ACIT, V. Nayal Education Society,

ITA 1805/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7015 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRASAD J
• Assessee Lawyers: P DINESH
• Keywords: Salary income
• Section: 143(3); 133A; 12AA; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 1 805 / BANG/20 13 (ASSESSMENT YEAR: 20 0 9 - 10 ) ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1, BI JAPUR. APPELLANT VS. NAYAK EDUCATION SOCIETY, 899/3, NEAR BAZARAT JUNEDI DARGA, BIJAPUR. RESPONDENT PAN:A ADAS8918B APPELLANT BY: DR.K.SHANKAR PRASAD, JCIT(DR). RESPONDENT BY: SHRI P.DINESH, ADVOCATE. DATE OF HEARING : 1 0 /12/2014 . DATE OF PRONOUNCEMENT: 31 /12/2014 . O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), BELGAUM , DATED 15/10/2013 FOR THE ASSESSMENT YEAR 200 9 - 10 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, WHICH IS AN EDUCATIONAL INSTITUTION, HAD FILED ITS RETURN OF INCOME ON 21/12/2009 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING ITA NO . 1 805 /BANG/20 1 3 NAYAK EDUCATION SOCIETY. PAGE 2 OF 6 EXEMPTION U/S 11 OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT']. DURING THE ASSESS MENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAS NOT BEEN GRANTED REGISTRATION U/S 12AA OF THE ACT AND, THEREFORE, IS NOT ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE ACT. HE FURTHER OBSERVED THAT THE ASSESSEE S CASE IS ALSO NOT COVERED BY THE PROVISIONS OF SEC TIONS 10(23C)(IIIAB) OR 10(23C)(IIIAD) OR 10(23C)(VI) OF THE ACT. HE OBSERVED THAT THE ASSESSEE S APPLICATION FOR REGISTRATION U/S 12AA HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME - TAX (CIT) VIDE ORDER DATED 26/02/2010 AND FURTHER THE RECEIPTS OF THE ASSESSEE EXCEED RS.1 CRORE AND THEREFORE, THE EXEMPTION U/S.10(23C) IS NOT AVAILABLE TO THE ASSESSEE. IN THIS BACKGROUND, HE OBSERVED THAT THE ENTIRE SURPLUS ALONG WITH DONATIONS AND VOLUNTARY CONTRIBUTION S ARE TAXABLE WITHIN THE PURVIEW OF SEC.2(24) OF THE ACT. AFTER EXAMINING THE DETAILS OF THE BUILDING FUND, CAPITAL FUND, DONATIONS AND HAND LOAN S AS SHOWN IN THE FINANCIAL STATEMENT FOR THE YEAR ENDING 31/03/2009, A SURVEY U/S 133A WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 22/02/2010. TAKING INTO CONSIDERATION , THE CONCLUSION ARRIVED AT DURING THE COURSE OF SURVEY ACTION, THE AO ISSUED A SHOW - CAUSE NOTICE DATED 29/11/2011 STATING THAT ALL THE CLAIM S MADE IN THE LIABILITY SIDE OF THE BALANCE SHEET ARE REQUIRE D TO BE ADDED AS THE INCOME OF THE SOCIETY. THE ASSESSEE RESPONDED VIDE LETTER DATED NIL STATING THAT INCREASE IN THE BUILDING FUND S WAS ONLY ON ACCOUNT OF ITA NO . 1 805 /BANG/20 1 3 NAYAK EDUCATION SOCIETY. PAGE 3 OF 6 REVALUATION AND NO FRESH FUNDS WERE RECEIVED AND THAT THE DONATIONS WERE ONLY FROM TH E GOVERNMENT AND THE DONORS LIST HAS ALREADY BEEN FILED DURING THE COURSE OF REGISTRATION. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS SOLELY ENGAGED IN EDUCATION AND W AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT AND THE RECEIPTS ARE BELOW RS.1 CRORE AND AS SUCH WAS ENTITLED FOR EXEMPTION U/S 10(23C) OF THE ACT. THE AO , W AS HOWEVER, NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE AGGREGATE A NNUAL RECEIPTS OF THE ASSESSEE EXCEED ED RS.1 CRORE AND THEREFORE THE PROVISIONS OF SEC.10(23C) AR E NOT APPLICABLE. AS REGARDS THE CLAIM OF EXEMPTION U/S 11, HE HELD THAT SINCE THE CIT HAS REJECTED THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11. THEREAFTER , HE PROCEEDED TO MAKE ADDITION S ON ACCO UNT OF ADDITIONS TO THE BUILDING FUND AND THE CAPITAL FUND AND MADE ADDITIONS TO THE RE TURNED INCOME ACCORDINGLY. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. CHILDREN EDUCATION SOCIETY IN ITA NO.386 OF 2010 DATED 18/03/2013 WHEREIN IT HAS BEEN HELD WHERE A SOCIETY IS RUNNING VARIOUS EDUCATIONAL INSTITUTIONS HAS TO BE ASSESSED IN THE CAPACITY OF ARTIFICIAL JURIDICAL PERSON (A JP) AND WHILE CALCULATING THE LIMIT OF RS.1 CRORE, THE AGGREGATE RECEIPT OF EACH INSTITUTION HAS TO BE ITA NO . 1 805 /BANG/20 1 3 NAYAK EDUCATION SOCIETY. PAGE 4 OF 6 CONSIDERED SEPARATELY AND NOT THEIR COMBINED RECEIPTS AS ADOPTED BY THE AO. THUS OBSERVING , THE CIT(A) ALLOWED THE ASSESSEE S APPEAL HOLDING THAT THE AS SESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. ACCORDING TO THE REVENUE, THE AGGREGATE ANNUAL RECEIPTS OF ALL THE INSTITUTIONS RUN BY THE SOCIETY HAVE TO BE CONSIDERED FOR THE PURP OSE OF SEC.10(23C)(IIIAD) OF THE ACT. THE REVENUE HAS ALSO RAISED A GROUND AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF ADDITIONS TO BUILDING FUND AND CAPITAL FUND. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO WHILE THE LEAR NED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE ORDER OF THE JURISDICTIONAL HIGH COURT AND SUPPORT ED THE ORDER OF THE CIT(A). 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD , WE FIND THAT THE ISSUE AS TO WHETHER EACH E DUCATIONAL INSTITUTION OF THE SOCIETY OR A TRUST HAS TO BE CONSIDERED SEPARATELY FOR THE PURPOSE OF AGGREGATION OF ANNUAL RECEIPTS U/S 10(23C)(IIIAD) IS CONCERNED, IT IS COVERED BY THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CHILDREN ED UCATION SOCIETY (SUPRA). THEREFORE, WE UPHOLD THE FINDING OF THE CIT(A) THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23)(IIIAD) OF THE ACT AS THE AGGREGATE ANNUAL RECEIPTS OF EACH OF THE ITA NO . 1 805 /BANG/20 1 3 NAYAK EDUCATION SOCIETY. PAGE 5 OF 6 INSTITUTIONS IS LESS THAN RS.1 CRORE. AS REGARDS THE ADDITION MADE ON ACCOUNT OF ANONYMOUS DONATION S AND ADDITION TO BOTH BUILDING FUND AS WELL AS CAPITAL FUND IS CONCERNED, IT IS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE DISCREPANCIES WITH REGARD TO THE INCREASE IN THE BUILDING FUND AND CAPITAL FUND AND THEREFORE THE AO HAS RIGHTLY BROUGHT THEM TO TAX. IT IS THE CASE OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT INCREASE IN THE BUILDING FUND IS NOT ON ACCOUNT OF ANY RECEIPT BUT IS ON ACCOUNT OF REVAL UATION OF THE LAND AND BUILDING AND AS REGARDS INCREASE IN CAPITAL FUND IS CONCERNED, IT IS HIS CASE THAT IT IS THE CONTRIBUTION MADE BY THE SOCIETY AND THE MANAGEMENT WHO DONATED OUT OF THEIR SALARY INCOME, AGRICULTURAL INCOME AND PAST SAVINGS. 6. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT U/S 10(23C)(IIIAD), INCOME OF ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED DO NOT FORM PART OF THE TOTAL INCOME. UNDER RULE 2BC, THE PRESCRIBED AMOUNT IS RS.1 CRORE. SINCE IT HAS BEEN HELD BY THE CIT(A) THAT THE AGGREGATE ANNUAL RECEIPTS OF EACH EDUCATIONAL INSTITUTION IS LESS THAN RS.1 CRORE, ITS ENTIRE INCOME DOES NOT FORM PART OF THE TOTAL INCOME AND THEREFORE IS EXEMPT FROM TAX. AS REGARDS ADDITION TO ITA NO . 1 805 /BANG/20 1 3 NAYAK EDUCATION SOCIETY. PAGE 6 OF 6 BUILDING FUND AND CAPITAL FUND ARE CONCERNED, WE FIND THAT THE CONTENTIONS OF THE A SSESSEE HAVE NOT BEEN CONSIDERED BY EITHER THE AO OR THE CIT(A). THEREFORE, WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION IN ACCORDANCE WITH LAW AND IF THEREAFTER IT IS FOUND THAT THE AGGREGATE ANNUAL RECEIP TS OF THE INSTITUTION ARE LESS THAN RS.1 CRORE, THEN THE ASSESSEE SHALL BE GRANTED EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. 7. IN THE RESULT, THE REVENUE S APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN C OURT ON 31 ST OF DECEMBER, 2014. SD/ - SD/ - (JASON P BOAZ) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE.