M/s. Public Education Society, Bangalore V. Deputy Director of Income Tax, Bangalore

ITA 1642/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9254 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRATHIK P
• Keywords: Benefit of exemption
• Section: 142(1); 12A; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1642/BANG/2016 (ASSESSMENT YEAR: 2005-06) ASSESSEE BY : SHRI. PRATHIK. P, CA REVENUE BY : SHRI. SARAVANAN B, ADDL. CIT DATE OF HEARING : 29.11.2016 DATE OF PRONOUNCEMENT : 02.12 .2016 ORDER PER GEORGE GEORGE K, JM : THIS APPEAL INSTITUTED, AT THE INSTANCE OF THE ASSE SSEE SOCIETY, IS DIRECTED AGAINST THE ORDER OF THE CIT ( A)-14 [LTU], M/S. PUBLIC ED U CATION SOCIETY, ST. MIRAS HIGH SCHOOL, #45/37, GUBBANNA LAYOUT, 6 TH BLOCK, RAJAJINAGAR, BENGALURU. PAN : AABPT1260A VS. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE-17(2), BENGALURU. APPELLANT RESPONDENT ITA NO. 1642/BANG/2016 PAGE 2 OF 8 BANGALORE, DATED 30.06.2016. THE RELEVANT ASSESSME NT YEAR IS 2005-06. 2. THE ASSESSEE SOCIETY HAS, IN ITS GROUNDS OF APPE AL, RAISED TWO EFFECTIVE GROUNDS, NAMELY: (1) THAT THE HONBLE CIT (A)[LTU] OUGHT TO HAVE HEL D THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10(23C) OF THE ACT UNDER THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE; IN THE ALTERNATIVE AND WITHOUT PREJUDICE , THE CIT (A) OUGHT TO HAVE HELD THAT THE INCOME OF THE ASSESSEE WAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF S. 11 OF THE ACT; & (2) THAT THE CONTRIBUTIONS TO THE BUILDING FUND IN A SUM OF RS.27,28,900/- BEING IN THE NATURE OF CORPUS DONATIONS OUGHT TO HAVE BEEN EXCLUDED FROM THE TOTA L INCOME OF THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE ISSUE ARE AS F OLLOWS: THE ASSESSEE SOCIETY HAS BEEN RUNNING THREE SCHOOL S IN DIFFERENT PARTS OF BANGALORE UNDER THE NAME ST. MI RAS HIGH SCHOOL. FOR THE ASSESSMENT YEAR 2005-06, THE ASSES SEE SOCIETY HAD FURNISHED A RETURN OF INCOME ON 31.5.20 07, ADMITTING RS. NIL INCOME ALONG WITH AUDITORS REP ORT, STATEMENT OF ACCOUNTS ETC. ACCORDING TO THE AO, AS THE SAID R ETURN WAS BELATED, NO ACTION WAS INITIATED ON IT. SUBSEQUENT LY, A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 27.11.2007, REQUIR ING THE ASSESSEE SOCIETY TO FURNISH ITS RETURN OF INCOME. AS THERE WAS ITA NO. 1642/BANG/2016 PAGE 3 OF 8 NO RESPONSE FROM THE ASSESSEE, A NOTICE U/S 142(1) WAS ISSUED ALONG WITH NOTICE U/S 143(2) OF THE ACT. IN RESPON SE, THE ASSESSEES AUTHORIZED REPRESENTATIVE APPEARED ON 3. 12.2008 AND REQUESTED THE AO TO TREAT THE RETURN OF INCOME ALREADY FURNISHED AS IN RESPONSE TO THE NOTICE U/S 148. AF TER DUE CONSIDERATION AND VERIFICATION OF THE BOOKS OF ACCO UNTS, BILLS, VOUCHERS, BANK ACCOUNTS ETC., THE AO HAD CONCLUDED THE ASSESSMENT, DETERMINING THE TOTAL INCOME OF THE ASS ESSEE SOCIETY AT RS.35,19,200/- WITH THE FOLLOWING REASON ING: THE ASSESSEE IS RUNNING 3 EDUCATIONAL INSTITUTIONS IN THE NAME OF ST. MIRAS HIGH SCHOOL AT 3 PLACES IN BANGALORE. THE GROSS RECEIPTS EXCEED (SIC) EXCEEDED RS.1 CRORE. THE ASS ESSEE IS NEITHER REGISTERED U/S 12A (A) NOR NOTIFIED U/S 10(23C) OF THE ACT. THEREFORE, THE ENTIRE INCOME EARNED IS TAXABLE. SE CTION 11 HAS NO APPLICATION. 4. AGGRIEVED, THE ASSESSEE SOCIETY TOOK UP THE ISS UE WITH THE CIT (A)-LTU FOR CONSIDERATION. ACCORDING T O THE CIT (A), THREE HEARING NOTICES POSTING THE CASE FOR HEA RING ON 27.8.2015, 27.4.2016 AND FINALLY ON 21.6.2016 WERE ISSUED TO THE ASSESSEE SOCIETY TO COMPLY WITH THE SAME. AS TH ERE WAS NO COMPLIANCE TO ANY OF THE HEARINGS NOTICES ISSUED (S UPRA), THE CIT (A) HAD CHOSEN TO DISMISS THE APPEAL OF THE ASS ESSEE SOCIETY WITH A REMARK THE APPELLANTS OBVIOUS DISINTEREST IN PURSUING THIS APPEAL, I AM LEFT WITH NO OPTION BUT TO DISMISS THE ITA NO. 1642/BANG/2016 PAGE 4 OF 8 SAME CONFIRMING THE AOS VIEW [REFER: PARA 5 OF THE CIT (A)S ORDER]. 5. AGGRIEVED, THE ASSESSEE SOCIETY HAS COME UP WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE ASSESSEE SOCIETYS COUNSEL ARE SUMMARIZ ED AS UNDER: - THAT REGISTRATION UNDER S. 12A DESERVES TO BE GRA NTED TO THE ASSESSEE SOCIETY WITH EFFECT FROM AY 2005-6 ITSELF, AS THE FACTS AS WELL AS THE FINDINGS OF THE AO WILL ESTABLISH THAT THE CONDITIONS FOR THE GRANT OF REGISTRATION, SUBJECT TO CODONATION OF DELAY IN FIL ING THE APPLICATION FOR REGISTRATION ARE FULFILLED. THE SO CIETY WAS ESTABLISHED AND EXISTS SOLELY FOR EDUCATION PURPOSES AND NOT FOR PROFIT AND, THERE WAS NO FINDI NG BY AN AUTHORITY TO CONTROVERT THIS CLAIM. IN THE L IGHT OF THE EARLIER ORDER OF THIS HONBLE BENCH DATED 23.12.2009, THEREFORE, THE APPLICATION FOR REGISTRA TION DATED 4.11.2008 AND THE SUBSEQUENT APPLICATION DATE D 27.5.2009 FOR CONDONATION OF DELAY, REGISTRATION OU GHT TO BE GRANTED W.E.F. AY 2005-06 AND THE INCOME OF THE ASSESSEE SOCIETY HAS TO BE COMPUTED BY GIVING EFFECT TO THE PROVISIONS OF S. 11 AND OTHER RELEVAN T PROVISIONS; AND - THAT WITHOUT PREJUDICE TO WHAT HAS BEEN SUBMITTED , HAVING REGARD TO THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. CHILDRENS EDUCATION SOCIETY [358 ITR 373 (KAR)], T HE ASSESSEE SOCIETY WAS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10(23C)(IIIAD) AS THE GROSS RECEIPTS OF EACH EDUCATIONAL INSTITUTION RUN BY IT WERE WELL BE LOW THE LIMIT OF RS.1 CRORE PRESCRIBED BY S. 10(23C)(II IAD) READ WITH RULE 2BC OF THE INCOME-T AX RULES AND, THEREFORE, THE AO HAD ERRED IN LAW IN DENYING THE BENEFIT OF THE EXEMPTION UNDER THE SAID PROVISION. THE ENTIRE INCOME OF THE ASSESSEE SOCIETY FOR THE AY ITA NO. 1642/BANG/2016 PAGE 5 OF 8 2005-06, WAS EXEMPT UNDER THE PROVISIONS OF S. 10(23C)(IIIAD) OF THE ACT. IN CONCLUSION, IT WAS PLEADED THAT THE STAND OF THE AUTHORITIES BELOW DESERVE TO BE REVERSED. 5.1. ON THE OTHER HAND, THE LEARNED DR PRESENT SUPP ORTED THE STAND TAKEN BY THE AO AS WELL AS THE CIT (A) AND, A CCORDINGLY, URGED THAT NO INTERFERENCE OF THIS BENCH IS WARRANT ED AT THIS STAGE. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO T HE DOCUMENTARY EVIDENCES PRODUCED BY THE LEARNED COUNS EL FOR THE ASSESSEE SOCIETY IN THE FORM OF A PAPER BOOK. AT THE OUTSET, WE WOULD LIKE TO POINT OUT THAT THE ENTIRE INCOME E ARNED BY THE ASSESSEE SOCIETY WAS BROUGHT UNDER THE TAX NET BY T HE AO ON A SOLE GROUND THAT THE ASSESSEE IS RUNNING 3 EDUCATIONAL INSTITUTIONS IN THE NAME OF ST MIRAS HIGH SCHOOL AT 3 PLACES IN BANGALORE. THE GROSS RECEIPTS EXCEEDED RS.1 CRORE. THUS, THE GAMUT OF THE ISSUE BEFORE US FOR ADJUDICATION IS: WHETHER THE ASSESSEE WAS ENTITLED FOR EXEMPTION WHEN THE GROSS RECEIPTS OF THE ASSESSEE SOCIETY EXCEEDED RS.1 CROR E FROM ITA NO. 1642/BANG/2016 PAGE 6 OF 8 ALL THE THREE EDUCATIONAL INSTITUTIONS OR OF EACH EDUCATIONAL INSTITUTION RUN BY IT? 6.1. THE ABOVE QUESTION HAS BEEN ANSWERED EXPLICITL Y BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX AND ANOTHER V. CHILDRENS EDUCATION S OCIETY REPORTED IN [2013] 358 ITR 373 (KAR) . FOR READY REFERENCE, THE RELEVANT PORTION OF THE RULING OF THE HONBLE COURT IS REPRODUCED AS UNDER: (ON PAGE 34) EACH EDUCATIONAL INSTITUTION IS A SEP ARATE ENTITY CONTROLLED UNDER VARIOUS STATUTES FOR VARIOUS PURPO SES. THE MANAGEMENT OF THESE EDUCATIONAL INSTITUTIONS MAY BE IN THE HANDS OF THE SOCIETIES OR THE TRUST, BUT, FOR ALL O THER PURPOSES, THEY ARE DIFFERENT, INDEPENDENT ENTITIES. ANY PER SON IN SECTION 10(23C) REFERS TO THE ASSESSEE AND ON BEHALF OF R EFERS TO SUCH INSTITUTION. IT MAY BE AN UNIVERSITY, IT MAY BE AN EDUCATIONAL INSTITUTION, IT MAY BE A HOSPITAL OR OTHER INSTITUT IONS OF SIMILAR NATURE. AS ALL SUCH INSTITUTIONS ARE INDEPENDENT E NTITIES AND THEY GENERATE INCOME WHEN THAT INCOME IS RECEIVED BY THE ASSESSEE, IT BECOMES THE INCOME IN THE HANDS OF THE ASSESSEE AND IT IS SUCH INCOME WHICH IS SOUGHT TO BE EXCLUDED WHILE COMPUTI NG THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 10. THE TEST P RESCRIBED UNDER THE PROVISION IS NOT THE INCOME OF THE EDUCAT IONAL EDUCATION. IT IS THE AGGREGATE ANNUAL RECEIPTS OF SUCH EDUCATIONAL INSTITUTION THAT IS PRESCRIBED AT RS.1 CRORE. THEREFORE, THE EXPRESSION AGGREGATE ANNUAL RECEIPT S HAS TO BE UNDERSTOOD IN THE CONTEXT IN WHICH IT USED AND THE PURPOSE FOR WHICH THE PROVISION WAS INSERTED, KEEPING IN MIND, THE SCHEME OF THE ACT. THEREFORE, IN THE CASE OF AN ASSESSEE RUN NING SEVERAL EDUCATIONAL INSTITUTIONS, IF ANY OF THEM IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT, THEN THE INCOME FROM SU CH EDUCATIONAL INSTITUTION RECEIVED BY THE ASSESSEE IS NOT INCLUDED WHILE COMPUTING ITS TOTAL INCOME. SIMILARLY, INCOM E FROM EACH EDUCATIONAL INSTITUTION IF IT IS NOT RECEIVING ANY AID FROM THE GOVERNMENT WHOLLY OR SUBSTANTIALLY IN RESPECT OF WH ICH THE AGGREGATE ANNUAL RECEIPTS DO NOT EXCEED RS.1 CRORE RECEIVED BY THE ASSESSEE, IS ALSO NOT INCLUDED WHILE COMPUTING THE ANNUAL TOTAL INCOME OF THE ASSESSEE. THE AGGREGATE ANNUAL RECEIPTS OF OTHER EDUCATIONAL INSTITUTION MEANS, THE TOTAL ANNU AL RECEIPTS OF EACH EDUCATIONAL INSTITUTION. ITA NO. 1642/BANG/2016 PAGE 7 OF 8 6.2 IN CONSONANCE WITH THE RULING OF THE HONBLE CO URT (SUPRA),WE ARE OF THE VIEW THAT THE AGGREGATE ANNUAL RECEIPTS OF OTHER EDUCATIONAL INSTITUTION MEANS, THE TOTAL A NNUAL RECEIPTS OF EACH EDUCATIONAL INSTITUTION. TO EXAMINE THE SAID ISSUE, THE CASE IS RESTORED TO AO. IT IS ORDE RED ACCORDINGLY. 6.3 WE HAVE SINCE ALLOWED THE ASSESSEES APPEAL; IT S SECOND PLEA OF CONTRIBUTION TO THE BUILDING FUND BEING IN THE NATURE OF CORPUS DONATIONS TO BE EXCLUDED FROM THE TOTAL INCO ME HAS NOT TAKEN UP FOR ADJUDICATION. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 02/12/2016. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE : BANGALORE DATED : 02/12/2016 /NS/ ITA NO. 1642/BANG/2016 PAGE 8 OF 8 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A)-II BANGALORE 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT RE GISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE