DCIT, Nainital V. M/s. All Saints College Society, Nainital

ITA 3106/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65972 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIOTHI PAL SINGH
• Assessee Lawyers: SOM
• Keywords: Business income; Charitable institution
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI .A.D. JAIN, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3604,3110 & 3106/DEL/2010-11 ASSESSMENT YEAR : 2005-06,2006-07, 07-08 DCIT, ALL SAINTS COLLEGE SOCIETY, GOLGHAR, BARA BAZAR, NAINITAL. NAINTAL. V. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRIOTHI PAL SINGH, SR. DR RESPONDENT BY : DR. RAKESH GUPTA, SHRI ASHWANI TANEJA, ADVOCATE & SHRI SOMIL AGARWAL, C.A. ORDER PER TS KAPOOR, AM: THESE ARE THREE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF LD CIT(A) DATED 25.3.2011, 17.2.2010 & 17.2.2010 RESPEC TIVELY. THE GROUNDS OF APPEALS TAKEN IN ALL THE THREE YEARS ARE SI MILAR. GROUND NO.1 TO 4 IN ASSESSMENT YEAR 2005-06 ARE SIMILAR TO GROU ND NO.1 TO 3 IN ASSESSMENT YEAR 2006-07 AND 2007-08. IN ASSESSMENT YEAR 2006- 07 AND 2007-08, THE ASSESSEE HAS TAKEN ADDITIONAL GROUND COMPARED TO ASSESSMENT YEAR 2005-06. THESE APPEALS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OFF THROUGH A COMMON CONSOLIDATED O RDER. FOR THE SAKE OF CONVENIENCE, GROUNDS OF APPEALS RELATING TO ASSE SSMENT YEAR 2007-08 ARE REPRODUCED BELOW:- ITA NO3604,3110&3106/DEL/10-11 2 1. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN A LLOWING EXEMPTION U/S 11 R/W SEC. 12 OF THE INCOME TAX ACT, 1 961 . 2. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN H OLDING THAT THE RATIO LAID DOWN BY THE HON'BLE ITAT, NEW DELHI IN ITS ORDER IN I.T.A. NO. 5365/DEL/2004 IN THE CASE OF BEERSHIVA SOC IAL WELFARE SOCIETY, HALDWANI IS NOT APPLICABLE TO THE ASSESSEE SOCIE TY WHEREAS THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES A RE IDENTICAL AS SUCH THE ASSESSING OFFICER HAS RIGHTLY APPLI ED THE RATIO LAID DOWN BY HON'BLE ITAT IN THE SAID ORDER. 3. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS, RELYING UPON THE ORDER OF THE HON'BLE ITAT NEW DELHI DATED 13.4.2005 FOR ASSESSMENT YEAR 1998-99 & 2001-02 AS THE FACTS OF THE CA SE FOR ASSESSMENT YEAR 1998-99 & 2001-02 ARE TOTALLY DIFFERENT FROM THE PRESENT ONE. 4. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS HOL DING THAT THE DISALLOWANCES OF CONTRIBUTION TO ADTA FOR ` .15,50,000/- THE ADDITION OF ` .1,93,73,532/- TO FIXED ASSETS AND ` .2,02,55,140/- OF PREVIOUS YEAR EXPENSES ON ALTERNATE GROUNDS APPEALED BY THE ASSESSEE NEEDS NO ADJUDICATION AS ASSESSEES CASE IS SQUARELY COVERED U/S 11(4A) OF THE IT ACT, HENCE THE EXPENSES C LAIMED ARE NOT ALLOWABLE AS REVENUE EXPENSES AND RIGHTLY ADDED T O THE INCOME OF THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE SOCIETY I S REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 AND IT S IS RUNNING SENIOR SECONDARY SCHOOL IN NAINITAL AND IT FILED IT S RETURN OF INCOME IN THE ABOVE ASSESSMENT