTIONS OF THE TRIBUNAL IN PARAS 4 TO 7 OF ORDER DATED 24.9.20 08. A REASONABLE OPPORTUNITY OF HEARING SHALL BE ALLOWED TO THE AS SESSEE. THE ORDER OF CIT(A) IS THUS SET ASIDE AND THE GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APPEAL FILED BY THE REVENUE AND WE PROCEED TO DEAL WITH THE SAME. THE GROUND (A) RAISED BY THE ASSESSEE READS AS UNDER:- A) THE LD. CIT(A) ERRED IN MENTIONING OF DEFICIT OF THE ASSESSEE AT RS. 6,29,272/- (PARAGRAPH 10.1) INSTEAD OF RS. 9,55,162/- WORKED OUT IN THE COMPUTATION SHEET GIVEN TO THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS . 9. THE LD. AR FOR THE ASSESSEE FAIRLY POINTED OUT T HAT THE CORRECTION OF THE FIGURES OF DEFICIT OF THE ASSESSEE SOCIETY M AY BE VERIFIED BY THE ASSESSING OFFICER AND ADJUDICATED. IN THE LIGHT O F THE ADMISSION OF THE ASSESSEE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE DEFICIT OF THE ASSESSEE FOR THE YEAR UNDER APPEAL, WHICH THE CIT(A ) IN PARA 10.1 HAS 6 MENTIONED AT RS. 6,29,272/- BUT AS PER THE CLAIM OF THE ASSESSEE, THE SAME WAS WORKED OUT AT RS. 9,55,162/- IN THE COMPUT ATION SHEET GIVEN TO THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDI NGS. A REASONABLE OPPORTUNITY OF HEARING SHALL BE ALLOWED TO THE ASSE SSEE BY THE ASSESSING OFFICER. THE GROUND NO.(A) RAISED BY THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 10. THE ISSUE IN GROUND NO.(B) RAISED BY THE ASSESS EE IS IN RESPECT OF ADDITION ON ACCOUNT OF THE ACCREDITATION TO THE DEV ELOPMENT FUND AND BUILDING FUND OF RS. 20,75,750/-. THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE SHOWN THE FOLLOWING LIABILITIES IN ITS BALANCE SHEET AS ON THE CLOSE OF THE YEAR. I) BUILDING FUND A/C RS. 14,31,750/- II) DEVELOPMENT FUND FEE A/C RS. 1,51,85,425/- III) SECURITY FEE RS. 20,6222,400/- 11. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE ABOVE SAID WERE TREATED AS LIABILITIES AND ALSO TO FURNISH COMPLETE EVIDENCE IN SUPPORT OF THIS ACCOUNTING TREATMENT. THE ASSESSEE WAS ALSO A SKED TO EXPLAIN WHY THE SAID SHOULD NOT BE TREATED AS PART OF NORMAL FE E CHARGED FROM STUDENTS AND AS SUCH TREATED AS INCOME OF THE ASSES SEE. THE ASSESSEE EXPLAINED THAT THE SECURITIES TAKEN FROM THE STUDEN TS WERE REFUNDABLE WHEN THE CHILD LEAVES THE SCHOOL. THE CHARGES ON ACCOUNT OF BUILDING FUND AND DEVELOPMENT FUND WERE RECEIVED FROM THE ST UDENTS AT THE TIME OF ADMISSION IN THE FORM OF DONATION. THE SPECIFIC PURPOSE OF SPENDING THE SAME WAS ON BUILDING AND OTHER INFRASTRUCTURE O F THE SCHOOL. THE EXPENDITURE WAS CLAIMED TO BE IN THE NATURE OF CAPI TAL RECEIPTS AS IT WAS RECEIVED FOR SPECIFIC PURPOSE. THE ASSESSING OFFI CER OBSERVED THAT THE CHARGES WERE NOT DONATIONS AS CLAIMED BY THE ASSESS EE BUT WERE PART OF FEES. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE DONATIONS ARE 7 NEVER CHARGED BY THE DONOR FROM THE DONEE AND ARE P AID AT THE WILL OF THE DONOR, BUT THE FUNDS WERE CHARGED ALONGWITH NOR MAL TUITION FEES AND FORMED PART OF THE FEE BILL. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT THE RECEIPTS WERE PART OF THE NORMAL FEES CHAR GED FROM THE STUDENTS AND ONLY BY GIVING A DIFFERENT NOMENCLATURE, THE SA ID RECEIPTS WERE CLAIMED TO BE AS CAPITAL RECEIPTS. THE ASSESSING OFFICER HELD THAT AT MAXIMUM SECURITY FEES COULD BE TREATED AS A LIABILI TY AS THE SAME IS TO BE REFUNDED TO THE STUDENTS, BUT THE RECEIPTS OF BU ILDING FUND AND DEVELOPMENT FUND WERE TO BE TREATED AS INCOME OF TH E ASSESSEE. AS DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA D COLLECTED RS. 20,55,750/-, THE SAME WERE INCLUDED AS INCOME OF TH E ASSESSEE. THE CIT(A) CONFIRMING THE OBSERVATIONS OF THE ASSESSING OFFICER FURTHER HELD THAT THE RECEIPTS BEING PART OF NORMAL FEES C HARGED FROM THE STUDENTS AND BY GIVING THEM DIFFERENT NOMENCLATURE WOULD NOT MAKE THE NATURE OF THE SAME AS CAPITAL RECEIPT. THE CIT(A) FURTHER OBSERVED THAT THE AMOUNTS WERE TO BE UTILIZED FOR CREATING ASSETS OF THE SCHOOL ONLY AND INCOME OF ANY ASSESSEE IS ALSO TO BE UTILIZED O F THE SAME. THE CIT(A) FURTHER HELD APPLICATION OF INCOME EITHER FOR CREATING OF CAPITAL ASSET OR FOR INCREASING REVENUE EXPENDITURE OR FOR OTHER PURPOSES DOES NOT CHANGE THE NATURE OF SUCH INCOME AS FAR AS ITS TAXABILITY IS CONCERNED. THE CIT(A) ALSO UPHELD THE ORDER OF ASSESSING OFFICER TO THE EXTENT THAT THE RECEIPTS C OULD NOT BE SAID TO BE IN THE NATURE OF DONATION. THE PLEA OF THE LD. AR FOR THE ASSESSEE THAT SIMILAR RECEIPTS WERE NOT CONSIDERED AS INCOME IN T HE EARLIER ASSESSMENT YEARS WAS DISMISSED HOLDING THAT THE ASSESSEE COULD NOT BE ALLOWED THE BENEFIT FROM THIS WRONG STAND OF THE DEPARTMENT. THE CIT(A) FURTHER NOTED THAT THIS ISSUE WAS NOT DISCUSSED IN DETAIL I N ANY OF THE PAST YEAR AND IT COULD NOT BE SAID THAT DEPARTMENT HAD TAKEN A DEFINITE STAND 8 WHICH NEEDED TO BE FOLLOWED. THE ASSESSEE HAS FILE D THE PRESENT CROSS OBJECTIONS AGAINST THE SAID OBSERVATIONS OF CIT(A). 12. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E OBJECTION OF THE ASSESSING OFFICER IN THIS CONNECTION WERE THAT THE SAID AMOUNTS WERE CHARGED ALONG WITH THE FEES FROM THE STUDENTS AND W ERE NOT DONATIONS AS THE PAYMENT OF THE SAME WAS COMPULSORY IN NATURE. THE LD. AR FURTHER POINTED OUT THAT THE DEVELOPMENT FUND DONATION IS C HARGED ONLY ONCE AT THE TIME OF ADMISSION FOR THE PARTICULAR PURPOSE OF DEVELOPMENT AND IS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. FU RTHER, RELIANCE WAS MADE ON VARIOUS CASE LAWS TO SUPPORT THE PROPOSITIO N. THE LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE SOCIETY IS RUNNING A SCHOOL AND IN ADD ITION TO THE FEE CHARGED FROM THE STUDENTS, HAD ALSO CHARGED AMOUNTS ON ACCOUNT OF BUILDING FUND AND DEVELOPMENT FUND. THE CLAIM OF T HE ASSESSEE IS THAT THE SAID CHARGE WAS ONE TIME RAISED AT THE TIME OF ADMISSION OF THE STUDENTS TO THE SCHOOL. THE SAID AMOUNT IS FURTH ER CLAIMED TO BE UTILIZED FOR THE CONSTRUCTION OF THE BUILDING AND O THER INFRASTRUCTURE. THE NATURE OF THE SAID RECEIPT IS CLAIMED TO A CAPI TAL RECEIPT BEING FOR A SPECIFIC PURPOSE AND NOT TAXABLE IN THE HANDS OF TH E ASSESSEE. THE CLAIM OF THE LD. AR BEFORE US WAS THAT SIMILAR RECE IPTS IN THE EARLIER YEARS HAD BEEN ACCEPTED UNDER ORDERS PASSED U/S 143 (3) OF THE ACT AND FOLLOWING THE RULE OF CONSISTENCY, THE SAID RECEIPT S SHOULD BE TREATED AS CAPITAL RECEIPTS IN THE HANDS OF THE ASSESSEE. 14. WE FIND THAT IN ASSESSEES OWN CASE IN APPEAL F ILED BY THE REVENUE BEING ITA NOS. 415 & 416 OF 2009 (O&M) (DAT E OF DECISION 9 26 TH MAY 2010), THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. LUDHIANA AGGARWAL HAD CONSIDERED THE FOLLOWING QUES TION OF LAW FOR DETERMINATION:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ITAT WAS RIGHTLY HOLDING THE DONATION OF RS. 20.50, 000/- BEING DONATION AND RS. 1,46,200/- BEING TDS DEBITED TO P&L ACCOUNT, AS CAPITAL RECEIPTS NOT LIABLE TO TAX? 15. ON THE CONSIDERATION OF THE ISSUE, IT WAS HELD AS UNDER:- HAVING HEARD THE LD. COUNSEL WE HAVE NOT BEEN ABLE TO PERSUADE OURSELVES TO CONCLUDE THAT ANY QUESTION OF LAW MUCH LESS A SUBSTANTIVE QUESTION OF LAW WOULD ARISE FOR DETERMINATION OF THIS COURT. THE QUESTION WHETHER A PARTICULAR SUM IS A CAPITAL RECEIPT OR OTHERWISE IS NECESSARILY A MIXED QUESTION OF FACT AND LAW. ONCE THE ASSESSING OFFICER HAS EXCLUDED RS. 15,00,000/- RECE IVED FROM PUNJAB GOVERNMENT ON ACCOUNT OF INFRASTRUCTURE FUND DONATION THEN IT FOLLOWS THAT DONATIONS RECEIVED BY THE ASSESSEE SOCIETY FOR DEVELOPMENT ACCOUNT FROM OTHER HAVE TO BE REGARDED AS CAPITAL RECEIPT. ACCORDINGLY, THE ORDERS PASSED BY THE CIT(A) AND THE TRIBUNAL ARE NO T OPEN TO CHALLENGE. THEREFORE, NO SUBSTANTIVE QUESTION O F LAW WITHIN THE MEANING OF SECTION 260A OF THE ACT WOULD ARISE WARRANTING ADMISSION OF THESE APPEALS. THE APPEALS ARE WHOLLY WITHOUT MERIT AND THE SAME ARE ACCORDINGLY DISMISSED. 16. THE ISSUE BEFORE US IS IN CONNECTION WITH THE R ECEIPTS ON ACCOUNT OF BUILDING FUND AND DEVELOPMENT FUND RECEIVED BY T HE ASSESSEE. HOWEVER, FROM THE PERUSAL OF RECORD, WE ARE NOT IN A POSITION TO VERIFY THE NATURE OF RECEIPTS RECEIVED IN THE YEAR UNDER CONSIDERATION AND / OR IN ASSESSMENT YEAR 2002-03 . IN THE INTEREST OF JUS TICE AND FOLLOWING THE RATIO APPLIED IN ASSESSMENT YEAR 2002-03 IN CONNECT ION WITH ONE TIME DONATION FOR DEVELOPMENT ACCOUNT, HEREIN WE REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER IN ORDER TO VERIFY TH E NATURE OF RECEIPTS OF BUILDING FUND AND DONATION FUND AND THEREAFTER ADJU DICATE THE ISSUE WHETHER THE SAID RECEIPTS RECEIVED BY THE ASSESSEE DURING THE YEAR ARE IN NATURE TO THE CAPITAL RECEIPTS OR NOT AND THEREA FTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL A LSO TAKE INTO 10 CONSIDERATION THE CASE LAWS RELIED ON BY THE LD. AR FOR THE ASSESSEE. A REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE. THE GROUND NO.