M/s Punjabi University , Patiala V. CIT(E), Chandigarh

ITA 1080/CHANDI/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7547 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12A; 73; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1080/CHD/2017 (ASSESSMENT YEAR: 2016-17) M/S PUNJABI UNIVERSITY VS. THE CIT PATIALA CHANDIGARH PAN: AAAJT2610D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. H.R. SALDI DEPARTMENT BY : SHRI. D.S. KALYAN DATE OF HEARING : 11/04/2018 DATE OF PRONOUNCEMENT : 09/07/2018 O R D E R PER DR.B.R.R.KUMAR, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. CIT(E), CHANDIGARH, DATED 29/04/2017. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1.THE LD. CIT(E) HAS WRONGLY AND ARBITRARILY REJECT ED THE APPLICATION FOR APPROVAL U/S 10(23C)(VI) WITHOUT ANY BASIS AND MATERIAL ON R ECORD. 2. THE LD. CIT HAS WRONGLY HELD THAT THE APPELLANT WAS WRONGLY CLAIMING EXEMPTION U/S 10(23C)(IIIAB)ALTHOUGH IT WAS ON RECO RD THAT THE UNIVERSITY WAS SUBSTANTIALLY FINANCED BY THE STATE GOVERNMENT AND AS SUCH WAS NOT REQUIRED TO FILE THE RETURNS. FURTHER THE SAME IS IRRELEVANT FO R APPROVAL U/S 10(23C)(VI). 3. THE LD. CIT(E) WRONGLY WORKED OUT THE SURPLUS / PROFIT ALTHOUGH THERE WERE HUGE LOSSES. 4. THE LD. CIT(E) WRONGLY PRESUMED THAT THE OBJECTS AND ACTIVITIES OF THE UNIVERSITY ARE NOT GENUINE AND CANNOT BE EXAMINED IN THE ABSEN CE OF INCOME TAX RETURNS. THIS PRESUMPTION IS TOTALLY AGAINST THE FACTS ON RE CORDS. 5. THAT THE REJECTION OF THE APPLICATION IS ONLY ON PRESUMPTION AND AGAINST ALL THE ACTUAL FACTS. AS SUCH THE CIT(E) BE DIRECTED TO GRA NT APPROVAL UNDER SECTION 10(23C)(VI). 6. THE ORDER OF THE LD. CIT(E) IS AGAINST THE WELL SETTLED LAW BY THE HONORABLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PINE GROVE INTERNATIONAL CHARITABLE TRUST AND OTHERS VS. UNION OF INDIA-327 ITR PAGE NO. 73 AND CONFIRMED BY THE HONORABLE SUPREME COURT IN THE CASE OF QUEE NS EDUCATIONAL SOCIETY VS. 2 CIT-372 ITR PAGE NO. 699. 3. THE APPLICANT SOCIETY HAD FILED AN APPLICATION I N FORM NO.56D ON 22.4.2016 SEEKING APPROVAL U/S 10(23C)(VI) OF THE A CT. THE SAME WAS REJECTED BY THE LD.CIT(EXEMPTIONS) FOR THE REASON THAT THE ASSE SSEE HAD NEVER IN THE PAST FILED ITS RETURN OF INCOME, CLAIMING TO BE EXEMPT U /S 10(23C)(IIIAB), OF THE ACT, WHICH WAS INCORRECT. FURTHER, THE LD.CIT(EXEMPTIONS ) STATED THAT THE ASSESSEE HAS BEEN RECEIVING GRANTS FROM PUNJAB GOVERNMENT ON AN INTERMITTENT BASIS ONLY. SUBSEQUENTLY THE AMENDMENT IN PROVISIONS OF SECTION 10(23C)(IIIAB) W.E.F 01/04/2015 ONLY IF THE GRANT IS MORE THAN 50%, THE ASSESSEE IS TO BE TREATED AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 4. THE LD.CIT(E) STATED THAT IN THE ABSENCE OF RETU RN OF INCOME AND OTHER RELEVANT DOCUMENTS, IT WAS DIFFICULT TO APPRAISE TH E ACTIVITIES OF THE INSTITUTION DURING THE PAST SEVERAL YEARS AND, THEREFORE, THERE WAS NO WAY THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT SOCIETY COULD BE CORROBORATED WITH ITS STATED AIMS AND OBJECTS. 4.1 LD.CIT(E) FURTHER TOOK NOTE OF THE FACT THAT TH E APPLICANT SOCIETY DID NOT HAVE PAN WHILE DENYING APPROVAL TO THE APPLICANT/ A SSESSEE THE LD. CIT(A) OBSERVED THAT THE UNIVERSITY IS SUBSTANTIALLY FINAN CED (AS CLAIMED) BY THE GOVERNMENT BUT HAS NEVER FILED ITS INCOME TAX RETUR N TILL DATE. THE APPLICANT HAS FURTHER CLAIMED THAT THE UNIVERSITY HAS BEEN ESTABL ISHED SOLELY FOR PROVIDING THE EDUCATION IN THE AREA BY THE GOVERNMENT OF PUNJAB A ND WAS NOT REQUIRED TO FILE THE INCOME TAX RETURN BEING OUT RIGHTLY EXEMPT UNDE R SECTION 10(23C)(IIIAB). THE FINANCIAL STATEMENTS AND THE WRITTEN REPLY OF THE A PPLICANT ALSO CONFIRMS THAT THE GRANTS RECEIVED FROM THE PUNJAB GOVERNMENT FALL IN THE BRACKET OF 17 TO 20 % OF THE TOTAL GROSS RECEIPT FOR ALL THE PRECEDING YEARS . THEREFORE, IT IS IMPORTANT TO MENTION HERE THE CLARIFICATION OF THE TERM 'SUBSTAN TIALLY FINANCED' AS EXPLAINED IN RULE 2BBB OF THE INCOME TAX RULE, 1962 INSERTED BY THE IT RULES, 2014, AS UNDER: 'FOR THE PURPOSES OF SUB-CLAUSES (IIIAB) AND (NINE) OF CLAUSE (23C) OF SECTION 10, ANY UNIVERSITY OR OTHER EDUCATIONAL INS TITUTION, HOSPITAL OR OTHER INSTITUTION REFERRED THEREIN, SHALL BE CONSID ERED AS BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT FOR ANY PRE VIOUS YEAR, IF THE GOVERNMENT GRANT TO SUCH UNIVERSITY OR OTHER EDUCAT IONAL INSTITUTION, HOSPITAL OR OILIER INSTITUTION EXCEEDS FIFTY PERCEN T OF THE TOTAL RECEIPTS INCLUDING ANY VOLUNTARY CONTRIBUTIONS, OF SUCH UNIV ERSITY OR OTHER EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITUT ION, AS THE CASE MAY BE DURING THE RELEVANT PREVIOUS YEAR.' 3 4.2 LD.CIT(E) OBSERVED THAT T HE CLAIM OF THE APPLICANT THAT IT FALLS UNDER THE DEFINITION OF SECTION 10(23C)(IIIAB) DOES NOT HOLD ANY GROUND IN VIEW OF THE RULE MENTIONED ABOVE. FURTHER, THE POSITION TAKEN BY THE UNIVERSITY THAT IT WAS NOT REQUIRED TO FILE RETURNS IF IT CLAIMED TO BE COVERE D UNDER SECTION 10(23C)(IIIAB) IS PATENTLY MISPLACED. IT IS A WELL ESTABLISHED PRINCI PLE THAT TO AVAIL THE BENEFITS OF THE CLAUSES BENEFICIAL TO THE ASSESSEES CLAIMS HAVE TO BE MADE WHICH IN INCOME TAX PROCEEDINGS THAT CAN BE DONE BY NO OTHER MEANS BUT FILING RETURNS. IN THE INSTANT CASE THERE IS A VIOLATION OF PROVISI ONS OF SECTION 139(4C)(E) OF THE INCOME TAX ACT, 1961 WHICH MAKES IT MANDATORY TO FU RNISH A RETURN IN THE PRESCRIBED FORM IF THE INCOME OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE (IIIAB) OF SECTION 10(23C ) EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX. THE APPLICANT MAY POS SIBLY TAKE THE PLEA THAT IT HAD NOT BEEN MANDATED IN THE ACT. THE RECENTLY INCO RPORATED PROVISION HOWEVER CLARIFIES THE LEGISLATIVE INTENT. FURTHER I N THE ABSENCE OF RETURNS OF INCOME IN THE PAST THE ACTIVITIES AND THE GENUINENE SS THEREOF CANNOT BE EXAMINED. 4.3 HOLDING THIS THE LD. CIT(A) REJECTED THE APPLIC ATION FOR APPROVAL UNDER SECTION 10(23C)(VI) OF THE INCOME TAX ACT. 5. DURING THE COURSE OF HEARING BEFORE US THE LD. A R STATED THAT ALL THE ALLEGATIONS LEVELED ON THE APPLICANT SOCIETY WERE I NCORRECT AND IRRELEVANT FOR THE GRANT OF APPROVAL U/S 10(23C)(VI) OF THE ACT. THE LD. AR STATED THAT THE ONLY TWIN CONDITIONS TO BE EXAMINED BY THE LD.CIT(E) WHI LE GRANTING APPROVAL WAS THE GENUINENESS OF THE OBJECTS AND OF THE ACTIVITIE S OF THE APPLICANT SOCIETY. THE LD. AR STATED THAT WHETHER THE APPLICANT SOCIET Y HAD FILED RETURN IN THE PAST OR NOT OR THAT IT HAD PAN OR NOT OR THE FACT THAT I T SHOULD HAVE CLAIMED THE BENEFIT U/S 10(23C)(IIIAD) OR U/S 10(23C)(VI) WERE NOT RELEVANT FOR THE PURPOSE OF GRANT OF APPROVAL AND THE LD.CIT(E) BEING GUIDED BY THESE FACTORS ALONE HAD, THEREFORE, ERRED IN REFUSING GRANT OF APPROVAL. TH E LD. AR FURTHER RELIED ON THE CIRCULAR NO. 351 [F.NO. 142(32)/82-TPL], DT. 26/11/ 1982 REGARDING THE FILING OF THE RETURNS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN RECEIVED GRANTS IN THE RANGE OF 25% TO 33% IN THE EARLIER YEARS AS AGAINST THE OBSERVATION OF LD. CIT(E) WHICH WAS 17% TO 20%. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE LD.CIT(E). 4 7. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S. WE ARE AWARE OF THE ORDER PASSED BY THE COORDINATE BENCH IN THE CASE OF THE ASSESSEE PERTAINING TO DENYING OF REGISTRATION UNDER SECTION 12A IN ITA NO . 1460/CHD/2016 FOR THE A.Y. 2016-17 WHEREIN THE MATTER HAS BEEN RESTORED BACK T O THE FILE OF LD. CIT(E) FOR RECONSIDERATION OF THE APPLICATION FOR GRANT OF REG ISTRATION. SINCE THE PROVISIONS OF SECTION 10(23C)(VI) ARE MORE STRINGENT AND SPECI FIC IN NATURE, WE HEREBY RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT( E) TO RECONSIDER THE FACTS MENTIONED THEREON WHILE DETERMINING THE ISSUE OF AL LOWING THE APPLICATION UNDER SECTION 10(23C)(VI). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09/07/2018 AG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR