DEPUTY COMMISSIONER OF INCOME TAX (E), JAIPUR V. M/S SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY, KOTA

ITA 142/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1685 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S NEHRA
• Assessee Lawyers: MAHENDRA GARGIEYA ADV DHK
• Keywords: Depreciation; Question of law
• Section: 143(3); 12AA; 147; 10; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA -@ ITA NO. 142/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 DEPUTY COMMISSIONER OF INCOME TAX (E), CIRCLE- JAIPUR C UKE VS. M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY, MODI HOUSE, GUMANPURA, KOTA. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO. AAATN1183H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI A. S. NEHRA, (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADV) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/04/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/06/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A), JAIPUR DATED 09-11-2017 FOR THE A.Y. 2010-11 IN THE MATTER OF ORDER PASSED U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION 10(23C(VI) OF THE I.T ACT, 1961 IN SPITE OF THE FACTS THAT THE ASSESSEE SOCIETY DOES NOT EXIST SOLELY FOR EDUCATION AS IT IS RUNNING A HOSPITAL. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR ACCUMULATING OF RS. 2,57,91,515/- BEING 15% OF INCOME WITHOUT APPRECIATING THE FACT THE ASSESSEE SOCIETY HAS NOT FULFILLED THE ITA NO. 142/JP/18 DCIT(E)VS M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY 2 CONDITIONS OF SECTION 10(23C)(VI) OF RUNNING ACTIVITIES SOLELY FOR EDUCATION PURPOSE. 3. ANY OTHER QUESTION OF LAW AS DEEMED FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE MAY ALSO BE FRAMED BEFORE THE HONBLE TRIBUNAL IN INTEREST OF JUSTICE. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE M/S SETH RAMJIDAS MODI VIDYA NIKETAN SOCIETY, KOTA IS RUNNING VARIOUS EDUCATIONAL INSTITUTIONS AT KOTA AND ALSO RUNNING A HOSPITAL NAMELY DR. R.N. MODI HOSPITAL (FORMERLY KNOWN AS FORTIS MODI HOSPITAL). THE ASSESSEE SOCIETY IS REGISTERED U/S 12AA WITH EFFECT FROM 03.07.1986. THEREAFTER, ASSESSEE SOCIETY WAS APPROVED U/S 10 (23C)(VI) OF THE ACT BY THE CHIEF COMMISSIONER OF INCOME TAX, UDAIPUR FOR A.Y. 2009-10 AND ONWARDS VIDE ORDER NO. CCIT/UDR/ITO (TECH)/2008-09/2071 DATED 13.10.2008. . WHILE FRAMING ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT APPLIED 85% OF ITS GROSS RECEIPTS AND MOREOVER, NO FORM NO. 10 AS REQUIRED BY SECTION 11(2) OF THE ACT WAS FILED ALONGWITH RETURN FOR SETTING APART 15% OF THE GROSS RECEIPTS. BY THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE ASSESSEE WAS COVERED U/S 10(23C)(VI) OF THE ACT WHERE THERE WAS NO MANDATORY REQUIREMENT OF ACCUMULATION TO THE EXTENT OF 15% FOR A PERIOD OF FIVE YEARS. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE TRUST HAS ALREADY ONLY 84.92% OF THE COLLECTION, THEREFORE, TO THE EXTENT OF SHORT FALL BELOW 85%, THE SAME IS LIABLE TO TAX. ACCORDINGLY, THE LD. CIT(A) ITA NO. 142/JP/18 DCIT(E)VS M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY 3 HAS UPHELD THE ADDITION OF RS. 1,52,576/- AND DELETED THE BALANCE AFTER OBSERVING THAT THE PROVISIONS RELATING TO SETTING APART OF THE RECEIPTS IS PRESCRIBED U/S 11(2) OF THE ACT THAT WHEN AN INSTITUTION IS NOT ABLE TO INCUR/APPLY ITS INCOME UP TO 85% THAN AN OPTION HAS BEEN GIVEN TO THE APPLY THE A.O. FOR GRANTING PERMISSION TO SET APART, SUCH RECEIPTS TOWARDS SOME SPECIFIC OBJECTS IN THE STIPULATED PERIOD OF FIVE YEARS OR SO AND THEN AN INTIMATION IN FORM 10 IS REQUIRED TO BE FILED. HOWEVER, IN THIS CASE, SINCE THE ASSESSEE HAS UTILIZED LESS THAN 85% WHICH AMOUNTS TO RS. 1,52,576/-, THE SAME IS LIABLE TO BE TAXED. IN SO FAR AS THE ASSESSEE DID NOT WANT IT TO SET APART THIS FUND. ACCORDINGLY, THERE WAS NO REQUIREMENT TO FILE FORM NO. 10. WE FOUND THAT THE ASSESSEE SOLELY EXISTED FOR EDUCATION WHICH HAS NOT BEEN DENIED BY THE A.O.. SO FAR AS THE ASSESSEE HAS SET OFF ITS LOSSES OF RS. 7,64,82,228/- IN RESPECT OF ITS HOSPITAL ACTIVITY, FROM THE INCOME OF EDUCATIONAL INSTITUTION, THE LD. CIT(A) HAS ALREADY CONFIRMED THE ACTION OF A.O. AGAINST WHICH THE ASSESSEE IS NOT IN APPEAL BEFORE THE ITAT. THUS, BENEFIT OF SECTION 10(23C)(VI) OF THE ACT WAS RESTRICTED TO THE EDUCATIONAL ACTIVITY OF THE SOCIETY AND THE LOSSES INCURRED IN RUNNING OF HOSPITAL WAS NOT ALLOWED TO BE SET OFF AGAINST THE INCOME FROM EDUCATIONAL ACTIVITY. SO FAR AS THE ASSESSEES CLAIM OF DEPRECIATION IS CONCERNED, THE LD.CIT(A) HAS ALLOWED THE SAME AFTER FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT, AGAINST WHICH THE REVENUE IS NOT IN FURTHER APPEAL BEFORE THE ITAT. ITA NO. 142/JP/18 DCIT(E)VS M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY 4 4. FROM THE RECORD WE FOUND THAT THE . AO HAS NOT ACCEPTED CLAIM IN RESPECT OF 15% SET APART OF TOTAL RECEIPT AS THE ASSESSEE HAS NOT APPLIED 85% OF THE INCOME NOR HAS GIVEN APPLICATION IN FORM NO. 10 FOR APPLICATION OF THE SURPLUS FUNDS AS REQUIRED U/S 11(2) OF THE ACT. THE ASSESSEE HAS UTILIZED/APPLIED 84.92% OF THE GROSS RECEIPTS DURING THE YEAR AND BALANCE AMOUNT OF RS.1,52,506/- (0.08%) REMAINS TAXABLE AS PER CALCULATION GIVEN BY THE ASSESSEE. THE ASSESSEE IS NOT REQUIRED TO FURNISH FORM NO. 10 AS SUCH FORM IS APPLICABLE FOR ACCUMULATION EXCEEDING 15% OF THE GROSS RECEIPTS AND COVERED BY SECTION 11 OF THE ACT. THEREFORE. ASSESSEE IS ALSO NOT COVERED BY SECTION 11(2) OF THE ACT. 5. IN THIS REGARD WE OBSERVE THAT THE ACCUMULATION OF 15% IS PERMISSIBLE IN ACCORDANCE WITH PROVISO 3 RD OF SECTION 10(23C)(VI) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ACTION OF THE LD. CIT(A) FOR DISALLOWANCE OF SHORT FALL IN THE EXPENDITURE/APPLICATION OF FUNDS TO THE EXTENT OF SHORTFALL BELOW 85%. HOWEVER, THE A.O. IS DIRECTED TO REVERIFY THE CALCULATION PART SO AS TO FIND CORRECTNESS OF GROSS COLLECTION OF EDUCATIONAL INSTITUTION AND ACCUMULATION OF 15%. WE DIRECT ACCORDINGLY. ITA NO. 142/JP/18 DCIT(E)VS M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY 5 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART FOR STATISTICAL PURPOSES, IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2019. SD/- SD/- FOT; IKY JKO JES'K LH 'KEKZ (VIJAY PAL RAO) (RAMESH C SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKA D@ DATED:- 10 TH JUNE, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT (E), CIRCLE- JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S. SETH RAMJI DAS MODI VIDYA NIKETAN SOCIETY, KOTA. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 142/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR