M/s Chandigarh Institute of Hotel Management & Catering Technology (CIHMCT), Chandigarh V. CIT (Exemptions), Chandigarh

ITA 1021/CHANDI/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3600 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 01-08-2018
• Assessment Year: misc
• Appeal Filed On: 28-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 462/CHD/2017 ASSESSMENT YEAR : 2013-14 CHANDIGARH INSTITUTE OF HOTEL VS. THE DCIT, MANAGEMENT & CATERING TECHNOLOGY, CIRCLE-1 (EXEMPT IONS), (CIHMCT), SECTOR 42-D, CHANDIGARH CHANDIGARH PAN NO. AAAC4897N & ITA NO. 1021/CHD/2016 (U/S 12AA) CHANDIGARH INSTITUTE OF HOTEL VS. THE DCIT, MANAGEMENT & CATERING TECHNOLOGY, CIRCLE-1 (EXEMPT IONS), (CIHMCT), SECTOR 42-D, CHANDIGARH CHANDIGARH PAN NO. AAAC4897N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH KHANNA, CA RESPONDENT BY : SH. MANOJ MISHRA, CIT DR DATE OF HEARING : 01.08.2018 DATE OF PRONOUNCEMENT : 21. 08.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEALS HAS BEEN PREFERRED BY THE ASS ESSEE AGAINST THE SEPARATE ORDERS DATED 5.12.2016 (IN ITA NO. 462/CHD/2017) OF THE COMMISSIONER OF INCOME TAX(A)- 2, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)] AN D DATED 30.7.2016 ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 2 (IN ITA NO.1021/CHD/2016) OF COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(E)]. 2. SINCE CERTAIN COMMON ISSUES HAVE BEEN RAISED IN BOTH THE APPEALS, HENCE THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 462/CHD/2017 IS TAKEN AS LEAD CASE FOR NARRATION OF FACTS. ITA NO. 462/CHD/2017 3. THOUGH THE ASSESSEE IN THIS APPEAL HAS TAKEN AS MANY AS 14 GROUNDS OF APPEAL, HOWEVER, THE EFFECTIVE ISSUE RA ISED IN THIS APPEAL IS AGAINST THE DENIAL OF EXEMPTION TO THE ASSESSEE CLAIMED U/S 10(23C)(IIIAB) OF THE INCOME-TAX ACT, 1961 (IN SHOR T 'THE ACT'). 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A SOCIETY REGISTERED WITH REGISTRAR OF SOCIETIES, CHANDIGARH AND THE MAIN OBJECT OF THE SOCIETY IS TO UNDERTAKE AND TO ASSOCI ATE ITSELF WITH NUTRITIONAL EXTENSION AND DEVELOPMENT WORK. THE BRO AD OBJECTIVES ARE LISTED IN THE ASSESSMENT ORDER. THE ASSESSEE I S RUNNING AN EDUCATIONAL INSTITUTION IN THE NAME AND STYLE OF CH ANDIGARH INSTITUTE OF HOTEL MANAGEMENT AND CATERING TECHNOLOGY AND CLA IMED EXEMPTION U/S 10(23C)(IIIAB) OF THE INCOME TAX AC T, 1961. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NO T FULFILLING THE CONDITIONS OF ELIGIBILITY FOR CLAIMING EXEMPTION U/ S 10(23C) (IIIAB) OF THE ACT. HE OBSERVED THAT TO CLAIM EXEMPTION U/ S 10(23C)(IIIAB), THE EDUCATIONAL INSTITUTION MUST BE SOLELY FOR THE PURPOSE OF EDUCATION AND WITHOUT ANY PROFIT MOTIVE. HE FURTHE R OBSERVED THAT ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 3 THOUGH THE ASSESSEE HAD BEEN RUNNING HOTEL MANAGEME NT COURSE, YET, SIMULTANEOUSLY RUNNING PROFITABLE HOTEL IN THE NAME OF CHANDIGARH HOTEL BECKONS. ALSO THE INSTITUTE HAD BEEN PROVIDI NG MID-DAY MEAL FOR GOVERNMENT SCHOOLS OF CHANDIGARH ADMINISTRATION AND THESE ACTIVITIES COULD NOT BE SAID FOR EDUCATIONAL PURPOS E. CHANDIGARH HOTEL BECKONS WAS BEING RUN ON COMMERCIAL BASIS TO EARN HUGE PROFIT AND THERE WAS NO OBJECTS SHOWN IN MOA OF THE ASSES SEE OF RUNNING OF A HOTEL. THE ASSESSING OFFICER HELD THAT ASSESSE E WAS NOT EXISTING SOLELY FOR THE PURPOSE OF EDUCATION AND WITHOUT ANY PROFIT MOTIVE AND THUS NOT ELIGIBLE FOR DEDUCTION U/S 10(23C)(IIIAB) OF THE ACT, AND THE SAME WAS ACCORDINGLY DISALLOWED. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). HOWEVE R, THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE ASSESSING OFF ICER ON THE ABOVE ISSUE. HE FURTHER HELD THAT TO CLAIM EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT, ONE OF THE REQUIREMENT WAS THAT INSTITUTIO N MUST BE WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. HE FU RTHER OBSERVED THAT EVEN THE ASSESSEE INSTITUTION WAS NOT SUBSTANT IALLY FINANCED BY THE GOVERNMENT WHICH MEANS THAT THE GRANT RECEIVED FROM THE GOVERNMENT SHOULD BE MORE THAN OF 50% OF THE TOTAL RECEIPTS DURING THE RELEVANT YEAR. HOWEVER, IN THE CASE OF THE ASS ESSEE, IT WAS BELOW 50%. HE, THEREFORE, HELD THAT ASSESSEE EVEN OTHERW ISE DID NOT SATISFY THE CONDITION THAT IT WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT DURING THE YEAR. THE LD. CIT(A) THEREFORE, UPHELD THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US. ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 4 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE SOCIETY HAS BEEN RUNNING ITS EDUCATIONAL INSTITUTE SOLELY FOR THE PURPOSE OF EDUCATION AND NOT FOR PROFIT AND THA T THE ASSESSEE SOCIETY HAS RIGHTLY CLAIMED EXEMPTION U/S 10(23C)(I IIAB) OF THE ACT IN RESPECT OF THE INCOME OF ITS EDUCATIONAL INSTIT UTE. IT HAS BEEN FURTHER SUBMITTED THAT ASSESSEE WAS ALLOWED EXEMPTI ON U/S 10(23C)(IIIAB) OF THE ACT FOR THE ASSESSMENT YEAR S 2009-10, 2010-11 AND 2012-13. HOWEVER, FOR THE YEAR UNDER CONSIDERAT ION, THE CLAIM OF EXEMPTION HAS BEEN WRONGLY DENIED TO THE ASSESSEE. IT HAS BEEN FURTHER CLAIMED THAT EARLIER THE ASSESSEE SOCIETY H AS BEEN RUNNING THE EDUCATIONAL INSTITUTION ONLY. HOWEVER, IN THE YEA R 2007, THE ASSESSEE SOCIETY APART FROM ITS EDUCATIONAL INSTIT UTION, ESTABLISHED THE HOTEL CHANDIGARH BECKONS (A UNIT OF CIHM, CHAN DIGARH) FOR PROVIDING HANDS ON EXPERIENCE TO THE STUDENTS OF TH E INSTITUTE. AS SUCH FROM 2007, THE SOCIETY STARTED RUNNING ITS HO TEL ACTIVITY APART FROM ITS EDUCATIONAL INSTITUTE AND BOTH THE ACTIVI TIES ARE BEING RUN SEPARATELY AS TWO SEPARATE DIVISIONS OF THE SOCIETY AND EVEN BOOKS OF ACCOUNT ARE MAINTAINED SEPARATELY FOR BOTH ITS EDU CATIONAL INSTITUTE AND HOTEL CHANDIGARH BECKONS. THE LIABILITY OF DUE AMOUNT OF INCOME TAX IS DISCHARGED FOR ITS HOTEL BUSINESS. TH AT THE EXEMPTION IS CLAIMED ONLY FOR ITS EDUCATIONAL INSTITUTE AND NOT FOR BOTH THE EDUCATIONAL INSTITUTE AND THE HOTEL. THE LD. COUNSE L, THEREFORE, SUBMITTED THAT ASSESSEE SHOULD BE ALLOWED EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT IN RESPECT OF THE EDUCATI ONAL INSTITUTION. ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 5 7. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED TH AT SINCE THE ASSESSEE IS ALSO INVOLVED IN A BUSINESS ACTIVITY OF RUNNING A HOTEL, HENCE, THE ACTIVITIES OF THE ASSESSEE CANNOT BE SAI D TO BE SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT AND, THEREF ORE, THE DEDUCTION HAS RIGHTLY BEEN DENIED TO THE ASSESSEE BY THE LOWE R AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAV E GONE THROUGH THE RECORD. THE LD. COUNSEL HAS RELIED UPO N THE VOLUMINOUS RECORD TO SUBMIT THAT THE ACTIVITY OF THE ASSESSEE IN RESPECT OF THE RUNNING OF EDUCATIONAL INSTITUTE IS SEPARATE AND DI STINCT FROM ITS ACTIVITY OF RUNNING OF A HOTEL AND THAT BOTH THE AC TIVITIES CANNOT BE CLUBBED TOGETHER. THAT SEPARATE BOOKS OF ACCOUNT AR E BEING MAINTAINED IN RESPECT OF BOTH THE ACTIVITIES. FURT HER, THAT EDUCATIONAL INSTITUTE RUN BY THE ASSESSEE IS SUBSTANTIALLY FINA NCED BY THE GOVERNMENT AND THAT THE GRANTS RECEIVED FROM THE GO VERNMENT CANNOT BE QUANTIFIED IN RESPECT OF TOTAL RECEIPTS OF THE A SSESSEE I.E. FROM EDUCATIONAL INSTITUTE AS WELL AS HOTEL, RATHER, THE SAME HAVE TO BE QUANTIFIED IN RESPECT OF RECEIPTS OF THE EDUCATIONA L INSTITUTE AS THE SAME ARE RECEIVED FOR FUNDING OF THE EDUCATIONAL AC TIVITY ONLY OF THE ASSESSEE. 9. TO ARRIVE AT THE PROPER CONCLUSION, WE DEEM ITS FIT TO REPRODUCE HERE THE RELEVANT PROVISIONS OF THE SECTION 10(23C) (IIIAB) OF THE ACT 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED . ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 6 ( 23C ) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF . ( IIIAB ) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT; OR .. A PERUSAL OF THE ABOVE RECORDED PROVISIONS OF SECT ION 10(23C)(IIIAB) REVEALS THAT THEY ARE NOT SPECIFIC TO THE TOTAL INC OME OF A PERSON, RATHER, THEY TALK OF EXEMPTION OF INCOME RECEIVED B Y A PERSON ON BEHALF OF ANY UNIVERSITY OR EDUCATIONAL INSTITUTE E XISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PRO FIT WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT ; MEANING THEREBY THAT PART OF THE INCOME OF A PERSON WHICH IS RECEIVED ON BEHALF OF ANY INSTITUTE FALLING UNDER THE PROVISION S OF SECTION 10(23C)(IIIAB) OF THE ACT WILL BE EXEMPT, IT DOES N OT MEAN THAT ENTIRE INCOME OF THE PERSON SHOULD BE FROM THE INSTITUTE SOLELY EXISTING FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT AND SU BSTANTIALLY FINANCED BY THE GOVERNMENT OR THAT THE PERSON IS BARRED FROM ENTERING INTO ANY BUSINESS ACTIVITY. HENCE, IN OUR VIEW, AS PER THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE ACT, TH AT PART OF THE INCOME OF THE PERSON WILL BE EXEMPT WHICH IS RECEIV ED FROM AN INSTITUTION SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT AND IS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE CLAIM OF THE ASSESSEE IN THE CASE IN HAND IS FOR EXEMPTION U/S 10(23C)(I IIAB) OF THE ACT IS RELATING TO THE INCOME RECEIVED ON BEHALF OF EDUCAT IONAL INSTITUTION BEING RUN BY IT SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT AND WHICH IS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. HOWEVER, THE LOWER AUTHORITIES HAVE NOT EXAMINED THIS ASPECT. I T IS THE CLAIM OF ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 7 THE ASSESSEE THAT SEPARATE BOOKS OF ACCOUNT ARE BE ING MAINTAINED IN RESPECT OF EDUCATIONAL INSTITUTION RUN BY IT AND T HAT IT IS SUBSTANTIALLY FINANCED BY THE GOVERNMENT AND IS NOT RUN FOR PR OFIT. IN VIEW OF THIS, THE MATTER REQUIRES TO BE REMANDED BACK TO TH E FILE OF THE ASSESSING OFFICER TO CORRECTLY APPLY THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE ACT AND TO EXAMINE AND VERIFY WHETHER THE EDUCATIONAL INSTITUTION RUN BY THE ASSESSEE, IRRES PECTIVE OF THE OTHER ACTIVITY OF RUNNING OF THE HOTEL OF THE ASSESSEE, I S RUN SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT AND WHETHER THE SAID INSTITUTION IS SUBSTANTIALLY FINANCED BY THE GOVER NMENT. IF THE INSTITUTE IS FOUND TO QUALIFY THE ABOVE CONDITIONS OF SECTION 10(23C)(IIIAB) OF THE ACT, THE ASSESSEE WILL BE EN TITLED TO CLAIM EXEMPTION IN RESPECT OF INCOME RECEIVED BY IT ON BE HALF OF SUCH EDUCATIONAL INSTITUTION. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND REMAND THE MATTER TO THE ASSESSING OFFICER AND DIRE CT THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AND IN ACCORDANCE WITH LAW. THIS APPEAL OF THE ASSESSEE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1021/CHD/2016 10. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINS T THE DENIAL OF REGISTRATION TO THE ASSESSEE SOCIETY U/S 12A OF T HE ACT. 11. BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAV E SUBMITTED THAT SINCE THE FINDINGS OF THE LD. CIT(E)) IN THIS CASE WAS BASED ON THE ITA NOS. 462/CHD/2017 & 1021/CHD/2016- CHANDIGARH INSTITUTE OF HOTEL MANAGEMENT & CATERING TECHNOLOGY, CHANDIGARH 8 FINDINGS OF THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE WAS RUNNING A HOTEL BUSINESS ALONG WITH AN EDUCATIONAL INSTITUTE AND SINCE THE MATTER HAS BEEN RESTORED TO THE FILE OF THE ASS ESSING OFFICER, IN RESPECT OF ITA NO. 462/CHD/2017 (ASSESSMENT YEAR 20 13-14), AS OBSERVED ABOVE, THE MATTER IN THIS APPEAL IS ALSO B E RESTORED TO THE FILE OF LD. CIT(E) TO EXAMINE AFRESH IN ACCORDANCE WITH LAW. 12. IN VIEW OF THE ABOVE SUBMISSIONS OF BOTH THE LD . REPRESENTATIVES OF THE PARTIES, THE MATTER IN THIS APPEAL IS RESTORED TO THE FILE OF LD. CIT(E) FOR DECISION AFRESH IN ACCOR DANCE WITH LAW. BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.08.2018. SD/- SD/- (B.R.R KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :21.08.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR