ACIT, Bhubaneswar V. Siksha "O" Anusandhan, Bhubaneswar

ITA 116/CTK/2014

• Counselvise Citation: 11622114 RSA 2014
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUMAR
• Assessee Lawyers: G NAIK; S K SARANGI
• Keywords: Charitable institution; Maximum Marginal Rate; Benefit of exemption

Judgement Text

I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI S .V. MEHROTRA (ACCOUNTANT MEMBER) , AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 116 / CTK / 20 1 4 ASSESSMENT YEAR : 20 10 - 20 1 1 ASSISTANT COMMISSIONER OF INCOME TAX, ........ .. .APP ELL ANT CIRCLE - 1(2), BHUBANESWAR - VS. - SIKSHA O ANUSANDHAN,........................................ RESPONDENT 224, DHARMA VIHAR, KHANDAGIRI, BHUBANESWAR [PAN : AABTS 1525 R] APPEARANCES BY: SHRI K. AJAY KUMAR, CIT, D.R, FOR THE DEPART MENT SHRI G. NAIK AND SHRI S.K. SARANGI , A .R. , FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : OCTOBER 1 6 , 2 01 4 DATE OF PRONOUNCING THE ORDER : OCTOBER 20 , 201 4 O R D E R PER GEORGE MATHAN : TH IS IS AN APPEAL FILED BY THE REVENU E AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , B HUBANESWAR IN I.T. APPEAL NO. 0 011 / 1 3 - 1 4 DATED 28 . 0 1 .20 1 4 FOR THE ASSESSMENT YEAR 20 10 - 1 1 . 2 . SHRI K. AJAY KUMAR, CIT, D.R, REPRESENTED ON BEHALF OF THE REVENUE AND SHRI G. NAIK AND SHRI S.K. SARANGI , A .R. , REPRESENTED ON BEHALF OF THE ASSESSEE. 3 . AT THE TIME OF HEARING, I T WAS SUBMITTED BY THE LD. CIT (D.R.) THAT THE ISSUE IN THIS APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN ALLOWING THE BENEFIT OF EXEMPTION UNDER SECTION 11 IN RESPECT O F THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN SO FAR AS THE SAID ACTIVITY WAS NOT I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 2 OF 6 CHARITABLE IN NATURE. IT WAS THE FURTHER SUBMISSION THAT THE VIOLATION UNDER SECTION 13(1)(C)(II) HAVING BEEN CONFIRMED BY THE LD. CIT(APPEALS) , THE ASSESSEE WAS LIABLE TO B E HELD NOT ENTITLED TO THE EXEMPTION UNDER SECTION 11 OF THE ACT. 4. LD. A.R. SUBMITTED THAT THE ISSUE IN THIS APPEAL WAS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 473 TO 475/CTK/2012 AND C.O. NOS. 36 & 37/CTK/2 012 DATED 23.11.2012. IT WAS THE SUBMISSION THAT ALL THE ISSUES AS RAISED IN THIS APPEAL WERE SIMILAR IN THE REVENUES APPEAL AND THE ASSESSEES CROSS OBJECTIONS REFERRED TO SUPRA, WHICH WERE FOR THE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10. 5. LD. CIT(D.R.) V EHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 473 TO 475/CTK/2012 AND C.O. NO S. 36 & 37/CTK/2012 DATED 23.11.2012 SHOWS THAT THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: - 6. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF RIVAL SUBMISSIONS, IT IS FOUND THAT THE ASSESSEE HAS F ILED RETURNS FOR THE PERIOD UNDER CONSIDERATION AND THEY WERE PROCESSED U/S.143(3) OF THE I.T. ACT BY PASSING THE IMPUGNED ASSESSMENT ORDERS. IN THE ASSESSMENT ORDERS, THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT THE ASSESSEE IS NOT ENTITLED FOR E XEMPTION U/S. 11 IN VIEW OF THE VIOLATION OF THE PROVISIONS OF SECTION 13(1)(D) IN SO FAR AS THE ASSESSEE HAS PAID AMOUNTS TO THE VICE - PRESIDENT OF THE ASSESSEE - SOCIETY. CONSIDERING THE APPEALS BY THE ASSESSEE BEFORE HIM, THE LD. CIT(A) HAS EXAMINED THE OR DERS PASSED BY THE ASSESSING OFFICER AND FOUND THAT THE ASSESSING OFFICERS CONCLUSION IS NOT IN ACCORDANCE WITH LAW AS THE ASSESSEE IS TO BE TAXED ONLY ON THE AMOUNTS PAID TO THE PROHIBITED PERSON, I.E., VICE - I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 3 OF 6 PRESIDENT OF THE ASSESSEE - SOCIETY ONLY AT THE MAXIMUM MARGINAL RATE BUT NOT DISENTITLED FOR EXEMPTION U/S. 11 OF THE I.T. ACT. WHILE COMING TO THAT CONCLUSION, THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. - ITO (1979) 117 ITR 284, 287, WHEREIN HONBLE COURT HAS HELD THAT MERELY BECAUSE CERTAIN SURPLUS ARISES FROM ITS OPERATIONS, IT CANNOT BE HELD THAT THE INSTITUTION IS BEING RUN FOR THE PURPOSE OF PROFIT SO LONG AS OPER ATIO N OR INDIVIDUAL IS ENTITLED T O ANY PORTION OF THE SAID PROFIT AND THE SAID PROFIT IS USED FOR THE PURPOSES AND FOR THE PROMOTION OF THE OBJECTS OF THE INSTITUTION. THERE AFTERWARDS THE LD. CIT(A) CONSIDERED THE DECISION OF HONBLE APEX COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTIT UTION ETC. VS. - ADDL. CIT (1997) 139 CTR (SC) 7 WHEREIN IT IS HELD THAT THE AVAILABILITY OF EXEMPTION MUST BE EVALUATED BY FINDING OUT WHETHER THE EDUCATIONAL INSTITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT. THE HONBLE APEX COURT OBSERVED AS UNDER: - 8............AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER, THE OBJECT IS TO MAKE PROFIT. IN EVALUATING OR APPRAISING THE ABOVE, ONE SHOULD ALSO BEAR IN MIND THE DISTINCTION/DIFFE RENCE BETWEEN THE CORPUS, THE OBJECTS AND THE POWERS OF THE CONCERNED ENTITY. IF ONE LOOKS AT THE OBJECTS CLAUSE, THERE ARE OTHER NOBLE AND PIOUS OBJECTS BUT ASSESSEE SOCIETY HAS DONE NOTHING TO ACHIEVE THE OTHER OBJECTS EXCEPT PERUSING MAIN OBJECT OF PROV IDING EDUCATION AND EARNING PROFIT. FURTHER, WITH PROFIT EARNED THE SOCIETY HAS STRENGTHENED OR ENHANCED ITS CAPACITY TO EARN MORE RATHER THAN TO UNDERTAKE ANY OTHER ACTIVITIES TO FULFIL OTHER NOBLE OBJECTS FOR THE CAUSE OF POOR AND NEEDY PEOPLE OR ADVANCE MENT OF RELIGIOUS PURPOSE. THE LEARNED CIT(A) ALSO CONSIDERED THE DECISION IN THE CASE OF AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE VS. - CBDT (2008) 301 ITR 86 (SC), WHEREIN HONBLE APEX COURT HAS LAID DOWN THE PRINCIPLES AS UNDER: I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 4 OF 6 IN ADDL. CIT VS. - SURAT ART SILK CLOTH MANUFACTUERS ASSOCIATION REPORTED IN [1980] 121 ITR 1, IT HAS BEEN HELD BY THIS COURT THAT THE TEST OF PREDOMINANT OBJECT OF THE ACTIVITY IS TO BE SEEN WHETHER IT EXISTS SOLELY FOR EDUCATION AND NOT TO EARN PROFIT. HOWEVER, THE PURPOSE WOULD NOT LOSE ITS CHARACTER MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. THAT, IT IS NOT POSSIBLE TO CARRY ON EDUCATIONAL ACTIVITY IN SUCH A WAY THAT THE EXPENDITURE EXACTLY BALANCES THE INCOME AND THERE IS NO RESULTANT PROFI T, FOR, TO ACHIEVE THIS, WOULD NOT ONLY THE DIFFICULT OF PRACTICAL REALIZATION BUT WOULD REFLECT UNSOUND PRINCIPLES OF MANAGEMENT. IN ORDER TO ASCERTAIN WHETHER THE INSTITUTE IS CARRIED ON WITH THE OBJECT OF MAKING PROFIT OR NOT IT IS DUTY OF THE PRESCRIBE D AUTHORITY TO ASCERTAIN WHETHER THE BALANCE OF INCOME IS APPLIED WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH THE APPLICANT IS ESTABLISHED. THE LEARNED CIT(A) HAS ALSO RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PIN EGROVE INTERNATIONAL CHARITABLE TRUST VS. - UOI (2010) 327 ITR 73 (P&H), WHEREIN THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. - SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION REPORTED IN (1980) 121 ITR 1 AND ADITANAR EDUCATIONAL INSTITUTIO N ETC. VS. - ADDL. CIT (1997) 139 CTR (SC) 7 HAVE BEEN APPLIED. WE FIND THAT THE LD. CIT(A) HAS DISTINGUISHED THE DECISION OF THE ITAT , HYDERABAD BENCH IN THE CASE OF VODITHALA EDUCATION SOCIETY VS. - ADIT (EXEMPTION) - II, HYDERABAD (2008) 20 SOT 353 (HYD.) ] STATING THAT IT WAS IN THE CONTEXT OF AN INSTITUTION WHICH WAS CHARGING FEES OVER AND ABOVE THE PRESCRIBED FEES AND PROMOTERS WERE TAKING AWAY THE EXCESS FEES, WHEREAS IN THE PRESENT CASE THE ASSESSEE SOCIETY IS CHARGING FEES AS PRESCRIBED BY THE CONCER NED AUTHORITIES AND THE ASSESSING OFFICER IS NOT ABLE TO SAY THAT THE ASSESSEE IS COLLECTING MORE THAN THE FEES PRESCRIBED BY THE CONCERNED AUTHORITIES. HENCE, HE CAME TO THE CONCLUSION THAT THE ASSESSEE CANNOT BE CONSIDERED AS RUNNING ANY COMMERCIAL ACTIV ITIES AND HENCE, FOUND THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 11. LATER ON THE LD. CIT(A) HAS CONSIDERED THE ASPECT OF AMOUNT PAID TO THE VICE - PRESIDENT OF THE ASSESSEE SOCIETY. HE CONSIDERED THE ISSUE WITH REFERENCE TO THE CBDT CIRCULAR N O. 387 DT. 6.7.1984. HE ALSO EXAMINED THE ISSUE IN THE LIGHT OF THE DECISIONS OF ITAT, LUCKNOW BENCH IN THE CASE OF ITO VS. - VIRENDRA SINGH MEMORIAL SHIKSHA SAMIITI (2009) 18 DTR (LUCKNOW) (TRIB.) 502, WHEREIN IT IS HELD THAT IF SOME BENEFITS HAVE BEEN GI VEN TO A PERSON OF PROH I BITORY CATEGORY SAME C ANNOT BE BASIS FOR DENYING EXEMPTION. IN SUCH CASES, I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 5 OF 6 TAX HAS TO BE LEVIED AT THE MAXIMUM MARGINAL RATE ON SUCH INCOME WHICH HAS BEEN APPLIED TO THE BENEFIT OF THE PROHIBITED PERSONS AS DECIDED IN THE CASE OF DI T(EXEMPTION) VS. - SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST (2001) 249 ITR 533 (BOM.), WHICH IS EXTRACTED IN THE IMPUGNED ORDER AT PARA 6.2 BY THE LD. CIT(A). RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT (SUPRA), THE LD. CIT(A) HAS COME TO THE CON CLUSION THAT THE ASSESSEE IS TO BE TAXED ONLY ON THE AMOUNTS PAID TO VICE - PRESIDENT OF THE ASSESSEE AT THE MAXIMUM MARGINAL RATE. ACCORDINGLY THE LD. CIT(A) HAS SET ASIDE THE ORDERS OF THE ASSESSING OFFICER BY PARTLY ALLOWING THE APPEALS OF THE ASSESSEE. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) , IT IS FOUND THAT THE SAME IS WELL REASONED ONE HAVING BEEN IN CONSONANCE WITH THE RATIOS OF VARIOUS JUDICIAL PRONOUNCEMENTS NARRATED THEREIN. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ARE NOT INFIRM ANY WAY REQUIRING ANY INTERFERENCE. HENCE, THE SAME ARE HEREBY UPHELD BY FINDING THE ISSUES RAISED BY THE REVENUE AS WELL AS THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS AS DEVOID OF MER ITS. 8. IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE HEREBY DISMISSED. AS IT IS NOTICED THAT THE ISSUES IN THIS APPEAL ARE SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEES OWN CASE (SUPRA) FOR THE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, THE APPEAL OF THE REVENUE STANDS DISMISSED. 7 . IN THE RE SULT, THE APPEAL OF THE REVENU E IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER , 2014. SD/ - SD/ - S .V. MEHROTRA GEORGE MATHAN ( ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) KOLKATA, THE 20 TH D AY OF OCTO BER , 201 4 I.T.A. NO. 116 / CTK ./20 1 4 ASSESSMENT YEAR: 20 10 - 20 1 1 PAGE 6 OF 6 COPIES TO : (1) THE ASSESSEE (2) THE DEPARTMENT (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL CUTTACK B ENCH, CUTTACK LAHA/SR. P.S.