M/s Church School, Jamshedpur V. ACIT, Jamshepur

ITA 103/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9621 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL JCIT LD
• Assessee Lawyers: ANSHUL RINGASIA LD
• Keywords: Depreciation; Charitable institution; Bonafide belief; Benefit of exemption
• Section: 234B; 12A; 12AA

Judgement Text

1 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIA L MEMBER I.T.A NO. 103/RAN/16 A.Y 2011-12 M/S. CHURCH SCHOOL PAN:AAATC1999A APPELLANT VS. ACIT, CIR-1, JAMSHEDPUR RESPON DENT I.T.A NO.104/RAN/16 A.Y 2011-12 I.T.O, EXEMPTION, JAMSHEDPUR APPELLANT VS. M/S. CHURCH SCHOOL RESPONDENT FOR THE APPELLANT : SHRI ANSHUL RINGASIA, ADVOCAT E, LD. A R FOR THE RESPONDENT : SHRI P.K. MONDAL, J CIT, LD.SR.DR DATE OF HEARING : 28-02-2018 DATE OF PRONOUNCEMENT : 16-05-2018 ORDER SHRI S.S. VISWANETHRA RAVI, JM: ABOVE TWO APPEALS BY THE ASSESSEE & REVENUE ARE AGA INST THE COMMON ORDER DT. 22-01-2016 OF CIT(A), JAMSHEDPUR F OR THE ASSESSMENT YEAR 2011-12. SINCE THE ISSUES RAISED IN BOTH THE APPEALS ARE ON THE SAME SET OF FACTS, THEREFORE, BOTH APPE ALS WERE HEARD TOGETHER AND DISPOSED OF THE SAME BY THIS COMMON OR DER FOR THE SAKE OF CONVENIENCE WITH THE CONSENT OF BOTH THE PARTIES . 2. FIRST, WE SHALL TAKE UP THE APPEAL IN ITA NO. 10 3/RAN/2016 FOR THE A.Y 2011-12- BY THE ASSESSEE. 2 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL ITA NO. 103/RAN/2016 FOR THE A.Y 2011-12 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CHARITABLE TRUST. IT CONDUCTS ITS ACTIVITIES UNDER THE NAME & STYLE AS CHURCH SCHOOL. THE ASSESSEE FILED ITS RETURN DECLARING A T OTAL INCOME OF RS. NIL. CONSIDERING THE ASSESSEES SUBMISSIONS ALONG W ITH DETAILS AND EVIDENCES, THE AO, DETERMINED THE TOTAL INCOME AT RS. 78,70,930/- (ROUNDED OFF) BY HER ORDER DT. 24-03-2014 PASSED U/ S. 143(3)/147 OF THE ACT BY MAKING THE FOLLOWING ADDITIONS AND ADDED THE SAME TO THE TOTAL INCOME:- I) RS. 53,88,461.57 ON ACCOUNT OF EXCESS OF INCOME OVER EXPENDITURE II) RS. 21,22,466/- ON ACCOUNT OF DEPRECIATION, AN D III) RS. 3,60,000/- ON ACCOUNT OF DONATION 4. BESIDES ABOVE, THE AO CHARGED INTEREST U/S. 234B & 234C OF THE ACT. 5. AGGRIEVED BY SUCH ORDER OF AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT-A, WHO DELETED THE ADDITION M ADE ON ACCOUNT OF DEPRECIATION AND SUSTAINED THE ADDITIONS MADE ON ACCOUNT OF INCOME OVER EXPENDITURE AND DONATION. 6. BEING NOT SATISFIED WITH THE ORDER OF THE CIT-A, NOW THE ASSESSEE AND THE REVENUE BOTH IN APPEAL BEFORE US C HALLENGING THE IMPUGNED ORDER OF THE CIT-A. 7. BEFORE US THE LD.AR SUBMITS THAT THE ASSESSEE IS A PREMIER INSTITUTE IN THE CITY OF JAMSHEDPUR AND IS KNOWN FO R ITS CHARITABLE ACTIVITIES ACROSS THE SOCIETY IRRESPECTIVE OF THE C ASTE AND CREED. THE ASSESSEE TRUST RUNS A SCHOOL IN THE NAME OF BELDIH CHURCH SCHOOL AND HAD FILED ITS RETURN OF INCOME FOR THE ASST YEAR 20 11-12 AT NIL CLAIMING THAT ITS INCOME WAS EXEMPT U/S 10(23)(C)(V I) OF THE IT ACT 1961. DURING ASSESSMENT, THE ASSESSING OFFICER OBSE RVED THAT APART FROM FEES, THE ASSESSEE TRUST ALSO EARN INCOME FROM SALE OF SWEATERS, UNIFORMS, BOOKS, INTEREST FROM FIXED DEPOSITS, ETC. THE ASSESSING OFFICER HAS CONSIDERED THESE RECEIPTS OUTSIDE THE O BJECT CLAUSE OF THE 3 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL ASSESSEE SINCE SAME WERE NOT CARRIED WITH CHARITY P URPOSE. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASS ESSEE TRUST IS NEITHER A REGISTERED TRUST U/S 12AA NOR HAVE ANY CE RTIFICATE U/S 10(23)(C)(VI) OF THE ACT AND HELD THAT THE ASSESSEE CANNOT BE TREATED AS CHARITABLE INSTITUTION AND CONSIDERED THE EXCESS OF INCOME OVER EXPENDITURE OF RS.53.88 LAKHS AS INCOME OF THE ASSE SSEE. FURTHER ADDED A SUM OF RS.21.22 LAKHS CLAIMED BY THE ASSESS EE UNDER THE HEAD DEPRECIATION AND HELD THAT DEPRECIATION CANNOT BE ALLOWED SINCE NO BUSINESS ACTIVITY IS INVOLVED. THE CIT(A) HAS CO NFIRMED THE ADDITION MADE BY ASSESSING OFFICER OF RS.53.88 LAKH S OBSERVING THAT THE ASSESSEE TRUST IS NOT RUNNING THE SCHOOL FOR EX CLUSIVELY CHARITABLE PURPOSES, SINCE IT HAS OTHER INCOME SUCH AS, SALE O F BOOKS, UNIFORMS, ETC. HOWEVER, LD. CIT(A) DELETED THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION HOLDING THAT THE SAME IS STATUTORY IN NATURE. THE ASSESSEE IS IN APPEAL AGAINST CONF IRMATION OF ADDITION OF RS.53.88 LAKHS. 8. THE ENTIRE ADDITION MADE BY ASSESSING OFFICER AN D CONFIRMED BY CIT(A) IS BASED ON THE HYPOTHETICAL ASSUMPTION THAT THE ASSESSEE IS HAVING RECEIPTS FROM OTHER SOURCES APART FROM FEES CHARGED FOR EDUCATIONAL PURPOSES. THE REVENUE AUTHORITIES GROSS LY ERRED IN INTERPRETING THE MAIN OBJECT OF THE ASSESSEE TRUST I.E IMPARTING EDUCATION FOR CHARITABLE PURPOSE AND IT WILL NOT LO SE ITS CHARACTER BEING A CHARITABLE PURPOSE MERELY BECAUSE SOME PROF IT ARISES FROM OTHER ACTIVITIES. THE HONORABLE APEX COURT IN THE C ASE OF LOKASHIKSHANA TRUST REPORTED IN 101 ITR 234 AND IN CASE OF CIT V/S SURAT ART SILK CLOTH MANUFACTURER ASSOCIATION REPOR TED IN 121 ITR 1, HELD THAT WHAT IS NECESSARY TO BE CONSIDERED IS WHE THER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE AND IN THE CASE OF ASSESSEE IT HAS NEVER BE EN USED FOR PROFIT MOTIVE AND ALL RECEIPTS ARE BEING USED FOR EDUCATIO NAL PURPOSES. 4 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL 9. THE INCOME TAX DEPARTMENT HAS ACCEPTED THE CONTE NTION OF THE ASSESSEE TO HAVE RUNNING THE SCHOOL FOR CHARITABLE PURPOSES AND HAVE ISSUED ORDER CUM CERTIFICATE U/S 12AA OF THE ACT VI DE ORDER DATED 29TH JANUARY, 2016, A COPY OF SUCH ORDER IS ALSO PL ACED ON RECORD. THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT IS RUNNING THE SCHOOL FOR CHARITABLE PURPOSE AND HAS ALSO GIVE N THE BENEFIT OF EXEMPTION FOR ALL PREVIOUS YEAR PENDING WITH ASSESS ING OFFICER BY FOLLOWING THE AMENDMENT BROUGHT BY LEGISLATION IN 2 014. 10. THE BENEFIT OF EXEMPTION IN THE YEAR INVOLVED I N THIS APPEAL COULD NOT BE GIVEN SINCE THE ASSESSMENT FOR THE SAM E WAS COMPLETED AND ARGUED THAT IT IS NOW AN UNDISPUTED FACT THAT THE ASSESSEE IS A CHARITABLE TRUST WHICH IS RUNNING AN EDUCATIONAL IN STITUTION FOR THE CHARITABLE PURPOSE WITHOUT ANY MOTIVE TO EARN PROFI T. 11. FURTHER, IT IS SUBMITTED THAT THE ASSESSEE HAD MADE AN APPLICATION FOR GRANT OF EXEMPTION U/S 10(23)(C)(VI ) ON 30.09.2009 ( A COPY IS PLACED ON RECORD IN PAPER BOOK) AND WAS U NDER THE BONAFIDE BELIEF THAT ITS APPLICATION HAS BEEN ACCEPTED AND H ENCE SURPLUS ARISING TO IT WERE NOT TAXABLE. THE SAID CLAIM OF THE ASSE SSEE HAS BEEN REJECTED IN A CASUAL MANNER BY BOTH ASSESSING OFFIC ER AND CIT(A) HOLDING THAT ITS APPLICATION U/S 10(23)(C)(VI) HAS NOT SUCCEEDED AND ARGUED THAT NO SUCH COMMUNICATION WAS EVER MADE TO ASSESSEE AS TO THE FATE OF SUCH APPLICATION U/S 10(23)(C) MADE BY IT ON 30TH SEPTEMBER 2009. 12. THE CASE LAWS RELIED BY THE REVENUE AUTHORITIES WHILE DENYING EXEMPTIONS ARE NOT RELEVANT TO THE PRESENT CASE WHE REAS THE CASE OF THE ASSESSEE IS IDENTICAL TO THE FACT OF THE CASE I N CASE OF M/S. QUEENS EDUCATIONAL SOCIETY VS. CIT DECIDED BY HONBLE SUPR EME COURT ON 16.03.2015. THE HONBLE SUPREME COURT HAS ELABORATE LY DISCUSSED THE PROVISIONS OF SECTION 10(23)( C )(VI) OF THE IT ACT AND HAS HELD THAT MERE SURPLUS DOES NOT MEAN THAT INSTITUTION IS EXISTING FOR 5 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL MAKING PROFIT. THE PREDOMINANT OBJECT TEST MUST BE APPLIED. HONBLE APEX COURT WHILE AFFIRMING THE DECISION OF PUNJAB A ND HARYANA HIGH COURT IN CASE OF PINE GROVE INTERNATIONAL CHARITABL E TRUST V/S UNION OF INDIA REPORTED IN 327 ITR 273 FURTHER HELD THAT IF AFTER MEETING EXPENDITURE, A SURPLUS ARISES FROM EDUCATIONAL INST ITUTION THEN IT WILL NOT SEIZE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND THE CORRECT TEST TO DETERMINE WHETHER AN EDUCATIONAL PU RPOSE AND NOT FOR PURPOSE OF PROFIT IS THE NATURE AND OBJECT OF THE T RUST AS OBSERVED BY IT IN CASE OF SURAT ART SILK 121 ITR 01 (SC), ADITA NAR 224 ITR31 0 (SC) AND AMERICAN HOTEL AND LODGING 301 ITR 86 (SC) . 13. FURTHER, HE ARGUED THAT THE REVENUE HAS NOW ACC EPTED THAT THE ASSESSEE IS A GENUINE AND BONAFIDE CHARITABLE TRUST BY ISSUING CERTIFICATE U/S 12AA OF THE ACT AND NO REASON EXIST TO DENY EXEMPTION TO THE ASSESSEE TRUST AND PRAYED BEFORE T HIS HONOURABLE BENCH TO DELETE THE ADDITION MADE BY ASSESSING OFFI CER AND CONFIRMED BY CIT(A). THE LD. DR RELIED ON THE ORDE RS OF AO & CIT-A. 14. HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD INCLUDING THE DETAILS AS AVAILABLE IN THE PAPER BOOK FILED BY THE LD.AR OF ASSESSEE BEFORE US. ON PERUSAL OF PAGE- 23 OF THE PAPER BOOK , WE FIND THAT THE ASSESSEE SCHOOL HAS BEEN GRANTED REGISTRATION U/SEC . 12AA OF THE ACT BY AN ORDER DT. 29-01-2016 BY COMMISSIONER OF INCOM E TAX (EXEMPTIONS), PATNA W.E.F 15-07-2015 AND IMPUGNED O RDER OF THE CIT-A, WHICH IS UNDER CHALLENGE BEFORE WAS ON 22-01 -2016. ADMITTEDLY, THERE WAS NO REGISTRATION FOR THE ASSE SSEE AS ON THE DATE OF PASSING THE IMPUGNED ORDER. THE EFFECT OF REGIST RATION U/S. 12AA OF THE ACT WAS GIVEN FROM 15-07-2015. THE ASSESSMENT ORDER AS WELL AS IMPUGNED ORDER OF CIT-A CONFIRMING THE DISALLOWANCE S MADE BY THE AO IS TO BE RE-CONSIDERED IN TERMS OF THE REGISTRAT ION U/SEC. 12AA BY THE CIT-E. THEREFORE, TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CASE, SUBMISSIONS OF THE LD.AR AND THE ISSUE INVOLVED IN THE APPEAL, WE DEEM IT FIT AND PROPER T O REMAND THE 6 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL MATTER TO THE FILE OF CIT-A FOR HIS CONSIDERATION IN TERMS OF REGISTRATION GRANTED BY THE CIT-E AS PLACED AT PAGE 33 OF THE PAPER BOOK AND DIRECTED THE AO TO PURSUE THE APPROVAL AS REQUIRED U/SEC. 10(23) ( C) (VI OF THE ACT. GROUNDS OF APPEAL RAISE D BY THE ASSESSEE IN THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 15. THE APPEAL OF ASSESSEE IN ITA NO. 103/RAN/2016 FOR THE A.Y 2011-12 IS ALLOWED FOR STATISTICAL PURPOSE. 16. NOW, WE SHALL TAKE UP THE APPEAL-ITA NO. 104/RA N/2016 FOR THE A.Y 2011-12 ( BY THE REVENUE) 17. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER T HE CIT-A IS RIGHT IN CHARGING OF INTEREST U/S. 234 B AND 234C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 18. SINCE WE HAVE DECIDED TO DISPOSE OF THE APPEAL (ITA NO. 103/RAN/2016 FOR THE A.Y 2011-12) IN REMANDING THE MATTER TO THE FILE OF THE CIT-A IN TERMS OF REGISTRATION U/S. 12A A OF THE ACT BY THE CIT-E AFRESH AND CHARGING OF INTEREST U/S. 234B & 2 3C DOES NOT ARISE, SINCE IT IS CONSEQUENTIAL IN NATURE. IT REQUIRES NO ADJUDICATION. THEREFORE, THE EFFECTIVE GROUND RAISED BY THE REVEN UE IN THE APPEAL IS DISMISSED. THIS APPEAL OF REVENUE-ITA NO. 104/RAN/2 016 FOR THE A.Y 2011-12 IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF ASSESSEE BEING ITA NO. 103/RAN/2016 FOR THE A.Y 2011-12 IS ALLOWED FOR STA TISTICAL PURPOSE AND THE APPEAL OF REVENUE BEING ITA NO. 104/RAN/201 6 FOR THE A.Y 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16-05-2018 SD/- SD/- J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16 -05-2018 7 ITA NOS.103 & 104/RAN/16 M/S. CHURCH SCHOOL PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. CHURCH SCHOOL, BELDIH TRIANGLE, BI STUPUR, JAMSHEDPUR - 831001. 2 RESPONDENT THE ACIT, CIRCLE-1, JAMSHEDPUR & ITO (E XEMPTIONS), WARD-JAMSHEDPUR, 1 OFFICE ROAD, NORHERN TOWN, JAMSH EDPUR- 831001. 3 . THE CIT(A), RANCHI 4. 5. CIT , RANCHI DR, ITAT RANCHI BENCHES, RANCHI. / TRUE COPY, BY ORDER, SR.PS ITAT, RANCHI