DCIT, Rewari V. M/s. Vevek Shiksha Samiti, Rewari

ITA 2637/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6850 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 21-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHANDER DUBEY
• Keywords: Charitable institution
• Section: 143(3); 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 2637/DEL/2014 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF VS. M/S VIVEK SHIKSHA SAM ITI INCOME TAX, CIRCLE REWARI C/O VIVEKANAND ACADEMIC S R. MODEL TOWN, SEC. SCHOOL, SEC-7, EXTENSION, REWARI (HARYANA) GURGAON (HARYANA ) (PAN: AAATV5336L) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. UMESH CHANDER DUBE Y, SR. DR ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH GOYAL, CA DATE OF HEARING : 21-09-2016 DATE OF ORDER : 18-10-2016 ORDER PER H.S. SIDHU, J.M. THE DEPARTMENT HAS FILED THE APPEAL AGAINST THE IM PUGNED ORDER DATED 28.2.2014 OF LD. CIT(A)-ROHTAK PERTAINI NG TO ASSESSMENT YEAR 2010-11. THE GROUNDS RAISED IN THE REVENUES APPEAL READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE EXEMPTION U/S. 10(23C)(IIIAD) OF THE I.T. ACT, 1961 CLAIMED B Y THE ASSESSEE WITHOUT APPRECIATING THE FACTS O THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE CAPITAL NAT URE 2 EXPENSE AS REVENUE NATURE EXPENSE CLAIMED BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CAS E. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD , DELETE OR AMEND THE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE HAD FILED THE RETURN OF INCOME ON 15.10.2006 DECLARING NIL INCOME AND THE SAME WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT. L ATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143( 2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. FURTHER, STAT UTORY NOTICE U/S. 142(1)/143(2) OF THE ACT ALONGWITH QUESTIONNAIRE WE RE ISSUED. IN RESPONSE THERETO THE ASSESSEES CHAIRMAN ATTENDED T HE PROCEEDINGS AND FURNISHED THE REQUISITE DETAILS / INFORMATION A S CALLED FROM TIME TO TIME. THE SAME WERE EXAMINED. BOOKS OF ACCOUNTS WERE PRODUCED AND EXAMINED ON TEST CHECK BASIS. THE AS SESSEE IS AN EDUCATIONAL SOCIETY REGISTERED UNDER REGISTRATION OF SOCIETIES ACT, 1980 IN THE NAME OF VIVEK SHIKSHA SAMITI, MAHENDERG ARH. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS SHOWN GR OSS RECEIPTS OF RS. 98,79,561/- AND CLAIMED EXPENSES OF RS. 73,37,1 35/- AND EXCESS OF INCOME OVER EXPENDITURE COMES TO RS. 25,4 3,426/-. ASSESSEE CLAIMED EXEMPTION U/S. 10(23C)(IIIAD)/11(1 )(A) OF THE INCOME TAX ACT, 1961. AO HAS MADE THE ALLEGATIONS THAT MOTIVE OF THE ASSESSEE IS TO EARN THE PROFIT AND NOT TO PROVI DE EDUCATION AND PROFIT EARNED BY THE SOCIETY COMES TO 25.73% WHICH IS ON VERY HIGHER SIDE. AO ALSO OBSERVED THAT THE ASSESSEE DOE S NOT MAINTAIN PROPER BOOKS OF ACCOUNT, PARTICULARLY BILL/ VOUCHER S AND DOUBTED 3 GENUINENESS OF THE EXPENDITURE. AO FURTHER OBSERVED THAT MEMORANDUM OF SOCIETY DOES NOT CONTAIN ANY CLAUSE R EGARDING DISTRIBUTION OF ASSETS ON DISSOLUTION OF SOCIETY. THEREAFTER, THE AO WITHDREW THE EXEMPTION OF RS. 25,43,426/- CLAIMED B Y THE ASSESSEE AND MADE VARIOUS ADDITIONS BY ASSESSING THE TOTAL I NCOME AT RS. 42,82,650/- VIDE HIS ORDER DATED 28.3.2013 PASSED U /S. 143(3) OF THE I.T. ACT, 1961. 