Asst. Director of Income Tax (Exemption)-I, Hyderabad V. M/s. Bishop Solomon Educational Trust, Karimnagar

ITA 1302/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74536 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 260A; 12A; 12AA; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO. 1302/HYD/2013 ASSESSMENT YEAR: 2007-08 ASST. DIRECTOR 0F INCOME-TAX(EXEMPTIONS), APPELLANT HYDERABAD VS. M/S BISHOP SOLOMON EDUCATIONAL TRUST, RE SPONDENT HYDERABAD. (PAN AAATB5720G) APPELLANT BY : SHRI SOLGY JOSE T KOTTARAM RESPONDENT BY : NONE DATE OF HEARING : 04/02/2014 DATE OF PRONOUNCEMENT : 04/02/2014 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF CIT(A)-IV HYDERABAD DATED 09/07/2013 FOR T HE ASSESSMENT YEAR 2007-08 WHEREIN THE REVENUE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSE E IS ELIGIBLE FOR CLAIM OF EXEMPTION U/S 11 OF THE IT ACT, 1961 E VEN IN ABSENCE OF APPROVAL UNDER SUB-CLAUSE (VI) TO THE SE CTION 10(23C) OF THE ACT. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT APPROVAL UNDER SUB-CLAUSE (VI) TO THE SECTION 10(23 C) OF THE IT ACT, 1961 IS DISTINCT FROM REGISTRATION U/S 12A OF THE ACT. 2 ITA NO. 1302/H/13 M/S BISHOP SOLOMON EDUCATIONAL TRUST 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT SU B-CLAUSE (VI) TO SECTION 10(23C), AS INSERTED BY THE FINANCE ACT, 1998 W.E.F. 01/04/1999, STATES THAT THE UNIVERSITY OR OTHER EDU CATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATION PURPOSE, AND WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY. THE ISSUE IS EXPLICITLY DEALT WITH BY THE ACT ITSELF AND THE INTENTION OF T HE LEGISLATURE IS QUITE CLEAR FROM IT. 5. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT OB TAINING APPROVAL FROM THE PRESCRIBED AUTHORITY IS MANDATORY , AS PER THE PLAIN MEANING OF SECTION 10(23C) OF THE IT ACT, 196 1,M WHENEVER THE GROSS RECEIPTS OF AN EDUCATIONAL INSTI TUTION EXCEED RS. ONE CRORE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE SOCIETY IS REGISTERED U/S 12A OF THE IT ACT, 1961. IT WAS RUNN ING EDUCATIONAL INSTITUTIONS AND DURING THE PREVIOUS YEAR RELEVANT TO AY UNDER CONSIDERATION IT HAD CLAIMED EXEMPTION U/S 11 OF TH E ACT. THE ASSESSEE HAS NOT OBTAINED NOTIFICATION U/S 10(23C)( VI) OF THE IT ACT. SINCE ASSESSEE WAS RUNNING EDUCATIONAL INSTITUTION, THE AO ASKED THE ASSESSEE AS TO WHY THE PROVISIONS OF SECTION 10(23C ) SHOULD NOT BE APPLIED AND IN THE ABSENCE OF SUCH NOTIFICATION U/S 10(23C)(VI), THE EXEMPTION SHOULD NOT BE DENIED TO THE ASSESSEE FOR THE AY UNDER CONSIDERATION. IN REPLY, THE ASSESSEE STATED AS FOL LOWS: THE PROVISIONS OF SECTION 10(23C) AND 11 TO 13 OF T HE ACT ARE BENEFICIAL PROVISIONS. HENCE, THE PROVISIONS THAT S UIT MORE TO THE ORGANIZATION CAN BE OPTED BY THE ORGANIZATION. THE PREFERENCE OF ONE SECTION OVER ANOTHER IS A MATTER OF PROCEDURAL CONVENIENCE AND BOTH THE SECTIONS ARE HAVING MORE O R LESS THE SAME MONITORING MECHANISM. IT HAS BEEN CLAIMED THAT THE ASSESSEE WAS REGISTERE D U/S 12 THEREBY ENTITLED TO THE APPLICATION OF THE PROVISIO NS OF SECTION 11-13. THESE PROVISIONS ALLOW EXEMPTION UNDER SPECI FIED CONDITIONS THAT (A) EXEMPTION WAS ALLOWABLE ONLY ON THE APPLICATION OF THE RECEIPTS TO THE OBJECTS OF THE T RUST; (B) ACCUMULATIONS SUBJECT TO SPECIFIC CONDITIONS; (C) N OT TO BE DIVERTED FOR PERSONAL GAINS AS DETAILED IN SECTION 13. THUS, THERE ARE STRICT CONTROL MECHANISMS ON THE APPLICAT ION FRONT AND IT HAD SATISFIED ALL THE REQUIREMENTS OF THESE CONT ROL MECHANISMS. 3 ITA NO. 1302/H/13 M/S BISHOP SOLOMON EDUCATIONAL TRUST 2.1 HOWEVER, THE AO HAD NOT CONSIDERED THE ABOVE SU BMISSIONS OF THE ASSESSEE AND DISALLOWED THE CLAIM OF THE ASSESS EE RELYING ON THE DECISIONS OF M/S ST. THERESA EDUCATION SOCIETY FOR THE AY 2003-04 FILED U/S 260A BEFORE THE HONBLE AP HIGH COURT AND THE DECISION OF THE ITAT, HYDERABAD IN MAHESWARA EDUCATIONAL SOCIET Y, NARASAMPET VIDE ITS ORDER DATED 16/07/2008 IN MA NO. 55/HYD/20 08 IN ITA NO. 270/HYD/2008 AND SINCE THE ASSESSEE HAS NOT OBTAINE D APPROVAL U/S 10(23C)(VI) OF THE IT ACT, THOUGH, ITS GROSS RECEIP TS HAVE BEEN CROSSED RS. 1 CRORE. 3. ON APPEAL, BEFORE THE CIT(A), THE ASSESSEE HAD A RGUED THAT OBTAINING OF APPROVAL U/S 10(23C)(VI) OF THE ACT IS NOT MANDATORY AND FOR THIS PROPOSITION THE ASSESSEE RELIED ON THE FOL LOWING JUDGMENTS: 1. M/S CHAITANYA MEMORIAL EDUCATION VS. ITO, ITA NO . 440/HYD/2012, DTD. 22/03/2013. 2. M/S BAPATLA EDUCATIONAL SOCIETY VS. ITO, DATED 2 5 TH FEBRUARY, 2010 AND JEEVAN DEEP CHARITABLE TRUST VS. CIT, HIGH COURT OF ALLAHABAD VIDE JUDGMENT DATED 29/10/2012. 3.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND RELYING ON THE DECISIONS PLACED BY THE ASSESSEE, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE IS N O STRENGTH IN THE ASSESSMENT ORDER PASSED BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE AT THE TIME OF HEARING BEFORE US. HOWEVER, WE PROCEED TO D ECIDE THIS APPEAL AFTER HEARING THE LEARNED DR AND ON MERITS. 6. WE HAVE HEARD THE LEARNED DR, PERUSED THE MATERI AL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF T HE SMC BENCH OF ITAT, HYDERABAD IN THE CASE OF ACIT(EXEMPTIONS) VS. RAISATANI 4 ITA NO. 1302/H/13 M/S BISHOP SOLOMON EDUCATIONAL TRUST SIKSHA SAMITI, [2008] 23 SOT 124 (HYD.) WHEREIN IT WAS HELD AS FOLLOWS: SEC. 11 MANDATES THE EXCLUSION OF INCOME DERIVED F ROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES FROM THE TOTAL INCOME OF A PERSON. SEC. 10 (23C) MANDATES THE EXCLUSION FROM THE TOTAL INCOME OF A P ERSON ANY INCOME RECEIVED BY SUCH PERSON ON BEHALF OF ANY UNI VERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR E DUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. THUS, IT H AS TO BE NOTED THAT THE EXEMPTION UNDER S. 11 AND S. 10(23C) IS AV AILABLE TO A PERSON ONLY. THE ONLY DIFFERENCE IS THAT UNDER S. 1 1, THE EXEMPTION WILL BE AVAILABLE TO THE EXTENT SUCH INCO ME IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES. ON THE OTHER H AND, UNDER S. 10(23C), ANY INCOME DERIVED BY THE PERSON ON BEHALF OF THE EDUCATIONAL INSTITUTION WILL BE EXEMPT. BECAUSE OF THIS DIFFERENCE, I.E., APPLICATION OF INCOME IN S. 11 AN D RECEIPT OF INCOME UNDER S. 10(23C), IT IS ARGUED BY THE DEPART MENTAL REPRESENTATIVE THAT WHEREAS EXEMPTION UNDER S. 11 I S ACTIVITY BASED, EXEMPTION UNDER S. 10(23C) IS INSTITUTION BA SED AND, THEREFORE, AN INSTITUTION CANNOT CLAIM EXEMPTION UN DER S. 11. HOWEVER, WHILE MAKING THIS ARGUMENT, THE DEPARTMENT AL REPRESENTATIVE, IT SEEMS, HAS MISSED OUT ON THE PRO VISIONS OF S. 12. SUB-S. (2) OF S. 12 PROVIDES THAT THE VALUE OF ANY SERVICES, BEING MEDICAL OR EDUCATIONAL, MADE AVAILABLE BY ANY CHARITABLE TRUST RUNNING SUCH INSTITUTION OR MADE AVAILABLE BY AN EDUCATIONAL INSTITUTION SHALL BE DEEMED TO BE INCOM E OF SUCH TRUST OR INSTITUTION DERIVED FROM PROPERTY HELD UND ER TRUST WHOLLY FOR CHARITABLE PURPOSES. BUT SUCH INCOME SHALL BE C HARGEABLE TO TAX ONLY TO THE EXTENT THE SERVICES ARE MADE AVAILA BLE TO ANY PERSON WHO HAS MADE SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, TO THE MEMBER OF AN HUF WHICH HAPPENS TO BE THE AUTHOR OR FOUNDER OF THE TRUST OR INSTITUTION, TO A NY TRUSTEE OF THE TRUST OR MANAGER OF THE INSTITUTION OR TO ANY RELAT IVE OF ANY SUCH AUTHOR, FOUNDER, PERSON, MEMBER, TRUSTEE OR MANAGER AS AFORESAID. THIS IS PROVIDED IN S. 12(2) R/W S. 13(3 )(B), (C), (CC) OR (D). TO SIMPLIFY WHAT IS STATED ABOVE, INCOME DERIV ED BY A TRUST RUNNING AN EDUCATIONAL INSTITUTION OR BY AN EDUCATI ONAL INSTITUTION PER SE IS DEEMED TO BE THE INCOME DERIV ED BY SUCH TRUST OR INSTITUTION FROM PROPERTY HELD UNDER TRUST AND WILL BE EXEMPT FROM INCOME SUBJECT TO THE EXCEPTIONS PROVID ED IN S. 13(3). THEREFORE, THERE IS NO GAINSAYING THAT AN ED UCATIONAL INSTITUTION CANNOT AVAIL EXEMPTION UNDER S. 11. MER ELY BECAUSE S. 10(23C) PROVIDES FOR EXEMPTION OF THE INCOME OF AN EDUCATIONAL INSTITUTION, IT DOES NOT FOLLOW THAT SU CH INSTITUTION CANNOT AVAIL EXEMPTION UNDER S. 11/12 SUBJECT TO CO NDITIONS BEING FULFILLED. IN FACT, IT IS DIFFICULT TO CONCEI VE THE IDEA OF 5 ITA NO. 1302/H/13 M/S BISHOP SOLOMON EDUCATIONAL TRUST AVAILABILITY OF EXEMPTION ON THE GROUND THAT ONE IS ACTIVITY ORIENTED AND THE OTHER IS INSTITUTION ORIENTED. HOW CAN AN INSTITUTION AVAIL EXEMPTION UNDER S. 10(23C) WITHOU T CARRYING OUT ANY ACTIVITY. IF THE ARGUMENT OF THE DEPARTMENTAL R EPRESENTATIVE IS TO BE ACCEPTED, THEN S. 12 WILL BE RENDERED OTIO SE AND S. 12AA WHICH SPEAKS OF REGISTRATION OF TRUST AS WELL AS INSTITUTION WILL ALSO BE PARTLY REDUNDANT. IT IS ABSOLUTELY FUT ILE TO ARGUE THAT INSTITUTIONS FALLING UNDER S. 10(23C) CANNOT CLAIM EXEMPTION UNDER S. 11. CIT VS. BAR COUNCIL OF MAHARASHTRA (1981) 22 CTR (SC) 106 : (1981) 130 ITR 28 (SC) RELIED ON. 6.1 IN VIEW OF THE DECISION OF THE COORDINATE BENCH , WE ARE OF THE OPINION THAT WHEN THE ASSESSEE DULY GRANTED REGISTR ATION U/S 12A OF THE IT ACT AND CLAIMED EXEMPTION U/S 11 OF THE ACT, THE ASSESSING OFFICER CANNOT DENY EXEMPTION ON THE REASON THAT TH E ASSESSEES CASE IS COVERED U/S 10(23C) OF THE IT ACT AND CANNO T THRUST UPON THE ASSESSEE FOR PARTICULAR DEDUCTION. IT IS LEFT OPEN FOR THE ASSESSEE TO CLAIM DEDUCTION U/S 11 OR U/S 10(23C) OF THE ACT. I N THE PRESENT CASE, ASSESSEE IS HAVING REGISTRATION U/S 12A OF THE ACT, THEREFORE, CLAIM OF EXEMPTION U/S 11 IS TO BE GRANTED. BEING SO, WE ARE IN AGREEMENT WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY THE SAME IS HEREBY CONFIRMED. THUS, THE GROUNDS RAISED BY THE REVENUE IN THIS REG ARD ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 04/02/2014. SD/- SD/- (D. MANMOHAN) (CHANDRA POOJARI) VICE PRESIDENT ACCOU NTANT MEMBER HYDERABAD, DATED: 05/02/2014. KV 6 ITA NO. 1302/H/13 M/S BISHOP SOLOMON EDUCATIONAL TRUST COPY TO:- 1) ADIT(E) I, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 2) M/S BISHOP SOLON EDUCATIONAL TRUST, H.NO. 1-3-41 /C/2, SANTHINAGAR, PEDDAPALLY, KARIMNAGAR 3) CIT(A)-IV, HYDERABAD 4) DIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T. A.T., HYDERABAD.