The Income-tax Oficer, Jammu V. M/s. Vipan Langer Educational Trust, Rajouri.

ITA 26/ASR/2013

• Counselvise Citation: 2620914 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 21-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2013
• Court: TRIBUNAL
• Keywords: Capital asset; Charitable institution; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.26(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AAATV9344A INCOME TAX OFFICER, VS. M/S. VIPAN LANGER EDUCATIO N TRUST, WARD-2(3), JAMMU. RAJOURI ( J & K ). (APPELLANT) (RESPONDENT) APPELLANT BY:SH.TARSEM LAL, DR RESPONDENT BY:SH. VINAMAR GUPTA, CA DATE OF HEARING: 03/09/2014 DATE OF PRONOUNCEMENT:05/09/2014 ORDER PER A.D.JAIN, AM ; THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE CIT(A), JAMMU, DATED 05.11.2012, FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITIONS MADE TO FIXED ASSET S/CAPITAL ASSETS AND CONSTRUCTION OF BUILDING WHICH ARE NOT THE APPL ICATION TOWARDS THE OBJECTS OF THE TRUST. ITA NO.26(ASR)/2013 2 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT CONSIDERING THE DECISION IN THE CASE OF CIT VS. QUEENS EDUCATIO NAL SOCIETY 233 CTR 395 WHEREIN THE HONBLE HIGH COURT OF UTTAR AKHAND HAD HELD THAT THE ASSETS PURCHASED/CONSTRUCTED OUT OF INCOME FROM IMPARTING THE EDUCATION WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE ADDITIONS MADE TO FIXED ASSET S/CAPITAL ASSETS & CONSTRUCTION OF BUILDING WHEN THE ASSESSEE WAS HA VING MORE OBJECTS OTHER THAN EDUCATION. 4. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE MOR E GROUNDS OF APPEAL. 2. AS PER THE FACTS AVAILABLE ON RECORD, THE ASSES SEE TRUST IS ENGAGED IN RUNNING A SCHOOL IN RAJOURI ( J & K ) UNDER THE NAM E AND STYLE OF INTERNATIONAL SCHOOL. THE ASSESSEE FILED RETURN OF INCOME ON 31.01.2011, DECLARING NIL INCOME TAXABLE, AFTER CLAIMING EXEMP TION U/S 10(23C)(IIIAD) OF THE INCOME TAX ACT, 1961 ON SURPLUS OF RS.28,34, 859/-. THE CASE OF THE ASSESSEE WAS DECIDED U/S 143(3) BY THE AO VIDE ORDE R DATED 15.12.2011, WHEREIN THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 1 0(23C)(IIIAD) AMOUNTING TO RS.28,34,859/- WAS DISALLOWED ON THE GROUND THAT SURPLUS GENERATED BY THE TRUST WAS PROFIT LIABLE TO TAX. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. THE GRIEVANCE OF THE DEPARTMENT B EFORE US, IS THAT WHILE ITA NO.26(ASR)/2013 3 WRONGLY DECIDING THE MATTER IN FAVOUR OF THE ASSESS EE, THE LD. CIT(A) HAS FAILED TO CONSIDER THE DECISION OF THE HONBLE UTTR AKHAND HIGH COURT, IN THE CASE OF CIT VS. QUEEN EDUCATIONAL SOCIETY, 233 CTR 395 (UTTRAK HAND) WHEREIN IT HAS BEEN HELD THAT THE ASSETS PURCHASED/ CONSTRUCTED OUT OF INCOME FROM IMPARTING EDUCATION WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME, DO NOT PERMIT OF EXEMPTION U/S 10(23 C)(IIIAD) OF THE ACT., AND THAT THE SOCIETY IN QUESTION HAD EARNED SURPLU S WITH VARIED OBJECTS AND IT WAS THUS, NOT EXISTING SOLELY FOR EDUCATIONAL P URPOSES. IT HAS BEEN CONTENDED THAT IN THE PRESENT CASE, THE ASSESSEE-SO CIETY WAS HAVING MORE OBJECTS OTHER THAN EDUCATION. 4. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS PLACED RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTEND ED THAT THE CASE OF M/S. QUEENS EDUCATIONAL SOCIETY (SUPRA) HAS BEEN CONSID ERED AND DISAGREED WITH IN THE CASE OF M/S. PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNION OF INDIA & OTHERS, 230 ITR 477 (P&H) AND A CONTR ARY VIEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE. RELIANCE WAS ALSO PLACED ON THE DECISION IN CIT VS. JYOTI PRABHA SOCIETY, 310 ITR 162 (UTTRAKHAND) AND THAT OF THE HONBLE ALLAHABAD HIGH COURT IN CITY MONTESSORI SCHOOL VS . UNION OF INDIA & ORS, 315 ITR 48 (ALL). IT HAS BEEN STRESSED THAT JYOTI PRABHA SOCIETY ITA NO.26(ASR)/2013 4 (SUPRA) IS A DECISION BY THE HONBLE UTTRAKHAND HIG H COURT, BY WHICH, THE DECISION OF QUEENS EDUCATIONAL SOCIETY (SUPRA) WA S DELIVERED. IT HAS BEEN SUBMITTED THAT JYOTI PRABHA SOCIETY (SUPRA) IS A DECISION OF THE HONBLE UTTRAKHAND HIGH COURT, WHICH DECISION WAS DELIVERED LATER IN POINT OF TIME AND RENDERED BY A CO-ORDINATE BENCH, AS COMPARED TO QUEENS EDUCATIONAL SOCIETY (SUPRA). THUS, ACCORDING TO THE ASSESSEE, THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. 6. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND THAT THE AO DISALLOWED EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, TO THE AS SESSEE-SOCIETY BY MERELY RELYING ON THE DECISION IN CIT VS. M/S. QUEENS EDU CATIONAL SOCIETY (SUPRA). M/S. QUEENS EDUCATIONAL SOCIETY, HOWEVER , HAS BEEN DIFFERED WITH IN M/S. PINEGROVE INTERNATIONAL CHARITABLE TR UST VS. UNION OF INDIA AND OTHERS (SUPRA). IN PINEGROVE INTERNATIONAL CHARI TABLE TRUST (SUPRA), IT WAS OBSERVED BY THE HONBLE PUNJAB & HARYANA HIGH COURT , THAT MERELY BECAUSE THERE ARE SURPLUSES IN THE HANDS OF THE EDUCATIONAL INSTITUTION, WOULD NOT IPSO FACTO LEAD TO AN INEVITABLE CONCLUSION THAT SUCH AN EDUCATIONAL INSTITUTION IS EXISTING FOR MAKING PROFITS AND NOT SOLELY FOR EDUC ATIONAL PURPOSES., THAT, THEREFORE, THE INTERPRETATION OF THE DEPARTMENT TH AT THERE HAS TO BE A REASONABLE PROFIT AND THEN ONLY AN INSTITUTION CAN ONLY BE SAID TO BE NOT ITA NO.26(ASR)/2013 5 EXISTING SOLELY FOR THE PURPOSES OF PROFIT, IS A M ISCONCEPTION OF LAW., THAT THERE IS A DEFINITE PURPOSE BEHIND THE ALLOWING OF SETTING UP EDUCATIONAL INSTITUTIONS AT THE HANDS OF PRIVATE ENTREPRENEUR S INCLUDING TRUSTS/SOCIETIES BY THE GOVERNMENT., THAT VARIOUS OTHER EDUCATIONAL COLLEGES, LIKE ENGINEERING COLLEGES AND PHARMACY COLLEGES, ETC. C OULD NOT HAVE BEEN ESTABLISHED FOR WANT OF FUNDS., THAT THE GOVERNMENT , WITH A DEFINITE IDEA AND OBJECT , OPENED THIS AREA OF EDUCATION FOR THE PRIV ATE SECTOR., THAT THE GOVERNMENT, LACKING FUNDS, APPEARS TO HAVE THOUGHT THAT THE PRIVATE SECTOR COULD DO THIS JOB VERY WELL AND THAT ONCE THE VERY INTENTION OF THE GOVERNMENT IS TO PROMOTE EDUCATION IN THE PRIVATE S ECTOR, THE ACTION OF THE DEPARTMENT IN DISALLOWING EXEMPTION U/S 10(23C)(III AD) OF THE ACT WOULD SERIOUSLY DISCOURAGE THOSE ACTIVITIES AND THE AVO WED OBJECTED COULD NEVER BE ACHIEVED. 6.1. IT WAS FURTHER OBSERVED THAT IN THE CASE OF T MA PAI FOUNDATION VS. STATE OF KARNATAKA, (2002) 8 SCC 481, THE CONSTITU TION BENCH COMPRISING OF 11 JUDGES OF THE HONBLE SUPREME COURT, HAS HEL D THAT PRIVATE EDUCATIONAL INSTITUTIONS ARE BOUND TO GENERATE FUN DS FOR THE BETTERMENT AND GROWTH OF THE INSTITUTIONS AND FOR WHICH THERE MAY BE SURPLUSES FOR ITA NO.26(ASR)/2013 6 FURTHERANCE OF EDUCATION., THAT THEREFORE, IT IS N OT ONLY PERMISSIBLE, BUT ALSO AN IMPORTANT REQUIREMENT, TO RUN THE INSTITUTIONS O F SUCH A STRENGTH. 6.2. IT WAS FURTHER OBSERVED THAT IN ADITANAR EDUC ATIONAL INSTITUTION ETC. VS. ADDL. CIT, (1997) 224 ITR 310 (SC), IT WAS HEL D THAT WHEN SURPLUS IS UTILIZED FOR EDUCATIONAL PURPOSES, I.E., FOR INFRAS TRUCTURE DEVELOPMENT, IT CANNOT BE SAID THAT THE INSTITUTION WAS HAVING THE OBJECT TO MAKE PROFIT., THAT THE SURPLUS USED FOR MANAGEMENT AND BETTERMENT OF T HE INSTITUTIONS COULD NOT BE TERMED AS PROFIT, THAT IF THE STAND OF THE DEPA RTMENT IS ACCEPTED TO BE CORRECT, ESPECIALLY IN THE WAKE OF THE METHODOLOGY ADOPTED BY THE DEPARTMENT IN ASCERTAINING PROFITS, THEN NO EDUCAT IONAL INSTITUTION CAN BE SAID TO BE EXISTING SOLELY FOR EDUCATIONAL PURPO SES, AS IN EVERY CASE OF AN EDUCATIONAL INSTITUTION, THERE IS BOUND TO BE A PRO FIT, THAT THE PROVISIONS OF SECTION 10(23C)(VI) WOULD BE RENDERED OTIOSE IF THE INTERPRETATION ADOPTED BY THE DEPARTMENT AND THE MANNER IN WHICH THE EXEMP TION VALIDLY GRANTED WAS WITHDRAWN, WERE TO BE ACCEPTED, THAT THE APPROA CH OF THE DEPARTMENT WAS WHOLLY ERRONEOUS, BEING CONTRARY TO THE EXPRESS PROVISIONS OF THE THIRD PROVISO TO SECTION 10(23C)(VI) OF THE ACT, SINCE UN LIKE THE PROVISIONS OF SECTION 37 AND 36(XII), THE INCURRING OF CAPITAL EX PENDITURE IS NOT EXPRESSLY EXCLUDED IN THE SAID THIRD PROVISO, AND IT HAD BEE N THE INTENTION OF THE ITA NO.26(ASR)/2013 7 LEGISLATURE TO EXCLUDE CAPITAL EXPENDITURE WHILE AP PLYING THE INCOME OF THE TRUST AS PER THE THIRD PROVISO TO SECTION 10(23C)(V I), THE SAID PROVISO WOULD HAVE CONTAINED AN EXPRESS EMBARGO AGAINST SUCH EXCL USION. 6.3. IT WAS ON THESE OBSERVATIONS THAT THE VIEW EXP RESSED IN M/S. QUEENS EDUCATIONAL SOCIETY (SUPRA) WAS NOT ACCEPTED. 6.4. THE ABOVE POSITION HAS BEEN DULY TAKEN INTO CO NSIDERATION BY THE LD. CIT(A) WHILE RIGHTLY GRANTING EXEMPTION U/S 10(23C) (IIIAD) OF THE ACT TO THE ASSESSEE. IT HAS ALSO CORRECTLY BEEN TAKEN INTO CO NSIDERATION THAT THE ASSESSEE-TRUST WAS RUNNING A SCHOOL IN A REMOTE ARE A OF RAJOURI IN J & K STATE AND WAS NOT CARRYING OUT ANY OTHER ACTIVITY, THAT THE ASSESSEE HAD GROSS RECEIPTS FROM THIS ACTIVITY, OF LESS THAN RS. 1 CR ORE AND HAD CLAIMED EXEMPTION U/S 10(23)(IIIAD), THAT THE ASSESSEE WAS NOT GETTING GOVERNMENT FUNDS AND WAS RUNNING THE INSTITUTION OUT OF ITS OW N SURPLUS, WHICH WAS TO THE TUNE OF RS.28,34,859/- IN THE A.Y. 2009-10, I.E ., THE YEAR UNDER CONSIDERATION, THAT THIS SURPLUS WAS SPENT BY THE A SSESSEE-SOCIETY FOR EDUCATIONAL PURPOSES AND IN CONSTRUCTION OF SCHOOL BUILDING, THAT THE AO HAD DISALLOWED THIS SURPLUS ON THE BASIS THAT THE ASSES SEE HAD A FEW MORE OBJECTIVES, WHICH WERE OTHER THAN THE OBJECT OF ED UCATION, AND THAT HOWEVER, THESE OBJECTIVES WERE INCIDENTAL TO THE PURPOSES OF EDUCATION, OR PURELY FOR CHARITY IN THE FIELD OF HEALTH AND UPLIFTMENT OF T HE POOR. ITA NO.26(ASR)/2013 8 6.5. BEFORE US, THE DEPARTMENT HAS NOT BROUGHT AN YTHING ON RECORD TO PROVE THAT THE ASSESSEE-SOCIETY WAS ALSO CARRYING O N ANY OTHER ACTIVITY BESIDES EDUCATION, OR THAT THE FACTUM OF THE ASSE SSEE CARRYING ON EDUCATIONAL ACTIVITY WAS NEVER DISPUTED BY THE AO, OR THAT THE SOCIETY WAS NOT A SMALL INSTITUTION ONLY IMPARTING EDUCATION TO THE CHILDREN IN A REMOITE AREA WHERE THERE IS HARDLY ANY PRESENCE OF GOVERNME NT SCHOOLS. 6.6. BEFORE US, THOUGH IT WAS CONTENDED THAT THE LD . CIT(A) ERRED IN NOT FOLLOWING THE CASE OF M/S. QUEENS EDUCATIONAL SOCI ETY (SUPRA), THE DEPARTMENT HAS NOT BEEN ABLE TO PLACE ANYTHING ON RECORD TO COUNTER THE WELL REASONED, ELABORATE, FACTUAL AS WELL AS LEGAL OBSER VATIONS ENTERED BY THE LD. CIT(A) AS DISCUSSED HEREINABOVE. FURTHER, NO DECISI ON CONTRARY EITHER TO M/S. PINEGROVE INTERNATIONAL CHARITABLE TRUST (SU PRA), OR TO TMA PAI FOUNDATION VS. STATE OF KARNATAKA (SUPRA), OR TO ADITANAR EDUCATIONAL INSTITUTION (SUPRA), HAS BEEN RELIED ON. 6.7. TO REITERATE, M/S. QUEENS EDUCATIONAL SOCIETY , HAS BEEN SPECIFICALLY DISAGREED WITH IN M/S. PINEGROVE INTERNATIONAL CH ARITABLE TRUST (SUPRA). ITA NO.26(ASR)/2013 9 6.8. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ME RIT THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IS HEREBY REJECTED. THUS, THE ORDER OF THE LD. CIT(A) STANDS CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH SEPTEMBER, 2014. SD/- SD/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5TH SEPTEMBER, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. VIPAN LANGER EDUCATION TRUST, RAJ OURI 2. THE ITO WARD 1(2), RAJOURI 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR