ITO (E) 2(3), MUMBAI V. ST JOSEPHS TECHNICAL SCHOOL, MUMBAI

ITA 1417/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2168 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KISHOR P PABARI
• Keywords: Business income; Benefit of exemption
• Section: 12A; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NO. 1417/MUM/2015 ( / ASSESSMENT YEAR: 2010-11 THE ITO (E) 2(3), PIRAMAL CHAMBERS, 5 TH FLOOR, PAREL, MUMBAI-400 012 / VS. ST. JOSEPHS TECHNICAL SCHOOL, PREMIER AUTOMOBILES ROAD, KURLA (W), MUMBAI-400 070 ./ ./ PAN/GIR NO. AACTS 0971N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI RAJESH OJHA / RESPONDENT BY: SHRI KISHOR P. PABARI / DATE OF HEARING :27.10.2016 ! / DATE OF PRONOUNCEMENT :28.10.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE LD. CIT(A)-1, MUMBAI DATED 05.12.2014 PERTAINING TO ASS ESSMENT YEAR 2010-11 IN GRANTING DEDUCTION U/S. 11 OF THE ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING COMMERCIAL COURSES LIKE WELDING, ALLIED TRADES, DRAUGHTSMAN COURSE WORKSHOP SKILL ETC AS EDUCATIONAL ACTIVITY AS PER OBJECT OF TRUST. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) FAILED TO CONSIDER ITA NO. 1417/M/15 2 THE EDUCATION DEFINED IN THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF LOK SIKSHAN TRUST VS. CIT (1975) 101 ITR 234 AND BIHAR INSTITUTE OF MINING & MINES SURVEYING (208 ITR 608) OF HONBLE PATNA HIGH COURT, ON WHICH ASSESSING OFFICER RELIED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT TREATING INTEREST FREE ADVANCE OF RS.1,95,00,000/- GIVEN TO DON BOSCO INSTITUTE OF TECHNOLOGY IS A VIOLATION OF SECTION 11(5). 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) ERRED IN IGNORING THAT THE INTEREST FREE ADVANCE TRANSACTION BETWEEN TWO TRUSTS IS HIT BY PROVISION OF SECTION 13(2)(A) AND 11(5). 5. THE APPELLANT PRAYS THAT, TO THE EXTENT OF ABOVE GROUNDS, THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. AT THE TIME OF HEARING, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT AN IDENTICAL ISSUES HAVE BEEN ARISEN IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YE AR 2009-10 WHEREIN THE CLAIMS OF THE ASSESSEE WERE ALLOWED AND THE ASSESSING OFFICER WAS DIRECTED TO GRANT EXEMPTION U/S. 11 OF THE ACT. THEREFORE HE SUBMITS THAT THE SAME MAY BE FOLLOWED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ISSUES HAVE BEEN DEALT WITH BY THE CO-ORDINATE BENCH IN TH E IMMEDIATELY PRECEDING ASSESSMENT YEAR 2009-10. 5. HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE A UTHORITIES BELOW. WE FIND THAT THE SIMILAR ISSUES HAVE BEEN DE CIDED BY THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER A SSESSMENT YEAR 2009-10 WHEREIN IT HAS BEEN HELD AS UNDER: ITA NO. 1417/M/15 3 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RECORD. THE MAIN CLAIM OF THE REVENUE IS ESSENT IALLY ON TWO COUNTS, I.E. (I) ASSESSEE ADVANCED SOME AMOUNT TO D ON BOSCO INSTITUTE OUT OF ACCUMULATED INCOME SET APART FOR A PPLICATION, IN TERMS OF SECTION 11(2) OF THE ACT, WHICH IS IN VIOL ATION OF THE PROVISIONS OF SECTION 11(5) OF THE ACT, AND (II) AS SESSEE LET OUT ITS PREMISES PARTLY TO JET AIRWAYS AND OTHERS AND THE I NCOME EARNED THEREFROM IS ASSESSABLE TO TAX AS BUSINESS INCOME. ON THE OTHER HAND, THE CASE OF THE ASSESSEE IS THAT THE ACTIVITY OF LEASING OUT PROPERTY WAS FOR ADVANCEMENT OF THE OBJECT OF GENER AL PUBLIC UTILITY; ASSESSEE WAS ENGAGED IN IMPARTING VOCATION AL TRAINING AND THE INSTITUTE WAS RECOGNISED BY NCVT. THE PROPE RTY WAS LET OUT FOR NO OTHER PURPOSE THAN FOR GIVING TECHNICAL TRAINING. JET AIRWAYS AND OTHERS TO WHOM THE PREMISES WERE LET OU T WAS ALSO ENGAGED IN IMPARTING TECHNICAL TRAINING AND THE ASS ESSEE HAD ALSO EARNED INCOME BY PARTICIPATING IN THE TRAINING PROGRAMMES CONDUCTED BY THEM IN THE FORM OF OFFERING THE SERVI CES TO THE LESSEE. IN FACT THE AGREEMENT WITH TATA SKY CLEARLY STIPULATES THAT THE INCOME SHOULD BE APPLIED SOLELY TOWARDS PROMOTI ON OF THE OBJECT OF THE SOCIETY. SIMILARLY, JET AIRWAYS SOUGH T THE EXPERTISE FOR CONDUCTING PROGRAMMES FOR THEIR EMPLOYEES AND S TAFF AND ASSESSEE CHARGED FOR IMPARTING SUCH TRAINING. THE S TAFF AND TRAINEES OF JET AIRWAYS WILL HAVE ACCESS TO THE PLA Y GROUND AND OTHER AMENITIES AVAILABLE TO ALL STUDENTS. LEAVE LI CENCE AGREEMENT WITH EKBOTE AUTO CONSULTANT WAS TO CONDUCT REPAIRIN G AND SERVICING OF CARS AS WELL AS PROVIDING HANDS-ON PRA CTICAL TRAINING IN AUTOMOBILE REPAIRS TO THE STUDENTS OF THE ASSESS EE FREE OF COST. TRAINING TIMINGS ARE TO BE OBSERVED STRICTLY AS PER NORMAL SCHOOLING. IN THE CASE OF DIT VS. SAHU JAIN TRUST 5 6 DTR 402 (CALCUTTA) IT WAS OBSERVED THAT EXEMPTION UNDER SEC TION 11 CANNOT BE DENIED ON THE GROUND THAT THE TRUST HAD L ET OUT PROPERTY FOR EFFICIENT UTILISATION OF ITS ASSETS. THE CBDT I N ITS CIRCULAR DATED 19 TH DECEMBER, 2008 CLARIFIED BY MENTIONING THAT THE NE WLY INSERTED PROVISO TO SECTION 2(15) WILL NOT APPLY WH ERE THE PURPOSE OF A TRUST OR INSTITUTION IS EDUCATION, EVEN IF IT INCIDENTALLY INVOLVES CARRYING ON OF COMMERCIAL ACTIVITIES. IN T HE CASE OF SAMUDRA INSTITUTE OF MARITIME VS. DDIT (ITA NO. 5760/MUM/2010) ITAT H BENCH, MUMBAI, VIDE ITS ORD ER DATED 30.11.2011, OBSERVED THAT EVEN IF THE COURSES ARE N OT APPROVED BUT IF THE INTENTION OF THE ASSESSEE WAS TO GIVE TE CHNICAL TRAINING, EXEMPTION UNDER SECTION 11 CANNOT BE DENIED. IN OTH ER WORDS, AS LONG AS THE TRUST IS IMPARTING EDUCATION AS PER THE OBJECT OF THE TRUST, INCOME EARNED BY SUCH TRUST SHOULD BE ALLOWE D THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT. HAVING RE GARD TO THE CASE LAW CITED BEFORE US WE ARE OF THE VIEW THAT SO LONG AS THE ASSESSEE HAS LET OUT THE PROPERTY FOR EFFICIENT UTI LISATION OF ITS ASSETS WITH A LARGER PURPOSE OF IMPARTING TECHNICAL TRAINING IN THE SAID CAMPUS, ASSESSEE CAN BE SAID TO BE CARRYING ON A CHARITABLE ACTIVITY AND INCOME THEREFROM IS EXEMPT FROM TAX. ITA NO. 1417/M/15 4 14. THIS LEAVES US WITH THE ISSUE OF THE AMOUNT GIV EN TO DON BOSCO INSTITUTE WITHOUT CHARGING ANY INTEREST FOR A SHORT PERIOD. THE CASE OF THE ASSESSEE IS THAT THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF ALARIPPU (SUPRA) WAS WRON GLY APPLIED BY THE TAX AUTHORITIES SINCE IT IS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE CASE OF THE AO AS WELL AS THE CIT(A) WAS THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PRO VISIONS OF SECTION 11(5) OF THE ACT SINCE THE MONEY IS NOT INV ESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SECTIO N 11(5) WHEREAS THE CASE OF THE ASSESSEE IS THAT NO PART OF THE INCOME IS APPLIED OR INVESTED BY WAY OF ADVANCES TO DON BOSCO INSTITUTE AND ON IDENTICAL ISSUE THE HON'BLE DELHI HIGH COURT , IN THE CASE OF ACME EDUCATIONAL SOCIETY 326 ITR 146, OBSERVED THAT INTEREST FREE LOAN GIVEN BY THE ASSESSEE SOCIETY TO ANOTHER SOCIETY WITH IDENTICAL OBJECT CANNOT BE TREATED AS INVESTMENT OR DEPOSIT IN WHICH EVENT THERE IS NO VIOLATION OF SECTION 13(1)( D) R.W.S. 11(5) OF THE ACT. THE CASE OF THE ASSESSEE HEREIN IS THAT BO TH THE ASSESSEES HAVE SIMILAR OBJECTS AND WERE REGISTERED UNDER SECTION 12A OF THE ACT AND INTEREST FREE LOAN WAS RETURNED SUBSEQUENTLY. THE CLAIM OF THE ASSESSEE IS NOT DISPUTED BY THE LE ARNED D.R. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE DECISION OF THE HON'BLE DELHI HIGH COURT, WE AR E OF THE VIEW THAT THE AMOUNT ADVANCED BY THE ASSESSEE TO DON BOS CO INSTITUTE IS NOT COVERED BY SECTION 11(5) OF THE ACT AND EVEN ON THAT COUNT THE CLAIM OF EXEMPTION COULD NOT HAVE BEEN DENIED T O THE ASSESSEE. UNDER THESE CIRCUMSTANCES WE ARE OF THE V IEW THAT THE PLEA TAKEN BEFORE US BY THE ASSESSEE MERITS ACCEPTA NCE AND WE DIRECT THE AO TO GRANT EXEMPTION UNDER SECTION 11 O F THE ACT ON THE INCOME EARNED BY THE ASSESSEE, INCLUDING LEASE RENT, ETC. FACTS AND CIRCUMSTANCES BEING IDENTICAL, RESPECTFU LLY FOLLOWING THE ABOVE SAID DECISION, WE SUSTAIN THE ORDER OF TH E LD. CIT(A) . 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) / ACCOUNTANT MEMBER $ % /JUDICIAL MEMBER MUMBAI; ( DATED 28 TH OCTOBER, 2016 . % . ./ RJ , SR. PS ITA NO. 1417/M/15 5 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI