ITO, Jaipur V. M/S MAHIMA SHIKSHA SAMITI, Jaipur

ITA 1149/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54261 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Additional evidence; Question of law; Fair market value; Benefit of exemption; Commercial expediency; Capital expenditure
• Section: 12A; 12AA; 10B; 205; 264; 12; 10; 11; 92

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 1149/ JP/2010 ASSESSMENT YEAR 2007-08 PAN: AAATM 1883 H THE ITO VS. M/S. MAHIMA SHIKSHA SAMITI WARD- 6(1) A-18, SHANTI PATH JAIPUR TILAK NAGAR, JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI SUNIL MATHUR ASSESSEE BY: SHRI SANJAY JHANWAR DATE OF HEARING: 4-10-2011 DATE OF PRONOUNCEMENT: 16-11-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)- II, JAIPUR DATED 01-07-2010 FOR THE ASSESSMEN T YEAR 2007-08. 2.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS TH AT THE LD. CIT(A) HAS ERRED IN ALLOWING THE BENEFIT OF EXEMPTION U/S 11 O F THE ACT WITHOUT CONSIDERING THE FACT THAT THE SOCIETY HAS EARNED HU GE SURPLUSES YEAR AFTER YEAR AND HAS ALSO VIOLATED THE PROVISIONS OF SECTIO N 13 OF THE ACT BY INCURRING EXPENSES FOR THE BENEFIT OF ITS KEY PERSO NS. 2 2.2 THE AO HAS GIVEN THE FOLLOWING CHART TO SHOW TH AT THERE HAS BEEN SUBSTANTIAL SURPLUS DURING THE YEAR. INCOME FEES 18,02,65,544/- OTHER INCOME 9,83,773/- EXPENDITURE SALARIES. ALLOWANCES & OTHER SCHOOL RUNNING EXPENSES 9,32,89,107 LOSS ON SALE OF VEHICLE 4,73,897 SURPLUS BEFORE DEPRECIATION 8,64,86,312 DEPRECIATION 1,96,94,246 SURPLUS FOR THE YEAR CARRIED TO CAPITAL FUND 6,77,9 2,066 THE ASSESSEE SOCIETY IS RUNNING FOUR INSTITUTIONS AND THE NAMES OF THESE FOUR INSTITUTIONS ARE AVAILABLE AT PARA 4.3 OF THE ASSESSMENT ORDER. SEPARATE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED FOR THE INST ITUTIONS AND CONSOLIDATED FINANCIAL STATEMENT HAS BEEN ANNEXED W ITH THE RETURN. IN ADDITION TO BOOKS OF ACCOUNTS MAINTAINED FOR FOUR I NSTITUTIONS, THE SAMITI IS ALSO MAINTAINING THE BOOKS OF ACCOUNTS AT HEAD OFFI CE. THE AO IN HIS ORDER HAS REFERRED TO THE GENERATION OF HEAVY SURPLUS FOR ALL THE PRECEDING YEARS. THE CHART AS MENTIONED BY THE AO IN HIS ORDER IS AS UNDER:- ASSESSMENT YEAR SURPLUS (RS. ) 2007-08 6,77,92,066 2006-07 5,96,81,354 2005-06 4,18,59,223 2004-05 2,80,82,530 2003-04 2,83,71,052 3 2002-03 2,98,01,918 2001-02 2,83,80,341 2000-01 2,36,72,347 1999-2000 1,62,46,018 THE AO HAS ALSO GIVEN THE DETAILS OF THE RECEIPTS A ND EXPENSES IN ALL THE FOUR INSTITUTIONS AND HAVE ALSO GIVEN THE QUANTUM O F SURPLUS BEING GENERATED BY EACH INSTITUTION. THE AO ANALYSED THE FEE CHARGE D IN EACH OF THE FOUR INSTITUTIONS. IN SEEDLING MODERN HIGH SCHOOL AND SE EDLING PUBLIC SCHOOL, THE ASSESSEE WAS CHARGING THE FEE UNDER FOLLOWING HEADS. 1. ADMISSION FEE 2. DEVELOPMENT FEE 3. ENROLMENT FEE 4. CAUTION MONEY 5. TUITION FEE 6. TERM FEE 2.3 THE INSTITUTION AS REFERRED AS SEEDLING ACADEMY OF DESIGN, TECHNOLOGY AND MANAGEMENT WAS CHARGING A FIXED FEE APPLICABLE FOR DIFFERENT COURSES THOUGH SUCH FEE VARIES FROM ONE C OURSE OF ANOTHER COURSE. ACCORDING TO THE AO, THE ASSESSEE IS CHARGING EXORB ITANT FEE AS COMPARED TO THE EXPENSES INCURRED FOR A SPECIFIC PURPOSES AND I NCLUDED UNDER THE HEAD IN WHICH SUCH FEE IS CHARGED.. THE AO HAS POINTED OUT THAT THE INSTITUTION IS CHARGING COMPUTER FEE OF AROUND RS. 4200/- PER ANNU M WHILE IT IS PAYING RS. 624/- PER ANNUM TO THE AGENCY WITH WHOM CONTRAC T FOR IMPARTING 4 COMPUTER EDUCATION HAS BEEN AWARDED. THE ASSESSEE W AS THEREFORE, ASKED BY THE AO TO JUSTIFY AS TO HOW THE INCOME IS EXEMPT U/ S 11(1) OF THE ACT AND TO SUBMIT THE DETAILS OF CHARITABLE WORK DONE BY IT . THE ASSESSEE FILED THE REPLY AND THE REPLY FILED IS AVAILABLE AT PARA 5.2 OF THE ASSESSMENT ORDER. ACCORDING TO THE AO, THE ASSESSEE IS NOT ENGAGED I N CHARITY AND THE DOMINANT PURPOSE FOR RUNNING VARIOUS INSTITUTIONS A PPEARS TO BE EARNING PROFIT. THE INSTITUTIONS OF THE SAMITI ARE BEING R UN ON COMMERCIAL BASIS BY CHARGING HEFTY FEES AND GENERATING HEAVY SURPLUS FR OM ITS EDUCATIONAL ACTIVITY. THE AO HAS POINTED OUT THAT EVEN AT THE P RIMARY LEVEL THE FEE PER CHILD IS RS. 25,000/- PER ANNUM EXCLUDING TRANSPORT CHARGES, UNIFORM EXPENSES AND BOOKS/COPIES EXPENSES. THE FEE CHARGED IS HIGHER THAN THE PER CAPITA INCOME OF INDIA. THE FUNDS OF THE SOCIETY AC CORDING TO THE AO ARE NOT BEING USED FOR CHARITABLE PURPOSES. THE AO HAS REFE RRED TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF MUNICIPAL CORPOR ATION OF INDIA VS. CHILDREN BOOK TRUST (1992) 3SCC 390 IN WHICH IT WAS OBSERVED THAT DOMINANT OBJECT OF THE SOCIETY MUST BE CHARITABLE A ND NOT TO EARN THE PROFIT. THERE MUST BE AN ELEMENT OF PUBLIC BENEFIT OR PHILA NTHROPY. THEREFORE, EDUCATION PER SE CANNOT BE REGARDED AS A CHARITABLE OBJECT OTHERWISE EVEN IF EDUCATION WAS CARRIED ON WITH A VIEW TO MAKE PROFIT , TO CALL IT A CHARITY WOULD BE UNREASONABLE. 5 2.4 THE FIGURES IN THE FINAL ACCOUNTS OF THE TRUST SHOW THAT THERE ARE HEAVY CONTRIBUTIONS FROM THE INSTITUTIONS TO THE TRUST EV ERY YEAR. SINCE THE INSTITUTIONS ARE NOT ONLY SELF SUPPORTING BUT ARE A LSO GENERATING POSITIVE INCOME, THEREFORE, THE AO HELD THAT ACTIVITIES CARR IED OUT BY THE SOCIETY ARE NOT CHARITABLE. 2.5 BEFORE THE LD. CIT(A), IT WAS CONTENDED BY THE LD. AR THAT ISSUE OF ALLOWING REGISTRATION TO THE SOCIETY AND ALLOWING E XEMPTION U/S 11 OF THE ACT STANDS DECIDED BY THE ITAT JAIPUR BENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2001-02 TO 2005-06. THE LD. CI T(A) FOR THE ASSESSMENT YEAR 2006-07 ALSO HELD THAT THE SOCIETY IS ENTITLED TO EXEMPTION U/S 11 OF THE ACT. 2.6 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. AR , THE LD. CIT(A) HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11 A FTER OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND ARGUM ENTS TAKEN BY SHRI JHANWAR QUITE CAREFULLY. THIS ISSUE H AS BEEN DISCUSSED IN DETAIL IN MY CONSOLIDATED APPELLATE OR DER PASSED IN THIS CASE FOR THE ASSESSMENT YEAR 2001-02, 2002-03 AND 2005- 06 DATED 16-09-2008 WHICH IS ALSO UPHELD BY HON'BLE ITAT JAIPUR BENCH AND THE SAME ALSO BEEN FOLLOWED BY ME IN ASSESSMENT YEAR 2006-07 WHILE DISPOSING APPEAL NO. 790/08-09 DATED 26-10-2009 IN MY CONSIDERED VIEW WHEN THERE I S NO CHANGE IN THE FACTS OF THE CASE, REASONING GIVEN BY ASSESSING 6 OFFICER AND ARGUMENTS TAKEN BY SHRI JHANWAR THEREFO RE, IN MY CONSIDERED VIEW FOR THE PRESENT ASSESSMENT YEAR ALS O THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DENYING THE EXEMPTION CLAIM U/S 11 OF THE I.T. ACT AND AO IS THEREFORE, D IRECTED TO ALLOW THE SAID EXEMPTION CLAIM U/S 11 OF THE I.T. A CT AND ACCORDINGLY THE RELEVANT GROUNDS OF APPEAL ARE HERE BY ALLOWED. 2.7 BEFORE US, THE LD. DR STATED THAT THE LD. CIT(A ) HAS DECIDED THE APPEAL OF THE ASSESSEE TRUST BY SOLELY RELYING UPON EARLIER ORDERS OF THE LD. CIT(A) AND THE TRIBUNAL IN APPEALS FOR THE EARLIER YEARS WITHOUT CONSIDERING THE CRUCIAL ASPECT OF THE FACTUAL INCONGRUENCE AND PERSISTENT INCONSISTENCY IN THE INTERPRETATION OF STATUTORY PROVISIONS PERVADIN G THROUGH THE ENTIRE SERIES OF THE APPELLATE DECISIONS RELIED UPON. THE BINDING NATURE OF THE PRECEDENTS IN THE HIERARCHICAL SYSTEM OF JUDICIAL AUTHORITIES IS ALSO SUBJECT TO CERTAIN EXCEPTIONS, SUB SILENTIO AND PER INCURAIM BEING TWO GENRES OF SUCH RULE OF EXCEPTIONS. IN EITHER CASE, THE DECISION LOOSES ITS EFFICACY AS A GOOD PRECEDENT. IT WILL BE USEFUL TO REPRODUCE THE SUBMI SSIONS OF THE LD. DR AS UNDER:- YOUR HONOURS LD. CIT(A) HAS TREATED THE EARLIER Y EARS ORDERS AS BINDING PRECEDENTS BUT IT IS HUMBLY SUBMITTED THAT THE BINDING NATURE OF PRECEDENTS IN THE HIERARCHICAL SYSTEM OF JUDICIAL A UTHORITIES IS ALSO SUBJECT TO 7 CERTAIN EXCEPTIONS, SUB SILENTIO AND PER INCURIAM B EING TWO GENRES OF SUCH RULE OF EXCEPTIONS. IN EITHER CASE THE DECISION LOOSES ITS EFFICACY AS A GOOD PRECEDENT. THE DOCTRINE OF SUB SILENTIO AND PER INCURIAM HAS BEEN ELABORATELY DISCUSSED BY THE HON. ANDHRA PRADESH HIGH COURT IN THE DECISION DT 13-08-2002 IN WP N0 141175 OF 2002 IN THE CASE OF K. SRINIVAS RAO VS STATE OF AP & ORS, WHEREIN THE HONBLE JUSTICE L NARASIMHA REDDY SPEAK ING FOR THE BENCH OBSERVED; PER INCURIAM AND SUB SILENTIO ARE EXCEPTIONS TO T HE CONCEPT OF STARE DECISIS. SIR JOHN SALMOND IN HIS TREATISE ON JURI SPRUDENCE HAS APTLY STATED THE CIRCUMSTANCES UNDER WHICH A PRECEDENT CAN BE TREATE D PER INCURIAM; 'A PRECEDENT IS NOT BINDING IF IT WAS RENDERED IN I GNORANCE OF A STATUTE OR A RULE HAVING THE FORCE OF STATUTE, I.E., DELEGATED LEGISLATION. THIS RULE WAS LAID DOWN FOR THE HOUSE OF LORDS BY LORD HALSBURY IN THE LEADING CASE (LONDON STREET TRAMWAYS V. L.C.C. (1898) A.C.375) AND FOR T HE COURT OF APPEAL IT WAS GIVEN AS THE LEADING EXAMPLE OF A DECISION PER INCU RIAM WHICH WOULD NOT BE BINDING ON THE COURT {YOUNG VS. BRISTOL AEROPLANE C O. LTD (194) K.B. AT 729 (C.A.)}. THE RULE APPARENTLY APPLIES EVEN THOUGH T HE EARLIER COURT KNEW OF THE STATUTE IN QUESTION, IF IT DID NOT REFER TO, AND HA D NOT PRESENT TO ITS MIND, THE PRECISE TERMS OF THE STATUTE. SIMILARLY, A COURT M AY KNOW OF THE EXISTENCE OF A STATUTE AND YET NOT APPRECIATE ITS RELEVANCE TO THE MATTER IN HAND; SUCH A MISTAKE IS AGAIN SUCH INCURIA AS TO VITIATE THE DECISION. EVEN A LOWER COURT CAN IMPUGN A PRECEDENT ON SUCH GROUNDS .' (SALMOND ON JURISPRUDENCE 12TH EDITION PAGES 15 1 AND 152). C.K.ALLEN, IN 'LAW IN THE MAKING' (PAGE 246) ANALYS ES THE CONCEPT OF PER INCURIAM AS UNDER: 'INCURIA MEANS LITERALLY 'CARELESSNESS', WHICH APPA RENTLY IS CONSIDERED LESS UNCOMPLIMENTARY THAN IGNORANTIA; BUT IN PRACTICE P ER INCURIAM APPEARS TO MEAN PER IGNORANTIAM. IT WOULD ALMOST SEEM THAT IGNORAN TIA JURIS NEMINEM EXCUSAT - EXCEPT A COURT OF LAW, IGNORANCE OF WHAT? THE EXAM PLE GIVEN IN THE ACTUAL RULES IN YOUNG'S CASE {YOUNG VS. BRISTOL AEROPLANE CO. LT D (194) K.B. AT 729 (C.A.)} 8 IS IGNORANCE OF A STATUTE, OR OF A RULE HAVING STAT UTORY EFFECT {SUCH AS A RULE OF THE SUPREME COURT (LANCASTER MOTOR CO. LTD. VS. BREMITH LTD (1941) 1 KB 675)}, WHICH WOULD HAVE AFFECTED THE DECISION IF THE COURT HAD BEEN AWARE OF IT.' ONE OF THE EXCEPTIONS TO THE PRINCIPLE OF STARE DEC ISIS IS WHERE THE COURT GIVES A DECISION PER INCURIAM BECAUSE THE PROVISION S OF A STATUTE OR THE AUTHORITY OF A CASE HAVE NOT BEEN BROUGHT TO THEIR ATTENTION (LORD GODDARD, CJ, IN MOORE VS. HEWITT (1947(2) AIL. ER 270). THE CONCEPT GET S ATTRACTED EITHER WHEN AN IMPORTANT PROVISION OF LAW ELUDED THE ATTENTION OF THE COURT OR WHERE THE COURT WAS ALLUSIVE TO SUCH PROVISIONS WHILE RENDERING THE DECISION. INSTANCES OF PER INCURIAM MAY ALSO ARISE WHERE THE DECISION IS RENDE RED IGNORING A BINDING PRECEDENT. THE PRINCIPLE OF SUB SILENTIO WOULD ARISE; ONCE AGA IN, IN THE WORDS OF SIR JOHN SALMOND: 'WHEN THE PARTICULAR POINT OF LAW INVOLVED IN THE D ECISION IS NOT PERCEIVED BY THE COURT OR PRESENT TO ITS MIND. THE COURT MAY CONSCIOUSLY DECIDE IN FAVOUR OF ONE PARTY BECAUSE OF POINT A, W HICH IT CONSIDERS AND PRONOUNCES UPON. IT MAY BE SHOWN, HOWEVER, THAT LO GICALLY THE COURT SHOULD NOT HAVE DECIDED IN FAVOUR OF THE PARTICULAR PARTY UNLESS IT ALSO DECIDED POINT B IN HIS FAVOUR; BUT POINT B WAS NOT ARGUED OR CONSIDERED BY THE COURT.' THE FULL BENCH OF THE HON ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. B. R. CONSTRUCTIONS (1993) 202 ITR 222 (AP) (FB), HAS DISCUSSED IN DETAIL THE GENERAL PRINCIPLES REGARDING THE BINDING NATURE OF PRECEDENT WHICH READS: THE EFFECT OF A BINDING PRECEDENT IN INDIA IS THAT THE DECISIONS OF THE SUPREME COURT ARE BINDING ON ALL THE COURTS. ARTICLE 141 OF THE CONSTITUTION EMBODIES THE RULE OF PRECEDENTS. ALL T HE SUBORDINATE COURTS ARE BOUND BY THE JUDGMENTS OF THE HIGH COURTS. A SI NGLE JUDGE OF A HIGH 9 COURT IS BOUND BY THE JUDGEMENT OF ANOTHER SINGLE J UDGE AND A FORTIORI JUDGEMENTS OF BENCHES CONSISTING OF MORE JUDGES THA N ONE. SO ALSO, A DIVISION BENCH OF A HIGH COURT IS BOUND BY THE JUDG EMENT OF ANOTHER DIVISION BENCH OR A FULL BENCH. A SINGLE JUDGE OR B ENCHES OF HIGH COURTS CANNOT DIFFER FROM THE EARLIER JUDGEMENTS OF CO-ORDINATE JURISDICTION MERELY BECAUSE THEY HOLD A DIFFERENT V IEW ON THE QUESTION OF LAW FOR THE REASON THAT CERTAINTY AND UNIFORMITY IN THE ADMINISTRATION OF JUSTICE IS OF PARAMOUNT IMPORTANCE. BUT IF THE EARLIER JUDGEMENT IS ERRONEOUS OR ADHERENCE TO THE RULE OF PRECEDENTS RE SULTS IN MANIFEST INJUSTICE, DIFFERING FROM AN EARLIER JUDGEMENT WILL BE PERMISSIBLE. FURTHER RELIANCE IS PLACED UPON THE FOLLOWING DEC ISIONS: PER INCURIAM DECISION - WHEN A DECISION IS RENDERED WITHOUT NOTICING A BINDING PRECEDENT OR IS INCONSISTENT WIT H A STATUTORY PROVISION, IT IS PER INCURIAM AND, THEREFORE, LOSES ITS EFFICA CY AS A PRECEDENT. EXCEPT THE PARTIES TO THE LIS, IT BINDS NONE [PER M. N. RAO, J., IN Y. V. ANJANEYULU VS. ITO, (1990) 182 ITR 242, 307 (AP)}. A DECISION SHOULD BE TREATED AS GIVEN PER INCURIAM WHEN IT IS GIVEN IN IGNORANCE OF THE TERMS OF A STATUTE OR OF A RULE HA VING THE FORCE OF A STATUTE [MUNICIPAL CORPORATION OF DELHI VS. GURNAM KAUR, (1 989) 1 SCC 101, 110 (SC)] . DECISIONS BY JURISDICTIONAL HIGH COURT ON THE ISSUE OF PRECEDENTS; BEFORE MAKING FURTHER SUBMISSIONS, IT IS ALSO SUBMI TTED THAT EVEN THE JURISDICTIONAL HIGH COURT IN THE CASE OF WOLKEM (P) LTD. VS. CIT (2003) 259 ITR 430 (RAJ) WHILE HOLDING ITS EARLIER DECISION IN CIT VS WOLKE M (P) LTD (1996) 228 ITR 129 (RAJ) PER INCURIAM, HAS NOT FOLLOWED THE SAME. IN THE CASE OF CIT VS. FOSS ELECTRONIC(2003) 263 ITR 125(RAJ.) ,WHILE UPHOLDING THE REVISIONAL POWERS OF CIT U/S 263(1) T HE HONBLE COURT OBSERVED THAT THE TRIBUNAL HAS COMMITTED AN ERROR IN TAKING THE V IEW FOLLOWING THE VIEW TAKEN IN EARLIER YEARS BY THE A.O. IF SOME WRONG VI EW HAS BEEN TAKEN, THAT SHOULD NOT BE ALLOWED TO PERPETUATE IN THE SUBSEQUENT YEAR S. 10 SUBMISSIONS IN RESPECT OF SPECIFIC GROUNDS OF APPEA L- 3. GROUND NO (I) IN THE FIRST GROUND OF APPEAL , THE ORDER OF THE LD CIT(A) OF ALLOWING THE BENEFIT OF SECTION 11(1) OF THE ACT TO THE ASS ESSEE TRUST DESPITE CONTRAVENTIONS OF VARIOUS STATUTORY PROVISIONS CON TAINED IN SECTION 11 TO SECTION 13 OF THE ACT HAS BEEN CHALLENGED. THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER HAS DISCUSSED IN DETAIL HOW THE VARIOUS CONDITIONS LAI D DOWN IN SECTION 11 TO 13 OF THE ACT FOR CLAIMING BENEFIT UNDER SECTION 11 (1) HAVE NOT BEEN MET OR VIOLATED BY THE ASSESSEE TRUST THUS DISENTITLING IT TO THE CLAIM OF EXEMPTION UNDER THE SAID SECTION. THE LD CIT(A) AT PAGE 4 OF THE IMPUGNED ORDER HAS MERELY OBSERVED THAT IDENTICAL I SSUE HAS BEEN DECIDED BY THE LD CIT(A) AND THE HON TRIBUNAL IN A.Y. 2001- 02, 2002-03,2005- 06 AND BY HIMSELF IN A.Y. 2006-07 IN FAVOUR OF THE ASSESSEE AND THEREAFTER ALLOWED THE APPEAL OF THE ASSESSEE. THE ORDERS OF THE LD CIT(A) & HON TRIBUNAL ARE , SU B SILENTIO AND PER INCURIAM OF STATUTORY PROVISIONS AS WELL AS ORDERS OF THE HIGHER COURTS -IT IS SUBMITTED THAT THE ORDERS RELIED UPON THE LD CIT(A) ARE NOT GOOD PRECEDENT FOR HAVING BEEN PASSED PER INCURIAM AND SUB SILENTIO FOR THE FOLLOWING REASONS; A. THE CASE FALLS UNDER THE PROVISIONS OF SUB CL AUSE (II) OF CLAUSE ( C) OF SUB SECTION (1) OF SECTION 13 OF THE ACT WH ICH EXCLUDES THE APPLICABILITY OF PROVISIONS OF SECTION 11 OF THE AC T - THE ASSESSING OFFICER IN ALL THE EARLIER ASSESSME NTS HAS CATEGORICALLY HELD THAT THE INCOME OF THE TRUST HAS BEEN APPLIED FOR THE DIRECT BENEFIT OF PERSONS REFERRED TO IN SECTION 13 (3) OF THE ACT THEREBY DISENTITLING THE ASSESSEE TRUST FROM CLAIMING EXEMP TION U/S 11 OF THE ACT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 13(1) (C ) (II) OF THE ACT WHICH READS AS UNDER; 11 SECTION 11 NOT TO APPLY IN CERTAIN CASES; SECTION 13 (1) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF PREVIOUS YEA R OF THE PERSON IN RECEIPT THEREOF- ..(C ) IN THE CASE OF TRUST FOR CHARITABLE OR RELIG IOUS PURPOSES OR CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF. (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED, DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB SECTION (3) . 2.8 ON THE OTHER HAND, THE LD. AR HAS RELIED UPON T HE ORDER OF THE LD. CIT(A). OUR ATTENTION WAS DRAWN TOWARDS THE DECISIO N OF ITAT JAIPUR BENCH IN THE CASE OF THE ASSESSEE FOR EARLIER ASSES SMENT YEARS. 2.9 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE HAS B EEN THREAD BARE EXAMINED BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2003-04. THE TRIBUNAL IN ITS PARA 8 OF THE DECISION FOR THE ASSESSMENT YEAR 2003-04 (ITA NO. 792/ JP/2006 DATED 31-01-2008) HAS REFERRED TO THE OBSERVATIONS MADE BY THE AO FOR DENYING EXEMPTION U /S 11(1(A) OF THE ACT. SINCE THE LD. DR HAS RAISED THE PLEA THAT THE ORDER OF THE TRIBUNAL SHOULD NOT BE FOLLOWED AND THE FACTS AS AVAILABLE FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION SHOULD BE CONSIDERED AND THE RATIO OF LAW AS LAID DOWN BY THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V S. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY, 315 I TR 428 SHOULD BE 12 CONSIDERED. IT WILL BE USEFUL TO REPRODUCE OBSERVAT ION OF THE AO FOR DENYING EXEMPTION U/S 11(1) FOR THE ASSESSMENT YEAR 2003-04 SO AS TO UNDERSTAND THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003- 04. - THE SOCIETY IS FORMED WITH PROFIT MOTIVE. THIS STAT EMENT IS BASED ON THE ANALYSIS OF FINANCIAL STATEMENTS, WHICH SHOW ED THE SYSTEMATIC GENERATION OF SURPLUSES, YEAR AFTER YEAR. THIS IS A LSO STRENGTHENED FROM THE FACT THAT SURPLUS RANGES FROM 35.91% TO 55 .32% OF GROSS RECEIPTS. - THE INSTITUTIONS RUN BY THE ASSESSEE SAMITI HAVE BE EN CHARGING FEES UNDER VARIOUS HEADS FROM THE STUDENTS. HOWEVER, THE CORRESPONDING EXPENSES UNDER THESE HEADS WERE FOUND TO BE OF MEAG ER AMOUNT. THE INSTITUTIONS OF THE SAMITI ARE CHARGING HEFTY FEES AND GENERATING HEAVY SURPLUS JUST LIKE A BUSINESS ESTABLISHMENT. - SYSTEMATIC SURPLUS GENERATED UNDER THE HEADS MEDIC AL FEE, COMPUTER FEE AND VARIOUS OTHER HEADS CANNOT BE HE LD TO BE INCOME FROM THE PROPERTY HELD FOR THE CHARITABLE O R RELIGIOUS PURPOSE FOR THE PURPOSE OF SECTION 11(1). - CHARITY DENOTES ALTRUISTIC THOUGHT AND ACTION AND T HE SAMITI IS NOT ENGAGED IN IT. - SINCE THE INSTITUTIONS ARE NOT ONLY SELF-SUPPORTING BUT ARE ALSO GENERATING POSITIVE INCOME, IT IS HELD THAT THE ACT IVITIES CARRIED OUT BY THE SOCIETY ARE NOT CHARITABLE. - MERELY BECAUSE ASSESSEE IS REGISTERED U/S 12A THE G RANT OF EXEMPTION U/S 11 IS NOT AUTOMATIC. - NEGLIGIBLE EXPENSES HAVE BEEN SHOWN AGAINST OTHER C OMPULSORY FEES CHARGED FROM THE STUDENTS WHICH PROVES THAT THE INS TITUTIONS ARE BEING RUN ON COMMERCIAL LINES AND PURELY WITH AN EYE ON P ROFIT MAKING. 13 - FEES BEING CHARGED UNDER VARIOUS HEADS ARE NOTHING BUT ADVENTURE IN THE NATURE OF TRADE. - PERSONAL USE OF THE CARS, HELD UNDER THE PROPERTY O F THE SOCIETY, BY THE PERSONS REFERRED IN SECTION 13(3) HAS BEEN MADE AND IT CANNOT BE RULED OUT HENCE SECTION 13(1)(C)(II) COMES INTO OPE RATION. - TRAVELS BY THE BAKSHI FAMILY TO UDAIPUR AND MUMBAI ARE HELD FOR THE BENEFIT OF PERSON REFERRED IN SECTION 13(3) IN THE ABSENCE OF ANY EXPLANATION - THERE WAS NO CONTRIBUTION MADE BY THE SAMITI TO THE SCHOOL RATHER THE SCHOOL WAS CONTRIBUTING VARIOUS AMOUNTS TO THE SAMITI. - HUGE ADVERTISEMENT EXPENSES HAVE BEEN INCURRED TO E STABLISH AND EN- CASH THE NAME OF THE SCHOOLS. - THERE WAS NO MANDATE IN THE TRUST DEED THAT INCOME FROM THE TRUST PROPERTY WAS TO BE SPENT ON RELIGIOUS OR CHARITABLE PURPOSES. HENCE THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11 O F THE ACT. - M/S TILAK NURSING HOME HAS BEEN PAID THE FEES FOR M EDICAL EXAMINATION OF THE STUDENTS WHOSE PROPRIETOR IS MR. B. K. JAIN WHO ALSO HAPPENS TO BE A PERSON DEFINED U/S 13(3) BEING A TRUSTEE OF THE SAMITI. ASSESSEE HAS FAILED TO ESTABLISH THAT THESE PAYMENTS HAVE BEEN MADE AT MARKET RATE. FURTHER CERTAIN VOUCHERS FOR EXPENSES RELATE TO BENEFITS ENJOYED BY PERSONS REFERRED U/S 13(3). - AS NO ADDRESS HAS BEEN FURNISHED IN RESPECT OF THE PARENTS OF THE STUDENTS AND IN THE ABSENCE OF THE ELIGIBILITY OF P ERSONS TO WHOM CONCESSIONS AND FEE REBATES HAVE BEEN ALLOWED, IT C ANNOT BE HELD THAT REBATE AND CONCESSIONS HAVE BEEN PROVIDED FOR ANY C HARITABLE REASONS. ASSESSEE HAS EVEN NOT DISCHARGED ITS ONUS OF PROVING THAT PERSONS REFERRED IN SECTION 13(3) HAVE NOT ENJOYED REBATE AND CONCESSIONS. 14 - SHRI ADITYA RAWAT, CHARTERED ACCOUNTANT IS HIMSELF AUDITING THE FINANCIAL ACCOUNTS OF THE SAMITI AND ITS VARIOUS IN STITUTIONS, SINCE INCEPTION OF THE TRUST, IN CONTRAVENTION THE CODE O F CONDUCT ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA WHI CH SPECIFICALLY PROHIBITS THE AUDIT BY A CHARTERED ACCOUNTANT WHO I S A TRUSTEE OF A TRUST. - AUDITORS REPORT IN FORM 10B IS INCORRECT AS SOME PAYMENTS HAVE BEEN MADE DIRECTLY TO THE MEMBERS OF THE BAKSHI FAM ILY WHO ARE CLEARLY PERSONS COVERED U/S 13(3) AND ARE HIGHER TH AN THOSE PAID TO OTHER EMPLOYEES. - THE PERSONS SPECIFIED IN SECTION 13(3) HAVE ENJOYED DIRECTLY OR INDIRECTLY THE BENEFIT FROM THE SAMITI. SOME PAYME NTS ARE MADE TO THE MEMBERS OF THE SOCIETY ON ACCOUNT OF SALARY OR OTHERWISE WHICH SHOULD BE HELD TO BE PART OF INCOME FOR THE BENEFIT OF PERSON REFERRED IN SECTION 13(3) AND HENCE SECTION 13(1)(C)(II) COM ES INTO OPERATION AS EITHER THE MEMBERS ARE NOT ACTIVELY INVOLVED IN THE DAY TO DAY AFFAIRS OF THE SOCIETY OR THE PAYMENT IS MORE THAN ITS FAIR MARKET VALUE OR THEY DONT HAVE ANY EXPLANATION FOR SUCH P AYMENT. 2.10 DURING THE COURSE OF THE APPELLATE PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04, THE LD. AR SUBMITTED THAT WORDS CHAR ITY AND CHARITABLE PURPOSES MUST BE CONSTRUED IN THEIR LEGAL OR TECHN ICAL SENSE WHICH IS DIFFERENT FROM THEIR POPULAR MEANING. THE LEGISLATU RE HAS RECOGNIZED THAT EDUCATION AND MEDICAL RELIEF ARE SUCH OBJECTS WH ICH REQUIRES PROMOTION BY GIVING ADDITIONAL FISCAL INCENTIVES BECAUSE THES E OBJECTIVES IRRESPECTIVE OF THEIR COST OF THE BENEFICIARIES STILL ENSURE FOR THE GENERAL WELFARE OF THE PUBLIC AS WELL AS BENEFICIARIES THEMSELVES. EDUCA TION AND MEDICAL 15 RELIEF ARE REQUIRED TO BE PROMOTED BY GIVING ADDI TIONAL INCENTIVES AS THEY HELP IN BUILDING OF A NATION AND ALSO SECURING A BR IGHT FUTURE TO THE NATION. THE PROPERTY OF THE SOCIETY REMAINS WITH THE SOCIET Y WHILE THE MANAGING COMMITTEE/ TRUSTE MAY CHANGE FROM TIME TO TIME. THE EARNING OF INCOME/ SURPLUS IS NOT A PROHIBITORY CONDITION FOR CARRYING OUT THE CHARITABLE PURPOSE. FOR THIS RELIANCE WAS PLACED ON THE FOLLOW ING DECISIONS. 1. DHARMADEEPTI VS. CIT, KERALA, 114 ITR 454 (SC) 2. ADDL. CIT, MYSORE VS. SURAT ART SILK CLOTH MANUFACT URERS ASSOCIATION, 121 ITR 1 (SC) 3. ADDL. CIT, MYSORE VS. AROOR BROTHERS CHARITABLE TRU ST, 115 ITR 418 (KER.) 2.11 THE TRIBUNAL IN PARA 24 OF ITS ORDER DATED 31- 01-2008 HELD THAT WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT QUALIFIES ONLY THE OBJECT IMMEDIATELY PRECEDING IT I.E. ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY. REFERENCE HAS BEEN MADE TO THE DECISION O F HON'BLE APEX COURT IN THE CASE OF ACIT VS. SURAT ART SILK CLOTH MANUFCTUR ERS ASSOCIATION (SUPRA) AND ACIT VS. AROOR BROS CHARITABLE TRUST (SUPRA). T HE TRIBUNAL AT PAGE 31 OF ITS ORDER HAS OBSERVED AS UNDER:- . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN STATE TEXT BOOK BOARD (SUPRA) HAS BEEN PLEASED TO HOLD THAT WHERE THE ASSESSEE SOCIETY WA S AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE PUR POSE OF EDUCATION AND EVEN IF IT HAD SURPLUS, THE ASSESSEE WOULD NOT BE DISENTITLED FOR 16 EXEMPTION IF THE SAME HAS BEEN UTILIZED FOR THE PUR POSE OF EDUCATION. IN THE PRESENT CASE BEFORE US THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAS DEVIATED FROM ITS MAIN OBJECT OF IMPARTING EDUCATION. 2.12 THE LD. DR HAS RELIED UPON THE DECISION OF HON 'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY (SUPRA). IN THIS CASE, THE HON' BLE HIGH COURT HAS HELD AS UNDER:- HELD: ALLOWING THE APPEAL, THAT SECTION 12AA OF THE ACT PROVIDES THE- PROCEDURE FOR REGISTRATION. C LAUSE (A) OF SUB-SECTION (1) OF SECTION 12AA EMPOWERS THE COMMIS SIONER TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T OR INSTITUTION AND HE MAY ALSO MAKE SUCH INQUIRIES, AS HE MAY DEEM NECESSARY IN THIS BEHALF. THE COMMISSIONER IS NOT S UPPOSED TO ALLOW REGISTRATION WITH BLIND EYES. THE COMMISSIONE R HAD CONSIDERED THE RELEVANT PAPERS BEFORE HIM, WHICH IN CLUDED THE INCOME AND EXPENDITURE ACCOUNTS OF THE PREVIOUS YEA RS AFTER THE ASSESSEE--SOCIETY GOT REGISTERED WITH THE ASSIS TANT REGISTRAR OF FIRMS, SOCIETIES AND CHITS. THE COMMISSIONER OBS ERVED THAT THE SOCIETY WAS CHARGING SUBSTANTIAL FEES FROM THE STUDENTS AND MAKING HUGE PROFITS. MERELY IMPARTING EDUCATION FOR THE PRIMARY PURPOSE OF EARNING PROFITS COULD NOT BE SAI D TO BE A CHARITABLE ACTIVITY. IN THE EXPRESSION 'CHARITABLE PURPOSE', 17 'CHARITY' IS THE SOUL OF THE EXPRESSION. MERE TRADE OR COMMERCE IN THE NAME OF EDUCATION CANNOT BE SAID TO BE A CHA RITABLE PURPOSE AND THE COMMISSIONER HAS TO SATISFY ITSELF AS PROVIDED UNDER SECTION 12AA OF THE ACT BEFORE ALLOWING THE R EGISTRATION. THE ORDER OF THE COMMISSIONER WAS JUSTIFIED. 2.13 THE ABOVE REFERRED DECISION OF HON'BLE UTTARAK HAND HIGH COURT HAS BEEN CONSIDERED BY THE HON'BLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF PINGROVE INTERNATIONAL CHARITABLE TRUST & ORS VS . UNION OF INDIA, 327 ITR 73. THE HON'BLE PUNJAB & HARYANA HIGH COURT HA S DISSENTED FROM THE JUDGEMENT OF HON'BLE UTTARAKHAND HIGH COURT. THE HO N'BLE PUNJAB & HARYANA HIGH COURT HAS REFERRED THAT MERELY THERE A RE SURPLUSES IN THE HANDS OF THE EDUCATIONAL INSTITUTIONS WOULD NOT IPS O FACTO LEAD TO AN INEVITABLE CONCLUSION THAT SUCH AN EDUCATIONAL INST ITUTION IS EXISTING FOR MAKING PROFIT AND NOT SOLELY FOR EDUCATIONAL PURPOS ES. IT WILL BE USEFUL TO REPRODUCE THE HELD PORTION FROM THE ABOVE REFERRED JUDGEMENT. THERE IS A DEFINITE PURPOSE BEHIND THE ALLOWING O F SETTING UP EDUCATIONAL THE ALLOWING OF SETTING UP E DUCATIONAL INSTITUTIONS AT THE HANDS OF PRIVATE ENTREPRENEURS INCLUDING TRUSTS/SOCIETIES BY THE GOVT. VARIOUS OTHER EDUCATI ONAL COLLEGES LIKE ENGINEERING AND PHARMACY ETC. COULD NOT HAVE B EEN ESTABLISHED FOR WANT OF FUNDS. THE GOVT WITH A DEFI NITE IDEA AND OBJECT PURPORTEDLY OPENED THIS AREA OF EDUCATIO N FOR THE PRIVATE SECTOR. THE GOVT. WHO IS LACKING FUNDS APPE ARS TO HAVE 18 THOUGHT THAT PRIVATE SECTOR COULD DO THIS JOB VERY WELL. ONCE THE VERY INTENTION OF THE GOVERNMENT IS TO PROMOTE EDUCATION IN THE PRIVATE SECTOR SUCH AN ACTION LIKE THAT OF T HE CHIEF CIT WOULD SERIOUSLY DISCOURAGE THOSE ACTIVITIES AND THE AVOWED OBJECT COULD NEVER BE ACHIEVED. IF THE STAND OF THE DEPARTMENT/ REVENUE IS ACCEPTED TO BE CORRECT, ESPECIALLY IN TH E WAKE OF THE METHODOLOGY ADOPTED BY THE CHIEF CIT IN ASCERTAININ G THE PROFITS, THEN NO EDUCATIONAL INSTITUTION LIKE THE P ETITIONER- SOCIETY COULD BE SAID TO BE EXISTING SOLELY FOR ED UCATIONAL PURPOSES AS IN EVERY CASE OF AN EDUCATIONAL INSTITU TION, THERE IS BOUND TO BE A PROFIT. THE PROVISIONS OF SECTION 10( 23C)(VI) WOULD BE RENDERED OTIOSE IF THE INTERPRETATION ADOP TED BY THE CHIEF CIT IS ACCEPTED AND THE MANNER IN WHICH EXEMP TION VALIDLY GRANTED TO THE PETITIONER-SOCIETY HAS BEEN WITHDRAWN. THE APPROACH OF THE CHIEF CIT IS WHOLLY ERRONEOUS B EING CONTRARY TO THE EXPRESS PROVISIONS OF THE THIRD PRO VISO TO SECTION 10(23C)(VI) FOR THE FOLLOWING REASONS (1) U NLIKE THE PROVISIONS OF SUB-SECTION 37AND 36(1)(XII), THE INC URRING OF CAPITAL EXPENDITURE IS NOT EXPRESSLY EXCLUDED IN TH E THIRD PROVISO; AND (II) HAD IT BEEN THE INTENTION OF THE LEGISLATURE TO EXCLUDE CAPITAL EXPENDITURE WHILE APPLYING THE INCO ME OF THE TRUST AS PER THE THIRD PROVISO TO SECTION 10(23C)(V I) THEN THE SAID PROVISO WOULD HAVE CONTAINED AN EXPRESS EMBARG O AGAINST SUCH EXCLUSION. ADITANAR EDUCATIONAL INSTITUTION ET C V ADDL. CIT (1997), 139 CTR (SC)7,: (1997) 224 ITR 310 (SC) AND CITY MONTESSORI SCHOOL (REGD) VS. UNION OF INDIA & ORS (2009) 225 CTR (ALL) 188: (2009) 27 DTR (ALL) 136 R ELIED ON; 19 MUNICIPAL CORPORATION OF INDIA & ORS (2009) 225 CTR (ALL) 188: (2009) 27 DTR (ALL) 136 RELIED ON; MUNICIPAL CORPORATION OF DELHI VS. CHILDREN BOOK TRUST AIR 19 92 SC 1456, LD. DR. MAHARAJ KRISHANA KAPUR EDUCATIONAL CH ARITABLE TRUST & MANAGEMENT SOCIETY VS. UNION OF INDIA & ANR . (CIVIL WRIT PETITON NO. 2047 OF 2009, DATED 10 TH FEB. 2009 AND THE SCIENTIFIC EDUCATIONAL ADVANCEMENT SOCIETY VS. UNIO N OF INDIA & ANR. (CIVIL WRIT PETN. NO. 2052 OF 209 DATE D 10 TH FEB. 2009) DISTINGUISHED; CIT VS. QUEENSS EDUCATIONAL S OCIETY (2009) 23 CTR (UTTARAKHANNNND 395 DISSENTED FROM. 2.14 THE HON'BLE DELHI HIGH COURT IN THE CASE OF DI GEMBER JAIN SOCIETY FOR CHILD WELARE VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), 329 ITR 459 DIRECTED THE REVENUE TO GIVE EXEMPTION TO T HE SOCIETY U 10(23C)IV) OF THE ACT AS THE SOCIETY MADE A STATEMENT BEFORE T HE COURT THAT THE SURPLUS ARISING FROM THE EDUCATIONAL ACTIVITY WILL NOT BE U TILIZED FOR ANY OTHER PURPOSES BUT SOLELY FOR EDUCATIONAL PURPOSES. IN TH E INSTANT CASE, THE SURPLUS, IF ANY, GENERATED IS BEING UTILIZED FOR EDUCATIONAL PURPOSES. THE ITAT CHENNAI BENCH IN THE CASE OF ST. MARYS CHRISTIAN CHARITABLE TRUST VS. ITO, 11 ITR (TRIBUNAL) 205 HELD THAT THE PROFIT EAR NED CANNOT BE A GROUND FOR REFUSING THE REGISTRATION. IN THE CASE BEFORE I TAT CHENNAI BENCH, THE REVENUE RELIED UPON THE DECISION OF HON'BLE UTTARAK HAND HIGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL 20 SOCIETY (SUPRA). BEFORE THE ITAT CHENNAI BENCH, THE LD. AR RELIED UPON THE JUDGEMENT OF THE SAME HON'BLE UTTARAKHAND HIGH COUR T REPORTED AT 310 ITR 162 IN THE CASE OF CIT VS. JYOTI PRABHA SOCIETY. IN THIS CASE, THE SOCIETY WAS LETTING OUT THE PROPERTIES TO THE EDUCATIONAL INSTI TUTIONS AND THE RENTAL INCOME EARNED BY THE SOCIETY IS BEING UTILIZED AGAI N FOR THE PURPOSE OF IMPARTING EDUCATION BY MAINTAINING THE BUILDING AND CONSTRUCTING NEW BUILDING FOR THE SAME PURPOSE. THE HON'BLE UTTARAKH AND HIGH COURT HELD THAT CHARITABLE PURPOSE IS NOT LOST AND IT CANNOT B E SAID THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION CLAIMED BY IT U/S 11 OF T HE ACT. WE ARE AWARE THAT ITAT CHENNAI BENCH IN THE CASE OF RAJAH SIR ANNAMAL I CHETTIAR FOUNDATION VS. DIRECTOR OF INCOME-TAX (EXEMPTIONS) 10 ITR (TRIBUNAL) 424 OBSERVED THAT THE INSTITUTIONS RUN BY CHARITABL E SOCIETIES MAY COLLECT FEES AND SERVICE CHARGES DID NOT MEAN THAT THE INST ITUTION COULD CHARGE FESS, ETC. AT COMMERCIAL RATES FROM ALL PEOPLE WITHOUT GI VING ANY ELEMENT OF CHARITY TO THE NEEDY PEOPLE. 2.15 MERE MAKING OF PROFIT WILL NOT BE A GROUND TO DENY THE REGISTRATION IN THE CASE OF AN EDUCATIONAL INSTITUTION. THE RELIANC E IS PLACED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GAUR BRAHMIN VIDYA PARCHARNI SABHA 2011-TIOL-662-HC P&H -IT AND SANATAN DHARM SHIKSHA SAMITI VS. CCIT, 2011-TIOL-666-HC P& H-IT. THE 21 CUTTACK BENCH IN THE CASE OF ITO VS. SILICON INSTIT UTE OF TECHNOLOGY 2011- TIOL-627-ITAT-CUTTACK ALSO HELD THAT SURPLUS GENERA TED OR FEES RECEIVED UNDER DIFFERENT HEADS LIKE CANTEEN FUND, BOOK FUND, GUEST HOUSE ETC. CANNOT BE A GROUND FOR NOT ALLOWING REGISTRATION. ONCE REG ISTRATION IS GRANTED THEN EXEMPTION CANNOT BE DENIED EXCEPT THE CONDITIONS ME NTIONED IN SECTION 11 OR 13. 2.16 AFTER CONSIDERING THE ORDERS OF THE TRIBUNAL F OR EARLIER YEARS, WE FEEL THAT DECISION OF THE TRIBUNAL IS BINDING PRECEDENT AS THE TRIBUNAL HAS CONSIDERED ALL THE FACTS. IT IS TRUE THAT THE TRIBU NAL WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 HAS FOLLOWED THE D ECISION OF THE TRIBUNAL FOR THE EARLIER YEARS BUT THE DECISION OF THE TRIBU NAL IN EARLIER YEARS HAS CONSIDERED ALL THE ASPECTS AND HELD THAT THE ASSESS EE IS ENTITLED TO EXEMPTION U/S 11 OF THE ACT. ACCORDINGLY WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXEMPTION U/S 11 OF THE ACT. 3.0 SINCE THE REVENUE HAS RAISED THE ISSUE OF VIOLA TION OF PROVISIONS OF SECTION 13 IN GROUND OF APPEAL 3 AND 5, THEREFORE, THE ISSUE OF VIOLATION OF SECTION 13 WILL BE DECIDED WHILE DISPOSING OF GROUN D OF APPEAL NO. 3AND 5. 3.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE CLUBBING OF LOSS OF RS. 2 1,54,948/- MADE BY THE AO U/S 60 OF THE ACT WITHOUT APPRECIATING THE FACT THA T THE SOCIETY MERELY 22 TRANSFERRED THE INCOME OF SEEDLING NURSERY SCHOOL T O ANKUR UDBODHAK SAMITI WITHOUT TRANSFERRING THE ASSETS AND ANUKU UD BOHAK SAMITI IS NOT REGISTERED U/S 12A. 3.2 THE ABOVE REFERRED ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL WHILE DECIDING THE APPEAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2002- 03 AND 2005-06 VIDE ORDER DATED 31-07-09. IT WILL B E USEFUL TO REPRODUCE FOLLOWING PARAS FROM THE ORDER OF THE TRIBUNAL DATE D 31-07-2009 22. GROUND NO. (B) OF THIS APPEAL IS HOWEVER, A N EW GROUND. THE FACTS RELATING TO THIS GROUND ARE THAT DURING THE YEAR UNDER CONSIDERATION, ONE OF HE SCHOOLS OF THE ASSESSEE SOCIETY NAMELY SEEDLING NURSERY SCHOOL WAS TRANSFER RED TO ANOTHER SOCIETY NAMELY M/S. ANKUR UDBODHAK SAMITI, VIDE MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN THE TWO SOCIETIES DATED 12-11-2001. M/S. ANKUR UDBODHAK SAM ITI IS ALSO A SOCIETY WITH SIMILAR OBJECTIVES RELATING TO EDUCATION AND THE PURPOSE OF SUCH TRANSFER WAS STATED TO BE FOCUS ED EXPANSION OF THE ASSESSEE SOCIETY IN THE FILED OF HIGHER EDUC ATION. THE SAID TRANSFER OF SEEDLING NURSERY SCHOOL WAS ALONGW ITH ALL ASSETS, LIABILITIES, OBLIGATIONS AND INCIDENTAL ACT IVITIES ATTACHED TO SUCH SCHOOL AS APPARENT FROM THE MOU DATED 12-11 -201 AND THE DETAILS OF ASSETS AND LIABILITIES AVAILABLE ON RECORD. 23. ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 60 OF THE INCOME TAX ACT, 1961 AND CLUBBED THE INCOME OF M/S. ANKUR UDBODHAK SAMITI FROM SEEDLING 23 NURSERY SCHOOL AMOUNTING TO RS. 38,07,883/- WITH TH E INCOME OF ASSESSEE SOCIETY BY MAKING CERTAIN ALLEGATIONS. THE LD. CIT(A) ON THE OTHER HAND HELD THE FOLLOWING PARA 5. 3 OF HIS ORDER. I HAVE CONSIDERED THE FACTS OF THE CASE AND ARGUMENTS TAKEN BY SHRI JHANWAR QUITE CAREFULLY. IT IS A FACT THAT THERE IS A PROPER MOU AND AS PER PARAGRAP H 4 OF THE SAID MOU DATED 17-10-2001 ALL ASSETS / OBLIGATION/ LIABILITIES AND INCIDENTAL ACTIVITIES W ERE TRANSFERRED TO M/S. ANKUR UDBODHAK SOCIETY ALONGWIT H AVAILABLE FDR AND CASH BALANCE AND BANK BALANCE AS ON THAT DAY AND FURTHER THE ASSETS AND LIABILITIES OF THE SAID SCHOOL WAS NOT INCORPORATED IN FINAL ACCOUNT O F THE APPELLANT SOCIETY AND THEREFORE, IT IS CLEAR THAT A LL THE ASSETS INCLUDING FIXED ASSETS WERE TRANSFERRED TO M /S. ANKUR UDBODHAK SOCIETY BY THE APPELLANT SOCIETY AS PER AFORESAID MOU AND IN MY CONSIDERED VIEW ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 60 OF I.T. ACT TO CLUB THE INCOME OF SEEDLI NG NURSERY SCHOOL IN THE INCOME OF APPELLANT SOCIETY. WITHOUT PREJUDICE TO THAT SINCE APPELLANT SOCIETY I S ELIGIBLE FOR EXEMPTION U/S 11 THEREFORE, THIS EXERC ISE OF CLUBBING THE INCOME IS FUTILE BECAUSE EVEN IF CLUBB ING IS UPHELD THE SAID INCOME WILL ALSO BE EXEMPT U/S 11 O F I.T. ACT. WITH THIS DISCUSSION THE SAID CLUBBING OF INCO ME IS HEREBY APPLIED FOR ASSESSMENT YEAR 2002-03 AND 24 ASSESSMENT YEAR 2005-06 BY ALLOWING RELEVANT GROUND OF APPEAL. 24. WE HAVE CONSIDERED THE FACTS OF THE CASE AND AR E OF THE VIEW THAT PROVISIONS OF SECTION 60 OF THE AC T CANNOT BE INVOKED IN THE PRESENT CASE SINCE ASSESSEE SOCIETY HAD TRANSFERRED ALL ASSETS OF THE SCHOOL TO M/S. ANKUR UDBODHAK SAMITI BY WAY OF AN MOU. FURTHER, WE ALSO AGREE THA T EVEN OTHERWISE THE EXERCISE OF CLUBBING WOULD BE FUTILE BECAUSE EVEN THE CLUBBED INCOME WOULD BE EXEMPT U/S 11 OF T HE ACT. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(A) A ND DISMISS THIS GROUND OF THE DEPARTMENT. 3.3 IN THE IMMEDIATELY PRECEDING YEAR, THE TRIBUNA L HAS FOLLOWED ITS OWN DECISION FOR THE EARLIER YEAR. HENCE, THE ISSU E STANDS COVERED BY THE DECISION OF THE TRIBUNAL. FOLLOWING THAT ORDER, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE CLUBBING OF LOSS OF R S. 21,54,948/- MADE BY THE AO U/S 60 OF THE ACT. 4.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS TH AT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,20,000/ - MADE BY THE AO ON ACCOUNT OF EXCESSIVE SALARIES PAID BY THE SOCIETY TO ITS KEY PERSONS AND MEMBERS COVERED U/S 13(1)(C) OF INCOME TAX ACT. 4.2 SHRI M.S. BAKSHI IS A PERSON COVERED U/S 13(3) OF THE ACT. HENCE, THE SALARY OF RS. 3.60 LACS HAS BEEN PAID TO SHRI M.S. BAKSHI. SHRI M.S. BAKSHI 25 WAS LOOKING AFTER THE EFFICIENT MANAGEMENT OF TRANS PORT SYSTEM AND TO ASCERTAIN THAT THE INSTITUTION UNDER THE GROUP ARE PROGRESSING TOWARDS THE OBJECTIVES OF ISO-9001 AND TO CONDUCT THE BANK TRAN SACTION OF THE GROUP AND TO MONITOR FEE ACCOUNTS. ACCORDING TO THE AO, NO EV IDENCE OF INVOLVEMENT OF SHRI M.S. BAKSHI IN DAY TO DAY AFFAIRS BY THE AS SESSEE HAS BEEN FURNISHED. THEREFORE, IT WAS HELD THAT SECTION 13(1)( C)(III) WILL BE APPLICABLE. 4.3 SHRI SANDEEP BAKSHI IS COVERED U/S 13(3) OF THE ACT AND HE HAS BEEN PAID SALARY OF RS. 10.80 LACS. ACCORDING TO THE AO , THE QUALIFICATION OF SHRI SANDEEP BAKSHI WAS NOT SUBMITTED. NO REASONS HAVE B EEN GIVEN TO PAY SUCH HEAVY SALARY TO SHRI SANDEEP BAKSHRI. THE SALARY PA YMENT OF RS. 90,000/- PER MONTH TO HIM IS MUCH MORE THAN WHAT IS FAIR MA RKET VALUE OF WORK DONE BY HIM. THE AO HELD THAT THE SUM OF RS.80,000/- SHO ULD BE DISALLOWED OUT OF SALARY PAID TO SHRI SANDEEP BAKSHI. 4.4 SMT. MOHINI BAKSHI IS ALSO A PERSON COVERED U/S 13(3) OF THE ACT AND SHE WAS PAID SALARY OF RS. 4.80 LACS. ACCORDING TO AO, NO REASON HAS BEEN GIVEN TO SUCH HEAVY SALARY PAYMENT. THE AO HELD THA T IT WILL BE FAIR AND JUSTIFIABLE TO DISALLOW RS. 80,000/- OUT OF SALARY PAID TO SMT. MOHINI BAKSHI. THE AO ACCORDINGLY DISALLOWED EXCESS SALARY TO THE EXTENT OF RS. 2.20 LACS. 26 4.5 THE LD. CIT(A) DELETED THE ADDITION ON THE BASI S OF THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESS MENT YEARS 2003-04 AND 2005-06. THE LD. CIT(A) HELD AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND ARGUM ENTS TAKEN BY SHRI JHANWAR QUITE CAREFULLY. FOR SIMILAR REASONS AS DISCUSSED IN DETAIL IN PARA 6.3 OF THE APPELLATE OR DER DATED 16- 09-2008 FOR ASSESSMENT YEAR 2001-02, 2002-03 AND 20 05-06 WHICH IS ALSO UPHELD BY HON'BLE ITAT JAIPUR BENCH AND HAS ALSO BEEN FOLLOWED IN ASSESSMENT YEAR 2006-07 IN AP PELLATE ORDER DATED 26-10-2009 AND FURTHER KEEPING IN VIEW THE COMMERCIAL EXPEDIENCY WHICH HAS TO BE DECIDED FROM THE POINT OF VIEW OF THE APPELLANT, IN MY CONSIDERED VIEW THE AO WAS NOT JUSTIFIED IN DISALLOWING PART OF SALARY EXPENDI TURE IN THE NAME OF EXCESSIVE SALARY CLAIM OF RS. 2,20,000/- AN D AO IS HEREBY DIRECTED TO DELETE THE SAID DISALLOWANCE. 4.6 WE HAVE HEARD BOTH THE PARTIES. THE SALARY PAID TO SHRI SANDEEP BAKSHI, SMT. MOHINI BAKSHI AND SHRI M.S. BAKSHI IS THE SAME AS IN THE IN THE IMMEDIATELY PRECEDING YEAR. AS COMPARED TO THE SALARY PAID TO THESE PERSONS IN THE FINANCIAL YEAR 2004-05, THE SALARIES WERE INCREASED ONLY TO THE EXTENT OF RS. 1,000/- PER MONTH IN THE CASE OF SHRI SANDEEP BAKSHI AND RS. 500/- PER MONTH IN THE CASE OF , SMT. MOHINI BAKSH I AND RS. 2,500/- IN THE CASE OF SHRI M.S. BAKSHI. THE SALARIES PAID DURING THE FINANCIAL YEAR 2004- 27 05 AND 2005-06 HAVE BEEN CONSIDERED AS REASONABLE A ND THERE HAS BEEN NO UNDUE BENEFIT. SINCE THE QUANTUM OF SALARY PAID DUR ING THE YEAR IS THE SAME IN THE PRECEDING YEAR, THEREFORE, FOLLOWING OUR ORD ER FOR THE ASSESSMENT YEAR 2006-07, WE HOLD THAT THE PROVISIONS OF SECTION 13( 1) (C) WILL NOT BE APPLICABLE. HENCE, THE GROUND OF APPEAL NO. 3 IS DI SMISSED. 5.1 THE FOURTH GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY WAY OF DISAL LOWANCE OF INTEREST PAYMENT U/S 36(1)(III) OF THE ACT IRRESPECTIVE OF T HE FACT THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF FURNISHING THE EVID ENCE OF USE OF THE ASSET. 5.2 THE ASSESSEE HAS SHOWN INTEREST PAYMENT OF RS. 92,56,629/- ON THE TERM LOAN FOR SEEDLING ACADEMY, RS. 2,86,058/- ON T ERM LOAN FOR SEEDLING INSTITUTE AND RS. 1,71,331/- ON TERM LOAN FOR MAHAV EER NAGAR SCHOOL, DURING THE YEAR. THE INTEREST WAS NOT CAPITALIZED B Y THE ASSESSEE. THE ASSESSEE DID NOT FURNISH THE EVIDENCE OF USE OF ASS ETS ON CREATION OF WHICH LOAN WAS TAKEN. THE AO REQUIRED THE ASSESSEE TO EXP LAIN AS TO WHY INTEREST PAYMENT BE NOT DISALLOWED UNDER PROVISO TO SECTION 36(1)(III) OF THE ACT. THE ASSESSEE SUBMITTED THAT ALL THE FIXED ASSETS HA VE BEEN PUT TO USE AND THEREFORE, INTEREST IS ALLOWABLE. THE AO HELD THAT INCOME IS BEING COMPUTED UNDER THE HEAD BUSINESS OR PROFESSION AND THEREFORE , THE INTEREST PAYMENT WAS DISALLOWED.. 28 5.3 THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBU NAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 DELETED TH E DISALLOWANCE. 5.4 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE STAND S COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEAR. SINCE WE HAD ALREADY HELD THAT THE ASSESSEE IS ENTITLED TO EXEMP TION U/S 11 OF THE ACT, THEREFORE, THE INCOME IS NOT TO BE TAXED UNDER THE HEAD BUSINESS OR PROFESSION. WHILE DECIDING THE APPEAL IN THE CASE O F THE KRISHI UPAJ MANDI SAMITI VIDE ORDER DATED 06-01-2011 IN ITA NO. 560 & 561/JP/2010, WE HAVE HELD THAT IN THE CASE OF THE TRUST, THE PROFIT IS TO BE BASED ON COMMERCIAL PRINCIPLES. FOR THIS, WE HAVE RELIED ON THE FOLLOWING DECISIONS. 1. ZAVERCHAND LAXMI CHAND & CO. VS. CIT 55 ITR 486 (GU J) 2. CIT VS. TRUSTEE OF H.E.H. THE NIZAM SUPPLEMENTAL RE LIGIOUS ENDORSEMENT TRUST, 127 ITR 378 (A.P. 3. CIT VS. RAO BAHADUR CALVALA CUNNAN CHETLY CHARITIES , 135 ITR 485 (MAD. 4. CIT VS. GANGA CHARITY TRUST FUND, 162 ITR 612 (GUJ ) 5. CIT VS. RAIPUR POLLOTTINE SOCIETY, 180 ITR 579 (MAD .) 6. CIT VS. SHETH MANILAL RANCHODDAS VISHRAM BHAVAN TRU ST, 198 ITR 598 (GUJ.) 7. CIT VS. PROGRAMME FOR COMMUNITY ORGANIZATION 228 IT R 620 (KER.) 8. CIT VS. BHORUKA PUBLIC WELFARE TRUST 240 ITR 513 (C AL.) 29 9. CIT VS. INSTITUTE OF BANKING 264 ITR 110 (BOM.) 10. DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. FRAMJEE CAS WASJEE INSTITUTE, 109 CTR 463 (BOM.) THE PROVISO TO SECTION 36(1)(III) WILL NOT BE APPLI CABLE IF THE PROFIT IS TO BE COMPUTED ON COMMERCIAL PRINCIPLES WHEN TRUST IS ENT ITLED FOR EXEMPTION U/S 11 OF THE ACT. HENCE, WE HOLD THAT THE LD. CIT(A) W AS JUSTIFIED IN DELETING THE ADDITION. 6.1 THE 5 TH GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. C IT(A) HAS ERRED DELETING THE ADDITION MADE BY DISALLOWANCE OF FOREIGN TRAVELING EXPENSES DESPITE THE FACT THAT IT COULD NOT BE PROV ED THAT THE EXPENSES WERE INCURRED FOR THE OBJECTS OF THE SOCIETY. 6.2 DURING THE YEAR, THE SOCIETY HAS DEBITED A SUM OF RS. 13,51,914/ IN RESPECT OF FOREIGN TRAVELING OF DIFFERENT PERSONS BELONGING TO BAKSHI FAMILY. THE AO NOTICED THAT INVARIABLY THE MEMBERS OF THE B AKSHI FAMILY ARE VISITING THE FOREIGN COUNTRIES EVERY YEAR WITH A CL AIM THAT THE PURPOSE IS INTERACTION WITH FOREIGN EDUCATIONAL INSTITUTIONS. THE AO REFERRED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE F OR THE ASSESSMENT YEAR 2001-02 , 2002-03 AND 2005-06 IN WHICH EXPENSES DIS ALLOWED BY THE AO WERE CONFIRMED. THEREFORE, THE AO DISALLOWED A SUM OF RS. 13,51,914/-. 30 6.3 BEFORE LD. CIT(A),IT WAS SUBMITTED THAT DURING THE YEAR THE FOREIGN VISITS WERE MADE TO GERMANY AND DUBAI. THE VISITS W ERE MADE TO SOME OF THE SCHOOL TO STUDY THAT HOW STUDENTS IN THESE COUN TIES ARE GROOMED TO TTAKE UP BUSINESS ACTIVITIES IN THEIR ORDINARY LIFE. THE ADDITIONAL EVIDENCES WERE ALSO FILED BEFORE THE LD. CIT(A). SUCH ADDITIONAL E VIDENCES WERE SENT TO THE AO BY THE LD. CIT(A). THE AO HAS SENT HIS REPORT VI DE LETTER DATED 17-06- 2010 TO THE LD. CIT(A). THE AO HAS POINTED OUT THAT EVERY YEAR MEMBERS OF THE BAKSHI FAMILY BEING THE CONTROLLER OF THE ASSES SEE SAMITI ARE VISITING FOREIGN COUNTRIES WITH A CLAIM THAT THE PURPOSE IS INTERACTION WITH FOREIGN EDUCATIONAL INSTITUTIONS. THESE PERSONS ARE NOT RES PONSIBLE FOR ACADEMIC DEVELOPMENT OF THE EDUCATIONAL INSTITUTIONS BEING R UN BY THE SAMITI. NEITHER THE PRINCIPAL NOR THE OVERALL INCHARGE OF THE EDUCA TIONAL INSTITUTIONS ACCOMPANIED THE MEMBERS OF THE BAKSHI FAMILY. THE A O WAS OF THE VIEW THAT FOREIGN TRAVELING BY THE MEMBERS OF THE BAKSHI FAMILY ARE PERSONAL IN NATURE. THE COPY OF THE REPORT WAS GIVEN TO THE LD . AR AND THE LD. AR GAVE HIS COMMENTS TO THE LD. CIT(A) VIDE HIS LETTER DATE D 30-06-2010. THE ASSESSEE HAS FURNISHED THE COPY OF THE CORRESPONDEN CE SHOWING THE INTERACTION WITH OVERSEAS EDUCATIONAL INSTITUTIONS IN GERMANY AND DUBAI. THE ASSESSEE HAS FILED THE NEWS CLIPPINGS IN RESPEC T OF INDIO GERMAN 31 EXCHANGE PROGRAMME. THE PLEADINGS AND EVIDENCES IN RELATION TO THE ISSUE OF CLAIM OF INTEREST AND SALARY EXPENDITURE ARE ALR EADY ON RECORD. 6.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S DELETED THE DISALLOWANCE AFTER OBSERVING AS UNDER:- I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENTS TAKEN BY SHRI JHANWAR QUITE CAREFULLY. IN MY CONSIDERED VIEW VARIOUS ADDITIONAL EVIDENCE IN SUPP ORT OF JUSTIFICATION OF FOREIGN JOURNEY BY THE AFORESAI D 4 PERSONS WHEN COULD NOT BE COLLECTED IN THE ASSESSME NT PROCEEDINGS, THEN IN ORDER TO DECIDE THE ISSUE IN JUSTIFIABLE MANNER THESE EVIDENCES ARE REQUIRED TO BE ADMITTED UNDER RULE 46A(1) OF I.T. RULES, 1962 AND THE SAID ADDITIONAL EVIDENCE ARE HEREBY ADMITTED. A FTER CONSIDERING THESE EVIDENCE, I AGREE WITH SHRI JHANW AR IN TODAYS GLOBAL ECONOMIC SCENARIO ALL PREMIER EDUCAT IONAL INSTITUTIONS ARE ATTEMPTING TO PROVIDE THE EDUCATIO N OF GLOBAL STANDARDS TO THEIR STUDENT SO THAT THEY CAN MEET GLOBAL CHALLENGES FOR WHICH STUDENT EXCHANGE PROGRAMME AND REGULAR FOREIGN TRAVEL OF PEOPLE AT T OP MANAGEMENT IS REQUIRED. HON'BLE ITAT JAIPUR BENCH IN THE CONSOLIDATED ORDER FOR ASSESSMENT YEAR 2001-02, 2002-03 AND 2005-06 HAS DISALLOWED THE SAID CLAIM BECAUSE NO EVIDENCE LIKE CORRESPONDENCE ETC. WERE FURNISHED TO JUSTIFY THE BOANAFIDE OF THE CLAIM THA T THE VISIT WAS BENEFICIAL TO THE OBJECT OF THE TRUST. HO WEVER, 32 CONTRARY TO THAT FOR THE PRESENT ASSESSMENT YEAR, T HERE WERE LOT OF NEW CLIPPINGS IN RESPECT OF INDO GERMA N EXCHANGE PROGRAMME AND THERE WAS COPY OF MOU BETWEEN GERMAN EDUCATIONAL INSTITUTIONS AND APPELLA NT SOCIETY AND THERE WERE CERTIFICATES ISSUED TO THE S TUDENTS OF APPELLANT SOCIETY BY GERMAN INSTITUTIONS. SIMILA RLY BEING THE GLOBAL HUB OF EDUCATIONAL ACTIVITY IN DUB AI, THE POTENTIAL BUSINESS PURPOSES FOR THE FOREIGN TRAVELI NG CANNOT BE IGNORED AND IN ANY CASE AS DECIDED BY VAR IOUS COURTS THAT IT IS FOR THE APPELLANT TO DECIDE THAT WHICH EXPENDITURE AND HOW MUCH EXPENDITURE IS NECESSARY F OR THE PURPOSES OF THE TRUST AND ASSESSING OFFICER CAN NOT SUBSTITUTE HIM TO ARRIVE AT THE SAID DECISION. WITH THIS DISCUSSION IN MY CONSIDERED VIEW, THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN DISALLOWING THE AFORESAID TRAV ELING EXPENSE CLAIM OF RS. 13,51,914/- AND THE AO IS HERE BY DIRECTED TO DELETE THE SAID DISALLOWANCE. 6.5 DURING THE COURSE OF PROCEEDING BEFORE US, THE LD. DR DREW OUR ATTENTION TO THE TOUR REPORTS AVAILABLE AT PAGES 1 51 TO 160 OF THE PAPER BOOK. THE DUBAI TOUR REPORT OF SMT. MOHINI BAKSHI I S AVAILABLE AT PAGES 157 AND 158 OF THE PAPER BOOK AND TOUR REPORT OF SH RI SANDEEP BAKSHI IS AVAILABLE AT PAGES 159 TO 160 OF THE PAPER BOOK. TH E LD. DR STATED THAT BOTH THE TOUR REPORTS ARE SIMILAR. SIMILARLY THE TOUR RE PORTS OF SMT. MOHINI BAKSHI 33 AND SHRI SANDEEP BAKSHI IN RESPECT OF VISITS TO IN TERNATIONAL SCHOOL OF DUSSELDORF AND AMERICAN INTERNATIONAL SCHOOL ARE SI MILAR IN NATURE. THESE ARE AVAILABLE AT PAGES 151 TO 156 OF THE PAPER BOOK . FROM THIS, THE LD. DR STATED THAT THE ATTEMPT HAS BEEN MADE TO FILE THE C OOKED UP TOUR REPORTS AND THESE DID NOT IN ANY WAY SHOW THAT THESE VISITS WER E FOR THE OBJECTS OF THE TRUST. IF THERE IS VIOLATION ENUMERATED IN SECTION 13 THEN THE ASSESSEE IS DISENTITLED FOR THE CLAIM OF EXEMPTION U/S 11 OF TH E ACT. THE LD. DR HAS RELIED UPON THE FOLLOWING DECISIONS. I) RAM BHAWAN DHARMSALA VS STATE OF RAJASTHAN 258 ITR 725(RAJ) II) PT KANAHYA LAL PUNJ CHARITABLE TRUST VS DIT (EXEMPT ION) 297 ITR 66 (2008) DELHI. III) ACTION FOR WELFARE & AWAKENING IN RURAL ENVIRONMENT (AWARE) VS DY COMMISSIONER OF INCOME TAX 263ITR13 (AP) IV) SHREE NARAYAN CHANDRIKA TRUST VS CIT 224 ITR 464 (K ER) V) AGAPPA CHILD CENTRE VS CIT 226 ITR 211(KER) VI) CIT VS MUTHOOTU CHARITABLE TRUST 227 ITR 203 (KER) VII) CHAIRMAN ANDHRA PRADESH WELFARE TRUST VS CIT 1 43 ITR 82 (AP) VIII) CIT VS RATTAN TRUST (1997) 227 ITR 356 (SC) IX) CIT VS NAGARTHU VAISIYARGAL SANGAM 246 ITR 164 (MAD) X) CHANDRIKA EDUCATIONAL TRUST VS CIT 139 CTR 96 (K ER) XI) CHAMPA CHARITABLE TRUST VS CIT 214 ITR 764 (BO MBAY) XII) DIRECTOR OF INCOME TAX VS BHARAT DIAMOND BOUR SE 259 ITR 280(SC) 34 XIII) SKIN INSTITUTE & PUBLIC SERVICES CHARITABLE TRUST VS ADIT (EXEMPTION) 65 ITD 125 (DEL) XIV) DY. DIRECTOR OF INCOME TAX (EXEMPTION) VS PA RIWAR SEWA SANSTAHN 110 TTJ(DEL) 861 XV) THE LITTLE TRADITION VS DY DIRECTOR OF INCOME T AX (EXEMPTION) 119ITD 127(DEL) XVI) SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN & RURAL AREA VS DCIT 90 ITD 493 (HYD). 6.6 THE LD. DR FURTHER DREW OUR ATTENTION TO THE AD DITIONAL EVIDENCES FILED BEFORE THE LD. CIT(A) TO SHOW THAT SUCH ADDI TIONAL EVIDENCES ARE NOT SUFFICIENT TO HOLD THAT TOUR TO FOREIGN COUNTRIES W ERE FOR THE OBJECT OF THE TRUST. 6.7 WE HAVE HEARD BOTH THE PARTIES. WE AGREE WITH T HE CONTENTIONS OF THE LD. DR THAT IN CASE THERE IS ANY VIOLATION OF SECTI ON 13(1) ( C) OF THE ACT THEN THE TRUST WILL LOOSE EXEMPTION. HENCE, IN CASE THE EXEMPTION IS TO BE DISALLOWED THEN THE AO WILL HAVE TO MAKE OUT THE FO OLPROOF CASE. THE ASSESSEE HAS FILED THE EVIDENCE AND ADDITIONAL EVID ENCES WERE SENT TO THE AO BY THE LD. CIT(A). THE TOUR REPORTS SUGGEST THAT FOREIGN VISITS WERE FOR THE PURPOSE OF THE OBJECTS OF THE TRUST. IF THE AO WAS OF THE VIEW THAT THE VISITS WERE PERSONAL IN NATURE THEN THERE WAS NOTHI NG PREVENTING THE AO TO EXAMINE THE MEMBERS OF THE BUKSHI FAMILY. HOWEVER, ON THE BASIS OF THE 35 SURMISES AND SUSPICION, THE EXEMPTION TO THE TRUST CANNOT BE DENIED AND SINCE THE AO FAILED TO COLLECT ANY POSITIVE EVIDENC E, THEREFORE, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVELING EXPEN SES. 7.1 THE LAST GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT DEPRECIATION ON ASSETS IS ALLOWABLE EV EN THOUGH THE SAME HAD ALREADY BEEN CLAIMED AS APPLICATION OF INCOME IN TH E PREVIOUS YEARS. 7.2 THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF KRISHI UPAJ MANDI SAMITI, BARAN (ITA NO.560 & 561/JP/2010 DATED 06-01-2011. WE HAD EARLIER REFERRED TO THE DECISION OF THE TRIB UNAL TO SHOW THAT IN THE CASE OF THE TRUST, THE PROFITS ARE TO BE COMPUTED O N THE BASIS OF THE COMMERCIAL PRINCIPLES. IN THAT DECISION, WE HAVE HE LD THAT DEPRECIATION WILL BE ALLOWABLE EVEN IF THE ACQUISITION OF ASSET IS AP PLICATION OF INCOME. FOR THIS WE HAVE RELIED UPON THE FOLLOWING DECISIONS. CIT VS. INSTITUTE OF BANKING 264 ITR 110 (BOM.) DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. FRAMJEE CAS WASJEE INSTITUTE, 109 CTR 463 (BOM.) DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. GIRDHARI LA L SHEWNARAIN TANTA TRUST, 19 ITR 215 (BOM CIT VS. KRISHI UPAJ MANDI SAMITI, GAJ SINGPUR, 227 CTR 79 36 7.3 FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA) ON THIS ISSUE, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT T HE DEPRECIATION ON ASSETS IS ALLOWABLE EVEN THOUGH THE SAME HAD ALREADY BEEN CLA IMED AS APPLICATION OF INCOME IN THE PREVIOUS YEARS. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16-11-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 16 /11/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO, WARD- 6 (1), JAIPUR 2. M/S. MAHIMA SHIKSHA SAMITI, JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1149/JP /10) A.R, ITAT, JAIPUR 37