Pine Grove Educational Trust, Bassi Pathana V. ITO, Sirhind

ITA 192/CHANDI/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51526 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Tangible material
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 192/CHD/2010 ASSESSMENT YEAR: 2003-04 PINE GROVE EDUCATIONAL TRUST, V ITO, MORINDA ROAD, WARD-SIRHIND, BASSI PATHANA. (HQ-MGG). PAN: AAATE-0942K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK GOYAL DEPARTMENT BY SHRI N.K.SAINI DATE OF HEARING : 18.10.2011 DATE OF PRONOUNCEMENT : 19.10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 18.12.2009 PASSED BY THE LD. CIT(A) PAT IALA U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: 1. THAT THE WORTHY CIT(A) PATIALA HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING EXEMPTION U/S 10(23C) OF THE INCOME-TAX ACT,1961 THEREBY DISALLOWING EXEMPTION OF INCOME OF RS.1,16,920/- CLAIMED UNDER THE ABOVE SECTION. 2. THAT THE WORTHY CIT(A), PATIALA HAS ERRED TO CONSIDER THAT THE ASSESSEE FULFILLS ALL THE CONDITIONS PERTAINING TO THE EXEMPTION U/S 10(23C) OF THE ACT AND EXEMPTION U/S 10(23C) WAS RIGHTLY ALLOWED BY THE AO VIDE ITS EARLIER ORDER PASSED U/S 143(3) ON 29.08.2005 ACCEPTING NIL 2 RETURNED INCOME AFTER ALLOWING EXEMPTION OF INCOME OF RS.1,16,920/- U/S 10(23C) OF THE INCOME-TAX ACT. 3. THAT THE ACTION OF THE CIT(A) PATIALA IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING EXEMPTION U/S 10(23C) IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND BY NOT CONSIDERING OUR SUBMISSIONS PROPERLY. 4. THAT THE CIT(A) HAS ERRED TO CONSIDER THAT THE APPELLANT HAS RIGHTLY REBUTTED THE OBJECTION LEVELED BY SHRI S.D.VERMA ONE OF THE EARLIER TRUSTEE OF THE TRUST REGARDING EMBEZZLEMENT OF TRUST FUND/PROFIT FOR PERSONAL USE, BEFORE THE AO AND ALSO BEFORE HIM. 5. THAT THE LD. CIT(A) HAS ERRED TO CONSIDER THAT THE AO HAS TAKEN THE PROFIT AS DECLARED IN THE AUDITED SET OF ACCOUNT AND NO DISALLOWANCE OF ANY EXPENDITURE HAS BEEN MADE OR ANY RECEIPTS ADDED TO THE RECEIPTS ALREADY DISCLOSED AND THEREFORE, THE FINDING OF THE AO OR WORTHY CIT(A) REGARDING EMBEZZLEMENT OF TRUST FUNDS FOR PERSONAL USE DESERVES TO BE VACATED AND WITHDRAWAL OF EXEMPTION U/S 10(23C) IS UNCALLED FOR. 6. THAT THE CIT(A) HAS ALSO ERRED TO CONSIDER THAT REGISTRATION U/S 12A WAS NOT REQUIRED WITH THE CIT IF THE RECEIPTS ARE LESS THAN RS. 1 CRORE IN RESPECT OF EDUCATIONAL INSTITUTION. 7. THAT THE WORTHY CIT(A) HAS ALSO ERRED TO CONSIDER THAT THERE WAS NO DIFFERENCE BETWEEN THE COPIES OF THE TRUST DEED SUBMITTED TO THE REGISTRAR AND TO THE DEPARTMENT, BECAUSE TRUST DEED IS SIGNED BY TWO TRUSTEES AND WHILE MEMORANDUM OF ARTICLES HAVE BEEN SIGNED BY THE SEVEN OFFICE BEARERS. 3. IN THIS APPEAL, THE ASSESSEE TRUST CHALLENGED FI NDINGS OF THE LD. CIT(A) WHEREBY IT HAS BEEN HELD THAT THE AO WAS 3 RIGHT IN NOT ALLOWING EXEMPTION U/S 10(23C) OF THE ACT. THE LD. 'AR' CONTENDED THAT THE ACTION OF THE AO AS WEL L AS OF THE CIT(A) IS CONTRARY TO THE EXPRESS PROVISIONS OF SEC TION 10(23C). IT WAS ARGUED BY THE LD. 'AR' THAT THE RE CEIPTS OF THE SCHOOL ARE LESS THAN RS.1 CRORE AND CONSEQUENTL Y INCOME OF THE EDUCATIONAL INSTITUTION IS EXEMPT FROM TAX. THE SCHOOL IS AFFILIATED TO THE CENTRAL BOARD OF SCHOOL EDUCATION AND ALL THE OBJECTIVES OF THE INSTITUTION ARE WITHI N THE MEANING OF SECTION 10(23C) OF THE ACT. IT WAS FURT HER CONTENDED THAT THE TRUST WAS FORMED AS PER TRUST DE ED WHICH WAS DULY REGISTERED. IT IS NOT INCUMBENT UPON THE ASSESSEE TO OBTAIN REGISTRATION U/S 12A OF THE ACT HAVING REGARD TO THE PROVISIONS OF SECTION 10(23C) OF THE ACT AS THE RECEIPTS ARE LESS THAN RS.1 CRORE. IT WAS FURTHER ARGUED THAT THE EARLIER AO, AS PER ORDER DATED 03.03.2008 CLEARLY MENTIONED AS UNDER : THE ASSESSEE IS AN EDUCATIONAL INSTITUTION AND REGISTERED WITH THE REGISTRAR OF FIRMS & SOCIETIES, PUNJAB. THE INSTITUTION IS STATED TO BE EXISTING SOLELY FOR EDUCATION PURPOSES AND AS SUCH EXEMPTION U/S 10(23C) OF THE INCOME-TAX ACT,1961 HAS BEEN CLAIMED. THE RECEIPTS OF THE INSTITUTION DO NOT EXCEED RS. ONE CRORE. THEREFORE, ASSESSEE'S CLAIM O F EXEMPTION U/S 10(23C) IS IN ORDER. 4. IT WAS VEHEMENTLY ARGUED BY THE LD. 'AR' THAT TH ERE IS NO DIFFERENCE BETWEEN THE COPIES OF TRUST DEED SUBM ITTED TO THE REGISTRAR AND TO THE DEPARTMENT BECAUSE THE TRU ST DEED IS SIGNED BY TWO TRUSTEES WHEREAS THE MEMORANDUM OF ASSOCIATION HAS BEEN SIGNED BY SEVEN OFFICE BEARERS . 4 THEREFORE, THERE IS NO DIFFERENCE BETWEEN THE TWO D OCUMENTS SUBMITTED TO THE REVENUE AND TO THE OFFICE OF REGIS TRAR OF FIRMS & SOCIETIES. IT WAS ALSO SPECIALLY HIGHLIGHTE D BY THE LD. 'AR' THAT THE AO MADE A MENTION OF CERTAIN ALLE GATIONS LEVELED BY ONE OF THE TRUSTEES SHRI S.D.VERMA WITHO UT ANY SUBSTANTIAL EVIDENCE. THESE EVIDENCES ARE MOTIVATE D AND THE AO MADE ADDITIONS BASED ON SUCH ALLEGATIONS WIT HOUT BRINGING COGENT AND CREDIBLE EVIDENCES AGAINST THE ASSESSEE APPELLANT. THEREFORE, THE EXEMPTION U/S 10(23C) BE GRANTED TO THE APPELLANT. 5. LD. 'DR' RELIED UPON THE ORDERS OF THE LOWER AUT HORITIES. 6. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORD. THE AO PROCEE DED ON THE ALLEGATIONS LEVELLED BY ONE OF THE TRUSTEES TO THE EFFECT THAT THE INSTITUTION IS NOT RUN FOR THE ACHIEVEMENT OF SPECIFIED AIMS AND OBJECTIVES. IT WAS, FURTHER, ALL EGED BY THAT TRUSTEE THAT NO ACCOUNTS HAVE BEEN AUDITED AND THE ASSETS OF THE INSTITUTION ARE USED FOR PERSONAL BEN EFIT. INSPIRED BY THESE ALLEGATIONS, THE AO CONCLUDED THA T THE TRUST EXISTS SOLELY FOR PROFIT PURPOSE AND HAS LOST SIGHT-OF ITS AIMS AND OBJECTIVES FOR WHICH IT WAS CREATED. THE RELEVANT PART OF THE FINDINGS OF THE AO IS REPRODUC ED HEREUNDER : 5. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE TRUS T EXISTS SOLELY FOR PROFIT PURPOSES AND HAS THUS LOST SIGHT OF ITS AIMS AND OBJECTIVES FOR WHICH IT WAS CREATED. THE TRUST DOES NOT ENJOY EXEMPTION U/S 11 OF THE INCOME-TAX ACT,1961. MOREOVER, REGISTRATION U/S 12A APPLIED BY THE TRUST WAS NOT GRANTED BY THE 5 DEPARTMENT. THE TRUST DEED DOES NOT HAVE THE DISSOLUTION CLAUSE. AS SUCH ANY PERSON CAN TAKE BENEFIT OF THE ASSETS ON ITS DISSOLUTION. AS SUCH, THE TRUST IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE INCOME-TAX ACT,1961. THE ASSESSEE HAS CLAIMED EXEMPTION OF RS.1,16,920/- U/S 10(23C) OF THE ACT WHICH IS NOT ALLOWED. 7. THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO. T HE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED HEREUNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE IN DETAI L, RIVAL CONTENTIONS AND FIND THAT AO HAS RIGHTLY DENI ED THE EXEMPTION U/S 10(23C) OF THE ACT BY GIVING DETAILED REASONING AND PASSED SPEAKING ORDER IN THIS REGARD. IN THIS CASE, IT IS ALSO A FACT THAT REGISTRATION U/S 12A WAS NOT GRANTED BY THE DEPARTMENT AS IT DOES NOT FULFILL THE CONDITIONS FO R GETTING REGISTRATION. THE APPELLANT COULD NOT REBUT THE ALLEGATIONS LEVELED BY SHRI D.D.VERMA NEITHER BEFORE AO NOR BEFORE ME. THUS, FROM ALL THE ABOVE FACTS DISCUSSED ABOVE, IT IS CLEAR THAT TRUST EXIST S SOLELY FOR PROFIT PURPOSES AND HAS NOT DONE IT WORK FOR THE BENEFIT OF PEOPLE FOR WHOM BENEFIT IT WAS CREATED. HENCE IN THE LIGHT OF ABOVE, I HELD THAT A O IS FULLY JUSTIFIED IN NOT ALLOWING EXEMPTION U/S 10(23C) OF THE ACT. 8. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND RELEVANT RECORDS MADE AVAILABLE. IT IS IMPERATIVE TO APPRECIATE THE RELEV ANT PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT AND HENCE, THE TEXT OF THE PROVISION IS REPRODUCED HEREUNDER : 10(23C)(IIIAD) ANY UNIVERSITY OR OTHER EDUCATIO NAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE S AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE 6 ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED. 9. THE EXPRESSION SOLELY FOR EDUCATIONAL PURPOSE A ND NOT FOR PURPOSE OF PROFIT HAS BEEN USED IN SECTION 10( 23C) OF THE ACT, IN A NUMBER OF CLAUSES. THEREFORE, IT IS I MPERATIVE TO UNDERSTAND THE MEANINGS ASSIGNED TO SUCH EXPRESS ION IN THE LIGHT OF THE CONTEXT IT IS USED. THE EXPRESSION STANDS JUDICIALLY DEFINED BY THE HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION V ADDL.CIT (199 7) 224 ITR 310 (S.C)AS THAT IF AFTER MEETING EXPENDITURE, ANY SURPLUS RESULTS INCIDENTLY FROM ACTIVITY LAWFULLY C ARRIED ON BY AN EDUCATIONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSE. SIMILARLY , HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V KHAL SA RURAL HOSPITL AND NURSING TRAINING INSTITUTE (2008) 304 I TR 20 (P&H) HELD THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE TRUST WAS CHARGED CAPITATION FEE. THE AO HAD NOT FOUND ANY IRREGULARITY IN THE ACCOUNTS OF THE T RUST. THERE WAS NO DOCUMENT TO SHOW THAT THE TRUST WAS BE ING RUN FOR ANY PURPOSE OF PROFIT EXCEPT FOR EDUCATIONA L PURPOSES. THE ASSESSEE WAS ENTITLED TO EXEMPTION U/ S 10(22) OF THE ACT. 10. THE AO SUMMARILY CONCLUDED THAT THE ASSESSEE TR UST SOLELY EXISTS FOR THE PURPOSE OF PROFIT, WITHOUT CO RROBORATING SUCH FINDINGS BY ANY MATERIAL. NO INCIDENCE OF RUNN ING OF THE TRUST SOLELY FOR THE PURPOSE OF PROFIT HAS BEEN CITED BY THE AO. ON THE CONTRARY, THE TRUST IS IMPARTING ED UCATION 7 WITHIN THE PARAMETERS OF ITS STATED OBJECTS. THE A O FAILED TO REBUT SUCH FACTUM AS CONTENDED BY THE ASSESSEE T RUST. IT IS UNDISPUTED LEGAL PROPOSITION THAT LEVELING OF AL LEGATIONS IS NO PROFIT OF ALLEGATIONS. NO MATERIAL OR DOCUME NTARY PROOF WAS BROUGHT ON RECORD TO PRIMA-FACIE ESTABLIS H THAT THE TRUST IS BEING RUN CONTRARY TO ITS OBJECTS AND CONTRRY TO THE PROVISIONS OF SECTION 10(23C) OF THE ACT. 11. THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT IS AVAILABLE TO ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSE OF PROFIT, IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UN IVERSITY OR EDUCATIONAL INSTITUTION DONT EXCEED RS. ONE CRORE, THE PRESCRIBED LIMIT VIDE RULE 2BC. THE ASSESSEE TRUST IS AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE EDU CATIONAL PURPOSE AND ITS AGGREGATE ANNUAL RECEIPTS DONT EXC EED RS. ONE CRORE. THE ASSESSEE TRUST DISCHARGED ITS ON US BY BRINGING EVIDENCES TO SUPPORT ITS CLAIM OF EXEMPTIO N U/S 10(23C) OF THE ACT. THE AO CANNOT REBUT SUCH CLAIM OF THE ASSESSEE TRUST BY WAY OF MERE ASSERTION NOT SUPPORT ED BY ANY TANGIBLE MATERIAL. 12. IT IS PERTINENT TO INDICATE THAT SECTION 10(23C ) HAS BEEN SUBSTANTIALLY AMENDED/ENLARGED, VIDE THE FINAN CE (NO.2) ACT,1998, W.E.F. 1.4.1999, IN ORDER TO PROVI DE EXEMPTION TO ANY INCOME OF A UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR MEDICAL INST ITUTION, WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GO VERNMENT OR THE INCOME OF WHICH DOES NOT EXCEED THE PRESCRIB ED LIMIT OR WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORIT Y. 8 THESE AMENDMENTS ARE CONSEQUENTIAL TO THE OMISSION OF SS. 10(22) AND 10(22A) PROVIDING EXEMPTION TO EDUCATION AL AND MEDICAL INSTITUTIONS, RESPECTIVELY. THE AFORESAID PROVISIONS ARE CONTAINED IN SUB-CLAUSES (IIAB), (IIIAC), (IIIA D), (IIIAE), (VI) AND (VIA) OF CLAUSE (23C) OF S.10 OF THE ACT. 13. NORMALLY, THE TRUSTS, INSTITUTIONS, AND FUNDS C REATED FOR CHARITABLE OR RELIGIOUS PURPOSES ARE GOVERNED B Y THE PROVISIONS OF SECTIONS 11, 12, 12A, 12AA, AND 13 UN DER THE INCOME-TAX ACT,1961, WHICH LAY DOWN VARIOUS CONDITI ONS IN RESPECT OF CLAIM OF EXEMPTION REGARDING THE INCOME OF SUCH TRUSTS, INSTITUTIONS AND FUNDS. IT WAS FELT THAT TH ERE ARE CERTAIN INSTITUTIONS, WHICH ARE OF GREAT NATIONAL I MPORTANCE, E.G. THE PRIME MINISTERS NATIONAL RELIEF FUND, THE NATIONAL FOUNDATION FOR COMMUNAL HARMONY, AND OTHER SUCH INSTITUTIONS AND IN SUCH CASES, THE APPLICABILITY O F STRINGENT PROVISIONS OF THE AFORESAID SECTIONS WOULD NOT BE I N PUBLIC INTEREST. THEREFORE, S.10(23C) WAS INSERTED IN THE INCOME- TAX ACT, IN ORDER TO PROVIDE FULL EXEMPTION FROM TA X IN RESPECT OF INCOME EARNED BY SUCH INSTITUTIONS WITHO UT ANY RESTRICTIONS. 14. IN THE UNDISPUTED FACT-SITUATION OF THE PRESENT CASE AND IN LIGHT OF THE CLEAR PROVISIONS OF SECTION 10( 23C)(IIIAD) OF THE ACT, ASSESSEE TRUST IS ELIGIBLE FOR EXEMPTIO N UNDER THE SPECIFIC PROVISIONS OF SECTION 10(23C)(IIIAD) OF TH E ACT. IT IS NOT STATUTORILY INCUMBENT UPON THE ASSESSEE TO OBTA IN REGISTRATION U/S 12A OF THE ACT, TO ENABLE IT FOR E XEMPTION U/S 10(23C) OF THE ACT. AS IS EVIDENT THAT REGISTR ATION IS 9 NOT RELEVANT U/S 12A OF THE ACT, HAVING REGARD TO T HE FACT- SITUATION OF THE CASE, AS ITS RECEIPTS, DONT EXCEE D RS. ONE CRORE AND THE ASSESSEE TRUST EXISTS SOLELY FOR THE EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROF IT. IN THIS SPECIFIC CONTEXT, RATIO OF THE HON'BLE SUPREME COURT AND JURISDICTIONAL HIGH COURT IN THE CASE LAWS DISC USSED EARLIER, SQUARELY COVERS THE CASE OF THE PRESENT AS SESSEE. 15. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS, WE ARE OF THE CONSIDERED OPINION THAT THE FINDINGS OF THE LD. CIT(A), ON THE ISSUE IN QUESTION, CANNOT BE SUSTAIN ED BEING CONTRARY TO THE EXPRESS PROVISIONS OF SECTION 10(23 C) OF THE ACT AND ALSO NOT IN CONSONANCE WITH THE JUDICIAL MA NDATES, ON THE ISSUE IN QUESTION, DISCUSSED ABOVE. ACCORDI NGLY, THE ASSESSEE APPELLANT SUCCEEDS IN ITS APPEAL. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCT.,2011. SD/- SD/- ( H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 19 TH OCT.,2011. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH