ACIT, Chandigarh V. M/s Amar Shaheed Baba Ajit Singh, Ropar

ITA 1065/CHANDI/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9806 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-07-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1065/CHD/2011 ASSESSMENT YEAR: 2003-04 THE ACIT, VS M/S AMAR SHAHEED BABA AJIT SINGH CIRCLE 2(1), JUJHAR SINGH MEMORIAL COLLEGE, PHASE VI, BELA ( ROPAR ). CHANDIGARH. PAN: AACTA2270N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 13.07.2016 DATE OF PRONOUNCEMENT : 20.07.2016 O R D E R THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 23.08.2011 FOR ASSESSMENT YEAR 2003-04 ON THE FOLLO WING GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE GRANT- IN-AID, VOCATIONAL GRANT AND DONATION FROM HANSALI WALE SAN TJI WERE NOT TO BE TREATED AS RECEIPTS FOR COMPUTING THE CAP OF RS1 CR ORE AND THAT THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE INCOME TAX ACT WERE APPLICABLE IN THE CASE OF THE ASSESSEE. 2. THE LD. CIT(A) HAS ERRED IN HOLDING THAT TH E INCOME OF THE ASSESSEE WAS EXEMPT AND THAT THE PROVISIONS OF SECTION 10(23 C)(IIIAB) OF THE INCOME TAX ACT WERE APPLICABLE IN THE CASE OF THE ASSESSEE AS THE ASSESSEE 2 WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT WHEREA S THE TOTAL FINANCE RECEIVED FROM GOVERNMENT WAS ONLY 25.6% OF THE TOTAL RECEIPTS . 3. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE SOCIETY WAS RUNNING EDUCATIONAL INSTITUTION AND CLA IMED ITS INCOME AS EXEMPT UNDER SECTION 10(23C)(IIIAB), 10(23C)(IIIAD) AND 10(23C)(VI) OF THE ACT. THE ASS ESSEE CLAIMED BEFORE LD. CIT(APPEALS) THAT ASSESSING OFFI CER FAILED TO DEDUCT THE GRANT-IN-AID AND OTHER RECEIPT S WHICH ARE NOT INCLUDIBLE IN THE TOTAL INCOME. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE LD. CIT(APPEALS) WHICH ARE REPRODUCED AS UNDER : ' THE SOCIETY WAS SETUP IN THE YEAR 1975 WITH THE OBJ ECT OF IMPARTING EDUCATION. A SCHOOL AND ART COLLEGE WAS SE TUP. THE GOVERNMENT GAVE GRANT IN-AID OF 95% TO RUN THE S CHOOL AND COLLEGE. TILL 2000, THE EXPENDITURE WAS MORE THA N THE RECEIPTS AND UPTO 2002, THE RECEIPTS WERE ALSO LESS THAN ONE CRORE, AS SUCH THERE WAS NO NEED TO FILE ANY APPLICA TION FOR EXEMPTION. THE COMMISSIONER OF INCOME TAX-I HAS PASSED ORDER ON 25.09.2008 U/S 12AA OF THE IT. ACT, 1961 GRANTED REGISTRATION U/S 12AA(L)(B)OF THE I. T. ACT, 1961. SIM ILARLY, CHIEF COMMISSIONER OF INCOME TAX HAS ALSO PASSED THE ORDER ON 17.09.2010 U/S 10(23C)(VI) OF IT ACT, 1961 . EXEMPTION HAS BEEN GRANTED FROM 2003-04 ONWARDS RELEVANT TO THE ASSESSMENT YEAR 2004-05 ONWARDS. IN THE PRESENT APPEAL FIXED BEFORE YOUR HONOUR, THE RECEIPTS WERE LESS THAN RS. 1 CRORE THOUGH IN THE ACCOUNTS T HE TOTAL RECEIPTS HAVE BEEN SHOWN RS. L,48,31,595.30 BUT ITEMS OF INCOME WHICH DO NOT FORM PART OF THE TOTAL RECEIP TS IF DEDUCTED THE NET RECEIPT FROM EDUCATION R S. 3 82,60,646/-. SOME OF THE MAJOR HEAD ARE REPRODUC ED AS UNDER: I) 5%M.C.SHARE RS. 66,000/- II) 95% GRANT IN AID RS. 40,01,416/- III) SCHOLARSHIP RECEIVED RS. 48,883/- IV) DONATION RS. 4,87,085/- V) VOCATIONAL COURSE GRANT RS. 9,00,000/- (VI) SPORTS EQUIPMEN T GRANT RS. 25,.250/- TOTAL RS. 55,28,634/- THE SCHOOL WHEN ESTABLISHED WAS SANCTIONED 95% GRANT IN AID FOR MEETING THE EXPENDITURE ON SALARY ET C. SCHOLARSHIPS WERE GIVEN BY THE UNIVERSITY FOR DISBURSEMENT TO THE STUDENT. SIMILARLY DONATIONS HAVE BEEN GIVEN BY HANSALI WALE SANT FOR EDUCATION PURPOSES. SO ALL THESE AMOUNTS DO NOT FORM PART OF THE TOTAL RECEIPTS. A LETTER OF THE GOVT. REGARDING FINANCIAL GRANT OF 95% GRANTED TO THE INSTITUTION IS ENCLOSED AND A LETTER DATED 20.03.2002 OF THE UNIVERSITY GRANT COMMISSION REGARDING VOCATIONAL COURSE GRANT OF RS. 9,00,000/- IS ALSO ENCLOSED AND A LETTER DATED 29.01.2003 REGARDING SCHOLARSHIP TO SCHEDULE CASTE STUDENT IS ENCLOSED. DETAILS OF DONATION RECEIPTS FROM HANSALI WALE SANT BABA JI ON DIFFERENT DATES AMOUNTING TO RS. 4,87,085/- IS ALSO ENCLOSED. THESE DETAILS WERE CALLED FOR IN THE LAST HEARING AS PER ORDER SHEET ENTRY. IT IS ALSO COVERED U/S 10(23C)(IIIAB), ANY UNIVERSI TY 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. GRANT IN AID, DONATIONS AND VOCATIONAL COURSE GRANT DOES NOT FORM PART OF THE TOTAL RECEIP TS. THE RECEIPTS BEING LESS THAN RS. 1 CRORE AND THE SOCIETY WAS SETUP WITH THE OBJECT OF IMPARTING 4 EDUCATION WITHOUT ANY MOTIVE OF PROFITS AND THE RECEIPTS BEING LESS THAN 1 CRORE IS EXEMPT FROM TAX. ' 4. THE LD. CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE. HIS FINDINGS ARE REPRODUCED AS UNDER : 4.2 1 HAVE CONSIDERED THE SUBMISSION OF TH E LD. COUNSEL FOR THE APPELLANT AND PERUSED THE VARIOUS DOCUMENTS FIL ED BY THE LD. COUNSEL. THE APPELLANT HAD APPLIED FOR EXEMPTION U/ S 10(23C)(VI) TO THE LD. CHIEF COMMISSIONER OF INCOME TAX, N.W. REGI ON, CHANDIGARH FROM A.Y. 2004-05 ONWARDS AND THE SAME WAS GRA NTED. THE LD. COUNSEL FOR THE APPELLANT HAS ARGUED BEFORE ME T HAT APPLICATION FOR EXEMPTION U/S 10(23C)(VI) FOR A.Y. 200 3-04 WAS NOT MADE BEFORE THE CHIEF COMMISSIONER OF INCOME TAX, N.W. REGION, CHANDIGARH BECAUSE THE RECEIPTS OF THE APPELLANT WE RE LESS THAN RS. 1 CRORE IN F.Y. 2002-03, PERTAINING TO A.Y. 20 03-04 AND FURTHER IT WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 4.2.1 FOR THE SAKE OF READY REFERENCE, PROVISIONS O F SECTION 10(23C)(IIIAD) ARE REPRODUCED BELOW : '10- INCOMES NOT INCLUDED IN TOTAL INCOME IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE IN CLUDED- (23C) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF O F- (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITU TION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECE IPTS AS MAY BE PRESCRIBED;' 4.2.2 THUS, THE ANNUAL RECEIPTS OF THE EDUCATIONAL INSTITUTION HAVE TO BE TAKEN INTO ACCOUNT FOR CALCU LATION U/S 10(23C)(IIIAD) AND THE GRANT-IN-AID AND THE AMOUNTS RECEIVED FOR SPECIFIC PURPOSES ARE NOT TO BE INCLUD ED IN TOTAL RECEIPTS. A PERUSAL OF THE INCOME EXPENDITUR E ACCOUNT OF THE APPELLANT REVEALS THAT APPELLANT'S TOTAL REC EIPTS WERE OF RS.1,48,31,595/-. OUT OF WHICH 95% GRANT-IN-AID WAS RS. 40,01,416/-, VOCATIONAL COURSE GRANT WAS RS. 9,00,0 00/- AND DONATION FROM HANSALI WALE SANTJI WAS RS. 4,87, 085/-. 95% GRANT-IN-AID GIVEN BY THE PUNJAB GOVERN MENT IS TOWARDS PAYMENT OF SALARY AND CANNOT BE SAID TO BE PART OF RECEIPTS OF THE APPELLANT, SINCE IT IS FOR A PARTIC ULAR PURPOSE. SIMILAR IS THE CASE WITH VOCATIONAL COU RSE GRANT RECEIPT FROM UGC WHICH IS ALSO FOR RUNNING THE VOCA TIONAL COURSE AND CANNOT BE SAID TO BE PART OF RECEIPTS. DONATION WAS FOR BUILDING PURPOSES AND SO THE AMOUNT OF DONA TION 5 CAN ALSO NOT BE TREATED AS RECEIPTS OF THE APPELLAN T. THESE THREE ITEMS ITSELF, IF TOTALED, AMOUNT TO RS. 53,88 ,501/- AND IF THIS AMOUNT IS REDUCED FROM GROSS RECEIPTS, THE EFFECTIVE RECEIPTS WOULD BE ONLY RS. 94,43,094/-. APART FROM . THESE, THERE ARE SOME OTHER RECEIPTS, WHICH ARE FOR PARTIC ULAR PURPOSES AND CANNOT BE INCLUDED FOR THE PURPOSES OF CALCULATION OF RECEIPT U/S 10(23C)(IIIAD) OF THE AC T. THUS, RECEIPTS OF THE APPELLANT, WHICH SHOULD BE TAKEN FO R THE PURPOSES OF SECTION 10(23C)(IIIAD) WOULD BE LESS TH AN RS, 1 CRORE AND SO THE CASE OF THE APPELLANT WAS DULY COV ERED BY SECTION 10(23C)(IIIAD) OF THE ACT. ALTERNATE SUBM ISSION OF THE APPELLANT IS THAT THE APPELLANT SOCIETY IS SUBS TANTIALLY FINANCED BY THE GOVERNMENT, WHICH IS ALSO CORRECT B ECAUSE PUNJAB GOVT. HAS BEEN FINANCING ALMOST ENTIRE SALARY OF THE TEACHERS EMPLOYED BY THE SOCIETY. THUS, THE CASE O F THE APPELLANT IS ALSO COVERED BY SECTION 10(23C)(IIIAB) OF THE ACT. IN VIEW OF THIS DISCUSSION, IT IS HELD THAT THE ASSESSING OFFICER W AS NOT RIGHT IN TAXING THE SURPLUS OF INCOME OVER EXPENDITURE IN TH E CASE OF THE APPELLANT, AS APPELLANT'S CASE WAS COVERED U/S 10(2 3C)(IIIAB)/ (IIIAD) OF THE ACT. GROUNDS OF APPEAL NO. 2 TO 5 AR E ALLOWED. 5. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OFFICER. THE LD. DR SUBMITTED THAT SECTION 10(23C)( IIIAD) NOWHERE SPECIFIES AS TO WHAT CONSTITUTES AGGREGATE ANNUAL RECEIPT. HE HAS SUBMITTED THAT NO WORDS HAV E TO BE ADDED IN THE STATUTE. HE HAS REFERRED TO RULE 2 BBB OF THE IT RULES AND SUBMITTED THAT AS PER THIS RULE , THE SUBSTANTIAL FINANCE BY THE GOVERNMENT WOULD BE CONSIDERED IN FAVOUR OF THE ASSESSEE IF THE GOVERNM ENT GRANT TO SUCH UNIVERSITY OR OTHER EDUCATIONAL INSTI TUTION ETC. EXCEEDS 50% OF THE TOTAL RECEIPTS INCLUDING AN Y VOLUNTARY CONTRIBUTIONS. THE LD.DR, THEREFORE, SUBM ITTED THAT ASSESSEE, WOULD NOT BE ENTITLED FOR DEDUCTION UNDER BOTH THE PROVISIONS. 5(I) ON THE OTHER HAND, LD. COUNSEL FOR THE ASSES SEE RELIED UPON ORDER OF THE LD. CIT(APPEALS) AND REITE RATED THE SUBMISSIONS MADE BEFORE HIM. HE HAS SUBMITTED 6 THAT IT IS NOT IN DISPUTE THAT ASSESSEE SOCIETY IS EXISTING SOLELY FOR IMPARTING EDUCATION AND ASSESSEE IS SUBSTANTIALLY FINANCED BY THE PUNJAB GOVERNMENT. H E HAS SUBMITTED THAT ASSESSING OFFICER AT THE TIME OF PASSING OF THE ORDER HELD THAT ASSESSEE WAS RECEIVI NG ONLY 25.6% OF THE TOTAL RECEIPTS AS GRANTS FROM GOVERNMENT, THEREFORE, SAME CANNOT BE COVERED UNDER WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. HE HAS SUBMITTED THAT ASSESSING OFFICER HAS NOT DOUBTE D THAT ASSESSEE SOCIETY EXISTS SOLELY FOR EDUCATIONAL PURPOSES. THE ONLY ISSUE WAS REGARDING TOTAL RECEI PTS AND SUBSTANTIAL FUNDING BY THE GOVERNMENT. HE HAS SUBMITTED THAT THE GRANT-IN-AID AND OTHER GRANTS RECEIVED FROM THE OTHERS WHEN TAKEN UP TOTALLY, SAM E WOULD COME TO 34.56% AND THE SAME WOULD NOT PARTAKE CHARACTER OF RECEIPTS OF EDUCATIONAL INSTITUTION. I F THE SAME AMOUNT IS EXCLUDED, TOTAL RECEIPTS OF THE ASSE SSEE WOULD BE LESS THAN RS. 1 CRORE, THEREFORE, ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER BOTH THE PROVISIONS. HE HAS SUBMITTED THAT 95% GRANT-IN-AID BY PUNJAB GOVERNMENT WAS FOR EXPENDITURE ON SALARY ETC . AND VOCATIONAL COURSE GRANT IS RECEIVED FROM THE UG C FOR RUNNING VOCATIONAL COURSE. DONATION FROM HANSALIWA LE SANTJI WAS MEANT FOR BUILDING PURPOSES AND OTHER DONATIONS HAVE BEEN RECEIVED FOR SPECIFIC PURPOSES, THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF LD . CIT(APPEALS) IN ALLOWING RELIEF TO THE ASSESSEE. 7 6. I HAVE CONSIDERED RIVAL SUBMISSIONS. THE TOTAL RECEIPTS OF THE ASSESSEE HAVE BEEN CONSIDERED BY TH E ASSESSING OFFICER AFTER CONSIDERING THE GRANTS RECE IVED BY ASSESSEE, THE ASSESSING OFFICER FOUND THAT THE G RANT RECEIVED BY THE ASSESSEE IS ONLY 25.6% OF THE TOTAL RECEIPTS. THEREFORE, ASSESSING OFFICER DID NOT ALL OW BENEFIT TO THE ASSESSEE UNDER SECTION 10(23C)(IIIAB ) OF THE ACT. THE LD. DR REFERRED TO THE PROVISIONS OF RULE 2BBB OF THE IT RULES IN WHICH 50% OF THE TOTAL RECE IPTS HAVE BEEN PRESCRIBED FOR CONSIDERING WHETHER ASSESS EE IS SUBSTANTIALLY FINANCED BY THE GOVERNMENT FOR ANY PREVIOUS YEAR. THE LD. DR ADMITTED THAT THE SAID R ULE IS APPLICABLE AND INSERTED INTO ACT W.E.F. 12.12.2014, THEREFORE, THIS RULE WOULD NOT APPLY TO THE ASSESSM ENT YEAR UNDER APPEAL I.E. 2003-04. EVEN IN THE GROU ND OF APPEAL, THE REVENUE HAS CONTENDED THAT THE TOTAL FI NANCE RECEIVED FROM THE GOVERNMENT WAS ONLY 25.6% OF THE TOTAL RECEIPTS AS IS MENTIONED BY THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AS WELL. HON'BLE KARNATAKA HIGH COURT IN THE CASE OF DIT(EXEMPTIONS) VS DHAMAPAKASHA RAJAKARYA PRASAKTA B.M. SREENIVASAIAH EDUCATIONAL TRUST 372 ITR 307 HELD AS UNDER : THE ASSESSEE WAS RUNNING A NUMBER