ACIT, Central Circle-1(1), Hyd, Hyderabad V. Sri Venkata Sai Educational Society, Hyd, Hyderabad

ITA 1113/HYD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2621 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 25-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Depreciation; Search and seizure; Charitable institution; Benefit of exemption
• Section: 143(3); 12A; 12; 11

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1113/HYD/2015 ASSESSMENT YEAR: 2011-12 THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(1), HYDERABAD VS. M/S SRI VENKATA SAI EDUCATIONAL SOCIETY, HYDERABAD. PAN AABTS9158C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJEEV BENJWAL ASSESSEE BY : SHRI V. RAGHAVENDRA RAO DATE OF HEARING : 11-01-2018 DATE OF PRONOUNCEMENT : 24-01-2018 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE CIT(A)-XI, HYDERABAD DATED 01-06-2015. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT OBTAINING APPROVAL OF THE PRESCRIBED AUTHORITY IS MANDATORY AS PER THE PLAIN MEANING OF THE SEC. 10(23C)(VI) OF THE IT ACT WHEREVER THE AGGREGATE GROSS RECEIPTS OF EDUCATIONS ARE OVER AND ABOVE RS. 1 CRORE. 3. THE LD. CIT(A) ERRED ON FACTS AND CIRCUMSTANCES, IN LAW TO APPRECIATE THAT SEC 10(23C)(VI) AS SUCH IS NOT A REPLACEMENT OF SEC 10(22) AND 10(22A) AS STATED IN THE APPELLATE ORDER BUT ONLY SUB CLAUSES (III)(AD) AND (III)(AC) ARE REPLACEMENTS OF THE ERSTWHILE SEC. 10(22) AND 10(22A) RESPECTIVELY. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT IT WAS SEC. 10(22) THAT PROVIDED FOR EXEMPTION OF THE 2 ITA NO. 1113/HYD/2015 VENKATA SAI EDUCATIONAL SOCIETY, HYDERABAD. EDUCATIONAL INCOME OF THE TRUSTS, SOCIETIES ETC. AND NOT SEC. 11. 5. THE LD. CIT(A) ERRED IN NOT SUSTAINING THE DISALLOWANCE OF DEPRECIATION MADE BY THE AO BASING ON APEX COURT ORDER IN THE CASE OF ESCORTS & OTHERS VS UNION OF INDIA (199 ITRR 44). 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A SOCIETY ENGAGED IN RUNNING OF EDUCATIONAL INSTITUTIONS. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2011-12 ON 29-09- 2011 WHICH WAS REVISED ON 07-05-2012 DECLARING A TOTAL INCOME OF RS. NIL AFTER CLAIMING EXEMPTION U/S 11 OF THE IT ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT, THE A.O OBSERVED THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION 12A I.E ON 01-04-2000 AND CLAIMED EXEMPTION U/S 11 OF THE IT ACT. OBSERVING THAT FOR THE A.Y 2011-12, THE ASSESSEES GROSS RECEIPTS HAVE EXCEEDED RS. 1 CRORE, THE A.O HELD THAT THE ASSESSEE IS LIABLE TO GET MANDATORY APPROVAL U/S 10(23C)(VI) OF THE ACT. OBSERVING THAT THE ASSESSEE HAS NOT OBTAINED THE APPROVAL 10(23C)(VI) OF THE ACT, THE A.O DENIED THE EXEMPTION U/S 11 OF THE ACT AS WELL. 3. AGGRIEVED, THE ASSESSE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES CASE FOR THE A.YS 2003-04 TO 2009-10. AGAINST THE RELIEF GRANTED BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A), AT PARA 4.3 OF HIS ORDER HAS FOLLOWED ITAT DIRECTIONS TO HOLD AS UNDER: 3 ITA NO. 1113/HYD/2015 VENKATA SAI EDUCATIONAL SOCIETY, HYDERABAD. 04.3. THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. SIMILAR ISSUE HAS BEEN DECIDED BY CIT(A)-1, HYDERABAD IN APPELLANTS OWN CASE FOR A.Y 2010-11 WHICH IS REPRODUCED HEREUNDER: WITH REGARD TO THE GROUND RAISED IN RESPECT OF DENIAL OF EXEMPTION U/S. 11 BY THE A.O, IT MAY BE NOTED THAT FOLLOWING THE DECISION OF HONBLE ITAT, HYD IN ASSESSEES OWN CASE, MY PREDECESSOR VIDE APPELLATE ORDER DATED 8-6- 2011, HAS ALLOWED THE BENEFIT OF EXEMPTION U/S 11FOR THE ASSESSMENT YEAR 2003-04, 2004-05 AND 2006-07 SUBJECT TO FULFILMENT OF OTHER CONDITIONS. THE BENEFIT OF EXEMPTION U/S 11 FOR A.Y 2005-06, 2007-08 TO 2009 -10 WAS ALSO ALLOWED TO THE APPELLANT-SOCIETY BY MY PREDECESSOR VIDE ORDER IN ITA NOS. 418, 420 TO 422/CC-1, HYD/CIT(A)- 1/2009-10 DATED. 31-01-2012. RESPECTFULLY FOLLOWING THE SAME, THE AO IS DIRECTED TO ALLOW THE EXEMPTION U/S.11 TO THE APPELLANT AS THE SOCIETY IS STILL ENJOYING THE BENEFIT OF SEC.12A OF THE I. T. ACT. AS LONG AS THE SOCIETY ENJOYS THE REGISTRATION U/S.12A, BENEFIT OF SEC. 11 AND 12 CANNOT BE DENIED TO THE SOCIETY UNLESS AND UNTIL OTHER CONDITIONS SPECIFIED THEREIN ARE NOT COMPLIED WITH. SEEKING EXEMPTION U/S.10(23C)(VI) IS ONLY AN OPTION AVAILABLE TO THE CHARITABLE INSTITUTIONS TO AVAIL THE BENEFIT AND IT IS NOT MANDATORY FOR ALL CHARITABLE ORGANIZATIONS WHOSE GROSS RECEIPTS EXCEEDING ONE CRORE ARE REQUIRED TO OBTAIN APPROVAL UNDER THIS SECTION. PROVISION OF SEC.10(23C)(VI) IS A SEPARATE CODE BY ITSELF AND PROVIDES FOR EXEMPTION OF RECEIPTS SUBJECT TO THE CONDITIONS PRESCRIBED THEREIN. SEC. 11 AND 12 HAVE NO APPLICATION TO AN INSTITUTION OR TRUST APPROVED U/S. 10(23C)(VI) OF IT ACT. THEY OPERATE INDEPENDENTLY AND THERE IS NO COMPULSION ON THE PART OF THE TRUST/INSTITUTION TO OBTAIN APPROVAL U/S.10(23C)(VI) OF I.T .ACT. IN FACT, APPROVAL U/S 10(23C)(VI) IS NOT AN AUTOMATIC AND IT REQUIRES STRICT FULFILMENT OF CONDITIONS PRESCRIBED THEREIN. UNLESS THE OBJECTS OF THE INSTITUTION 4 ITA NO. 1113/HYD/2015 VENKATA SAI EDUCATIONAL SOCIETY, HYDERABAD. ARE SOLELY FOR THE PURPOSE OF EDUCATION, APPROVAL IS NOT ACCORDED TO SUCH INSTITUTIONS. IN RESPECT OF CHARITABLE ACTIVITIES OF THE SOCIETY ARE CONCERNED, THE AO COULD NOT BRING IT ON RECORD ANY VIOLATIONS OF THE OBJECTS OF THE SOCIETY. THE SOCIETY HAS BEEN ESTABLISHED IN A BACKWARD DISTRICT OF MAHABOOBNAGAR TO IMPART EDUCATION AND TO PROVIDE MEDICAL FACILITIES TO THE POOR AND NEEDY. SEARCH AND SEIZURE OPERATIONS ALSO DO NOT THROW LIGHT ON ANY OF THE ACTIVITIES OF THE SOCIETY THAT ARE NON CHARITABLE IN CHARACTER, WHATEVER BENEFIT DERIVED BY THE SECRETARY IS BY MISUSING HIS POSITION RATHER THAN SOCIETY CONFERRING BENEFIT ON HIM. THEREFORE, THE SAME CANNOT BE HELD AGAINST THE SOCIETY THAT RELATED PERSON IS BENEFITED BY THE APPELLANT. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BENEFIT OF EXEMPTION U/S.11 TO THE SOCIETY FOR THIS YEAR UNDER APPEAL ALSO. CONSEQUENTLY, THE AO HAS TO RECAST THE INCOME AND EXPENDITURE A/C AND, IF ANY SURPLUS IN EXCESS OF 15% IS RESULTED, THEN THE SAME HAS TO BE BROUGHT TO TAX'. IN VIEW OF THE ABOVE, THE A.O IS DIRECTED TO ALLOW THE BENEFIT OF EXEMPTION U/S 11 TO THE APPELLANT-SOCIETY FOR A.Y 2011-12 ALSO AND CONSEQUENTLY, THE A.O HAS TO RECAST THE INCOME AND EXPENDITURE A/C AND IF ANY SURPLUS IN EXCESS OF 15% IS RESULTED, THEN THE SAME HAS TO BE BROUGHT TO TAX. 4.1 SINCE, THE CIT(A) HAS FOLLOWED THE DECISION OF THE CO- ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR IN SIMILAR SET OF FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). HENCE, WE REJECT THE REVENUES GROUNDS NO. 2 TO 4. AS REGARDS GROUND NO. 5, WE FIND THAT THIS ISSUE IS NOW FINALLY SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RAJASTHAN & GUJARAT CHARATABLE FOUNDATION POONA, WHEREIN THE DECISION OF THE HONBLE COURT IN THE CASE OF CIT VS INSTITUTE 5 ITA NO. 1113/HYD/2015 VENKATA SAI EDUCATIONAL SOCIETY, HYDERABAD. OF BANKING PERSONNEL SELECTION (IBPS), [2003] 264 ITR 110 (BOMBAY) HAS BEEN UPHELD. IT WAS HELD THAT THE INCOME OF AN INSTITUTION WAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES, AFTER PROVIDING FOR ALLOWANCE OF NORMAL DEPRECIATION. RESPECTFULLY FOLLOWING THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS IN LINE WITH THE RATIO LAID DOWN DECISION OF THE HONBLE SUPREME COURT. HENCE, THE GROUND NO. 5 IS ALSO REJECTED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2018. SD/- SD/- (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 24 TH JANUARY, 2018 KRK 1 M/S SRI VENKATA SAI EDUCATIONAL SOCIETY, 16-2-740/51, KALYAN NAGAR, GADDIANNARAM, HYDERABAD. 2 ACIT, CENTRAL CIRCLE-1(1), HYDERABAD. 3 CIT(A)-XI, HYDERABAD 4 PR.CIT, CENTRAL RANGE-1, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE