M/S. JASLEEN EDUCATIONAL SERVICE SOCIETY, Indore V. THE ACIT-2(1), Indore

ITA 194/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5792 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K G GOEL
• Assessee Lawyers: S N AGRAWAL
• Keywords: Depreciation; Charitable institution; Retrospective amendment
• Section: 143(3); 12A; 194C; 201(1); 12; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, GRAM LIMBODI, KHANDWA ROAD, INDORE. .. ./ PAN: AAAAJ 1218 L VS. ACIT, 2(1), INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI S.N.AGRAWAL, C. A. / RESPONDENT BY SHRI K. G. GOEL, DR DATE OF HEARING 12.01.2017 DATE OF PRONOUNCEMENT 28.02.2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-22, HOLDIN G .. . / I.T.A. NO. 194/IND/2016 %' ' / A.Y.: 2005-06 I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 2 OF 21 CONCURRENT JURISDICTION OF CIT(A), INDORE-1 [HEREIN AFTER REFERRED TO AS THE CIT(A)] DATED 08.12.2015. THIS APPEAL PER TAINS TO ASSESSMENT YEAR 2005-06 AS AGAINST APPEAL DECIDED I N RESPECT OF ASSESSMENT ORDER DATED 31.12.2007 PASSED U/S 143 (3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT BY THE ACIT, 2(1), CIRCLE 2(1), INDORE (HEREAFTER REFERRED TO AS THE AO). 2. GROUND NOS.1.1 AND 1.2 RELATE TO DENYING OF CLAIM OF EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. 2.1 SUCCINCTLY, THE FACTS AS CULLED OUT FROM THE ORDERS OF THE LOWER AUTHORITIES ARE THAT THE ASSESSEE IS AN A .O.P. REGISTERED WITH REGISTRAR OF SOCIETY VIDE REGISTRATI ON NO.IMD/2914/98 DATED 09.12.1998. THE SOCIETY IS RUN NING AN EDUCATIONAL INSTITUTION IN THE NAME OF AUCKLAND AC ADEMY. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30.1 0.2003 SHOWING INCOME AT RS. NIL. THE ASSESSEE HAS SHOWN NE T PROFIT OF RS. 2,62,971/- ON THE GROSS ANNUAL RECEIPT OF RS . 41,99,249/- AND CLAIMED EXEMPTION OF RS. 2,62,971/- U/S 10(23C)(IIIAD) OF THE ACT. THE AO EXAMINED THE CLAI M AND HELD I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 3 OF 21 THAT THE ASSESSEE SOCIETY REGISTERED ON 09.12.1998, AND APPLIED FOR REGISTRATION U/S 12A ON 02.04.2007 BEFO RE THE CIT(A), INDORE, WHICH HAS NOT BEEN DECIDED, HENCE, T HE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT U/S 11 & 12 OF THE ACT. WITH REGARD TO EXEMPTION U/S 10(23C)(IIIAD), THE AO OBSE RVED THAT IN THE ASSESSMENT ORDER U/S 143(3) DATED 15.11.2006 , FOR ASSESSMENT YEAR 2004-05, IT WAS HELD THAT THE ASSESS EE WAS NOT EXISTED PRIMARILY FOR EDUCATIONAL PURPOSES AS I T HAS GIVEN LOAN OF RS. 1.25 CRORES TO M/S. SHEETU EDUCATIONAL SERVICES PVT.LTD., INDORE, ( FOR SHORT SESPL ), HENCE, THE ASSESSEE HAS DIVERTED THE FUNDS TO ITS SISTER CONCERN. FURTHER, THE ASSESSEE HAD NEITHER UTILIZED/EXPANDED ITS INCOME/FUNDS WHOLL Y AND EXCLUSIVELY FOR EDUCATIONAL PURPOSES NOR FOR THE OB JECTS OF THE INSTITUTION. THE AO FURTHER OBSERVED THAT THE ASSES SEE HAS SHOWN RECEIPTS OF RS. 9,17,200/- FOR BUS FEE AND ALS O CLAIMED DEPRECIATION OF RS. 2,76,872/- @ 40% ON MOTOR BUSES , WHICH MEANS THAT BUSES WERE FOR SOLELY USED FOR THE BUSINE SS OF RUNNING THEM ON HIRE AND NOT FOR OTHER PURPOSES. IN VIEW OF THIS MATTER, THE AO HELD THAT THE ASSESSEE IS NOT E XISTED SOLELY I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 4 OF 21 FOR EDUCATIONAL PURPOSES DURING THE ACCOUNTING YEAR UNDER CONSIDERATION, HENCE, THE CLAIM OF EXEMPTION U/S 10 (23C)(IIIAD) OF THE ACT IS NOT ALLOWABLE. 2.2 BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE CIT(A). HOWEVER, THE LD. CIT(A) NOTED THAT THE CIT(A)-II, INDORE, VIDE ORDER DATED 31.12.2012 FOR ASSESSMENT YEAR 2004- 05 IN APPEAL NO. 129/09-10/455 HELD THAT THE EXEMPT ION U/S 10(23C)(IIIAD) IS NOT AVAILABLE AS THE CONDITIONS U /S 10(23C)(IIIAD) IS NOT SATISFIED. ACCORDING TO THE C IT(A), THE INSTITUTION SHOULD NOT BE FOR THE PURPOSE OF PROFIT AND THIS CONDITION IS NOT SATISFIED AS HELD IN THE ASSESSMEN T YEAR 2004- 05. THEREFORE, FOLLOWING THE DECISION OF ASSESSMENT YEAR 2004- 05, THE LD. CIT(A) HAS UPHELD THE ORDER OF THE AO. 2.3 BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS A PPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE ASSESSEE HAS NOT ADVANCED LOAN TO SESPL, INDORE OF RS. 1,25,27,660/- BUT THE ENTIRE AMOUNT WAS ADVANCED FOR CONSTRUCTION OF SCHOOL BUILDING, WHICH WAS ULTIMATELY USED BY THE ASSESSEE OVER RUNNING OF SCHOOL. THE AO REFERRE D THAT THE I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 5 OF 21 AMOUNT OF RS. 4,01,947/- WAS FURTHER ADVANCED BY THE ASSESSEE, BUT FROM THE BALANCE SHEET OF THE COMPANY , IT IS CLEAR THAT THE SAID AMOUNT WAS UTILIZED FOR THE PURP OSE OF REPAYMENT OF LIABILITY AND MAINTENANCE OF SCHOOL BU ILDING AND FURNITURE. THE CONTENTION OF THE AO THAT AMOUNT WAS GIVEN TO M/S. SESPL WAS DIVERSION OF FUNDS BY THE ASSESSEE SO CIETY IS NOT CORRECT. THE ASSESSEE ON LEASE HOLD LAND OF IND IVIDUAL FAMILY MEMBERS IS IN POSSESSION OF THE COMPANY, CON STRUCTED A SCHOOL BUILDING SOCIETY AND THE SCHOOL BUILDING WA S ALSO USED FOR THE PURPOSE OF RUNNING OF SCHOOL OF THE SO CIETY. HENCE, THERE WAS NO DIVERSION OF FUNDS OF THE SOCIET Y FOR NON- EDUCATIONAL PURPOSES. AS REGARDS OBSERVATION OF THE AO THAT ADVANCE TO COMPANY TANTAMOUNT TO CONTRAVENTION OF PROVISIONS OF SECTION 13 OF THE ACT IS NOT CORRECT, AS THE AO HAS FAILED TO APPRECIATE FACTUAL POSITION THAT WHEN COMPANY IS IN THE LEASE HOLD LAND CONSTRUCT A SCHOOL BUILDING FOR THE ASSESSEE SOCIETY AND THE SAID SCHOOL BUILDING WAS AL SO USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL OF THE SOCIETY . HENCE, THE AMOUNT AS ADVANCED FOR THE CONSTRUCTION OF THE SCHO OL I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 6 OF 21 BUILDING WAS NOT CONTRAVENTION OF THE PROVISIONS OF SECTION 13 OF THE ACT. THUS, THE ASSESSEE HAS PROPERLY UTILIZE D ITS ENTIRE INCOME FOR THE PURPOSE OF EDUCATIONAL ACTIVITIES. F URTHER, THE BUS FEE AND OTHER RECEIPTS ARE DIRECTLY LINKED WITH THE EDUCATIONAL ACTIVITIES OF THE SOCIETY AND, THEREFOR E, THE ASSESSEE SOLELY ENGAGED IN THE EDUCATIONAL ACTIVITI ES. THE AOS INTERPRETATION THAT BUS USED FOR THE PURPOSE OF RUN NING ON HIRE IS FACTUALLY NOT CORRECT AS THE BUSES USED FOR PICK UP AND DROP OF THE STUDENTS AND BUS FEE WAS SEPARATELY CHAR GED FROM THE STUDENTS. HENCE, FOR THE PURPOSE OF ALLOWABILIT Y OF DEPRECIATION, THE SAME HAS BEEN CONSIDERED AS BUS R UN ON HIRE OTHERWISE ALL THE BUSES ARE USED FOR PICK AND D ROP OF THE STUDENTS ONLY. 2.4.1 THE LD. AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE FURTHER SUBMITTED THAT IT IS NOT IN DISPUTE THAT GR OSS RECEIPTS OF THE ASSESSEE IS RS. 48,66,663/-, WHICH IS LESS TH AN RS. 1 CRORE AND THE ASSESSEE SOLELY EXISTED FOR EDUCATION AL PURPOSES. HENCE, IT IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(III AD) OF THE ACT. THE LD. AO/CIT(A) DISALLOWED THE EXEMPTION BY HOLDI NG THAT I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 7 OF 21 THE ASSESSEE HAVING SURPLUS INCOME AND THE SAME WAS USED IN ADVANCING TO M/S. SESPL, ONE OF THE GROUP COMPANIES . HOWEVER, THE AO AND CIT(A) HAS FAILED TO APPRECIAT E THAT THE ASSESSEE ENTERED INTO A DEED OF SUB-LEASE ON 28.08. 1999 WITH M/S.SESPL FOR TAKING OF THE BUILDING OF M/S. SESPL ON LEASE FOR RUNNING OF ITS SCHOOL IN THAT BUILDING. THE LAN D AREA WAS AROUND 1.50 ACRES AND BUILT UP AREA WAS AROUND 15,00 0 SQ.FT. THE DEED AGREEMENT WAS EXECUTED BETWEEN BOTH THE PAR TIES ON 31.03.2000 WHEREAS IT WAS AGREED THAT THE PARTY REFE RRED TO AS TENANT ABOVE HAS DEPOSIT WITH THE OWNER OF THE AMO UNT WHICH HAS BEEN MUTUALLY DECIDED BY BOTH THE PARTIES BY WAY OF SECURITY DEPOSIT. AGAINST THIS DEPOSIT, THE INTE REST SHALL NOT BE CHARGED BY THE PARTY REFERRED TO AS TENANT (JAS LEEN EDUCATIONAL SERVICE SOCIETY) ABOVE AND THE PARTIES REFERRED TO AS OWNER (SESPL) SHALL NOT BE CHARGED RENT ON SAID B UILDING. THUS, THE AMOUNT RECEIVED BY SESPL WAS NOT USED FOR PERSONAL PURPOSES BUT USED FOR CONSTRUCTION OF BUIL DING. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTH ER SUBMITTED THAT SURPLUS EARNING OF THE ASSESSEE IN T HE YEAR OF I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 8 OF 21 APPEAL AND ALSO FEW PREVIOUS YEAR AND SUBSEQUENT YEA RS ARE AS UNDER :- S.NO. PARTICULARS 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 1. GROSS RECEIPT 6632783 7646452 4866664 4414765 4439171 2. NET INCOME 3904546 2229702 262970 482906 670353 % OF SURPLUS 58.87 % 29.16 % 5.40% 10.94% 15.10 2.4.2 THE LD. AUTHORIZED REPRESENTATIVE OF THE AS SESSEE RELIED ON THE FOLLOWING DECISIONS :- (I) ST. JOSEPHS UPPER PRIMARY SCHOOL VS. ITO, 16 TTJ 389 (HYD BENCH I.T.A.T. ) (II) ADDL CIT VS. ADITANAR EDUCATIONAL INSTITUTION, (1979) 118 ITR 235 (MAD). (III) GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. CIT,(1979) 117 ITR 284 (AP). (IV) EREAUT (H.M. INSPECTOR OF TAXES) VS. GIRLS PUBLIC DAY SCHOOL TRUST LTD., (1930) 15 TC 529 (HL) (ENGLISH DECISION) 2.4.3 THE BOARD ITSELF SEEMS TO HAVE ACCEPTED THI S VIEW BY THEIR INSTRUCTION NO. 1112 ( F.NO.194/16/77-IT (A-I ) DATED 29 TH OCTOBER, 1977 IN THE FOLLOWING WORDS :- I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 9 OF 21 HOWEVER, THERE MAY BE CASES WHERE THE EDUCATIONAL INSTITUTION MAY BE OWNED BY THE TRUSTS OR SOCIETIES TO WHOM THE PROVISIONS OF SECTIONS 11 MAY BE APPLICABLE. WHERE ALL THE OBJECTS OF THESE TRUSTS ARE EDUCATIONAL AND THE SURPLUS, IF ANY, FRO M RUNNING THE EDUCATIONAL INSTITUTION IS USED FOR EDUCATIONAL PURPOSES ONLY, IT CAN BE HELD THAT THE INSTITUTION IS EXISTING SOLELY FOR EDUCATIONAL PURP OSES AND NOT FOR THE PURPOSES OF PROFIT. 2.4.4 THE LD. AUTHORIZED REPRESENTATIVE OF THE AS SESSEE FURTHER RELIED UPON THE FOLLOWING DECISIONS :- (A) OASIS EDUCATIONAL SOCIETY VS. ADIT (EXEMPTIONS), 13 2 TTJ 59 ( HYD BENCH I.T.A.T. ) (B) ADITANAR EDUCATIONAL INSTITUTION ETC. VS. ADDL. CIT , 224 ITR 310 ( S. C.) (C) ACIT VS. VATSALYA SENIOR SECONDARY SCHOOL, 130 TTJ 27 (IND. I.T.A.T. ) 2.5 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 10 OF 21 2.6 WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDIS PUTED FACT OF THE CASE ARE THAT THE ASSESSEE SOCIETY DOES NOT POSSESS REGISTRATION U/S 12A OF THE ACT FOR THE YEAR UNDER CONSIDERATION. THEREFORE, EXEMPTION IN SECTION 11 & 12 IS NOT AVAILABLE TO ASSESSEE. WE FIND THAT THE ASSESSEE IS IN POSSESSION OF LEASE HOLD LAND WHICH BELONGS TO INDI VIDUAL FAMILY MEMBER OF TRUSTEES. THE ENTIRE AMOUNT OF RS. 1.25 CRORE, GIVEN TO M/S. SESPL BY THE ASSESSEE HAS BEEN UTILIZED FOR CONSTRUCTION OF SCHOOL BUILDING ON THE LAND IN POSSESSION OF LAND. WE ALSO FIND THAT THE ASSESSEE HAD UTILIZED T HE SAID BUILDING FOR THE PURPOSE OF RUNNING SCHOOL, WITHOUT PAYING ANY RENT. FURTHER, THE AMOUNT OF RS. 4,01,947/- PAID WAS FOR THE PURPOSE OF REPAYMENT OF LIABILITY AND MAINTENANCE O F SCHOOL BUILDING AND FURNITURE. THEREFORE, WE DO NOT FIND AN Y DIVERSION OF FUNDS AS ALLEGED BY THE AO. AS THE FUNDS SO ADVA NCED WERE USED FOR THE PURPOSE OF EDUCATION ONLY. IN VIEW OF T HESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS PROPERLY UTI LIZED THE ENTIRE INCOME FOR THE PURPOSE OF EDUCATIONAL ACTIVI TIES. WE ALSO I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 11 OF 21 FIND THAT THE BUSES WERE USED FOR PICK UP AND DROP OF THE STUDENTS ONLY FOR WHICH FEES WERE SEPARATELY CHARGED. THEREFORE, IT CANNOT BE SAID THAT THE BUSES WERE US ED FOR RUNNING THEM ON HIRE, AS EXCEPT PICK AND DROP OF ST UDENT, THESE BUSES WERE USED. HENCE, IT CANNOT BE HELD THA T THE ASSESSEE HAS DERIVED ANY BUSINESS PROFIT FROM BUSES . HOWEVER, FOR THE PURPOSE OF ALLWOABILITY, IT WAS CONSIDERED ON RUNNING THEM ON HIRE. WE ALSO NOTE THAT THE AMOUNT OF RS. 1 .25 CRORE ADVANCED TO M/S. SESPL WAS FOR THE PURPOSE OF CONSTR UCTION OF SCHOOL BUILDING, AS IS EVIDENT FROM THE FACTS TH AT NO INTEREST THEREON HAS BEEN CHARGED NOR ANY RENT OF SCHOOL BUI LDING WAS GIVEN. THIS VIEW IS SUPPORTED FROM THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION, ETC. VS. ADDL. CIT, (1997) 224 ITR 310 (S.C.), WHEREIN IT WAS HELD THAT WHEN SURPLUS IS UTILIZED FO R EDUCATIONAL PURPOSES I.E. FOR INFRASTRUCTURE DEVELO PMENT, IT CANNOT BE SAID THAT THE INSTITUTION WAS HAVING THE O BJECT TO MAKE PROFIT, THAT THE SURPLUS USED FOR MANAGEMENT A ND BETTERMENT OF THE INSTITUTION COULD NOT BE TERMED A S PROFIT. I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 12 OF 21 2.6.1 WE ALSO FIND SUPPORT OF OUR VIEW FROM C.B.D.T. INSTRUCTION NO. 1112 DATED 29.10.1977, WHEREIN IT HA S BEEN LAID DOWN THAT WHERE ALL OBJECTS OF TRUST ARE EDUCAT IONAL AND IF THERE IS ANY SURPLUS FROM RUNNING OF EDUCATIONAL IN STITUTE, WHICH IS USED FOR EDUCATIONAL PURPOSE ONLY AND IT CA N BE HELD THAT THE SAID INSTITUTION IS EXISTING SOLELY FOR ED UCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. WE ALSO FIND THAT THE ASSESSEE AND M/S. SESPL HAS ENTERED INTO AN AGREEME NT DATED 31.03.2000 ACCORDING TO WHICH THE ASSESSEE IS NOT TO CHARGE ANY RENT ON SECURITY DEPOSIT AND M/S. SESPL WILL NOT CHARGE RENT FROM THE ASSESSEE SOCIETY. 2.6.2 WE ALSO FIND SUPPORT FROM THE DECISION RELIED B Y THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IN TH E CASE OF ST. JOSEPHS UPPER PRIMARY SCHOOL VS. ITO, 16 TTJ 389 ( HYD.- TRIB), WHEREIN THE SCHOOL WAS HOUSED IN TWO BUILDINGS OWNED BY THE SOCIETY. THE OTHER BELONGS TO SMT. RAJAMMA, WHO WAS DAUGHTER IN LAW OF SECRETARY OF THE SOCIETY, THE FIR ST AND SECOND FLOOR WAS CONSTRUCTED BY BORROWINGS FROM THE S OCIETY. BUT THE SOCIETY HAS BENEFIT OF HOUSING OF ITS SCHOO L WITHOUT I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 13 OF 21 PAYING ANY RENT. IT WAS FOR THIS REASON THAT INTERES T WAS NOT CHARGED. IT WAS HELD THAT THERE WAS NO MISUSE OF ANY AUTHORITY SO AS TO MAKE THE SOCIETYS PROFESSED OBJECTS AS NO T BEING REAL AND, THEREFORE, SOCIETY CANNOT BE DEPRIVED OF BENE FIT OF EXEMPTION U/S 13 OF THE ACT. WE FIND THAT THE FACTS OF THE PRESENT CASE IS IDENTICAL AS HERE THE BUILDING WAS C ONSTRUCTED ON THE AMOUNT GIVEN BY SOCIETY IN WHICH SOCIETY IS R UNNING SCHOOL. THEREFORE, THE ASSESSEE SOCIETY IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. THE LD. AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE ALSO RELIED IN THE CASE OF OASIS ED UCATIONAL SOCIETY VS. ADIT (EXEMPTION) 132 TTJ 59 (HYD), WHERE IN THE PREAMBLE READ.. THAT IT IS FOUND THAT MERELY BECAU SE THE LAND ON WHICH THE SCHOOL BUILDING WAS CONSTRUCTED BELONG T O THE SONS AND WIFE OF THE PRINCIPAL/SECRETARY OF THE SOCI ETY, IT COULD NOT BE SAID THAT THE ASSESSEE SOCIETY IS RUNNING TH E EDUCATIONAL SOCIETY FOR EARNING PROFIT AND NOT FOR CHARITABLE PURPOSE. . THE OTHER CASE LAWS ARE RELIED AND REF ERRED ABOVE IN SUBMISSION OF LD. AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE ALSO SUPPORT THE CASE OF THE ASSESSEE SOCIETY. I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 14 OF 21 2.6.3 WE FIND THAT A SOCIETY CAN CLAIM EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, IF THE CONDITION ENUMERA TED THEREIN ARE SATISFIED. WE FIND THAT AGGREGATE ANNUAL RECEIP T OF THE SOCIETY ARE AT RS. 48,66,663/- WHICH DOES NOT EXCEED THE AMOUNT OF RS. 1 CRORE FOR THE ASSESSMENT YEARS UNDE R CONSIDERATION. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10(23C)(IIIAD) OF THE ACT. THE PERUSAL OF THE A SSESSMENT ORDER SHOWS THAT IMPARTING OF EDUCATIONAL NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE HAS NOT BEEN DOUBTED BY THE AO. THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT READS AS UNDER :- (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTIT UTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FO R 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; OR 2.6.4 THE PERUSAL OF THE ABOVE PROVISION SHOWS T HAT THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT IS AVAILABL E TO AN I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 15 OF 21 INSTITUTION, WHICH IS SOLELY EXISTS FOR EDUCATIONAL PURPOSES. THEREFORE, THE PHRASE USED AS SOLELY MEANS THAT N OT FOR THE PURPOSES OF PROFIT. THEREFORE, PLAIN READING OF THE SAID SECTION MEANS THAT AN EDUCATIONAL INSTITUTION, WHICH IS ENGA GED SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION IS SOLELY FO R THE PURPOSE OF IMPARTING EDUCATION IS QUALIFIES FOR THE EXEMPTION U/S 10(23C)(IIIAD). THE SOLELY WORDS USED THEREIN MEANS THAT THE ASSESSEE INSTITUTION IS NOT CARRYING OUT OTHER ACTIVITIES OF EARNING OF PROFIT. 2.6.5 WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. WE FIND THAT IN THE CASE OF ADDL.CIT VS. ADITANAR EDUCATIO NAL INSTITUTION, (1979) 118 ITR 235 (MAD), WHEREIN IT WAS HELD THAT IF A SOCIETY REGISTERED UNDER SOCIETIES REGISTRATIO N ACT, 1880, TO RUN EDUCATIONAL INSTITUTION COULD BE TREATED AS AN EDUCATIONAL INSTITUTION ITSELF U/S 10(22) OF THE AC T. THIS DECISION WAS APPROVED BY APEX COURT IN ADITANAR EDUC ATIONAL INSTITUTION VS. ADDL. CIT, (1997) 224 ITR 310 ( S.C .). I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 16 OF 21 2.6.6 IN THE LIGHT OF ABOVE DISCUSSION, FACTS AND CIRCUMSTANCES, WE FIND THAT THE ASSESSEE SOCIETY IS ENGAGED IN THE RUNNING OF SCHOOL AND AMOUNT OF SURPLUS HAS ALS O BEEN UTILIZED BY THE ASSESSEE FOR CONSTRUCTION OF SCHOOL BUILDING, WHICH WAS ALSO USED BY THE ASSESSEE, HENCE, THE SOCIE TY IS ENGAGED IN THE CHARITABLE PURPOSE U/S 2(15) OF THE ACT. SINCE THE GROSS RECEIPTS OF SOCIETY IS LESS THAN RS. 1 CR ORE, THEREFORE, IT IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. WE ALSO FIND THAT THE FACTS OF THE PRESENT CASE ARE SQ UARELY COVERED BY THE ABOVE DECISIONS DISCUSSED ABOVE. TH EREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE LOWER AUTHOR ITIES WERE NOT JUSTIFIED IN NOT ALLOWING THE DEDUCTION TO THE A SSESSEE U/S 10(23C)(IIIAD) OF THE INCOME-TAX ACT, 1961. ACCORDI NGLY, THE AO IS DIRECTED TO TREAT THE SOCIETY AS COVERED BY SECT ION 10(23C)(IIIAD) OF THE ACT AND ALLOW THE RELIEF ACCOR DINGLY. ACCORDINGLY, GROUND NOS.1.1 & 1.2 ARE ALLOWED. 3. GROUND NO. 2.1 & 2.2 READS AS UNDER:- 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF KITCHEN EXPENSES BY INVOKING I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 17 OF 21 THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WHEN THE ASSESSEE HAS REIMBURSED THE SAME TO IMPERIAL ACADEMY. 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT ALLOWING THE CLAIM OF KITCHEN EXPENSES AS PER 2 ND PROVISO TO SECTION 40(A)(IA) OF THE ACT EVEN WHEN 2 ND PROVISO HAVING RETROSPECTIVE EFFECT AS PER DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LIMITED,( I.T.A.NO. 160/161 OF 2015) 3.1 THE AO FOUND THAT THE ASSESSEE HAS CLAIMED RS . 4,75,486/- AS KITCHEN EXPENSES OUT OF WHICH RS. 1,89 ,000/- WERE REIMBURSED TO SHEETU EDUCTIONAL SOCIETY FOR THE KITCHEN WORK CARRIED OUT BY IMPERIAL ACADEMY. THE AO WAS OF THE VIEW THAT THESE EXPENSES WERE PAID FIXED @ RS 1000/- PER STUDENT FOR 189 STUDENTS, HENCE, PAYMENT FALLS ON SERVICES RENDERED UNDER CONTRACT, ON WHICH, TDS WAS LIABLE TO BE DEDUCT ED U/S 194C OF THE ACT. SINCE, NO TDS WAS DONE, HENCE, PAYM ENTS WERE DISALLOWED U/S 40(A)(IA) OF THE ACT. 3.2 THE LD. CIT(A) HAS OBSERVED THAT THE PAYMENT HA S BEEN MADE OF ROUND FIGURE OF RS. 1000/- PER ANNUM PER ST UDENT, I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 18 OF 21 HENCE, IT IS NOT REIMBURSEMENT OF ACTUAL EXPENSES B UT LUMP SUM PAYMENT FOR SERVICES, HENCE TDS WAS REQUIRED TO BE MADE. AS REGARDS RELIANCE BY ASSESSEE IN THE CASE O F ANSAL LAND MARK TOWNSHIP (P) LIMITED (I.T.A.NO. 160-161/2 015 DATED 26.08.2015), THE CIT(A) HAS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) R.W.S. 201(1) AND RULE 31 ACB, SPE CIFIES THAT FORM 26A IS REQUIRED TO BE FILED FOR CLAIMING BENEF IT OF SECOND PROVISO TO SECTION 40(A)(IA), WHICH HAS NOT BEEN FIL ED, HENCE, DISMISSED THE APPEAL. 3.3 BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT THE ASSESSEE HAS REIMBURSED KITCHEN EXPENSES I NCURRED BY IMPERIAL ACADEMY, HENCE, NOT LIABLE FOR TDS. FUR THER, THE RECEIPT HAS DULY CONSIDERED THE RECEIPTS IN THEIR B OOKS ON WHICH LEGITIMATE AMOUNT OF TAX DUE IS PAID, HENCE, A S PER SECOND PROVISO TO SECTION 40(A)(IA) HAVING RETROSPE CTIVE EFFECT IN THE LIGHT OF DECISION IN THE CASE OF ANSAL LAND MARK TOWNSHIP P.LTD. (160-161/2015 DATED 26.08.2015), THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM. I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 19 OF 21 3.4 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UP ON ON THE ORDERS OF THE LOWER AUTHORITIES. 3.5 WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE, T HE CLAIM OF ASSESSEE THAT THE RECIPIENT HAS PAID DUE TAX IN THE LIGHT OF SECOND PROVISO TO SECTION 40(A)(IA), WE DEEM FIT TO RESTORE THIS ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND IF FOUND CORRECT ALLOW THE SAME AS THE RATIO LAID DOWN IN THE CASE OF ANSAL LAND MARK TOWNSHIP P.LTD. [160 161/2015 DATED 26.08.2015 ] 4. GROUND NO. 4 STATES AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF RS. 28,648/- OUT OF KITCHEN EXPENSES WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION M ADE BEFORE HIM EVEN WHEN THERE WAS NO SPECIFIC DEFECTS WER E POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS OF T HE ASSESSEE. 4.1 THE ASSESSEE HAS CLAIMED KITCHEN EXPENSES OF RS. 5,75,486/- OUT OF WHICH RS. 1,89,000/- WERE CLAIMED AS REIMBURSEMENT TO IMPERIAL ACADEMY AND FOR BALANCE O F RS. 2,86,484/- ONLY LEDGER COPY WAS FILED. ON SPOT INQUI RY, THE I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 20 OF 21 INSPECTOR FOUND THAT NO MEAL WAS PROVIDED TO STUDENT S, CONSIDERING THE GENUINENESS, THE AO DISALLOWED RS. 28,648/- BEING 10% OF EXPENSES OF RS. 2,86,480/- AS INCOME F OR NON- EDUCATION ACTIVITY. 4.2 THE LD. CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE S O MADE. 4.3 THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT KITCHEN EXPENSES RELATES TO MESS FAC ILITY PROVIDED TO STUDENT, TEACHER AND STAFF, THEREFORE, THERE WAS NO JUSTIFICATION FOR DISALLOWANCE WHETHER BOOKS OF ACCOU NTS ARE AUDITED. 4.4 WE HAVE CONSIDERED THE FACTS AND WE ARE OF THE VIEW T HAT THE AO WAS NOT JUSTIFIED IN MAKING AD HOC DISALLOWAN CE WHEN BOOKS OF ACCOUNTS ARE AUDITED, VOUCHERS AND ACCOUNT S PRODUCED AND THERE CANNOT BE ANY EXPENSES OTHER THA N EDUCATION PURPOSES, HENCE, DISALLOWANCE MADE BY THE AO IS DELETED. THIS GROUND IS ALLOWED. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. I.T.A.NO. 194/IND/2016 M/S.JASLEEN EDUCATIONAL SERVICE SOCIETY, VS. ACIT, 2(1), INDORE AY-2005-06 PAGE 21 OF 21 THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 28 TH FEBRUARY , 2017. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 28 TH FEBRUARY, 2017. CPU*