OF EDUCATIONAL INSTITUTIONS. THE ASSESSING OFFICER, FOR THE ASSESSM ENT YEARS 2003-04 AND 2005-06, HELD THAT THE ASSESSEE WA S NOT ENTITLED TO THE BENEFIT CLAIMED UNDER SECTION 11 OF INCOME-TAX ACT, 1961. HE DID NOT GO INTO THE QUESTION OF EXCLUSION CLAIMED BY THE ASSESSEE UNDER SECTION 8 10(23C)(IIIAB). THE COMMISSIONER (APPEALS) GRANTED THE RELIEF TO THE ASSESSEE BUT HE DECLINED TO GRANT THE RELIEF UNDER SECTION 10(23C)(IIIAB). THE TRIBUNAL GRANTED R ELIEF TO THE ASSESSEE. ON APPEALS: HELD, DISMISSING THE APPEALS, THAT THE MATERIAL ON RE CORD DISCLOSED THAT THE GOVERNMENT HAS FINANCED THE ASSE SSEE- INSTITUTIONS AND ITS SHARE WAS 25 CENT. IT WAS NOT IN DISPUTE THAT THE ASSESSEE IS CARRYING ON ITS ACTIVITIE S OF IMPARTING EDUCATION. IT IS NOT EXISTING FOR THE SAKE OF PROFIT-MAKING. WHEN 25 PER CENT, OF THE FINANCE TO TH E ASSESSEE-INSTITUTIONS FLOWED FROM THE GOVERNMENT IT CONSTITUTED SUBSTANTIAL FINANCE AND, THEREFORE, IT S ATISFIED ALL THE LEGAL REQUIREMENTS PROVIDED UNDER SECTION 10(23C)(IIIAB). 7. IN THIS JUDGEMENT, HON'BLE HIGH COURT CONSIDERED THAT WHEN 25% OF THE FINANCE TO THE ASSESSEE INSTIT UTION IS RECEIVED FROM THE GOVERNMENT, IT CONSTITUTE SUBSTANTIAL FINANCE AND SATISFIED THE REQUIREMENTS OF SECTION 10(23C)(IIIAB) OF THE ACT. IT IS NOT IN DI SPUTE THAT ASSESSEE SOLELY EXISTS FOR EDUCATIONAL PURPOSE S. THEREFORE, ASSESSEE IS ENTITLED FOR DEDUCTION/EXEMP TION UNDER SECTION 10(23C)(IIIAB) OF THE ACT. FURTHER, THE LD. CIT(APPEALS) FOUND THAT ASSESSEE'S TOTAL RECEIPTS W ERE OF RS. 1.48 CR OUT OF WHICH 95% GRANT-IN-AID WAS RS. 40,01,416/-, VOCATIONAL COURSE GRANT WAS RS. 9 LACS . GRANT-IN-AID RECEIVED FROM THE GOVERNMENT AND FROM UGC WOULD NOT CONSTITUTE THE RECEIPTS OF EDUCATIONA L INSTITUTION. FURTHER, DONATIONS ARE MEANT FOR SPEC IFIC PURPOSES I.E. FOR BUILDING PURPOSES AND OTHER DONAT IONS 9 WERE ALSO SPECIFIC TOWARDS THE CORPUS OF THE ASSESS EE. THEREFORE, GRANT-IN-AID GIVEN BY THE PUNJAB GOVERNM ENT TOWARDS PAYMENT OF SALARY COULD NOT BE CONSTITUTED AS PART OF THE RECEIPTS OF THE ASSESSEE. SIMILARLY, R ECEIPTS FROM UGC FOR RUNNING VOCATIONAL COURSE WOULD NOT BE RECEIPT OF THE ASSESSEE. DONATIONS ARE MEANT FOR SPECIFIC BUILDING PURPOSES, THEREFORE, LD. CIT(APPE ALS) WAS JUSTIFIED IN HOLDING THAT THESE ARE NOT RECEIPT S OF THE ASSESSEE EDUCATIONAL INSTITUTION. WHEN THESE AMOUNTS ARE REDUCED FROM THE TOTAL RECEIPTS OF THE ASSESSEE, THE TOTAL RECEIPTS FROM EDUCATIONAL INSTI TUTION WOULD BE LESS THAN RS. 1 CRORE. THEREFORE, ASSESSE E WOULD BE ENTITLED FOR DEDUCTION/EXEMPTION UNDER SEC TION 10(23C)(IIIAD) OF THE INCOME TAX ACT. I DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS). I CONFIRM HIS FINDINGS AND DISMISS APPEAL OF THE REVENUE. 7. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 20 TH JULY,2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH.