M/s Hoshangabad Shanti Niketan Montessori School Society, Hoshagabad V. The CIT, Bhopal

ITA 309/IND/2012

• Counselvise Citation: 30922714 RSA 2012
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 23-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S SOLANKI
• Keywords: Charitable institution
• Section: 12A; 12AA; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : AAAAH2866C I.T.A.NO. 309 /IND/201 2 . HOSHANGABAD SHANTI NIKETAN MONTESSORI SCHOOL SOCIETY, VS COMMISSIONER OF INCOME-TAX, BHOPAL HOSHANGABAD APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.SOLANKI, C. A. RESPONDENT BY : SHRI R.A. VERMA, SR. DR DATE OF HEARING : 11 . 10 .2012 DATE OF PRONOUNCEMENT : 31 . 10 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX, BHOPAL, DATED 30 TH -: 2: - 2 MARCH, 2012, IN THE MATTER OF DENIAL OF REGISTRATIO N U/S 12A OF THE INCOME-TAX ACT, 1961. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS RUNNING A S CHOOL IN THE NAME OF HOSHANGABAD SHANTI NIKETAN MONTESSOR I SCHOOL. IT APPLIED FOR REGISTRATION U/S 12-A, WHICH WAS DECLINED BY THE COMMISSIONER OF INCOME TAX BY OBSER VING THAT THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS STIPU LATED U/S 12-A FOR GRANT OF REGISTRATION. 3. CONTENTION OF THE ASSESSEE WAS AS UNDER :- 1.6 THE ASSESSEE RUNS AN EDUCATIONAL INSTITUTION IN THE NAME OF SHANTI NIKETAN MONTESSORI HIGHER SECONDARY SCHOOL AT HOSHANGABAD. 1.7 THE PRIMARY OBJECT OF THE SOCIETY IS TO PROMOT E EDUCATION. 1.8 THE SOCIETY WAS REGISTERED BY REGISTRAR OF FIRM S AND SOCIETIES VIDE CERTIFICATE NO. 11342 DATE 21.6.82. 1.9 THE SOCIETY WAS GIVEN PERMISSIONS BY DISTT. EDUCATION OFFICER, HOSHANGABAD FOR CLASS 3 RD & -: 3: - 3 ONWARDS (UPTO 12 TH ) FROM 20.9.82 & ONWARDS. COPIES OF ORDERS GRANTING PERMISSION FOR OPENING CONTINUING VARIOUS CLASSES AT VARIOUS INTERVALS ARE ENCLOSED FOR YOU HONOUR'S KIND PERUSAL. 1.10 THE SAID PERMISSIONS WERE ALSO COUPLED WITH SO ME CONDITIONS OUT OF WHICH SOME OF THE MAIN CONDITIONS WERE:- (I) A SEPARATE BUILDING SHALL BE ARRANGED FOR OPENI NG 10 TH CLASS. (II) A SPORTS GROUND SHALL BE MADE AVAILABLE FO R CHILDREN TO PLAY. (III) A LAB & SCIENCE EQUIPMENTS SHALL BE MADE AVA ILABLE. 1.11 A NOTICE U/S 148 WAS ISSUED BY THE ITO-I, ITAR SI ON 19.01.2010. THE ASSESSEE VIDE ACK NO 110001193 FILE D RETURN ON 31.03.2010. 1.12 THE AO VIDE HIS ORDER DATE 14.12.2010 ASSESSED THE INCOME AT RS. 21,01,1998/-, AS AGAINST INCOME RETURNED AT NIL FIGURE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE REGARDING EXEMPTION OF INCOME U/S 10(23C) (IIIAD) BY HOLDING AS UNDER:- -: 4: - 4 (I) THAT THE ASSESSEE SOCIETY HAS FAILED TO PROVE THAT IT EXISTS SOLELY FOR EDUCATIONAL PURPOSES. IN VIEW OF THESE FACTS CLAIM OF THE ASSESSEE REGARDING EXEMPTION OF INCOME U/S 10 (23C) (IIIAD) IF THE INCOME TAX ACT IS NOT ACCEPTABLE AND HENCE HERE BY REJECTED. (II) CONTENTION OF THE ASSESSEE REGARDING THE EXEM PTION OF INCOME U/S 10(23C) OF THE INCOME TAX ACT, 1961, CANNOT BE ACCEPTED MERELY ON THE GROUND OF ITS RECE IPT BEING LESS THAN RS. 1 CRORE. ASSESSEE IS REQUIRED T O FILE ITS RETURN OF INCOME IN ORDER TO CLAIM THE EXEMPTIO N U/S 10(23C) WHICH HAS NOT BEEN DONE IN THE INSTANT CASE . 1.13 BOTH THE REASONS MENTIONED ABOVE AND QUOTED BY THE AO FOR DISALLOWANCE ARE WITH DUE RESPECT, WRONG AND DEVOID OF FACTS. 1.14 THAT A RETURN OF INCOME WAS FILED BY THE ASSES SEE AND AS THE ASSESSEE COULD NOT TRACE ACKNOWLEDGEMENT IN ITS RECORDS, DETAILS WERE FURNISHED BEFORE THE AO WHO W ITHOUT VERIFICATION ON OF RECORDS CAME TO A CONCLUSION THA T NO -: 5: - 5 RETURN WAS FILED. A CERTIFIED COPY FROM INCOME TAX DEPARTMENT CONFIRMING THE FILING OF RETURN IS ENCLO SED FOR YOUR HONOUR'S KIND PERUSAL. 1.15 AS REGARDS THE OBJECT, THE TRUST WAS RUNNING S OLELY FOR THE PURPOSE OF EDUCATION SINCE 1982 AND NO OTHER OBJECT OR PURPOSE WAS CARRIED OUT BY THE TRUST. 1.16 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE LEARNED CIT (A). 1.17 LEARNED CIT(A) VIDE HIS ORDER DATE 16.02.2012 HELD THAT THE APPELLANT SOCIETY IS ENTITLED FOR EXEMPTION U/S 10 (23C) OF THE ACT AND AS SUCH, ASSESSMENT OF THE IMP UGNED SUM AS TAXABLE INCOME IN THE HANDS OF THE APPELLANT IS UNSUSTAINABLE ON FACTS AND IN LAW BOTH. 1.18 THE LEARNED CIT(A) WHILE DECIDING THE ISSUE HE LD AS UNDER:- (I) AGAINST THE ABOVE, IN PROCEEDINGS BEFORE ME, IT WAS SUBMITTED ON BEHALF OF THE APPELLANT THAT THE APPEL LANT -: 6: - 6 HAD SUBMITTED AUDITED INCOME AND EXPENDITURE ACCOUNT, BALANCE SHEET AS ON 31.03.2008 AND COMPUTATION OF TOTAL INCOME ALONG WITH THE RETU RN FILED ON 31.03.2010. ACCORDING TO THE APPELLANT , NO EVIDENCE WHATSOEVER WAS BROUGHT ON RECORD BY TH E AO, TO CONCLUSIVELY PROVE THAT THE APPELLANT WAS CARRYI NG ON THE ACTIVITIES NOT FOR ADVANCEMENT OF EDUCATION BUT RUNNING THE SAID EDUCATIONAL INSTITUTION WITH PROFI T MOTIVE. IT WAS STATED THAT ALL THE FUNDS GENERATED WERE EXCLUSIVELY APPLIED FOR ADVANCEMENT OF EDUCATIONAL ACTIVITIES. COPY OF THE ACCREDITATION FROM GOVERNME NT FOR RUNNING THE EDUCATION DISPENSING ACTIVITY NAMED AS SCHOOL, FILED IN PROCEEDINGS BEFORE THE AO, WAS ALS O FILED IN PROCEEDINGS BEFORE ME. IT WAS EXPLAINED TH AT THE ACCREDITATIONS FROM STATE GOVERNMENT FOR THE SCHOOL WERE GIVEN TO THE SOCIETIES WHICH WERE FORME D WITH THE SOLE OBJECT OF ADVANCEMENT OF EDUCATIONAL SYSTEM AND NOT FOR PURPOSES OF MAKING PROFIT. IT WA S STATED THAT THE AO HAD NOT BROUGHT ANY EVIDENCE. ON RECORD TO PROVE THAT THE RECEIPTS WERE APPROPRIATED FOR -: 7: - 7 PURPOSES OTHER THAN ADVANCEMENT OF EDUCATIONAL ACTIVITY. IN THE LIGHT OF THE ABOVE, IT WAS URGED O N BEHALF OF THE APPELLANT THAT THE DENIAL OF EXEMPTIO N U/S 10(23C) TO THE APPELLANT WAS UNJUSTIFIED ON FACTS AND IN LAW. (II) I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT WITH REFERENCE TO THE FA CTS OBTAINING FROM THE RECORD. COPY OF REGISTRATION CERTIFICATE AND COPY OF BY-LAWS, CLAIMED TO HAVE BE EN PRODUCED IN ASSESSMENT PROCEEDINGS BEFORE THE AO, EVER SINCE INCEPTION OF THE APPELLANT SOCIETY, CLEA RLY EVIDENCES THE FACT THAT THE CONSTITUTION OF THE APP ELLANT WAS A CO-OPERATIVE SOCIETY AND IT WAS DULY REGISTER ED WITH REGISTRAR OF THE SOCIETIES, MADHYA PRADESH. NO EVIDENCE WHATSOEVER WAS BROUGHT BY THE AO ON RECORD TO CONCLUSIVELY ESTABLISH THAT THE APPELLANT SOCIET Y WAS FORMED FOR PURPOSES OTHER THAN FULFILLMENT OF ITS OBJECTIVES VIZ., FOR ADVANCEMENT OF EDUCATIONAL SYS TEM. SINCE THE APPELLANT SOCIETY IS RUNNING A SCHOOL, TH IS -: 8: - 8 EDUCATIONAL INSTITUTION STATUTORILY WAS AFFILIATED WITH CENTRAL BOARD OF SECONDARY EDUCATION (CBSE) SINCE 2005 AND THE AFFILIATION SO GRANTED WAS EFFECTIVE F OR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, UNDE R CONSIDERATION. COPY OF THE AFFILIATION LETTER WAS SUBMITTED TO THE AO VIDE APPELLANT'S LETTER DATED 08.12.2010. THE EDUCATIONAL INSTITUTION RUN BY THE APPELLANT SOCIETY IS ALSO AFFILIATED WITH MP BOARD OF SECONDARY EDUCATION, BHOPAL. COPY OF AFFILIATION CERTIFICATE ISSUED BY THE MP BOARD OF SECONDARY EDUCATION WAS ALSO PLACED ON RECORD IN ASSESSMENT PROCEEDINGS BEFORE THE AO. THE ACCOUNTS OF THE APPELLANT SOCIETY WERE SUBJECTED TO STATUTORY AUDIT AND THIS FACT OF FILING AUDIT REPORT IN ASSESSMENT PROCEEDINGS, WAS NOT DISPUTED BY THE A O. (III) IN THE WRITTEN SUBMISSIONS FILED IN PROCEEDIN GS BEFORE THE AO ON 08.12~.2010, WHICH WERE IN RESPONS E TO THE NOTICE/QUESTIONNAIRE ISSUED BY THE AO, IT WA S SUBMITTED THAT THE APPELLANT SOCIETY WAS FORMED ON -: 9: - 9 21.06.1982; IT WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES, MP AND IN EVIDENCE COPY OF REGISTRATION CERTIFICATE WAS FILED BEFORE THE AO. THE NAMES OF T HE MEMBERS OF THE SOCIETY WERE ALSO LISTED IN THE SAID REPLY FILED BEFORE THE AO. IT WAS SPECIFICALLY EMPHASIZED BEFORE THE AO THAT THE APPELLANT SOCIETY WAS FORMED SOLELY FOR THE PURPOSE OF PROVIDING EDUCATION FACILITY AND THAT THE APPELLANT WAS RUNNI NG A SCHOOL TITLED AS 'SHANTI NIKETAN MONTESORRI HIGHER SECONDARY SCHOOL' IN SADAR BAZAR, HOSHANGABAD. THE OFFICE OF THE APPELLANT SOCIETY WAS STATED TO HAVE BEEN LOCATED IN THE SCHOOL PREMISES ONLY. IT WAS STATED THAT THE APPELLANT SOCIETY HAD NO BANK ACCOUNT IN ITS NA ME. HOWEVER, THE EDUCATIONAL INSTITUTION RUN BY THE APPELLANT SOCIETY HAD ITS BANK ACCOUNTS IN PUNJAB NATIONAL BANK AND CANARA BANK AND THIS FACT WAS EVIDENT FROM THE COPIES OF THE RELEVANT BANK STATEM ENTS FILED BEFORE THE AO. IT WAS EXPLAINED THAT THERE WA S NO SPECIFIC PROVISION FOR SUBMISSION OF QUARTERLY REPO RTS TO THE REGISTRAR OF COOPERATIVE SOCIETIES AND GOVERNME NT -: 10: - 10 OF MP. THE GROSS RECEIPTS OF THE APPELLANT'S SOCIET Y WERE MUCH LESS THAN RS. 1 CRORE AND THIS FACT CERTIFIED BY THE STATUTORY AUDITORS, WAS NOT DISPUTED BY THE AO. IN THE PRESENCE OF THIS ACCEPTED POSITION OF FACTS, THE APPELLANT SOCIETY WAS NOT OBLIGED TO APPLY FOR EXEMPTION U/S 10(23C) (IIIAD) OF THE ACT. FOR THIS PROPOSITION, I PLACE RELIANCE ON THE DECISIONS IN P .C. RAJA RATNAM INSTITUTION V. MUNICIPAL CORPORATION OF DELHI & ORS. (1990) 181 ITR 354(SC) AND IN ADITANAR EDUCATIONAL INSTITUTION V. ADDL. CIT (1997) 139 CTR (SC) 7; AND OF THE HYDERABAD BENCH OF THE TRIBUNAL IN ST. JOSEPH'S UPPER PRIMARY SCHOOL V. ITO (1983) 16 TTJ (HYD.) 389. IT WAS CLARIFIED TO THE AO ON THE BASIS OF AUDITED ACCOUNTS THAT THE APPELLANT EDUCATIONAL INSTITUTION HAD PURCHASED MOVABLE ASSETS SUCH AS FURNITURE AND COMPUTERS, FOR THE SCHOOL AND NO IMMOVABLE ASSETS WERE PURCHASED DURING THE RELEVANT PREVIOUS YEAR. THE FACT THAT NO INVESTMENT IN FDR W AS MADE BY THE APPELLANT SOCIETY, DURING THE RELEVANT PREVIOUS YEAR, WAS ALSO SUBSTANTIATED BY THE AUDITE D -: 11: - 11 ACCOUNTS AND THE BANK STATEMENT FILED. THE AO HAD N OT DISPUTED THE CASH SYSTEM OF ACCOUNTING FOLLOWED BY THE APPELLANT. THIS EDUCATIONAL INSTITUTION AFFORDED TU ITION FACILITY UP TO 11TH STANDARD ONLY AS PER THE STIPUL ATIONS OF THE STATE GOVERNMENT AND CBSE. THE AUDITED ACCOUNTS ALSO DEMONSTRATED THE FACT THAT THIS EDUCATIONAL INSTITUTION COLLECTED ONLY TUITION FEE AND BUS FARE AND NO OTHER CHARGES WERE RECOVERED FROM THE STUDENTS. IT WAS EXPLAINED BEFORE THE AO ON THE BAS IS OF AUDITED ACCOUNTS WITH SUPPORTING BILLS AND VOUCH ERS THAT THE ADVERTISEMENT EXPENSES WERE PROVED TO HAVE BEEN INCURRED FOR PUBLICITY IN NEWSPAPER AND WALL PAINTINGS, POSTERS, BANNERS ETC. TRAVELLING EXPENSE S WERE INCURRED FOR MANAGEMENT ACTIVITIES OF THE SCHO OL AND THAT THE TELEPHONES AND VEHICLES WERE WHOLLY AN D EXCLUSIVELY USED FOR THE SCHOOL PURPOSES AND HENCE, THE EXPENDITURE RELATING THERETO, WAS FULLY ALLOWABLE. NONE OF THE AFOREMENTIONED SUBMISSIONS, MADE IN PROCEEDINGS BEFORE THE AO, VIDE APPELLANT'S LETTER DATED 08.12.2010, WERE PROVED BY THE AO AS FALSE. THE ENT IRE -: 12: - 12 RECEIPTS, RECOVERED FROM THE STUDENTS WERE WHOLLY A ND EXCLUSIVELY APPROPRIATED FOR PROVIDING BETTER EDUCATIONAL FACILITIES TO THE STUDENTS. (IV) NO EVIDENCE WHATSOEVER WAS BROUGHT BY THE AO O N RECORD TO CONCLUSIVELY PROVE THAT THE RECEIPTS WERE APPROPRIATED FOR PURPOSES OTHER THAN THE OBJECTIVES OF THE APPELLANT SOCIETY FOR ADVANCEMENT OF EDUCATION TO THE STUDENTS. THE AO HAD ALSO NOT BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT THE APPELLANT SOCI ETY WAS FORMED NOT FOR ADVANCEMENT OF EDUCATIONAL ACTIVITY BUT FOR THE PURPOSES OF EARNING AND ACCUMULATING PROFITS. IN THE ABSENCE OF EVIDENCE TO SUGGEST CHARGING OF CAPITATION FEE, IN MY CONSIDERE D VIEW, THE APPELLANT SOCIETY HAS TO BE HELD TO BE EL IGIBLE FOR THE EXEMPTION CLAIMED (CIT V. KHALSA RURAL HOSPITAL & NURSING TRAINING INSTITUTE (2008) 304 IT R 20 (P&H). (V) I HAVE ALSO CAREFULLY GONE THROUGH THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE AO. (I) IN GOETZ INDIA LTD. V. CIT 284 ITR 323 IT WAS HELD THAT: THE -: 13: - 13 CLAIM FOR EXEMPTION COULD NOT BE ALLOWED UNLESS THE RETURN WAS FILED. THE DECISION OF THE SUPREME COURT , RELIED UPON BY THE AO, HAS ABSOLUTELY NO APPLICATIO N TO THE FACTS OF THE APPELLANT'S CASE, UNDER CONSIDERAT ION, SINCE THE RETURN OF INCOME WAS PROVED TO HAVE BEEN FILED BY THE APPELLANT VIDE ACKNOWLEDGEMENT NO. 110001193 DATED 31.3.2010. IN VIEW OF DETAILED DISCUSSIONS DONE BY LEARNED CIT(A) AND REASON GIVEN THEREIN IT IS CLEAR THAT THE EXEMPTION U/S 1 O(23C) (IIIAD) HAS RIGHTLY BEEN ALLOWED BY LEARNED CIT(A). 1.19 FOR PROVING THAT THE ASSESSEE HAS RIGHTLY CLAI MED EXEMPTION UNDER SECTION 10(23C)(IIIAD). RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- (I) HON'BLE ITAT INDORE BENCH IN THE CASE OF ACIT V . VATSALYA SENIOR SECONDARY SCHOOL REPORTED IN 130 TTJ 27 HELD AS UNDER:- EXEMPTION UNDER S. 10(23C)(IIIAD) - EDUCATION INSTITUTION - PROFIT MOTIVE-AO DENIED EXEMPTION ON THE GROUND THAT ON ACCOUNT OF RECEIPT OF FEES FROM -: 14: - 14 THE STUDENTS, THE EDUCATIONAL INSTITUTION WAS NOT EXISTING SOLELY FOR EDUCATIONAL PURPOSES BUT EXISTI NG FOR PROFIT-NOT JUSTIFIED-ASSESSEE SCHOOL HAD GIVEN THE SUBSTANTIAL AMOUNT TO A SAMITI WHICH WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES, AS ALSO REGISTERED UNDER S. 12M, FOR CONSTRUCTION OF SCHOOL BUILDING-ACTIVITIES OF THE SCHOOL WERE CARRIED ON UNDER THE SUPERVISION OF THE SAMITI WHICH ALSO CONTRIBUTED SUBSTANTIAL AMOUNT FOR THE SCHOOL BUILDING-INSTITUTION/SCHOOL IS PRIMARILY ENGAGED IN EDUCATIONAL ACTIVITIES AND CONSTRUCTION OF BUILDING IS THE PRIME ACTIVITY TO ACHIEVE THE OBJECT OF EDUCATION-THE INCOME GENERATED FROM SCHOOL HAS BEEN UTILIZED EXCLUSIVELY FOR EDUCATIONAL ACTIVITIE S AND NOT FOR THE PERSONAL GAIN. IT IS NOT THE CASE T HAT THE ASSESSEE HAS ACCUMULATED HUGE PROFIT OR HAS MIS-UTILISED THE FUNDS IN ANY MANNER AGAINST THE OBJECTS OF THE ASSESSEE -ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER S. 10(23C)(IIIAD). -: 15: - 15 (II) HON'BLE BOMBAY HIGH COURT IN THE CASE OF VAN ITA VISHRAM TRUSTY VS CHIEF CIT REPORTED IN 327 ITR121 HELD AS UNDER:- EXEMPTION UNDER S. 10(23C) (VI)-EDUCATIONAL INSTIT UTION - PROFIT MOTIVE-PETITIONER TRUST CARRYING ON ONLY EDU CATIONAL ACTIVITY AND RUNNING SCHOOLS AT MUMBAI AND SURAT AP PLIED FOR APPROVAL UNDER S. 10(23C)(VI)-CHIEF CIT REJECTE D THE APPLICATION FOR GRANT OF EXEMPTION ON THE GROUND TH AT THE OBJECTS OF THE TRUST PERMITTED THE CONSTRUCTION OF ASHRAMS FOR GUJARATI HINDU WOMEN AND HENCE THE TRUST EXISTE D FOR OBJECTS OTHER THAN EDUCATION AND THAT THE TRUST HAD A SURPLUS IN EXCESS OF TWELVE PERCENT FROM ITS ACTIVI TIES AND SURPLUS WAS INVESTED IN MAKING ADDITIONS TO THE ASS ETS AND INCREASING BANK DEPOSITS HENCE IT WAS GENERATIN G PROFITS-NOT JUSTIFIED-PETITIONER HAS BEEN CONDUCTIN G PRIMARY AND SECONDARY SCHOOLS AND COLLEGES FOR ARTS, SCIENC E, COMMERCE AND TECHNICAL COURSES IN MUMBAI SINCE 1929 AND IN SURAT SINCE 1940 AND EXCEPT FOR CONDUCTING T HESE EDUCATIONAL INSTITUTIONS, THE PETITIONER HAS NOT CA RRIED ON -: 16: - 16 ANY OTHER ACTIVITIES-A HOLISTIC READING OF THE OBJE CT CLAUSE ESTABLISHES BEYOND DOUBT THAT THE SOLE PURPOSE FOR THE ESTABLISHMENT OF THE PETITIONER WAS TO FURTHER THE CAUSE OF EDUCATION AMONGST WOMEN BELONGING TO A CARRIED OUT BY THE PETITIONER TRUST EVER SINCE ITS INCEPTION IS TH E CONDUCT OF EDUCATIONAL INSTITUTION-FACT THAT A SURPLUS MAY INCIDENTALLY ARISE FROM THE ACTIVITIES OF THE TRUST AFTER MEETING THE EXPENDITURE INCURRED FOR CONDUCTING EDUCATIONAL ACTIVITIES WOULD NOT DISENTITLE THE TRU ST OF THE BENEFIT OF S. 10(23C)-PARLIAMENT DID NOT REGARD THE ACCUMULATION OF INCOME BY A UNIVERSITY OR EDUCATION AL INSTITUTION GOVERNED BY SUB-CL.(VI) AS A DISABLING FACTOR, SO LONG AS THE PURPOSE OF ACCUMULATION IS THE APPLICAT ION OF THE INCOME WHOLLY AND EXCLUSIVELY TO THE OBJECTS FO R WHICH THE INSTITUTION HAS BEEN ESTABLISHED-REJECTION OF A PPROVAL WAS MANIFESTLY MISCONCEIVED. PETITIONER IS ENTITLED TO APPROVAL UNDER SECTION 10(23C)(VI). (III) HON'BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION ETC V S. ADDITIONAL CIT REP ORTED IN 224 -: 17: - 17 ITR310 HELD AS UNDER:- EXEMPTION UNDER SECTION 10(22) - EDUCATIONAL INSTI TUTION-AN EDUCATIONAL SOCIETY OR A TRUST OR OTHER SIMILAR BOD Y RUNNING AN EDUCATIONAL INSTITUTION SOLELY FOR EDUCATIONAL PURP OSES AND NOT FOR PURPOSES OF PROFITS COULD BE REGARDED AS 'OTHER EDUCATIONAL INSTITUTION' ASSESSEE-SOCIETY'S OBJECTS BEING TO ES TABLISH, RUN MANAGE OR ASSIST COLLEGES, SCHOOLS AND OTHER EDUCAT IONAL ORGANIZATIONS SOLELY FOR EDUCATIONAL PURPOSES, IT I S OTHER EDUCATIONAL INSTITUTION' ENTITLED TO EXEMPTION UNDE R S. 10(22)- AVAILABILITY OF EXEMPTION SHOULD BE EVALUATED EACH YEAR AND IF ANY SURPLUS RESULTS INCIDENTALLY ASSESSEE WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES-ONE SH OULD BEAR IN MIND THE DISTINCTION BETWEEN THE CORPUS, THE OBJECT S AND THE POWERS OF THE CONCERNED ENTITY. (IV) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF PINEGROVE INTERNATIONAL CHARITABLE TRUST & OTHER V S. REPORTED IN 327 ITR73 HELD AS UNDER:- FACT THAT AN INSTITUTION HAS EARNED PROFIT WOULD N OT BE DECIDING FACTOR TO CONCLUDE THAT THE EDUCATIONAL IN STITUTION -: 18: - 18 EXISTS FOR PROFIT. EVEN IF THERE REMAINS A SURPLUS AT THE HANDS OF THE EDUCATIONAL INSTITUTION, IT WOULD BE ENTITLE D TO EXEMPTION UNDER S. 10(23C) (VI) PROVIDED THE EDUCATIONAL INST ITUTION SOLELY EXISTS FOR EDUCATIONAL PURPOSES. 1.20 THAT ALL THE DECISIONS QUOTED BY THE AO HAS BE EN DEALT WITH BY LEARNED CIT(A) IN DETAIL AND THEN HE HAS RE ACHED TO A CONCLUSION THAT THE CASE LAWS CITED BY THE AO WER E EITHER NOT APPLICABLE OR NOT RELEVANT TO THE FACTS OF THE CASE. THE LEARNED CIT (A) HAS ALSO DISCUSSED VARIOUS CASE LAW S RELEVANT TO ISSUE INCLUDING THAT OF HON'BLE ITAT IN DORE BENCH IN THE CASE OF ACIT V. VATSALYA SENIOR SECOND ARY SCHOOL. 1.21 THAT THE ASSESSEE IS IMPARTING EDUCATION SINCE 1982. NO OTHER WORK IS DONE BY THE SAID EDUCATION SOCIET Y APART FROM IMPARTING EDUCATION. IT HAS GRADUALLY IN CREASED THE CLASSESS FROM 1ST STANDARD TO 11 TH STANDARD AS IS CLEAR FROM THE PERMISSION GRANTED IN A PHASED MANNER. -: 19: - 19 1.22 FURTHER AS CAN BE VERIFIED FROM THE INCOME & E XPENDITURE A/C THE ASSESSEE HAS RECEIVED INCOME FROM TUITION F EES & BUS FEES AND NOT FROM ANY OTHER SOURCES (BARRING A NEGLIGIBLE INCOME OF RS.1205/- AS BANK INTEREST). N O OTHER INCOME FROM ANY OTHER SOURCE HAS BEEN EARNED BY THE ASSESSEE. 1.23 FROM THE BALANCE SHEET ALSO, IT IS CLEAR THAT THE ASSESSEE HAS INVESTED' ALMOST 950/0 IN ITS FIXED ASSETS, I.E SCHOOL BUILDING FURNITURE, BUS & OTHER RELATED ITEMS. THIS ITSELF SHOWS THAT THE INSTITUTION IS RUN WHOLLY FOR THE PU RPOSES OF EDUCATION AND FOR NO OTHER OBJECT. 4. ON THE OTHER HAND, THE LD. SENIOR DR SUBMITTED THAT ASSESSEE HAS NOT FULFILLED THE OBJECT OF CHARITABLE AND RELIGIOUS PURPOSES FOR THE CLAIM OF EXEMPTION U/S 12AA, ACCOR DINGLY, THE LD. CIT WAS JUSTIFIED TO DECLINE REGISTRATION O F SOCIETY U/S 12AA OF THE ACT. 5. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE ASSESSEE IS RUNNING A SCHOOL IN THE NA ME OF -: 20: - 20 HOSHANGABAD SHANTI NIKETAN MONTESSORI SCHOOOL. IN T HE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS APPLIED F OR EXEMPTION U/S 10(23C), WHICH WAS DECLINED BY THE AS SESSING OFFICER BUT WAS ALLOWED BY THE LD.CIT(A) ON THE PLE A THAT THE ASSESSEE SOCIETY WAS EXCLUSIVELY RUNNING A SCHOOL A ND, THUS, HAVING OBJECT OF EDUCATION, SINCE THE RECEIPTS OF T HE SCHOOL WAS LESS THAN RS. 1 CRORE, IT WAS NOT OBLIGED TO GET EX EMPTION CERTIFICATE FROM CHIEF COMMISSIONER. ACCORDINGLY, I T WAS HELD THAT THE ASSESSEE HAS RIGHTLY CLAIMED EXEMPTION U/S 10(23C)(IIIAD). FURTHER APPEAL WAS FILED BY THE DEP ARTMENT, BUT THE TRIBUNAL HAS DISMISSED THE REVENUES APPEAL ON THE PLEA THAT ASSESSEE WAS WHOLLY AND EXCLUSIVELY ENGAGED IN PROMOTING EDUCATION AND SINCE ITS RECEIPT WAS LESS THAN RS. 1 CRORE, THE CIT WAS JUSTIFIED IN GRANTING EXEMPTION IN RESPECT OF ITS INCOME U/S 10(23C)(IIIAD). ALL THE SUBMISSIONS MADE BY THE LD. AUTHORIZED REPRESENTATIVE APPEARS TO BE IN RES PECT OF ASSESSMENT YEAR 2008-09, WHEN THE APPEAL WAS FILED FOR DECLINE OF CLAIM OF EXEMPTION U/S 10(23C). HOWEVER, IN THE INSTANT APPEAL, THE ASSESSEE IS AGGRIEVED FOR DECLI NE OF REGISTRATION U/S 12AA. UNDER SECTION 11, INCOME FRO M PROPERTY -: 21: - 21 HELD FOR RELIGIOUS AND CHARITABLE PURPOSES ARE NOT LIABLE TO TAX. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS NO W HERE SHOWN THAT IT WAS MEANT FOR CHARITABLE AND RELIGIOU S PURPOSES. WHILE VERIFYING GENUINENESS OF THE OBJECTIVE OF TH E SOCIETY, THE LD. CIT HAS CALLED FOR A REPORT FROM ACIT-I(1), BHO PAL, WHO HAS REPORTED THAT SOCIETY IS SYSTEMATICALLY COLLECTING THE HUGE AMOUNT OF FEE AND THEREBY CREATING SURPLUSES AND AL SO FOUND THAT THERE WAS A PROFIT MOTIVE OF THE SOCIETY. AS P ER AUDITED INCOME AND EXPENDITURE ACCOUNT PLACED ON RECORD FOR THE ASSESSMENT YEAR 2008-09, WE FOUND THAT NET SURPLUS OF THE ASSESSEE WAS MORE THAN 20% OF ITS GROSS RECEIPTS, E VEN AFTER HAVING UTILIZED THE FUND FOR CAPITAL PURPOSES. THUS , THERE DOES NOT APPEAR TO BE ANY CHARITABLE OR RELIGIOUS PURPOS ES AND THE ASSESSEE SOCIETY IS ONLY RUNNING SCHOOL THEREBY PRO MOTING EDUCATION AND EARNING VERY GOOD INCOME. THE FINDING SO RECORDED BY THE CIT IN HIS ORDER WITH REFERENCE TO THE REPORT OF ACIT-I(1), BHOPAL, COULD NOT BE CONTROVERTED BY THE LD. AUTHORIZED REPRESENTATIVE BY BRINING ANY POSITIVE MATERIAL ON RECORD, ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY I N DECLINE OF CLAIM OF REGISTRATION U/S 12AA OF THE INCOME-TAX AC T, 1961. -: 22: - 22 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/ - SD/ - ( JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER A A CCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2012. 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