3. AGGRIEVED WITH THE AFORESAID ORDER, ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 28.2.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A). HE STATED THAT LD. CIT (A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFE RENCE ON MY PART, HENCE, THE SAME MAY BE UPHELD AND ACCORDINGLY , THE APPEAL OF THE REVENUE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CI T(A). I FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCU SSED THE ISSUES IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE ASSES SEE AND ADJUDICATED THE ISSUES AT PAGE NO. 3 TO 4 OF THE I MPUGNED ORDER. THE SAID RELEVANT PARAS ARE REPRODUCED AS UNDER:- 4 THE 2ND GROUND OF APPEAL ACCORDING TO THE APPELLAN T IS AGAINST NOT CONSIDERING THE FACT THAT THE APPELLANT SOCIETY IS COVERED U/S 10(23C)(IIIAD) OF THE ACT. THE GROSS RECEIPTS OF THE APPELLANT SOCIETY DURING THE YEAR UNDER APPEAL IS LESS THAN RS. ONE CRORE. SECTION 10(23C)(IIIAD) OF THE ACT IS REPRODUCED HERE UNDER FOR READY REFERENCE:- 10(23C)(IIIAD) ANY UNIVERSITY OR OTHER EDUCATION I NSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNI VERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED; ONE CRORE RUPEES UNDER RULE 2BC(1) THUS THE INCOME OF THE SOCIETY IS TOTALLY EXEMPT UNDER ABOVE SECTION. THE AO HAS TAKEN THE PLEA THAT MEMORANDUM OF THE SOCIETY DOES NOT CONTAIN ANY CLAUSE RELATING TO DISTRIBUTION OF ASSETS ON DISSOL UTION OF THE SOCIETY. THIS OBSERVATION OF THE AO IS FACTUALL Y INCORRECT. THE BYE LAWS OF THE SOCIETY CLEARLY CONT AINS THAT IN THE EVENT OF DISSOLUTION THE ASSETS WILL BE TRANSFERRED TO ANY REGISTERED INSTITUTION HAVING SI MILAR OBJECTS. I HAVE EXAMINED THE SUBMISSIONS OF THE ASSESSEE. IT IS A FACT THAT AS STATED IN THE ASSESS MENT ORDER SHOW THAT THE TOTAL RECEIPTS ARE LESS THAN A CRORE. HENCE, THIS INCOME IS EXEMPT U/S 10 (23C) (IIIAD) O F THE ACT. THE AO IS NOT CORRECT IN TREATING THIS INCOME AS NOT BEING EXEMPT IN VIEW OF THE OBJECTS AND BYE LAWS WH ICH ARE CLEAR ABOUT THE TREATMENT OF ASSETS ON DISSOLUT ION. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 5 WITHOUT PREJUDICE TO ABOVE, THE OTHER GROUND OF APPEAL RELATED TO DISALLOWANCE OF EXPENSES WHICH AR E DISCUSSED AS UNDER:- THE 3RD GROUND OF APPEAL IS AGAINST ADDITION OF RS. 25,43,426/- OUT OF EXPENSES CLAIMED BY THE APPELLANT AND DULY SHOWN IN THE INCOME & EXPENDITUR E A/ C DULY AUDITED AND FILED WITH THE RETURN OF INCO ME. THE LD. AO HAS OBSERVED THAT THE APPELLANT SOCIETY IS HAVING GROSS RECEIPTS OF RS. 98,79,561/- AND OUT OF WHICH EXPENSES HAVE BEEN CLAIMED AT RS. 7337135/- AND THE DIFFERENCE OF RS. 2543436/- HAS BEEN ADDED BY OBSERVING THAT PROFIT EARNED BY THE SOCIETY COMES T O 25.73%. THE AO HAS TOTALLY IGNORED THE COMPUTATION OF INCOME ATTACHED WITH THE RETURN OF INCOME (PHOTOCOP Y OF COMPUTATION IS ATTACHED HERE WITH). AS PER THE COMPUTATION THE SURPLUS IS LESS THAN 15% OF GROSS RECEIPTS INCLUDING BANK INTEREST OF RS. 535017/- WH ICH IN FACT IS NOT HE RECEIPTS BUT INCOME AS HAS BEEN H ELD BY THE HON'BLE ITAT DELHI BENCH IN THE CASE OF PARA M HANS SWAMI UMA BHARTI MISION VS ACIT REPORTED AT 15 4 TT J PAGE 531. THE AO HAS NOT BROUGHT ON RECORD AS TO HOW HE HAS ARRIVED AT THE CONCLUSION THAT THE INCOME/EXPENDITURE ACCOUNT REVEALS A PROFIT MOTIVE AND THAT THE EXPENSES INCURRED WERE FOR NOT CHARITABLE PURPOSES. I, THEREFORE, DELETE THE ADDITION OF RS 25,43,426). THIS GROUND OF APPEAL IS ALLOWED. THE 4TH GROUND OF APPEAL IS AGAINST ADDITION OF RS.16,73,757/-. THE EXPENSES INCURRED FOR REPAIR AN D RENOVATION OF THE SCHOOL BUILDING. THE EXPENDITURE INCURRED ON RENOVATION OF THE BUILDING IS REVENUE 6 EXPENDITURE. THIS VIEW HAS BEEN TAKEN BY THE HON'BL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINE GRO VE INTERNATIONAL CHARITABLE TRUST REPORTED AT 2 SARAL E- TAXATION 102. IN VIEW OF THE CITATION SUPPORTING THE ASSESSEES CLAIM, I DELETE THE IMPUGNED ADDITION. THIS GORUNDO APPEAL IS ALLOWED. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD.CIT( A) AND THE PROVISIONS OF LAW ON THE ISSUE IN DISPUTE, WITH R EGARD TO ALLOWING THE EXEMPTION RAISED VIDE GROUND NO. 1 BY THE REVE NUE IS CONCERNED, I FIND THAT THE INCOME OF THE SOCIETY IS TOTALLY EXEMPT UNDER SECTION 10(23C)(IIIAD). THE AO HAS TAKEN THE PLEA THAT MEMORANDUM OF THE SOCIETY DOES NOT CONTAIN ANY CLAU SE RELATING TO DISTRIBUTION OF ASSETS ON DISSOLUTION OF THE SOCIET Y. THIS OBSERVATION OF THE AO IS FACTUALLY INCORRECT. THE BYE LAWS OF T HE SOCIETY CLEARLY CONTAINS THAT IN THE EVENT OF DISSOLUTION THE ASSET S WILL BE TRANSFERRED TO ANY REGISTERED INSTITUTION HAVING SI MILAR OBJECTS. I HAVE EXAMINED THE SUBMISSIONS OF THE ASSESSEE. IT I S A FACT THAT THE TOTAL RECEIPTS ARE LESS THAN A CRORE. HENCE, THIS I NCOME IS EXEMPT U/S 10(23C) (IIIAD) OF THE ACT. THE AO IS NOT CORRE CT IN TREATING THIS INCOME AS NOT BEING EXEMPT IN VIEW OF THE OBJECTS A ND BYE LAWS WHICH ARE CLEAR ABOUT THE TREATMENT OF ASSETS ON DI SSOLUTION AND EXEMPTION CANNOT BE WITHDRAWN ON THE GROUND THAT SU CH CLAUSE IS NOT PRESENT IN THE MEMORANDUM. ACCORDINGLY, I AM O F THE VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDE R, WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UP HOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. ACCORDI NGLY, THE ISSUE IN DISPUTE IS DECIDED AGAINST THE REVENUE. 7.2 WITH REGARD TO DISALLOWANCE OF RS. 16,73,757/- INCURRED FOR BUILDING AND MAINTENANCE TREATING THE SAME AS CAPIT AL EXPENDITURE. 7 I FIND THAT THE EXPENDITURE HAS BEEN INCURRED FOR T HE PURPOSE OF MAINTENANCE OF SCHOOL BUILDING IS THE PART OF APPLI CATION UNDER SECTION 11 AND 10(23C) OF THE ACT. IT DOES NOT MA TTER IN THE CASE OF TRUST REGISTERED UNDER SECTION 12AA/10(23C) WH ETHER THE EXPENDITURE IS REVENUE IN NATURE OR CAPITAL EXPEND ITURE. IF THE APPLICATION IS MADE TOWARDS THE OBJECTS AND ACTIVIT IES OF THE TRUST THE SAME ARE TO BE ALLOWED AS HAS BEEN USED IN PIN EGROVE INTERNATIONAL CHARITABLE TRUST REPORTED AT 2 SARAL E-TAXATION 102 BY THE HONBLE PUNJAB AND HARAYANA HIGH COURT. IN VIE W OF THE ABOVE, I AM OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A W ELL REASONED ORDER ON THE ISSUE IN DISPUTE, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. ACCORDINGLY, THE ISSUE IN DISPUTE IS DECIDED AGAINST THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2016 . SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 18/10/2016 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR 8