YEARS CLAIMING EXEMPTION U/S 11 OF THE ACT. THE CASES OF THE ASSESSEE WERE SELECTED FOR SCRUTINY AND DURIN G ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED FROM TH E OBJECTS OF THE SOCIETY THAT THE ASSESSEE WAS ENGAGED ON IMPARTIN G CHRISTIAN ITA NO3604,3110&3106/DEL/10-11 3 BASED EDUCATION TO THE PEOPLE OF NAINITAL. SHE ALSO O BSERVED FROM THE OBJECTS OF THE SOCIETY THAT RUNNING OF SCHOOL WAS NO T AN OBJECT OF THE SOCIETY AND RATHER IT WAS BEING RUN ON SOUND BUSINESS PR INCIPAL OF GENERATING PROFITS YEAR AFTER YEAR. SHE FURTHER OBSE RVED THAT IN ASSESSMENT YEAR 1998-99 AND 2001-02 THE INCOME OF THE SO CIETY FOR RUNNING OF SCHOOL WAS HELD TO BE BUSINESS INCOME. WHILE HOLDING THAT THE ASSESSEE WAS NOT ENGAGED INTO CHARITABLE ACTIVITIES, THE ASSESSING OFFICER RELIED UPON HON'BLE ITAT DECISION IN THE CASE OF DCIT, HALDWANI V. BEERSHIVA WELFARE SOCIETY, IN I.T.A. NO. 5365/DEL /2004 FOR ASSESSMENT YEAR 2001-02 WHEREIN HON'BLE TRIBUNAL HAD DI RECTED THE ASSESSING OFFICER TO FIRST APPLY THE PROVISIONS OF SECTION 11(4A) AND THEN GRANT EXEMPTION U/S 11(1A) OF THE ACT FROM NET PROFIT OF THE SCHOOL IN RESPECT OF THE AMOUNT APPLIED FOR CHARITABL E PURPOSES. 3. THE COUNSEL OF THE ASSESSEE WAS REQUESTED TO FURNISH T HE COMPUTATION OF SURPLUS WITHIN THE MEANING OF SECTION 1 1(4A) OF THE ACT AND IN REPLY TO THAT THE LD AR OF ASSESSEE HAD SUBMITT ED THAT THE SAID SECTION WAS APPLICABLE TO PROFITS & GAINS OF BUSINESS WHIC H IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVE OF THE INSTITUTIO N AND THEIR CASE DO NOT FALL IN THIS CATEGORY AS NO BUSINESS WAS CARRIED OUT BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E SUBMISSION OF THE ASSESSEE BECAUSE SHE HARBORED A BELIEF TH AT ASSESSEE WAS RUNNING A SCHOOL WHICH WAS INCIDENTAL TO THE ATTAINMENT OF OBJECTIVE OF THE SOCIETY WHICH WAS TO GIVE CHRISTI AN BASED EDUCATION PARTICULARLY TO THE PEOPLE OF NAINITAL. 4. IN VIEW OF THE ABOVE THE ASSESSING OFFICER CALCULATE D THE SURPLUS EARNED BY THE ASSESSEE OUT OF INCOME AND EXPENDITURE AC COUNT AND THEN ALLOWED DEDUCTION FOR AMOUNTS SPENT BY THE ASSESSEE FOR CHARITABLE ACTIVITIES WHICH ACCORDING TO HER WAS LESS THAN MINIMUM ITA NO3604,3110&3106/DEL/10-11 4 STATUTORY LIMIT PROVIDED IN SECTION 11 AND THEREFORE TREATED THE INCOME EARNED BY THE ASSESSEE AS BUSINESS INCOME AND REJECTED THE CLAIM OF EXEMPTION U/S 11 OF THE ACT. 5. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMITTED AS UNDER:- A) THAT THE APPELLANT SOCIETY IS RUN ONLY FOR EDUCAT ION PURPOSES WHICH SOME TIMES RESULTED INTO SURPLUS AND SOMETIMES RESU LTED IN TO DEFICIT. IN THIS RESPECT, THE COMPARATIVE FIGUR ES OF EXPENDITURE & INCOME & SURPLUS/DEFICIT WERE PROVIDED FOR ASSESSMENT YEAR 1999-00 TO 2007-08 AND FROM THE FIGURES OF SURPLUS/DEFICIT IT WAS STRESSED BEFORE LD CIT(A) THAT THE OBSERVATIONS OF ASSESSING OFFICER WAS NOT CORRECT IN SO F AR AS HER FINDING THAT SCHOOL WAS BEING RUN ON SOUND BUSINESS PRIN CIPALS. RELIANCE WAS PLACED IN THE CASE OF TMA FOUNDATION & O THERS V. STATE OF KARNATAKA & OTHERS WHEREIN IT WAS HELD THAT IF A REASONABLE SURPLUS IF GENERATED BY AN EDUCATIONAL INSTI TUTION TO MEET THE COST OF EXPANSION AND AUGMENTATION OF FACILI TY THEN IT WILL NOT AMOUNT TO PROFIT & CHARITABLE PURPOSE OF TH E INSTITUTION WILL NOT BE DEFEATED. B) THAT APPELLANT SOCIETY IS RUNNING THIS INSTITUTION FOR IMPARTING EDUCATION WITHOUT ANY DISTINCTION OF CASTE AND CREED AND WITHOUT ANY PROFIT MOTIVE AND NO PART OF PROFIT WAS EVER SHAR ED BY ANY OF THE MEMBERS OF THE MANAGING SOCIETY AND DURING ITS EXI STENCE SINCE ITS INCEPTION THE SOCIETY HAS NOT CARRIED OUT ANY ACTIVITY OTHER THAN EDUCATION. ITA NO3604,3110&3106/DEL/10-11 5 C) THAT THE LD ASSESSING OFFICER IN HER ASSESSMENT ORDER HA S ACCEPTED THE APPELLANTS CONTENTION THAT IT IS A CHAR ITABLE INSTITUTION DOING CHARITABLE ACTIVITY BUT HAD GONE FURTHER INVOKING PROVISIONS OF SECTION 11(4A) OF THE ACT. D) THAT AFTER CONSIDERING IT AS A CHARITABLE INSTITUT ION, THE LD ASSESSING OFFICER HAD REJECTED THE CLAIM OF THE APPELLA NT U/S 11 ON THE PRETEXT THAT THERE IS FAILURE ON THE PART OF SOCIETY TO COMPLY WITH THE PROVISIONS OF SECTION 11. E) THAT ONCE IT IS ACCEPTED THAT IS A CHARITABLE INSTI TUTION THEN THE COMPUTATION OF ITS TAXABLE INCOME HAS TO BE DONE IN T HE MANNER AS PRESCRIBED UNDER THE PROVISIONS OF SECTION 11. F) THAT IN VIEW OF THE ABOVE, THE PROVISIONS OF SECTIO N 11(1) OF THE INCOME TAX ACT, 1961 ARE FULLY APPLICABLE TO THE AP PELLANTS SOCIETY. G) THAT HON'BLE ITAT DELHI IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 1998-99 AND 2001-02 AGAINST THE ORDER OF LD CIT (A) HAD DISMISSED THE APPEAL FILED BY THE REVENUE AND HON'BLE ITAT HAD HELD THE ACTIVITIES OF THE SOCIETY AS CHARITABLE. H) THAT LD ASSESSING OFFICER HAS NOT GIVEN ANY CONSIDERAT ION OR THOUGHT TO THE ITAT ORDER IN APPELLANTS OWN CASE EVE N WHEN THE FACTS, CONDITION AND CIRCUMSTANCES IN THE ASSESSMENT YEARS UNDER APPEAL ARE SIMILAR AND THIS FACT WAS BROUGHT TO THE NOTICE OF ASSESSING OFFICER ALSO. ITA NO3604,3110&3106/DEL/10-11 6 IN THIS RESPECT, RELIANCE WAS PLACED ON CIRCULAR NO.62 1 & 642 WHEREIN IT WAS CLARIFIED THAT PROFITS & GAINS OF BUSIN ESS IN THE CASE OF A TRUST OR INSTITUTION WILL NOT BE LIABLE TO T AX IF THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AND SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED BY INST ITUTION IN RESPECT OF SUCH BUSINESS. I) THAT THE FACTS AND CIRCUMSTANCES OF THE CASE OF M/S BEER SHIVA SOCIAL WELFARE SOCIETY, HALDWANI ARE DIFFEREN T FROM THE FACTS AND CIRCUMSTANCES OF THE SOCIETY WHEREIN THE SOCI ETY WAS MANAGED BY FOUNDER MEMBERS WHO WERE HUSBAND AND WIFE AND THAT SOCIETY HAD OBJECTIVES OTHER THAN EDUCATION ALSO WHEREAS IN THE APPELLANTS CASE, ALL THE OBJECTS ARE FOR EDUCATIO NAL PURPOSES AND SOCIETY IS MANAGED BY GOVERNING BODY CONSISTING OF NOT LESS THAN FIVE MEMBERS. MOREOVER IN THAT CASE, THE IMMOVA BLE PROPERTIES WERE ACQUIRED IN THE NAME OF FOUNDER MEMB ER WHEREAS IN THE APPELLANTS CASE ALL PROPERTIES ARE HELD IN THE SOCIETY NAME. 6. THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS AL LOWED THE EXEMPTION U/S 11 OF THE ACT. 7. AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS T RIBUNAL. 8. AT THE OUTSET, THE LD DR READ OUT STATEMENT OF FAC TS AND FROM THE APPEAL FOR ASSESSMENT YEAR 2007-08 AND RELIED UPON THE STATEMENT OF FACTS IN RESPECT OF ALL YEARS. 9. THE LD AR, ON THE OTHER HAND, STATED THAT ASSESSEE I S AN OLD SOCIETY WHICH WAS ESTABLISHED BEFORE INDEPENDENCE. HE STATED THAT IN ITA NO3604,3110&3106/DEL/10-11 7 ASSESSMENT YEAR 1998-99, FIRST TIME THIS QUESTION WAS RAISED AS TO WHETHER THE SOCIETY WAS FOR CHARITABLE PURPOSES OR NOT. THE LD AR ALSO READ OUT THE DEFINITION OF CHARITABLE PURPOSE FROM SE CTION 2(15) OF THE ACT AND ARGUED THAT ACTIVITIES OF THE ASSESSEE NECESSARILY FALL WITHIN THIS DEFINITION. HE FURTHER INVITED OUR ATTENTION TO PAPER BOOK PAGES 7 TO 17 WHEREIN COPY OF ORDER OF HON'BLE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 AND 2001-02 WAS PLACED. BASE D UPON ABOVE, THE LD AR ARGUED THAT THE FACTS AND CIRCUMSTAN CES OF THE PRESENT APPEALS ARE SAME AS IN ASSESSMENT YEAR 1998-99 & 2 001-02 AND THEREFORE THE SAME MAY BE DECIDED ACCORDINGLY. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSING OFFICER HERSELF HAS ADMITTED THAT ASSESSEE WAS RUNN ING A SCHOOL BUT HER ONLY OBJECTION WAS THAT SCHOOL WAS BEIN G RUN ON SOUND COMMERCIAL PRINCIPAL. SECTION 2(15) OF INCOME TAX A CT, 1961 CLEARLY STATES THAT CHARITABLE PURPOSE INCLUDES RELIEF FOR THE POOR, EDUCATION AND MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY. THUS FROM THE DEFINITION ITSELF, IT IS CLEAR THAT IMPARTING OF EDUCATION IS A CHARITABLE PURPOSE. THE FACTS AND CIRCU MSTANCES OF THE CASE LAW RELATING TO BEER SHIVA SOCIETY ARE NOT SIMIL AR TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASES. THEREFORE, THE REJEC TION OF CLAIM U/S 11 WAS NOT JUSTIFIED. MOREOVER, THE HON'BLE TRIBU NAL IN THE ASSESSMENT YEAR 1998-99 AND 2001-02 PLACED AT PAGES 7 T O 17 OF PAPER BOOK IN THE ASSESSEES OWN CASE HAS HELD THAT ASSESSEE WAS ENGAGED IN IMPARTING EDUCATION AND WAS NOT FOR THE P URPOSE OF PROFIT AND WAS ELIGIBLE FOR EXEMPTION U/S 10(22) OF THE ACT AS WELL AS SECTION 11 & 12 OF THE ACT. RESPECTFULLY FOLLOWING THE ABOV E, WE HOLD THAT ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 11 AND THEREFORE LD CIT(A) HAD RIGHTLY ALLOWED THE EXEMPTION U/S 11 OF THE INCOME T AX ACT, 1961 . ITA NO3604,3110&3106/DEL/10-11 8 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE A RE DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH DAY O F DECMBER, 2012. SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.07.11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 10.10.2012 DATE OF DICTATION 30.11.2012 DATE OF TYPING 30.11.2012 DATE OF ORDER SIGNED BY 07.12.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 07.12.2012 & SENT TO THE BENCH CONCERNED. ITA NO3604,3110&3106/DEL/10-11 9