(B)RAISED BY THE ASSESSEE IS THUS ALL OWED FOR STATISTICAL PURPOSES. 17. THE ISSUE IN GROUND NO. (C) IS AGAINST THE ORDE R OF CIT(A) IN NOT EXEMPTING THE ENTIRE INCOME OF THE SCHOOL U/S 10 (2 3C)(VI) OF THE INCOME TAX ACT. THE EXEMPTION U/S 10(23C) HAS NOT BEEN GRANTED TO THE ASSESSEE AND AS SUCH THE SURPLUS IN THE HANDS O F THE ASSESSEE WAS HELD TO BE TAXABLE. IN THE ABSENCE OF THE REQUISI TE APPROVAL BEING ACCORDED BY THE PRESCRIBED AUTHORITY, THE CLAIM OF EXEMPTION U/S 10(23C) OF THE ACT OF THE ASSESSEE WAS DECLINED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A). THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD WAS THAT IT HAD APPLIED FOR GRANT OF EXEMPTI ON U/S 10(23C) OF THE ACT BEFORE CHIEF COMMISSIONER VIDE APPLICATION FILE D ON 15 TH MAY 2006. A REMINDER WAS SENT TO THE CHIEF COMMISSIONE R ON 15.7.2008 AND ANOTHER REMINDER ON 5.12.2008. THE COPIES OF T HE SAID LETTERS ARE ENCLOSED AT PAGES 18 TO 21 OF THE PAPER BOOK. THE PLEA OF THE LD. AR OF THE ASSESSEE WAS THAT WHEN THE EXEMPTION HAS BE EN APPLIED AND NOT REJECTED BY THE CHIEF COMMISSIONER IT IS DEEMED TO HAVE BEEN GRANTED AFTER LAPSE OF REASONABLE TIME, THOUGH NO TIME LIMI T IS LAID DOWN TO DISPOSE OFF THE SAID APPLICATION. THE LD. AR FOR T HE ASSESSEE PLACED RELIANCE ON VARIOUS CASE LAWS FOR THE PROPOSITION O F WHAT IS REASONABLE TIME AND ALSO FOR THE DEEMING PROVISION OF THE EXEM PTION BEING GRANTED TO THE ASSESSEE, IF NOT DISPOSED OFF WITHIN REASONABLE TIME. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE CIT(A). 18. WE FIND THAT SIMILAR ISSUE OF NON GRANT OF EXEM PTION U/S 10(23C) OF THE ACT WAS RAISED BY WAY OF AN ALTERNATE PLEA B EFORE THE TRIBUNAL IN 11 ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 20 02-03 AND 2001-01. THE TRIBUNAL (SUPRA) VIDE ORDER DATED 24.9.2008 IN PARA 8 HAD NOTED THAT THOUGH THE ASSESSEE HAD MOVED THE APPLICATION SEEKING APPROVAL U/S 10(23C) OF THE ACT BEFORE THE CHIEF COMMISSIONER BU T THE EXEMPTION HAD NOT BEEN GRANTED BY THE PRESCRIBED AUTHORITIES EVEN AFTER THE REMINDER OF THE ASSESSEE. THE TRIBUNAL UPHELD THE O RDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE EXE MPTION U/S 10 (23C) IN ACCORDANCE WITH THE APPROVAL GRANTED BY THE CHIE F COMMISSIONER AND WITH REGARD TO THE PLEA OF THE ASSESSEE REGARDI NG THE DELAY IN CONSIDERING THE APPLICATION OF THE ASSESSEE IT WAS HELD THAT THE REMEDY FOR THE SAME LIES ELSEWHERE AND NOT BY WAY OF PRESE NT PROCEEDINGS. FOLLOWING THE RATIO LAID BY THE TRIBUNAL IN ASSESSE ES OWN CASE, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE APPROVAL GRANTED BY THE CHIEF C OMMISSIONER U/S 10(23C) OF THE ACT. THE ASSESSING OFFICER SHALL S EEK THE DETAILS OF APPROVAL ACCORDED BY THE CHIEF COMMISSIONER AND DEC IDE THE ISSUE IN ACCORDANCE WITH THE APPROVAL GRANTED BY THE CHIEF C OMMISSIONER, IN CONNECTION WITH THE APPLICATION MOVED BY THE ASSESS EE FOR CLAIMING EXEMPTION U/S 10(23C) OF THE INCOME TAX ACT. THE GR OUND NO.(C) RAISED IN CROSS OBJECTION WAS THUS ALLOWED FOR STATISTICAL PURPOSES. 19. THE ASSESSEE IN GROUND NO. (D) IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN NOT ADJUDICATING GROUND NO.4 BEFORE HIM T HAT RUNNING OF SCHOOL WAS NOT COMMERCIAL ACTIVITY. THE ASSESSING O FFICER HELD THAT THE INCOME OF THE SCHOOL IS NOT EXEMPT ON THE PRINCIPLE OF MUTUALITY. THE ASSESSING OFFICER FURTHER OBSERVED THAT RUNNING OF SCHOOL IS A COMMERCIAL ACTIVITY RUN BY ASSESSEE SOCIETY AND NOT AN ACTIVITY RUN FOR THE BENEFIT OF MEMBERS OF THE SOCIETY. WE FIND THA T TRIBUNAL (SUPRA) IN ASSESSMENT YEARS 2002-03 AND 2001-02 VIDE ORDER DAT ED 24.9.2008 12 WHILE CONSIDERING THE ISSUE OF APPLICATION OF PRINC IPLE OF MUTUALITY TO THE INCOME OF SCHOOL HAD RELIED UPON THE ORDER OF T HE TRIBUNAL DATED 31.3.2008, WHEREIN IT WAS HELD THAT WHETHER THE ASS ESSEE IS TO BE ASSESSED IN THE LIGHT OF EXEMPTION U/S 10(23C) OF THE ACT, DOES NOT PROHIBIT IT FROM CLAIMING THE EXEMPTION ON THE PRIN CIPLE OF MUTUALITY. THE TRIBUNAL IN PARA 7 OF ORDER DATED 24.9.2008 APP ROVED THE ORDER OF CIT(A) OF APPLICATION OF PRINCIPLE OF MUTUALITY TO THE INCOME OF SCHOOL ALBEIT LIMITED TO THE INCOME DERIVED FROM THE WARDS OF THE MEMBERS OF SOCIETY. THE ISSUE WAS SET ASIDE TO THE FILE OF TH E ASSESSING OFFICER FOR CARRYING OUT THE NECESSARY EXERCISE OF DETERMINING THE INCOME OF SCHOOL ELIGIBLE FOR RELIEF. WE ARE IN CONFORMITY WITH THE OBSERVATIONS OF TRIBUNAL IN ASSESSEES OWN CASE AND FOLLOWING THE S AME REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER, WHILE ADJUDICATING THE GROUNDS OF APPEAL NO.2 RAISED BY REVENUE. IN LINE WITH OUR OBSERVATIONS, THE GROUND NO.(D) IS ALLOWED AS INDIC ATED ABOVE. 20. THE GROUND NO(E) IS AGAINST CHARGING OF INTERES T U/S 234B AND 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE AND HENCE THIS GROUND OF ASSESSEE IS DISMISSED. 21. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF OCTOBER, 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND OCTOBER, 2010 RKK 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 14
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on Legal Requirements
₹1
1:1 Consultation on Business Valuations
₹1
1:1 Consultation on Startup Compliance
₹1
Sales Forecasting Sheet
₹100
Assignment of Registered Trademark
Mehul₹500
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026
Why Meesho got ₹1,500 Crore Tax Demand ?
Team Counselvise - March 09, 2026
Why Lacoste Won a 20-Year Trademark Battle Against Crocodile ?
Team Counselvise - March 10, 2026