M/s Prakash Education Society, Karnal V. CIT (Exemptions), Chandigarh

ITA 1083/CHANDI/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4551 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 17-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B M MONGA SHRI ROHIT KAURA
• Keywords: Charitable institution; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH !, ' # $ , . .. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 1083/CHD/2016 UNDER SECTION 10(23C)(VI) M/S PRAKASH EDUCATION SOCIETY, 794/13 URBAN ESTATE, KARNAL THE CIT(EXEMPTIONS) CHANDIGARH ./ PAN NO: AAATP3856H / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. B.M. MONGA, SHRI ROHIT KAURA ! / REVENUE BY : SHRI. RAM MOHAN SINGH ' !# $/ DATE OF HEARING : 30/05/2019 %&'()* $/ DATE OF PRONOUNCEMENT : 30/05/2019 ')/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(EXEMPTIONS), CHANDIGARH DT. 31/08/2016. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE ORDER OF ID. CIT (EXEMPTIONS), IS BAD IN L AW AS IT DID NOT APPRECIATE THAT THE CONDITIONS LAID DOWN UNDER SECTION 10(23C) (VI) OF THE INCOME-TAX ACT, 1961 WERE DULY FULFILLED BY APPELLANT SOCIETY AND A S SUCH, THE EXEMPTION AS CLAIMED SHOULD HAVE BEEN ALLOWED. 2. THAT THE ID. CIT (EXEMPTIONS) HAS ERRED IN INTERPRE TING THE PROVISIONS OF SECTION 10(23C)(VI) OF THE IT ACT, WHILE HOLDING TH AT IT IS APPLICABLE ONLY TO UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS AND NO T TO THE SOCIETY, THAT TOO AGAINST THE 'PRINCIPLES OF NATURAL JUSTICE'. 3. THAT THE ID. CIT (EXEMPTIONS) DID NOT APPRECIATE TH AT THE APPELLANT SOCIETY IS RUNNING ONLY ONE SCHOOL UNDER ITS AEGIS, WITHOUT ANY PROFIT MOTIVE ON CHARITABLE BASIS AND THERE IS NO VIOLATION OF THE OBJECTS OF T HE SOCIETY, AS NO NON-CHARITABLE ACTIVITY WAS CARRIED ON DURING THE YEAR. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERR ED WHILE REJECTING THE REGISTRATION U/S 10(23C)(VI) ON THE PREMISE OF PURCHASE/ADDING TRANSPORT VEHICLE/SCHOOL BUS WITHOUT APPRECIATING THAT THESE ARE SOLELY FOR THE PURPOSES OF TRANSPORTATION OF SCHOOL CHILDREN ONLY AND THERE IS NO SEPARATE SOURCE OF INCOME AND RECEIPTS FROM THE SAME IS UTILIZED SOLELY AND E XCLUSIVELY FOR THE PURPOSE OF EDUCATION ONLY . 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERR ED IN HOLDING THAT USE OF SEDANS-CAR BY AN ENTITY THAT CLAIMS TO BE CH ARITABLE & ALTRUISTIC IS NOT TENABLE AT ALL, WHEREAS THE SAID VEHICLE IS BEING U SE WHOLLY & EXCLUSIVELY FOR THE EDUCATIONAL ACTIVITIES OF THE SOCIETY. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERR ED IN HOLDING THAT THE SALARY STRUCTURE OF THE SOCIETY IS PITIABLY LOW , WHERE AS IT IS AS PER THE MARKET RATES PREVALENT IN THE VICINITY. 2 7. THAT THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPT IONS) HAS GROSSLY ERRED IN HOLDING THAT THE APPLICANT SOCIETY IS CHAR GING EXORBITANT FEES, WITHOUT APPRECIATING THE ACTUAL FACTS & FIGURES AND TAKING AND REPRODUCING THE CHART OF SOME OTHER SOCIETY/SCHOOL IN PARA 7.1 OF THE IMPUGN ED ORDER. 8. THAT THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPT IONS) HAS GROSSLY ERRED IN MISINTERPRETING THE PROVISIONS OF SECTION 10(23C)(VI) WHEREIN, THE CONDITION IS WITH REGARD TO EXPENDITURE/UTILIZATION OF INCOME . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED AN APPLICATION IN FORM NO. 56D DATED 25.08.2015 BEFORE THE LD. CIT(E) REQU ESTING FOR GRANT OF EXEMPTION / APPROVAL U/S 10(23C)(VI) OF THE INCOME TAX ACT, 1961. THE ASSESSEE IS A 'SOCIETY' REGISTERED UNDER SOCIETY'S REGISTRAT ION ACT XXI OF 1860 ON 17.05.1993 AND HAS CLAIMED EXEMPTION U/S 10(23C) (IIIAD) OF TH E I J. ACT TILL ASSESSMENT YEAR 2014-15. DURING THE F.Y. 2014-15 THE GROSS RECEIPT OF THE SOCIETY EXCEEDED RS. ONE CRORE AND THEREFORE THE SOCIETY PREFERRED TO AP PLY FOR APPROVAL U/S 10(23C)(VI) OF THE I.T. ACT. 4. THE ASSESSEE WAS ACCORDED OPPORTUNITY BY THE LD. CI T(E) VIDE LETTER DATED 03.08.2016 TO ANSWER THE VARIOUS QUERIES. AFTER AFF ORDING DUE OPPORTUNITY AND EXAMINATION OF THE DETAILS, THE LD. CIT(E) DENIED T HE GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) ON THE GROUNDS THAT A. THE SOCIETY IS ADDING TRANSPORT VEHICLES RATHER THAN RE DEPLOYING THE FUNDS ON EDUCATION AND TRANSPORTATION IS NOT MENTIO NED IN THE OBJECTS OF THE SOCIETY. B. THE SOCIETY WHICH HAS BEEN HITHERTO OWNING CARS HAS FURTHER PURCHASED ANOTHER CAR FOR RS. 13.04 LACS. C. THE SALARY STRUCTURE IS NOT IN SYNC WITH THE INS TRUCTIONS OF CBSE GUIDELINES. D. THE FEE STRUCTURE OF THE STUDENT IS TOO EXORBITA NT. 5. DURING THE HEARING BEFORE US, THE LD. AR ARGUED THAT THE OPENING VALUE OF THE CARS WAS RS. 8.30 LACS AND A VEHICLE WAS PURCHA SED FOR RS. 13.04 LACS FOR THE PURPOSE OF MEETING OBJECTS OF THE SOCIETY. THE BUS PURCHASED OF RS. 17.05 LACS IS USED ONLY FOR TRANSPORTATION OF STUDENTS AND NO COM MERCIAL PROFITS ARE EARNED 3 ON THIS OPERATIONS. FURTHER THE SCHOOL FEES IS LESS THAN RS. 1000/- WHICH CAN BE GAUZED FROM THE TABLE BELOW: REGISTRATION AND PROSPECTUS 500 ADMISSION FORM 100 ADMISSION FEE (NEW ADMISSION) 8000 RE-ADMISSION TO CLASS XI (OLD STUDENT) 4000 AMALGAMATED FUND (PAYABLE IN 3 INSTALMENTS) 3600 SECURITY 2500 CHILD WELFARE FUND 24 TUITION FEE 1 ST TO 5 TH 2470 6 TH TO 10 TH 2640 10 TH TO 12 TH 3240 ADDITIONAL SUBJECT 200 6. IT WAS FURTHER ARGUED THAT THE ASSESSEE HAS BEE N CLAIMING EXEMPTION UNDER SECTION 10(23C) (IIIAD) UPTO THE A.Y. 2014-15 AND THE SOCIETY IS EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF THE PROFIT AND HENCE RIGHTLY ELIGIBLE FOR REGISTRATION UNDER SECTION 10( 23C)(VI) OF THE INCOME TAX ACT,1961. 7. ON THE OTHER HAND THE LD.CIT (DR) VEHEMENTLY AR GUED QUOTING THE PROVISIONS OF THE ACT THAT SECTION 10(23C)(VI) IS C LEARLY APPLICABLE TO ANY 'UNIVERSITY' OR 'OTHER EDUCATIONAL INSTITUTION'. A SOCIETY OR A TRUST CANNOT CLAIM TO BE EITHER OF THEM. TRUSTS/ SOCIETIES/ SECTION 8 COM PANIES ARE ENTITLED TO CLAIM EXEMPTION AFTER REGISTRATION UNDER 12AA. A CLOSER E XAMINATION OF THE OTHER SECTIONS OF 10(23C) FURTHER REVEALS THAT WHEREVER T HE LEGISLATIVE INTENT WAS TO EXTEND BENEFITS TO TRUSTS AND SOCIETIES IT HAS BEEN DEARLY MENTIONED THEREIN. THE PROVISIONS OF SECTION 10(23C)(V) IS CASE IN POINT. FURTHER AS IS EVIDENT FROM THE PROVISIONS OF SECTION 13(6) IT IS CLEAR THAT THE AC T ACKNOWLEDGES THE CLEAR DISTINCTION BETWEEN A CHARITABLE TRUST AND AN EDUCA TIONAL INSTITUTION. THE LD. CIT(DR) MR. RAM MOHAN SINGH FURTHER ARGUED THAT A L OGIC CAN BE EXTENDED THAT SOCIETY/ TRUST ETC. ARE INCLUDED WITHIN THE SCOPE O F SECTION 10(23C) (VI) BECAUSE OF THE USE OF THE TERM 'PERSON' IN THE OPENING PREA MBLE OF THE SECTION. THIS LOGIC, HOWEVER, WOULD FAIL GIVEN THE FACT THAT A PERSON AS PER SECTION 2(31) OF THE IT. 4 ACT WOULD INVARIABLY ALSO INCLUDE AN INDIVIDUAL, HU F, COMPANY ETC THAT WOULD BELY THE LEGISLATIVE INTENT. THE INTENT IS NOT TO E XTEND THE EXEMPTION TO ALL ENTITIES COVERED BY THE DEFINITION OF PERSON BUT ONLY TO A U NIVERSITY OR OTHER EDUCATIONAL INSTITUTION. AND HENCE HE PLEADED THAT THE ORDER OF THE LD. CIT(E) NEEDS TO BE CONFIRMED. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES. TH E INCOME TAX ACT ENVISAGES EXEMPTION U/S 10(23C)(VI) TO UNIVERSITIES OR EDUCATIONAL INSTITUTION ONLY BUT NOT TO TRUSTS. THE RELEVANT PORTION OF THE ACT READS AS UNDER: (VI) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF - 'ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EX ISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, OTHER THAN THOSE MENTIO NED IN SUB CLAUSE (IIIAB) OR SUB-CLAUSE (WAD) AND WHICH MAY BE APPROVED BY THE PRESCRIBED A UTHORITY. 9. TO ALLOW THE EXEMPTION TO THE ASSESSEE TRUST , THE BARE PROVISIONS OF THE INCOME TAX ACT, 1961 ARE EXAMINED AS TO WHICH CATEG ORY OF ASSESSEES THE EXEMPTIONS ARE ALLOWED : (IIIAAC) - THE CLEAN GANGA FUND (IIIAB) - ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTE (IIIAC) - ANY HOSPITAL OR OTHER INSTITUTIONS (IIIAD) - ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTE (IIIAE) -ANY HOSPITAL OR OTHER INSTITUTIONS (IV) - ANY OTHER FUND OR INSTITUTIONS (V) - ANY TRUST (VI) - ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION (VII) - ANY HOSPITAL OR OTHER INSTITUTION THUS WE FIND DIFFERENT SUB SECTIONS / CLAUSES ARE M EANT FOR DIFFERENT CATEGORY OF ASSESSEE'S AND CLAUSE (VI) DO NOT PROVI DE FOR ANY EXEMPTION TO TRUSTS. HENCE, THE ASSESSEE HAS NOT CROSSED THE FIR ST LEVEL OF ELIGIBILITY OR THE PRIMARY FILTER TO BE ELIGIBLE FOR DEDUCTION UNDER S ECTION 10(23C)(VI). ANY ADJUDICATION ON THE OTHER GROUNDS WOULD BE ONLY ACA DEMIC IN NATURE KEEPING 5 IN VIEW THE ABOVE FINDINGS. THEREFORE WE HEREBY DEC LINE TO INTERFERE IN THE ORDER OF THE LD. CIT(E). 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . .. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 30/05/2019 &+ ,- .-)/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' // CIT 4. ' / ()/ THE CIT(A) 5. -!23 4, $ 4*, 67839/ DR, ITAT, CHANDIGARH 6. 38 :#/ GUARD FILE