Saraswati Educational & Welfare Society (Regd.), Kharar V. ITO, Mohali

ITA 223/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80813 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGARDR
• Assessee Lawyers: N K SAINI
• Keywords: Benefit of exemption

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 223 TO 226/CHD/2014 ASSESSMENT YEARS : 2007-08 TO 2010-11 M/S SARASWATI EDUCATIONAL & WELFARE VS THE INCOME TAX OFFICER, SOCIETY (REGD.) WARD 6(5), KHARAR. MOHALI. PAN : AAYFS6621F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY : SHRI J.S.NAGAR,DR DATE OF HEARING : 23.07.2014 DATE OF PRONOUNCEMENT : 08.08.2014 O R D E R PER SUSHMA CHOWLA, JM THE BUNCH OF APPEALS FILED BY THE SAME ASSESSEE AR E DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DATED 28.12.2013 RELATING TO ASSESSMENT YEARS 2007-08 TO 2010-11, AGAINST THE ORDER PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE ONLY ISSUE RAISED IN THE BUNCH OF APPEALS IS AGAINST DENIAL OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. ALL THE FOUR APPEALS RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 2 3. THE FACTS OF ALL THE CASES ARE IDENTICAL BUT REF ERENCE IS BEING MADE TO THE FACTS IN ITA NO. 223/CHD/2014 FOR ADJUDICATI NG THE ISSUE. THE GROUNDS OF APPEAL AS RAISED IN ITA NO. 223/CHD/2014 READ AS UNDER : 1. THE ORDER PASSED BY THE LEARNED CIT (A) IS CO NTRARY TO LAW & FACTS OF THE CASE. 2. THE LEARNED CIT (A) HAS ERRED IN LAW IN HOLDING THA T ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF IT ACT 1961. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS TH AT INCOME OF 'SARSWATI NURSING INSTITUTE' BEING RUN .BY 'M/S SAR SWATI EDUCATIONAL & WELFARE SOCIETY (REGD.)'IS INCLUDABLE IN THE INCOME OF 'M/S SARSWATI EDUCATIONAL & WELFARE SOCIETY (REGD.) ' THE ASSESSEE WHEREAS INCOME OF 'SARASWATI NURSING INSTITUTE' OF WHICH IS EXEMPT UNDER SECTION 10(23C)(IIIAD) OF IT ACT 1961. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS OF THAT SURPLUS AS PER INCOME OVER EXPENDITURE ACCOUNT AMOUNTING TO RS. 5, 00,391/- IS TAXABLE INCOME. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETURN OF INCOME DE CLARING TOTAL INCOME AT NIL AFTER CLAIMING EXEMPTION UNDER SECTION 10(23C )(IIIAD) OF THE ACT. DURING THE COURSE OF PROCEEDINGS, THE ASSESSING OFF ICER NOTED THE AIMS AND OBJECTS OF THE ASSESSEE SOCIETY AND ALSO NOTED THE FACT THAT THE AIMS AND OBJECTS WERE CHANGED W.E.F. ASSESSMENT YEAR 201 1-12. THE ASSESSING OFFICER OBSERVED THAT THE AIMS AND OBJECTS OF THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION WERE NOT ACCORDING TO THE ACTIV ITIES OF THE SOCIETY AND THE EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE A CT WAS CLAIMED WRONGLY. IN REPLY, THE ASSESSEE EXPLAINED THAT FRO M INCEPTION THE AIM OF THE SOCIETY WAS TO CARRY ON EDUCATIONAL ACTIVITY AN D IT HAD NOT ENGAGED IN ANY OTHER ACTIVITY EXCEPT EDUCATION AND MERELY BECA USE VARIOUS OTHER OBJECTS WERE CONTAINED IN THE MEMORANDUM, DID NOT E STABLISH THAT THE ASSESSEE SOCIETY WAS NOT IMPARTING EDUCATION AS PER THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT. THE ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSEE OBSERVED THAT PRIOR TO 2011, T HE OBJECTS OF THE 3 ASSESSEE WERE NOT EXCLUSIVELY FOR EDUCATION AND AS THE ESSENTIAL CONDITION FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE A CT. WAS NOT FULFILLED, THE ASSESSEE WAS NOT ENTITLED TO THE SAID EXEMPTION . FURTHER DISALLOWANCES WERE MADE ON VARIOUS ACCOUNTS BY THE ASSESSING OFFICER AND THE INCOME WAS COMPUTED IN THE HANDS OF THE ASS ESSEE AT RS. 17,26,705/-. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD TH AT THE INCOME IN THE HANDS OF THE ASSESSEE SOCIETY WOULD BE EXEMPT U NDER SECTION 10(23C)(IIIAD) OF THE ACT ONLY IF THE INSTITUTION E XISTED SOLELY FOR EDUCATIONAL PURPOSES. HOWEVER, THE OBJECTS OF THE A SSESSEE INCLUDED OBJECTIVES OTHER THAN EDUCATION AND THE COMMISSIONE R OF INCOME TAX (APPEALS) THUS, HELD THAT THE ASSESSEE WAS NOT ELIG IBLE FOR THE EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. HENCE, TH E EXEMPTION CLAIMED UNDER SECTION 10(23C)(IIIAD) OF THE ACT WAS DENIED TO THE ASSESSEE, AGAINST WHICH THE ASSESSEE IS IN APPEAL. OTHER ADD ITIONS MADE BY ASSESSING OFFICER WERE DELETED BY COMMISSIONER OF I NCOME TAX (APPEALS) AGAINST WHICH REVENUE IS NOT IN APPEAL. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS RUNNING NURSING COLLEGE AND THE EXCESS OF INCOME OV ER EXPENDITURE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAS REFERRED TO VARIOUS OBJECTS OF THE ASSE SSEE SOCIETY BUT THE ONLY OBJECT PURSUED WAS IN THE FIELD OF EDUCATION AND HE NCE, THE ASSESSEE WAS ENTITLED TO THE AFORESAID EXEMPTION. OUR ATTENTION WAS DRAWN TO THE COPY OF THE OBJECTS PLACED AT PAGES 42 TO 44 OF THE PAPE R BOOK. REFERENCE WAS MADE TO THE NOTES ON ACTIVITIES OF THE SOCIETY FURN ISHED BEFORE THE ASSESSING OFFICER WHICH IS PLACED AT PAGE 45 OF THE PAPER BOOK UNDER WHICH IT WAS CLARIFIED THAT THE ASSESSEE HAD ESTABL ISHED NURSING INSTITUTE 4 IN THE NAME OF SARASWATI NURSING INSTITUTE IN VILLA GE DHIANPURA AND IN THE YEAR 2003-04, FOR THE ESTABLISHMENT OF WHICH IT HAD RECEIVED THE NECESSARY AFFILIATION. IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT IN ASSESSMENT YEAR 2011-12, THE ASSESSEE HAD CHANGE D ITS OBJECTS AND THE ONLY OBJECT LEFT WAS IN THE FIELD OF EDUCATION I.E. RUNNING OF NURSING INSTITUTE. THE LD. AR FOR THE ASSESSEE FURTHER POI NTED OUT THAT THE ASSESSEE HAS BEEN GRANTED THE REGISTRATION UNDER SE CTION 10(23C)(IIIAD) OF THE ACT FOR THE ASSESSMENT YEAR 2011-12 BY THE CHIE F COMMISSIONER OF THE INCOME TAX, CHANDIGARH VIDE ORDER DATED 19.08.2011 COPY OF WHICH IS PLACED AT PAGE 1 & 2 OF THE PAPER BOOK. 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE SOCIETY WAS CONSTITUTED IN THE YEAR 2002 A ND WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES UNDER REGISTRATION NO. 7 85 DATED 30.04.2003. THE AIMS AND OBJECTS OF THE ASSESSEE SOCIETY WERE A S UNDER : I) THE MAIN AIM OF THE SOCIETY IS TO PROVIDE FREE COMPUTER EDUCATION OF POOR AND MIDDLE CLASS OF SOCIETY. II) TO ARRANGE MASS MARRIAGE OF POOR GIRLS OF THE SOCIETY. III) TO ARRANGE BLOOD DONATION CAMPS. IV) PROVIDE FREE MEDICINES FOR THE PERSONS ATT ENDING THE CAMPS. V) TO CO-OPERATE WITH OTHER SOCIAL AND WELFARE SOCIETIES IN THEIR BID FOR THE WELFARE AND UPLIFT OF THE PUBLIC. VI) TO BE ON THE FORE-FRONT IN HELPING THE ADMIN ISTRATION IN THE WAKE OF NATURAL CALAMITIES, VII) TO EDUCATE THE PEOPLE IN GENERAL AUDIT AIDS AND OTHER ILL EFFECTS OF TOBACCO AND INTOXICANTS THROUGH SEMINARS AND PEOPLE TO PEOPLE. VIII) TO TAKE STEPS TO PROVIDE ALSO AS WELL AS AY URVEDIC CHECK-UPS FROM THE TIME FROM THE AIDS RECEIVED THROUGH DONATIONS F ROM GENERAL PUBLIC, GOVERNMENT AND SOCIAL AND RELIGIOUS ORGANIZ ATIONS. IX) TO ARRANGE MEDICAL CAMPS, SUCH AS EYE CAMPS, GE NERAL CLINICAL CHECK. 5 X) ARRANGE THE WELFARE PROGRAMME LIKE HELP OF POOR STUDENTS, HELP OF THE WIDOWS BY GIVING SWING MACHINE, PROVIDING SP ORTS KITS TO THE YOUTH CLUBS OF VILLAGES. XI) THE SOCIETY WILL MARET EDUCATIONAL AND OTHER ED UCATION RELATED INSTITUTIONS OF ANY KIND. 9. THE ASSESSEE CLAIMS THAT IT ESTABLISHED NURSING INSTITUTE UNDER THE NAME AND STYLE OF M/S SARASWATI NURSING INSTITUTE IN THE FINANCIAL YEAR 2003-04 IN VILLAGE DHIANPURA. FOR ESTABLISHING THE SAID NURSING INSTITUTE, THE ASSESSEE OBTAINED NECESSARY PERMISSION FROM THE STATE GOVERNMENT AND IS ALSO AFFILIATED WITH PNRC AND THE INDIAN NUR SING COUNCIL. THE ASSESSEE HAS PLACED ON RECORD THE NOTE ON ITS ACTIV ITIES WHICH IS PLACED AT PAGE 45-46 OF THE PAPER BOOK. THE ASSESSEE CLAIMS THAT IT WAS IMPARTING THE SAID TRAINING TO THE GIRLS STUDENTS ONLY ON MIN IMUM CHARGE BASIS, WHICH WAS FIXED BY THE STATE GOVERNMENT. THE SAID TRAINING WAS IMPARTED FREE OF COST TO CERTAIN POOR STUDENTS AS MOSTLY THE GIRLS FROM THE SURROUNDING VILLAGE WERE TAKING TRAINING FROM THE I NSTITUTE. LATER ON, THE ASSESSEE STARTED THE COURSE OF B.SC (NURSING) COURS E BASIC, B.SC NURSING BASIC AND COURSE OF A.N.M. UNDER THE SAID COURSES, THE STUDENTS WHO WANTED TO CONVERT THEIR DIPLOMA INTO DEGREE WERE JO INING B.SC NURSING COURSE BASIC AFTER G.N.M. THE STUDENTS WHO WERE ON LY MATRICULATE WERE ELIGIBLE TO JOIN THE COURSE A.N.M. WHEREAS THE GIRL S STUDENTS WHO HAD PASSED THEIR 10+2 BOARDS IN MEDICAL STREAM WERE ELI GIBLE TO JOIN B.SC NURSING BASIC. IT IS THE CLAIM OF THE ASSESSEE BEF ORE US THAT BESIDES CARRYING ON THE SAID OBJECTIVE OF RUNNING A NURSING INSTITUTE, THE ASSESSEE HAD NOT UNDERTAKEN ANY OTHER ACTIVITY FOR THE YEARS UNDER CONSIDERATION OR FOR ANY OF THE OTHER YEARS. 10. THE ASSESSEE HAD CLAIMED THE BENEFIT OF EXEMPTI ON UNDER SECTION 10(23C)(IIIAD) OF THE ACT, AS ITS TOTAL TURNOVER WA S LESS THAN RS. ONE CRORE. THE PROVISIONS OF UNDER SECTION 10(23C)(III AD) OF THE ACT PROVIDES AS UNDER : 6 10(23C) ANY INCOME RECEIVED BY ............ (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTIT UTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUT ION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED; 11. IN THE MANDATE OF THE SAID PROVISIONS OF THE AC T IT IS PROVIDED THAT WHERE ANY UNIVERSITY OR TECHNICAL INSTITUTION IS IN EXISTENCE SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PRO FIT AND WHERE THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDU CATION INSTITUTION DOES NOT EXCEED THE PRESCRIBED AMOUNT, THEN THE INCOME O F THE SAID UNIVERSITY OR EDUCATIONAL INSTITUTION IS EXEMPT FROM TAX. THE PRESCRIBED LIMIT OF THE ANNUAL RECEIPTS, FOR THE YEAR UNDER APPEAL WAS RS. ONE CRORE OR LESS. THE ASSESSEE HAS PLACED ON RECORD ITS AUDIT REPORT ALON GWITH THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND ALSO TH E COPY OF RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2007-08 AT PAG E 5 TO 29 OF THE PAPER BOOK. THE PERUSAL OF THE PROFIT & LOSS ACCOUNT PLA CED AT PAGE 27 OF THE PAPER BOOK REFLECTS THE ASSESSEE TO HAVE RECEIVED F EES TOTALING RS. 54,66,000/-, OTHER RECEIPTS OF RS. 27,360/- SUBSCRI PTION OF RS. 1680/- AND INTEREST RECEIVED FROM BANK AT RS. 8241/-. PERUSAL OF THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE FOR THE FINANCIAL YEA R 2006-07 REFLECTS THAT THE ONLY SOURCE OF INCOME WAS OF M/S SARASWATI NURS ING INSTITUTE I.E. THE INSTITUTE RUN BY THE ASSESSEE AND WAS FROM THE FEES RECEIVED FROM ITS STUDENTS WHICH ADMITTEDLY WAS LESS THAN THE PRESCRI BED LIMIT UNDER THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT. T HE ASSESSEE HAD CLAIMED THE SAID INCOME TO BE EXEMPT IN ITS HAND AND FILED THE RETURN OF INCOME SHOWING NIL INCOME, IN VIEW OF THE EXEMPTION CLAI M UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 12. THOUGH THE AIMS AND OBJECTS OF THE ASSESSEE, CO PY OF WHICH IS PLACED AT PAGE 44 OF THE PAPER BOOK REFLECTS THAT T HE ASSESSEE AIMS TO 7 ENGAGE ITSELF IN VARIOUS TYPES OF CHARITABLE ACTIVI TIES WHICH WERE ALL CHARITABLE IN NATURE, BUT HAD ENGAGED ITSELF SOLELY FOR THE PURPOSE OF RUNNING THE EDUCATIONAL INSTITUTE UNDER THE NAME AN D STYLE OF SARASWATI NURSING INSTITUTE. NO OTHER PROJECT OTHER THAN THE PROVISION FOR EDUCATION HAD BEEN UNDERTAKEN BY THE ASSESSEE IN ANY OF THE Y EARS. IN VIEW THEREOF, WHERE THE ASSESSEE HAD SOLELY ENGAGED IN ENGAGING I TSELF AND PROVIDING EDUCATION THROUGH ITS NURSING INSTITUTE TO GIRLS ST UDENTS AND WHERE THE ANNUAL RECEIPTS OF THE SAID INSTITUTE WERE LESS THA N THE PRESCRIBED LIMIT, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFI T OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. MERELY BECAUSE THE ASSESSEE IN ITS AIMS AND OBJECTS HAD PRESCRIBED OTHER OBJECTS WHICH IT W AS NOT PURSUING DURING THE YEARS UNDER CONSIDERATION, WE FIND NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW IN HOLDING THAT THE ASSESSEE WAS NOT EXCLUSIVELY EXISTING FOR EDUCATIONAL PURPOSES. THE CONDUCT OF THE ASSES SEE AND THE ACTIVITIES CARRIED ON BY THE ASSESSEE CLEARLY ESTABLISHED THAT IT WAS SOLELY ENGAGED IN PROVIDING EDUCATION TO THE GIRL STUDENTS IN THE RURAL AREA IN WHICH IT HAD ESTABLISHED ITS NURSING INSTITUTE. IN THE ENTIR ETY OF THE ABOVESAID FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE BENEFIT OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. 13. ANOTHER ASPECT TO BE CONSIDERED IS THAT IN ASSE SSMENT YEAR 2011-12, THE ASSESSEE HAD AMENDED ITS AIMS AND OBJECTS AND T HEREAFTER HAD APPLIED FOR REGISTRATION BEFORE THE CHIEF COMMISSIONER OF I NCOME TAX, CHANDIGARH, WHO IN TURN VIDE ORDER DATED 19.08.2011 HAD APPROVED M/S SARASWATI NURSING INSTITUTE TO BE ELIGIBLE FOR EXEM PTION AND HAD PASSED THE ORDER UNDER SECTION 10(23C)(VI) OF THE ACT. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRCUMSTANCES, WE DIRECT THE AS SESSING OFFICER TO GRANT EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT TO THE SOCIETY FOR THE YEAR UNDER CONSIDERATION. THE GROUNDS OF APPEA L RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 8 14. THE FACTS AND CIRCUMSTANCES AND THE ISSUE IN IT A NOS. 224 TO 226/CHD/2014 ARE IDENTICAL TO THE FACTS AND CIRCUMS TANCES AND ISSUE RAISED IN ITA 223/CHD/2014 AND OUR DECISION IN ITA 223/CHD/2014 SHALL APPLY MUTATIS-MUTANDIS TO ITA NOS. 224 TO 226/CHD/2 014 ALSO. 15. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 8 TH AUGUST,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT/CHD