Sengunthat Matriculatiion Higher Secondary School, Salem V. Chief CIT, Trichy

ITA 2008/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7968 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-12-2015
• Assessment Year: 2014-2015
• Appeal Filed On: 18-09-2015
• Court: TRIBUNAL
• Department Lawyers: SUNEEL VERMACIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice
• Section: 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! , ' # $ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD , JUDICIAL MEMBER ./ I.T.A.NO.2008 /MDS./2015 ( / ASSESSMENT YEAR :2014-15) SENGUNTHAT MATRICULATION HIGHER SECONDARY SCHOOL , OMALUR MAIN ROAD, THARAMANGALAM, OMALUR TALUK, SALEM 636 502. VS. THE CHIEF COMMISSIONER OF INCOME TAX, 44, WILLIAM ROAD, CANTONMENT, TIRUCHIRAPPALLI. PAN AADAS 3487 R ( () / APPELLANT ) ( $*() / RESPONDENT ) / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE / RESPONDENT BY : MR.SUNEEL VERMA,CIT, D.R / DATE OF HEARING : 17.12.2015 ! /DATE OF PRONOUNCEMENT : 19.02.2016 + / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CHIEF COMMISSIONER OF INCOME T AX, TRICHY DATED 12.08.2015 PERTAINING TO THE ASSESSMENT YEAR 2014-15. ITA NO.2008/MDS/2015 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1) THE ORDER OF THE LEARNED CCIT IS BAD AND ERRONEO US IN LAW AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2) THE LEARNED CCIT ERRED IN NOT AT ALL CONSIDERING THE DETAILS FILED IN THE COURSE OF THE PROCEEDINGS BEFORE HIM. 3) THE LEARNED CCIT ERRED IN REJECTING THE APPLICAT ION FOR EXEMPTION U/S.10(23C)(VI) OF THE APPELLANT BY TAKING A VARY N ARROW VIEW THAT THE APPELLANT IS NOT HAVING INDEPENDENT EXISTENCE WITH CLEAR CUT OBJECTIVES, WITHOUT CONSIDERING THE FACT THAT THE APPELLANT SCH OOL HAS BEEN CONSISTENTLY FILING ITS INCOME TAX RETURNS AND THE SAME HAVE NOT BEEN NEGATED BY THE REVENUE ALL THESE YEARS AND THAT THE APPELLANT SCHO OL HAS BEEN CONSIDERED AND TREATED AS A SEPARATE ENTITY UNDER TAMILNADU RE COGNIZED PRIVATE SCHOOLS (REGULATION) ACT, 1973. 4) THE LEARNED CCIT ERRED IN NOT CONSIDERING THE VE RY VITAL FACT THAT THE RELEVANT SECTION 10(23C)(VI) USES ONLY THE WORD IN STITUTION, WHICH IS NOT DEFINED UNDER IT ACT,1961, WHICH IS CLEARLY CONSIDE RED UNDER TAMILNADU MOTOR VEHICLES TAXATION ACT,1974 AND THAT THE APPEL LANT INSTITUTION FITS INTO THE SAME IN ALL FORCE. [RELYING ON 358 ITR 373 (KAR )] 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE SCHOOL IS RUNNING IN THE NAME OF SENGUNTHER MATRICULATION HIG HER SECONDARY SCHOOL AT SALEM AND FILED RETURN OF INCOME ADMITTIN G THE GROSS COLLECTION FOR THE YEAR ENDING 31.03.2014 IS EXCEED ING RS.1.00 CRORE. ITA NO.2008/MDS/2015 3 THE ASSESSEE SUBMITTED AN APPLICATION FOR THE GRANT OF EXEMPTION U/S 10(23C)(VI) OF THE ACT. AS THE ASSESSEE BEING AN A OP (EDUCATIONAL INSTITUTIONS) ENGAGED ONLY IN THE ACTIVITY OF RUNNI NG EDUCATIONAL INSTITUTION WITH A NON-PROFIT OBJECTIVE, PERMISSION WAS GRANTED BY THE PROCEEDINGS OF THE DIRECTOR OF SCHOOL EDUCATION, CH ENNAI DATED 7.10.1997. AS PER PERMISSION BY STATE GOVERNMENT, T HE SCHOOL HAS BEEN GRANTED PROVISIONAL PERMISSION TO OPEN MATRICU LATION SCHOOL AT THARAMANGALAM, SALEM DISTRICT FOR CLASSES STANDARD TO 7TH STANDARD DURING THE YEAR1996-97. WHILE PROCEEDINGS, DATED 21 .2.2007, THE ASSESSEE SCHOOL HAS BEEN GRANTED FURTHER PERMISSI ON CONFIRMING THE EARLIER PERMISSION AND GRANTING EXTENSION OF CLASSE S FROM VTH TO 12TH STANDARD FROM 1.7.2005 TO 30.6.2008. AS PER THE SS ESSEE, VIDE ANOTHER CERTIFICATE OF RECOGNITION DATED 29.12.2014 , THE PERMANENT RECOGNITION HAS BEEN GRANTED FROM LKG TO 8TH STANDA RD FOR THE PERIOD FROM 1.6.2014 TO 31.5.2017. FOR THE 9 TO 12TH STAND ARD, THE PERIOD OF RECOGNITION HAS BEEN GRANTED FROM 1.6.2014 TO 31.3. 2017. AS PER THE ASSESSEE, THE SCHOOL HAS BEEN CONSTITUTED ON THE BA SIS OF ORDERS OF DIRECTOR OF SCHOOL EDUCATION; THE RETURN OF INCOME FOR THE ABOVE SCHOOL HAS BEEN FILED IN THE STATUS OF AOP (EDUCATI ONAL INSTITUTION) ITA NO.2008/MDS/2015 4 WITH THE SECRETARY CUM CORRESPONDENT OF THE SCHOOL AND ASST. SECRETARY OF THE SCHOOL. EXCESS OF INCOME EARNED WA S CREDITED TO THE CAPITAL FUND ACCOUNT. THE SCHOOL WAS STARTED WITH Z ERO CORPUS FUND. AS PER THE ASSESSEE, NO INITIAL CONTRIBUTION OR SUB SEQUENT CONTRIBUTION AS CAPITAL WAS GIVEN BY THE FOUNDERS OF THE INSTITU TION. AS PER THE ASSESSEE, THE SCHOOL IS CONDUCTED IN THE BUILDING B ELONGING TO SENGUNTHAR EDUCATIONAL BOARD WHICH HAS BEEN REGISTE RED UNDER THE SOCIETIES REGISTRATION ACT IN THE YEAR 1946. THE AB OVE SENGUNTHAR EDUCATION BOARD IS HAVING LAND AND BUILDING IN WHIC H THE SCHOOL IS FUNCTIONING AND THE SAID EDUCATION BOARD CHARGES A NOMINAL RENT OF RS.5000/-P.A., WHICH IS CLAIMED AS EXPENSE IN THE B OOKS OF SCHOOL. AS THE RESOLUTION PASSED IN THE COMMITTEE OF THE BO ARD OF SENGUNTHAR EDUCATIONAL BOARD, MR.P.KANDASAMY IS TO ACT AS SECR ETARY-CUM CORRESPONDENT AND MR. A. AMIRTHALINGAM AS ASSISTANT SERETARY TO THE SCHOOL. AS PER THE ASSESSEE, NO MEMORANDUM OF ASSOCIATION/ARTICLES OF THE ASSESSMENT/RULES FOR TH E INSTITUTION EXISTS. THE SCHOOL IS GOVERNED BY THE TAMILNADU PRIVATE SCH OOLS ACT AND RULES. THE ASSESSEE HAS FORWARDED COPIES OF FINANCI AL STATEMENTS FROM THE YEAR 31.3.1997 TO 31.3.2014 BEFORE CCIT. A S PER THE ITA NO.2008/MDS/2015 5 ASSESSEE, WHEREVER SURPLUS WAS MADE BY EDUCATIONAL INSTITUTION, IT WAS PLOUGHED BACK FOR EDUCATIONAL PURPOSES. ACCORDI NG TO AR THE SENGUNTHAR INSTITUTION WAS HELD TO BE EXISTING SOLE LY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. THE ASSE SSEE HAS CONTENDED THAT THE ASSESSEES SCHOOL SHOULD BE GRAN TED AN APPROVAL U/S 10(23C)(VI) OF THE INCOME TAX ACT, 1961. IT IS SEEN, THAT THE ASSESSEE SENGUNTHAR MATRICULATION SCHOOL IS BEING S HOWN AS AOP (EDUCATIONAL INSTITUTION). IT IS CLAIMED TO BE ENGA GED ONLY IN THE ACTIVITY OF RUNNING EDUCATIONAL INSTITUTION WHICH I S A NON-PROFIT OBJECTIVE. IT IS SEEN THIS THAT THE SCHOOL IS TOTAL LY CONTROLLED BY SENGUNTHAR EDUCATION BOARD WHICH IS REGISTERED UNDE R THE SOCIETY REGISTRATION ACT. THE SECRETARY AND ASSISTANT SECRE TARY OF THIS SCHOOL ARE APPOINTED BY SENGUNTHAR EDUCATIONAL BOARD, WHIC H IS THE SEPARATE ENTITY OF ITS OWN. NO MEMORANDUM OF THE AS SOCIATION OR THE ARTICLES OF THE SCHOOLS OR BYE LAWS EXISTS FOR THE SCHOOL. THERE WAS ZERO CORPUS FUND FOR THE START OF THE SCHOOL. FOR R EGULATION PURPOSES, PERMISSION HAS BEEN TAKEN FROM THE DIRECTOR OF SCHO OL EDUCATION, CHENNAI. IN THE ABSENCE OF ANY OBJECTIVE IN CONSTIT UTION OF THE AOP, SCHOOL CANNOT SAID TO BE EXISTING ONLY FOR EDUCATIO NAL PURPOSE. AS PER ITA NO.2008/MDS/2015 6 THE COPY OF THE BALANCE SHEET AS ON 31.3.2013 FURNI SHED BEFORE CCIT, THE ASSESSEE HAS SHOWN SUNDRY DEBTORS OF RS. 60,38,541/-. OUT OF SUNDRY DEBTORS OF RS.60,38,541/-, 59,08,221/ - IS DUE FROM SENGUNTHAR EDUCATION BOARD(SOCIETY IS CONTROLLING T HE SCHOOL). A SUM OF RS.1,30,320/- IS DUE TO SENGUNTHAR HIGHER SECOND ARY SCHOOL. IT IS SEEN THAT HUGE AMOUNT IS DUE FROM CONTROLLING SOCIE TY VIZ. SENGUNTHAR EDUCATIONAL BOARD. INDEPENDENT EXISTENCE OF ASSESSEES SCHOOL VIDE SEPARATE MEMORANDUM, ARTICLE, BYE LAWS IS NOT PROVED AT ALL. ACCORDING TO CCIT, THE ASSESSEE IS NOT HAVING INDEPENDENT EXISTENCE WITH CLEAR CUT OBJECTIVES. HENCE, THE CC IT REFUSED TO GRANT APPROVAL U/S.10(23C)(VI) OF THE ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS ADMITTED FACT THAT THE ASSESSEE WAS GRANTED PERMISSION TO RUN THE SCHOOL BY THE DIRECTOR OF SCHOOL EDUCATI ON, CHENNAI DATED 07.10.1997 VIDE R.C.NO.91778/E-4/1997. UNDER THIS PERMISSION, THE ASSESSEE WAS GRANTED PERMISSION TO OPEN MATRICULATI ON SCHOOL AT THARAMANGALAM, SALEM DISTRICT FOR CLASSES STANDARD 1 ST TO 7 TH ITA NO.2008/MDS/2015 7 STANDARD DURING THE YEAR 1966-1967. AGAIN BY PROCE EDINGS DATED 21.02.2007 IN M.M.NO.8064/E-5/2005, THE SCHOOL HAS BEEN GRANTED FURTHER PERMISSION CONFIRMING THE EARLIER PERMISSIO N AND GRANTING EXTENSION OF CLASSES FROM 1 ST TO 12 TH STANDARD FROM 01.07.2005 TO 30.06.2008. FURTHER BY ANOTHER CERTIFICATE OF RECO GNITION DATED 29.12.2014 IN PROCEEDINGS NO.5526/A-1/2014, THE PER MANENT RECOGNITION HAS BEEN GRANTED FROM L.K.G TO 8 TH STANDARD FOR THE PERIOD 01.06.2014 TO 31.05.2017 AND FOR THE 9 TH TO 12 TH STANDARD FROM THE SAME PERIOD RECOGNITION GRANTED FROM 01.06.2014 TO 31.03.2017. IT IS ALSO ADMITTED FACT THAT THE PRESENT ASSESSEE HAS BEEN FILING THE RETURN OF INCOME UNDER THE STATUS OF AOP (EDUCAT IONAL INSTITUTION). NOW THE OBJECTION OF THE DEPARTMENT IS THAT THE ASS ESSEE IS NOT HAVING INDEPENDENT EXISTENCE WITH CLEAR CUT OBJECTI VES. AS SUCH IT CANNOT BE CONSIDERED FOR GRANTING EXEMPTION U/S.10( 23C)(VI) OF THE ACT AND ALSO IT WAS ALLEGED THAT HUGE AMOUNT IS DU E FROM SENGUNTHER EDUCATION BOARD TO THE ASSESSEE AND THE ASSESSEE WA S NOT OWNING ANY BUILDING AND IT WAS FUNCTIONING FROM RENTED PRE MISES TAKEN FROM SENGUNTHER EDUCATION BOARD TO WHOM THE ASSESSEE IS PAYING RENT RS.5,000/- PER ANNUM TO THEM. HOWEVER, THERE IS NO ALLEGATION FROM ITA NO.2008/MDS/2015 8 THE CHIEF COMMISSIONER OF INCOME TAX THAT THE ASSES SEE DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSE AND FOR THE P URPOSE OF PROFIT AS SUCH THE ASSESSEE WOULD FALL UNDER THE PROVISIONS O F SECTION 10(23C)(VI) OF THE ACT. 4.1 SECTION 10(23C)(VI) READS AS FOLLOWS:- (VI) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIO N EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT, OTHER THAN THOSE MENTIONED IN SUB-CLAUSE (IIIAB) OR SUB-CLAUSE (IIIAD) AND WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY ; OR FURTHER IT IS APPROPRIATE TO PROVISION OF SECTION 1 0(23C)(IIIAB) AND CUB-CLAUSE (IIIAD) WHICH READS AS FOLLOWS:- (IIIAB) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EX ISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY TH E GOVERNMENT ; OR ITA NO.2008/MDS/2015 9 (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION E XISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSE S OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECE IPTS AS MAY BE PRESCRIBED ; OR THE PRIMARY CONDITION U/S.10(23C)(VI), THE ASSESSEE SHALL EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PR OFIT. THE CHIEF COMMISSIONER OF INCOME TAX WITHOUT OBSERVING THAT T HE ASSESSEE NOT SOLELY EXISTING FOR EDUCATIONAL PURPOSE, HE WENT ON PROPOSITION THAT THE ASSESSEE IS NOT HAVING MEMORANDUM OF ASSOCIATIO N OR TRUST DEED SO AS TO CARRY ON THE FUNCTION OF THE ASSESSEE . BUT THE FACT BROUGHT ON RECORD SUGGESTS THAT THE ASSESSEE IS AN AOP, MANAGED BY SENGUNTHER EDUCATION BOARD WHICH IS A REGISTERED BODY UNDER THE SOCIETY REGISTRATION ACT IN THE YEAR 1946 VIDE REGI STRATION NO.S/8/1946. THE ABOVE EDUCATION BOARD IS MANAGING THE ASSESSEE SCHOOL WITH THE COMMITTEE MEMBERS OF THE SAID EDUCA TION BOARD AND CONSTITUTED THE OFFICE BEARERS OF THE INSTITUTION A ND DULY FILING THE RETURN OF INCOME. IT IS TO BE OBSERVED THAT THERE IS NO EXPRESSED ITA NO.2008/MDS/2015 10 DEFINITION FOR INSTITUTION UNDER THE INCOME TAX ACT. HENCE, WE HAVE TO CONSIDER THE GENERAL MEANING DEFINED IN THE WEB STERS NEW DICTIONARY, THE WORD INSTITUTION MEANS AN ESTABLI SHED OR ORGANIZED SOCIETY OR CORPORATION, AN ESTABLISHMENT, ESPECIAL LY ONE OF PUBLIC CHARACTER, OR ONE EFFECTING A COMMUNITY; A FOUNDATI ON. FURTHER, THIS TRIBUNAL, DELHI BENCH G BENCH IN I.T.A.NO:3360(DE L) OF 2008 DATED 30.04.20 10 IN DECIDING THE APPEAL IN THE CAS E ST.THOMAS GIRLS SENIOR SECONDARY SCHOOL, NEW DELHI VS. DIRECTOR OF INCOME TAX(EXEMPTION), NEW DELHI HAVE HELD THAT THE WORD INSTITUTION IS WIDE ENOUGH TO INCLUDE A SCHOOL, WHICH HAS BEEN EST ABLISHED FOR IMPARTING EDUCATION. MERELY BECAUSE THE ASSESSEE S CHOOL DOES NOT HAVE POWER TO PURCHASE, ACQUIRE, OR SELL THE PROPER TY, DOES NOT MEAN THAT THE SCHOOL WILL CEASE TO EXIST AS AN INSTITUTI ON. THUS THE STATUS OF THE ASSESSEE COULD BE A.O.P. IN THE ABSENCE OF A NY MEMORANDUM OF ASSOCIATION OR TRUST DEED. CONSIDERING THE ABOV E DECISION OF THE I.T.A.T.DELHI BENCH, IN THE PRESENT CASE ALSO THE A BOVE MATRICULATION SCHOOL WHICH IS MANAGED BY EDUCATION BOARD AND GRAN TED PERMISSION BY THE DIRECTOR OF SCHOOL EDUCATION AS E ARLY AS 07.10.1997 IS AN INSTITUTION QUALIFYING FOR EXEMP TION U/S. 10(23C)(VI) ITA NO.2008/MDS/2015 11 OF THE I.T.ACT. HENCE THE EXEMPTION SOUGH FOR THE ABOVE INSTITUTION IS TO BE GRANTED. ACCORDINGLY, WE DIRECT THE CCIT T O GRANT EXEMPTION U/S.10(23C)(VI) OF THE ACT. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON FRIDAY , THE 19 TH OF FEBRUARY,2016 AT CHENNAI. SD/- SD/- ( ' # $ ) (CHALLA NAGENDRA PRASAD ) ( ( ' # $ % ) ) & CHANDRA POOJARI '( JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH FEBRUARY,2016 . K S SUNDARAM. )*(( +,(-, /COPY TO: ( 1. /APPELLANT 2. /RESPONDENT 3. ( .(&' /CIT(A) 4. ( . /CIT 5. ,/0( 1 /DR 6. 02(3 /GF