P.K.D.Trust, POLLACHI V. DCIT (EXEMPTIONS), COIMBATORE

ITA 1931/CHNY/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5800 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J PAVITHRAN KUMAR
• Assessee Lawyers: N ARUNRAJC A MR S SRIDHAR
• Keywords: Principle of natural justice; Maximum Marginal Rate; Benefit of exemption; Set aside
• Section: 12A; 10(23C); 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , . , & BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NOS.1930 & 1931/CHNY/2019 ( / ASSESSMENT YEARS: 2010-11 & 2012-13) M/S. PKD TRUST P.K.D. MATRIC SCHOOL, COIMBATORE ROAD, POLLACHI-642 001. VS THE DEPUTY COMMISSIONER OF INCOME TAX, (EXEMPTIONS), COIMBATORE. PAN:AAAAP 1297K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.ARUNRAJ,C.A FOR MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. J.PAVITHRAN KUMAR , JCIT, /DATE OF HEARING : 29.09.2020 /DATE OF PRONOUNCEMENT : 29.09.2020 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2,COIMBATORE, BOTH DATED 06.05.2019 AND P ERTAIN TO THE ASSESSMENT YEAR 2010-11 & 2012-13. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE THES E APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF, BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GRO UNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS. THEREFORE, FO R THE SAKE OF 2 ITA NO.1930 & 1931/CHNY/2019 BREVITY, THE GROUNDS OF APPEAL FILED FOR THE ASSESS MENT YEAR 2010-11 ARE REPRODUCED AS UNDER:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) - 2, COIMBATORE DATED 06.05.2019 IN I.T.A.NO40/17 -18 FO R THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS , AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER PASSED IN CONSEQUENCE TO THE ORDER OF THE A PPELLATE TRIBUNAL IN NOT GRANTING THE BENEFIT OF TAX EXEMPTION U/S 10 (23C)(VI)/BENEFIT OF TAX EXEMPTION COMPUTATION U/S 11 OF THE ACT WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE DECISION OF THE APPELLATE TRIBUNAL IN THE FIRST ROUND HAS NOT BECOM E FINAL AND PENDING BEFORE THE MADRAS HIGH COURT IN T.C.APPEAL NOS.286 TO 288/2018 AND OUGHT TO HAVE APPRECIATED THAT THE BEN EFIT OF TAX EXEMPTION IN SUCH CIRCUMSTANCES WAS WRONGLY REJECTE D IN VIEW OF THE NARROW AND WRONG INTERPRETATION OF THE RELATED PROV ISIONS OF THE ACT IN THE FIRST ROUND OF LITIGATION. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER PASSED IN CONSEQUENCE TO THE ORDER OF THE A PPELLATE TRIBUNAL IN THE FIRST ROUND AND OUGHT TO HAVE APPRECIATED TH AT THE DIRECTIONS ISSUED BY THE APPELLATE TRIBUNAL IN THEIR ORDER WER E NARROW WHILE NOT PROPERLY IMPLEMENTED, THEREBY VITIATING THE COMPUTA TION OF TAXABLE TOTAL INCOME ON VARIOUS GROUNDS. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE TAXATION OF THE INCOME FROM PKD MATRIC HIGHER SECONDARY SCHOOL AND PKD SCHOOL HOSTEL UPON REJECTING THE CLAIM FOR TAX EXEMPTION U /S 10(23C)(VI) OF THE ACT IN VIEW OF THE THRESHOLD LIMIT PRESCRIBED F OR SUCH TAX EXEMPTION SHOULD BE RECKONED AS BAD IN LAW ON VARIO US GROUNDS. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT DESP ITE THE ACTIVITY OF PROVIDING SUPPORT SERVICES, NAMELY, PROVIDING HOSTE L SERVICES FOR THE STUDENTS, DENIAL OF TAX EXEMPTION AS CLAIMED BASED ON THE RECORDING OF THE FINDING IN PARA 5.1.3 AND PARA 5.1.4 OF THE IMPUGNED ORDER WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SU STAINABLE IN LAW. 7. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE M ISCONSTRUCTION OF THE PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT IN DENYING THE BENEFIT 3 ITA NO.1930 & 1931/CHNY/2019 OF TAX EXEMPTION WOULD VITIATE THE DECISION RENDERE D IN RELATION THERETO. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED OR DER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A TRUST EVIDENCED BY A TRUST DEED DATED 09.09.1992 IS ENGA GED IN RUNNING EDUCATIONAL INSTITUTIONS FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2010-11 ON 07.10.2010 DECLARING NI L TOTAL INCOME AFTER CLAIMING EXEMPTION U/S.10(23C) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). IN THE ORIGINA L ASSESSMENT ORDER PASSED ON 23.01.2013, THE CLAIM OF EXEMPTION UNDER SECTION 10(23C) OF THE ACT WAS DENIED CONSEQUENT TO REJEC TION OF APPLICATION FILED BY THE ASSESSEE FOR REGISTRATION OF TRUST BY THE CHIEF COMMISSIONER OF INCOME TAX, COIMBATORE, BEC AUSE THE ASSESSEE TRUST WAS NOT REGISTERED UNDER SECTION 12A OF THE ACT. FURTHER, WHILE REJECTING THE CLAIM OF EXEMPTION, THE LEARNED ASSESSING OFFICER HELD THAT SINCE THE TOTAL RECEI PTS OF THE TRUST EXCEEDING RS. ONE CRORE, IN ORDER TO CLAIM THE BEN EFIT OF EXEMPTION UNDER SECTION 10(23C) OF THE ACT, THE ASSESSEE TR UST OUGHT TO HAVE OBTAINED APPROVAL FROM THE PRESCRIBED AUTHORITY. SINCE, THE ASSESSEE TRUST FAILED TO DO SO, THE EXEMPTION CLA IMED UNDER SECTION 4 ITA NO.1930 & 1931/CHNY/2019 10(23C) OF THE ACT HAS BEEN DENIED AND INCOME WAS BROUGHT TO TAX. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE H AS FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), COIMBATORE. THE LEARNED CIT(A) VIDE ORDER DATE D 29.05.2014 HAS CONFIRMED THE ORDER OF THE ASSESSING OFFIC ER ON THE GROUND THAT THE CHIEF COMMISSIONER OF INCOME TAX, COIMBATO RE VIDE ORDER DATED 24.06.2013 HAD REJECTED THE APPLICATION FI LED BY THE ASSESSEE FOR APPROVAL UNDER SECTION 10(23C) OF TH E ACT. THE ASSESSEE CARRIED THE MATTER IN FURTHER APPEAL BEFO RE ITAT. THE TRIBUNAL VIDE ITS ORDER DATED 10.12.2017 IN ITA NO. 2053/MDS/2014 HAS REMANDED THE ISSUE REGARDING RECOGNITION OF A SSESSEE TRUST UNDER SECTION 10(23C) OF THE ACT TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. IN COMPLIANCE TO THE ORDE R OF THE ITAT, THE CASE WAS TAKEN UP FOR HEARING ON 09.05.2017 AND AS SESSEE WAS REQUIRED TO FURNISH NECESSARY DETAILS TO PROVE IT S ELIGIBILITY FOR CLAIMING BENEFIT OF EXEMPTION UNDER SECTION 10(2 3C) OF THE ACT. IN RESPONSE, THE ASSESSEE HAS FILED ALL DETAILS AND STATED THAT OUT OF THE FIVE EDUCATIONAL INSTITUTIONS UNDER THE TRUST, GROSS RECEIPTS OF PKD MATRICULATION HIGHER SECONDARY SCHOOL IS ABOVE RS.ONE CRORE AND CORRESPONDING INCOME RELATING TO THAT SCHOOL IS ONLY AVAILABLE FOR TAXATION FOR THE RELEVANT ASSESSMENT YEAR . THE ASSESSING 5 ITA NO.1930 & 1931/CHNY/2019 OFFICER AFTER CONSIDERING THE RELEVANT SUBMISSIO NS OF THE ASSESSEE AND ALSO TAKEN NOTE OF PROVISIONS OF S ECTION 10(23C) OF THE ACT, OBSERVED THAT THERE IS NO MERIT IN THE A RGUMENTS OF THE ASSESSEE THAT FOR THE PURPOSE OF ASSESSMENT OF A TRUST EACH UNIT INCLUDING HOSTELS SHOULD BE SEPARATELY CONSIDE RED AND IF PKD SCHOOL HOSTEL IS TAKEN OUT FROM PKD MATRIC HIGHER S ECONDARY SCHOOL, THEN THE INCOME OF PKD MATRIC HIGHER SECON DARY SCHOOL ONLY AVAILABLE FOR TAXATION IS INCORRECT, BECAUSE HOSTEL OF A SCHOOL CANNOT BE CONSIDERED AS A SEPARATE ENTITY FOR THE PURPOSE OF EXEMPTION FOR THE REASON THAT THE SAME SET OF STUD ENTS ARE BENEFICIARIES OF THE SCHOOL AND THE HOSTEL ATTACH ED TO IT AS PART OF INSTITUTION WHICH IS OFFERING EDUCATION, THEREFOR E REJECTED THE EXPLANATION FURNISHED BY THE ASSESSEE AND ASSESS ED THE INCOME OF PKD MATRIC HIGHER SECONDARY SCHOOL AND PKD SC HOOL HOSTEL AS ONE INSTITUTION. SINCE, THE GROSS RECEIPTS OF THE INSTITUTION IS MORE THAN RS. ONE CRORE AND ALSO THE ASSESSEE W AS NOT HAVING THE BENEFIT OF REGISTRATION U/S.10(23C) OF THE ACT , DENIED EXEMPTION CLAIMED AND ASSESSED THE TOTAL INCOME AS AN AOP AS SESSABLE AT MAXIMUM MARGINAL RATE TAX. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) VID E ITS ORDER 6 ITA NO.1930 & 1931/CHNY/2019 DATED 06.05.2019 HAS UPHELD THE FINDINGS OF THE ASSESSING OFFICER AND REJECTED THE CLAIM OF EXEMPTION UNDER SECTION 10(23C) OF THE ACT ON THE GROUND THAT INCOME OF PKD MATRIC HIGHE R SECONDARY SCHOOL IS ASSESSABLE TO TAX AS IT IS NOT QUALIF IED FOR EXEMPTION UNDER SECTION 10(23C) BECAUSE GROSS ANNUAL RECEIPT S EXCEEDED RS. ONE CRORE AND THE INCOME OF PKD SCHOOL HOS TEL IS NOT QUALIFIED FOR EXEMPTION U/S.10(23C)AS IT IS NOT AN EDUCATIONAL INSTITUTION. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS APPEAL BEFORE US. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, AT THE TIME OF HEARING, SUBMITTED THAT BOTH THE APPE ALS NEED TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRES H CONSIDERATION, BECAUSE THE HONBLE JURISDICTIONAL HIGH COURT IN T AX CASE APPEAL NOS.286, 287 AND 288 OF 2018 HAS SET ASIDE THE OR DER OF TRIBUNAL AND REMITTED THE MATTER BACK TO THE CHIEF COMMISS IONER OF INCOME TAX, COIMBATORE FOR FRESH DECISION AFTER CONSIDERIN G THE ENTIRE FINANCIALS AND ALL OTHER RECORDS THAT MAY BE PLACED BEFORE HIM FOR CONSIDERING THE ENTITLEMENT FOR EXEMPTION U/S.10( 23C) OF THE ACT. THE LEARNED AR FURTHER SUBMITTED THAT THE HONB LE JURISDICTIONAL HIGH COURT ALSO SET ASIDE THE ORDERS PASSED BY TH E ASSESSING OFFICER, DENYING EXEMPTION U/S.10(23C) AND RESTORE D THE ISSUES 7 ITA NO.1930 & 1931/CHNY/2019 BACK TO THE FILE OF THE ASSESSING OFFICER, BECAUSE ASSESSMENT ORDERS ARE BASED UPON THE REJECTION OF PRAYER FOR EXEMPTION U/S.10(23C). THEREFORE, HE REQUESTED THAT THE APPEA LS MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFF ICER BY SETTING ASIDE THE IMPUGNED ORDERS FOR FRESH CONSIDERATION IN THE LIGHT OF OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH C OURT . 6. THE LEARNED DR, ON THE OTHER HAND, FAIRLY ACCE PTED THAT THE MATTER NEEDS TO BE GO BACK TO THE FILE OF THE ASS ESSING OFFICER IN THE LIGHT OF THE OBSERVATIONS OF THE HONBLE JUR ISDICTIONAL HIGH COURT , WHERE SUBSTANTIAL ISSUE OF DENIAL OF EX EMPTION U/S.10(23C) HAD BEEN RESTORED BACK TO THE FILE OF THE CHIEF COMMISSIONER OF INCOME TAX FOR RECONSIDERATION AND ACCORDINGLY TH E CONSEQUENTIAL ASSESSMENT ORDERS FRAMED BY THE ASSESSING OFFI CER NEEDS TO BE RECONSIDERED AFTER THE OUTCOME OF THE ORDER PASSED BY CHIEF COMMISSIONER OF INCOME TAX REGARDING ASSESSEES E NTITLEMENT FOR EXEMPTION U/S.10(23C) OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CAREFULLY CONSIDERED THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN TAX CASE APPEAL NOS. 286, 287 AND 8 ITA NO.1930 & 1931/CHNY/2019 288 OF 2018 DATED 11.06.2019 AND FIND THAT THE HONBLE HIGH COURT HAS SET ASIDE THE ORDER OF TRIBUNAL REG ARDING DENIAL OF EXEMPTION CLAIMED BY THE ASSESSEE U/S.10(23C) OF THE ACT. WE FURTHER NOTED THAT THE HONBLE HIGH COURT HAS ALSO SET ASIDE THE ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER FO R THE ASSESSMENT YEAR 2010-11 AND 2012-13 ON THE GROUND T HAT BOTH THE ASSESSMENTS ARE BASED UPON REJECTION OF PRAYER FOR EXEMPTION U/S.10(23C) OF THE ACT. SINCE THESE TWO APPEALS AR E FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE ASSESSING OFFICE R IN DENYING BENEFIT OF EXEMPTION CLAIMED U/S.10(23C) OF THE AC T AND THE VERY SAME MATTER HAS BEEN GONE BACK TO THE FILE OF THE C HIEF COMMISSIONER OF INCOME-TAX, COIMBATORE FOR RECONSID ERATION, THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER C ONSEQUENTIAL TO REJECTION OF EXEMPTION CLAIMED U/S.10(23C) OF T HE ACT CANNOT SURVIVE UNDER THE LAW. THEREFORE, WE ARE OF THE CON SIDERED VIEW THAT APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2010-11 AND 2012-13 NEED TO GO BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR RE-CONSIDERATION OF THE ISSUE AFTER THE OUTCOME OF THE PROCEEDINGS BEFORE THE CHIEF COMMISSIONER OF INCOME -TAX, COIMBATORE REGARDING ELIGIBILITY OF THE ASSESSEE FO R EXEMPTION U/S.10 (23C) OF THE ACT. HENCE, WE SET ASIDE THE IMPUGNED ORDERS AND 9 ITA NO.1930 & 1931/CHNY/2019 REMIT BOTH THE APPEALS BACK TO THE FILE OF THE ASSE SSING OFFICER AND DIRECT HIM TO REDO THE ASSESSMENTS IN ACCORDANCE WI TH THE LAW. 8. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR BOTH ASSESSMENT YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2020 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) $ & / JUDICIAL MEMBER & / ACCOUNTANT MEMBER $ /CHENNAI, ) /DATED 29 TH SEPTEMBER, 2020 DS +, -, /COPY TO: 1. APPELLANT 2. RESPONDENT 3. . () /CIT(A) 4. . /CIT 5. , 2 /DR 6. /GF .