K.J. KHILANANI EDUCATION TRUST, MUMBAI V. ITO (E) II(1), MUMBAI

ITA 1019/MUM/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8215 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Assessee Lawyers: N M PORWAL
• Keywords: Benefit of exemption
• Section: 22; 10(23C); 10

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, AM & SHRI RAVISH SOOD, JM ./ I.T.A. NO . 1019/MUM/2016 ( / ASSESSMENT YEAR: 2011 - 12 ) K. J. KHILNANI EDUCATION TRUST, MORI ROAD, MAHIM MUMBAI - 400 016 / VS. ITO (E) - II(1 ), MUMBAI PIN - ./ ./ PAN NO. A A A TK3073F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI N. M. PORWAL , AR / RESPONDENTBY : SHRI BRAJENDRA KUMAR , DR / DATE OF HEARING : 21.01 .202 1 / DATE OF PRONOUNCEMENT : 11.02.2021 / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 IN SHORT REFERRED A S 'LD. CIT(A)', MUMBAI, DATED 18.12.2015 FOR AS SESSMENT YEAR (IN SHORT AY) 2011 - 12. ASSESSEE FILED THE 2 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, ORIGINAL GROUNDS OF APPEAL WHICH CONSISTS O F 8 GROUNDS AND SUBSEQUENTLY, IT FILED ADDITIONAL GROUNDS OF APPEAL. 2. AT THE TIME OF HEARING, LD. AR SUBMITTED THAT ASSESSEE DOES NOT WANT TO PRESS THE ORIGINAL GROUNDS AND ADDITIONAL GROUNDS RAISED IN THIS APPEAL EXCEPT ADDITIONAL GROUND NO. 3. ACCOR DINGLY, THE ADDITIONAL GROUND NO. 3 RAISED BY THE ASSESSEE IS BORNE OUT OF THE FACTS AVAI LABLE ON RECORD, THEREFORE THIS GROUND ALONE IS CONSIDERED FOR ADJUDICATION. THE OTHER GROUNDS AND ADDITIONAL GROUNDS EXCEPT ADDL. GROUND NO. 1 & 2 RAISED BY THE ASSES SEE ARE DISMISSED AS NOT PRESSED. 3. FURTHER, LD. AR SUBMITTED A WRITTEN SUBMISSION RELEVANT TO THE ADDITIONAL GROUND NO. 3, WHICH IS REPRODUCED BELOW: - THE A.O. HAS OBSERVED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007 - 08 ON PAGE NO.7 PARA - 8 RE ADING AS UNDER: 'IT IS ALSO TO BE NOTED THAT IN THE RETURN OF INCOME THE ASSE SSEE HAS CLAIMED EXEMPTION U/S. 10 (23C) (IIIAB). HOWEVER, ON GOING THROUGH THE DETAILS IT IS NOTICED THAT THE ASSESSEE IS IN RECEIPT OF GRANT TO THE TUNE OF RS. 1,63,94,115/ - WHICH IS ONLY @ 40.65% OF THE TOTAL RECEIPT OF RS.4,03,28,796/ - . SINCE THE CASE OF THE 3 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, ASSESSEE DOES COMES UNDER THE LIMBS OF SECTION 10(23C) (IIIAB) I.E SUBSTANTIALLY FINANCED BY THE GOVERNMENT THE BENEFIT OF EXEMPTION U/S.10 (23C) (IIIAB) IS HEREBY REJE CTED TO THE ASSESSEE'. SIMILARLY THE A.O. HAS OBSERVED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008 - 09 ON PAGE NO.6 PARA - 8 READING AS UNDER: 'IT IS ALSO TO BE NOTED THAT IN THE RETURN OF INCOME THE ASSES SEE HAS CLAIMED EXEMPTION U/S.10 (23C) (IIIAB) . HOWEVER, ON GOING THROUGH THE DETAILS IT IS NOTICED THAT THE ASSESSEE IS IN RECEIPT OF GRANT TO THE TUNE OF RS. 1,82,75,603/ - WHICH IS ONLY @ 42.04% OF THE TOTAL RECEIPT OF RS.4,34,63,635/ - . SINCE THE CASE OF THE ASSESSEE DOES COMES UNDER THE LIMBS OF SE CTION 10(23C) (IIIAB) I.E SUBSTANTIALLY FINANCED BY THE GOVERNMENT THE BENEFIT OF EXEMPTION U/S.10 (23C) (IIIAB) IS HEREBY REJECTED TO THE ASSESSEE'. THUS THE FACTS AND FIGURES FOR EXEMPTION U/S.LO(23C)(IIIAB) WITH RESPECT TO FOLLOWING ASSESSMENT YEARS ARE AS UNDER: S.NO. ASSESSMENT AMOUNT OF TOTAL %OF YEAR GO VT. GRANT RECEIPT GOVT. GRANT 1. 2007 - 08 1,63,94,115/ - 4,03,28,635/ - 40.65 4 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, 2. 2008 - 09 1,82,75,603/ - 4,34,63,635/ - 42.04 3. 2011 - 12 3,06,62,561/ - 6,10,02,191/ - 50.26 NOTE: COPY OF PROFIT AND LOSS A/C AND BALANCE SHEET AS ON 31 ST MARCH 2011 IN ENCLOSED WITH MY LETTER DATED 16/01/2021 DULY ACKNOWLEDGED ON 18/1/2021 ALONG WITH ADDL.GROUNDS OF APPEAL UNDER RULE - 11 OF THE APPELLATE TRIBUNAL RULES, 1963. IN THIS CONNECTION I RELY ON FOLLOWING JUDGEMENTS: S. NO. PARTICULARS PAGE NO. 1 COPY OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. TATA INSTITUTE OF SOCIAL SCIENCE. 308 CTR 0759 (BOM) 1 TO 10 2 COPY OF HIGH COURT OF BOMBAY JUDGEMENT IN THE CASE OF COMMISSIONER OF INCOME TAX (EXEMPTIONS) VS. DECCAN EDUCATION SOCIETY. 306 CTR 0525 (BOM) 11 TO 14 3 COPY OF HIGH COURT OF KARNATAKA JUDGEMENT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. DHAMAPAKASHA RAJAKARYA PRASAKTA. 372 ITR 0307 (KARN) 15 TO 17 4 COPY OF HIGH COURT OF KARNATAKA JUDGEMENT COMMISSIONER OF INCOME TAX (EXEMPTIONS) VS. INDIAN INSTITUTE OF MANAGEMENT. 275 CTR 0424 (KAR) 18 TO 22 5 COPY OF BIHAR STATE TEXT BOOK PUBLISHING CORPORATION VS. COMMISSIONER OF INCOME TAX &ANR. 241 CTR 0403 (PATNA) 23 TO 30 COPY OF COMMISSIONER OF INCOME TAX VS. INDIAN INSTITUTE OF MANAGEMENT. 196 TAXMAN 0276 ((KRAN) 31 TO 33 5 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, 7 COPY OF YADHAVA KALVI NITHI VS.INCOME TAX OFFICER (EXEMPTIONS). 1 67 DTR 0422 (MAD) 34 TO 36 RULE 2BBB WAS INTRODUCED W.E.F 1/4/2015 READING AS UNDER: FOR THE PURPOSES OF SUB - CLAUSES (IIIAB) AND IIIAC) OF CLAUSE (23C) OF SECTION 10, ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITUTION REFERRED THEREIN, SHALL BE CONSIDERED AS BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT FOR ANY PREVIOUS YEAR, IF THE GOVERNMENT GRANT TO SUCH UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITUTION EXCEEDS FIFTY PER CENT OF THE TOTAL RECEIPTS INCLUDING ANY VOLUNTARY CONTRIBUTIONS, OF SUCH UNIVERSITY OR OTHER EDUCATIONAL INSTITUTI ON, HOSPITAL OR OTHER INSTITUTION, AS THE CASE MAY BE, DURING THE RELEVANT PREVIOUS YEAR. AS PER HON'BLE BOMBAY HIGH COURT JUDGEMENT IN THE CASE OF TATA INSTITUTE OF SOCIAL SCIENCE. 308 CTR 0759 (BOM), RULE 2BBB IS NOT RETROSPECTIVE AND THEREFORE % OF GOVT . GRANTS GIVEN ABOVE FOR ALL THE ASSESSMENT YEARS I.E.2007 - 08, 2008 - 09 AND 2011 - 12 SHOULD BE TREATED AS SUBSTANTIALLY FINANCED BY THE GOVT. 4 . ON THE OTHER HAND, LD. DR OPPOSED FOR THE ADMISSION OF ADDITIONAL GROUND, HOWEVER HE AGREED THAT THE FINANCIAL 6 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, INFORMATION SUBMITTED BY THE ASSESSEE THAT THE GRANTS RECEIVED BY THE ASSESSEE IS PROPER. EVEN THOUGH, HE RELIED ON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 5 . CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL PLACED ON RECORD. WITH REGARD TO ADDITIONAL GROUND NO. 3 RAISED BY THE ASSESSEE, LD. AR BROUGHT TO OUR NOTICE INCOME AND EXPENDITURE A CCOUNTS FOR THE YEAR ENDING 31 ST MARCH 2011 RELEVANT FOR THE ASSESSMENT YEAR AS PER WHICH THE GOVT. GRANT RE CEIVED BY THE ASSESSEE AT RS. 3,06,62,561/ - AND THE TOTAL RECEIPTS/ INCOME FOR THE YEAR IS RS. 6,10,02,191/ - , THEREFORE THE PERCENTAGE OF GRANTS RECEIVED FROM THE GOVT IS 50.26% OF THE TOTAL INCOME. THERE IS NO DISPUTE AS FAR FUNCTIONS OF THE ASSESSEE THAT ASSESSEE IS AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE EDUCATIONAL PURPOSES. DURING THIS ASSESSMENT YEAR, ASSESSEE HAS RECEIVED GRANTS FROM THE GOVT. IN EXCESS OF 50%. THEREFORE, AS PER THE AMENDED RULE OF 2BBB INSERTED BY THE FINANCE ACT 2014 W.E. F. 01.04.15, AS PER WHICH THE GRANT RECEIVED FROM THE GOVT IN EXCESS OF 50% IS CONSIDERED AS SUBSTANTIALLY FINANCED BY THE GOVT. SINCE, IT IS INTRODUCED IN 7 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, FINANCE ACT, 2014, HOWEVER THIS ASSESSMENT YEAR IS RELEVANT TO 2011 - 12 AS RELIED BY LD. AR THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VRS. TATA INSTITUTE OF SOCIAL SCIENCE (2019) 104 CCH 0242 (MUM HC) HAS HELD AS UNDER: - THERE WAS NO BASIS FOR INVOKING MEANING OF 'SUBSTANTIALLY FINANCED FOUND IN CAG ACT FOR PURPOSES OF S. 10(23C)(IIIAB). FIRST OF ALL, PROVISIONS OF CAG ACT WERE NEITHER INCORPORATED NOR CITED IN S. LO(23C)(IIIAB) OR IN ANY OTHER PROVISIONS OF ACT. SCOPE AND PURPOSE OF TWO ACTS I.E. CAG ACT AND I - T ACT WERE ENTIRELY DIFFERENT. THE CAG ACT IS IN RESPECT OF INSTITUTIONS RECEIVING FUNDS FROM THE CONSOLIDATED FUNDS OF INDIA AND WHICH WOULD BE SUBJECT TO AUDIT OF COMPTRO LLER AND AUDITOR GENERAL OF INDIA. IT HAD NO APPLICATION TO FUNDS RECEIVED BY AN INSTITUTION FROM GOVERNMENT THROUGH UNIVERSITY GRANT COMMISSION. WORDS 'SUBSTANTIALLY FINANCED IN S. 10 (23C)(IIIAB) WERE USED IN CONTEXT OF GOVERNMENT GRANTS OF FINANCE TO EDU CATIONAL INSTITUTIONS. THEREFORE, SCOPE AND AMBIT OF TWO ACTS I.E., CAG ACT AND I - T ACT WERE COMPLETELY DIFFERENT AND COULD NOT EVEN BE REMOTELY SAID TO BE IN PAR! MATERIAL SO AS TO PERMIT IMPORTING MEANING GIVEN IN CAG ACT TO I - T ACT. IN ABSENCE OF WORDS 'SUBSTANTIALLY FINANCED' BEING DEFINED IN I - T ACT AT 8 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, RELEVANT TIME, DIFFERENT METHODS/MODES WERE BEING ADOPTED BY AUTHORITIES UNDER ACT TO DETERMINE MANNER IN WHICH WORDS 'SUBSTANTIALLY FINANCED HAD TO BE MEASURED. MEANING OF WORDS 'SUBSTANTIALLY FINANCED' IN CAG ACT COULD NEVER BE INVOKED TO UNDERSTAND MEANING OF THE WORDS 'SUBSTANTIALLY FINANCED IN S. 10(23C)(IIIAB) OF I - T ACT. THUS, NO FAULT COULD BE FOUND WITH IMPUGNED ORDER OF ITAT IGNORING MEANING OF SUBSTANTIALLY FINANCED BY GOVERNMENT AS GIVEN IN CA G ACT. EXPLANATION TO S. 10(23C)(IIIAB) OF I - T ACT WAS TO CLARIFY POSITION/MEANING OF WORDS 'SUBSTANTIALLY FINANCED BY GOVERNMENT. EXPLANATION PER SE WAS NOT RETROSPECTIVE. NEVERTHELESS, IT WAS RECOGNIZED PRINCIPLE OF CONSTITUTION THAT SUBSEQUENT LEGISLATI ON MIGHT BE LOOKED AT IN ORDER TO SEE WHAT WAS PROPER INTERPRETATION TO BE PUT UPON EARLIER LEGISLATION, WHERE EARLIER ACT WAS OBSCURE OR AMBIGUOUS OR READILY CAPABLE OF MORE THAN ONE INTERPRETATION. SAME PRINCIPLE WOULD APPLY TO AN AMENDMENT MADE TO AN AC T TO UNDERSTAND MEANING OF AN AMBIGUOUS PROVISION, EVEN WHEN AMENDMENT WAS NOT HELD TO BE RETROSPECTIVE. THUS, WITHOUT HOLDING EXPLANATION TO S. 10 (23C)(IIIAB), INSERTED INTO ACT W.E.F. 1 ST APRIL, 2015, WAS RETROSPECTIVE, SAME WAS BEING USED AS AN AID IN CONSTRUING AMBIGUOUS PROVISION. 9 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, 6. CONSIDERING THE ABOVE DECISION OF HONBLE BOMBAY HIGH COURT, THE INSERTION OF RULE 2BBB IS TO INSTANT MEANING OF AN UNAMBIGUOUS PROVISION EVEN THOUGH WHEN THE AMENDMENT WAS NOT HELD TO BE RETROSPECTIVE. THUS, EVEN THOUGH THE RULE INSERTED INTO IT W.E.F. 01.04.15 WAS P ROSPECTIVE , THE SAME WAS BEING OF USE AS AN AID IN CONSIDERING THE AMBIGUOUS PROVISIONS WITH REGARD TO MEANING OF SUBSTANTIALLY FINANCED BY THE GOVT. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DIRECT THE AO TO APPLY THE PROVISION O F SECTION 10(23C)(IIIAB) AND TREAT THIS INSTITUTION AS AN EXISTING SOLELY FOR THE EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFIT WHICH IS SUBSTANTIALLY FINANCED BY THE GOVT. ACCORDINGLY, THE ADDITIONAL GROUND N O. 3 RAISED BY THE ASSESSEE IS ALLOWED . 7. IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.02 . 2021 . SD/ - SD/ - (RAVISH SOOD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 11.02. 2021 SR.PS. DHANANJAY 10 I.T.A. NO. 1019 /MUM/201 6 K. J. KHILNANI EDUCATION TRUST, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI