ADIT (E) II(1), MUMBAI V. YATEEM KHANA & MADRASA ANJUMAN KAIRAL ISLAM, MUMBAI

ITA 3115/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71523 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MANJUNATH KARKIHALLI
• Assessee Lawyers: B V JHAVERI

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL G GG G BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , !' !' !' !' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.3115/MUM/2012 3115/MUM/2012 3115/MUM/2012 3115/MUM/2012 ( %& %& %& %& ' ' ' ' / ASSESSMENT YEAR :2008-09) ADIT (E)-II92), ROOM NO. 507, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 & & & & / VS. M/S YATEEM KHANA & MADRASA ANJUMAN KAIRAL ISLAM, BAITUL AMAN CO-OP. HOC. SOCIETY LTD., NAGPADA, MUMBAI-400008 $( !' ./ ) ./ PAN/GIR NO. :AAATY0919J ( (* / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( +,(* / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) %& %&%& %& -. -. -. -. / 0 ! / 0 ! / 0 ! / 0 ! /ASSESSEE BY : SHRI B. V JHAVERI $ $ $ $ / 0 ! / 0 ! / 0 ! / 0 ! / REVENUE BY : DR. MANJUNATH KARKIHALLI & & & & / // / .' .' .' .' / DATE OF HEARING : 30 TH OCTOBER 2013 12' 12' 12' 12' / // /.' .' .' .' /DATE OF PRONOUNCEMENT: 30 TH OCTOBER 2013 #!3 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.3.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN LAW, THE LD. CIT(A ), ERRED IN ALLOWING THE ASSESSEES CLAIM OF EXEMPTION U/S 10(2 3C)(IIIAB) OF THE ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMI SSIONER OF INCOME TAX(APPEALS)-I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO.3115/M/2012 YATEEM KHANA & MADRASA ANUMAN KAIRAL ISLAM 2 3. WE HAVE HEARD THE LD. D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE CLAIMED E XEMPTION U/S 10(23C)(IIIAB) OF THE INCOME TAX ACT. THE A.O DENIE D THE EXEMPTION ON THE GROUND THAT IT IS ALLOWABLE ONLY TO THOSE INSTI TUTIONS WHICH ARE WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE A .O WAS OF THE VIEW THAT THE TERM SUBSTANTIALLY FINANCED BY THE GOVERNM ENT MEANS NOT LESS THAN 75% OF THE TOTAL EXPENDITURE. ON APPEAL, THE C IT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY NOTING THE FACT THAT THE G OVERNMENT GRANT IS AROUND 67% OF THE TOTAL EXPENDITURE AND THEREFORE, BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN CASE OF SANTOS H HAZARI VS PURUSHOTTAM TIWARI 251 ITR 84 IT IS CONSIDER AS SUB STANTIAL. THE LD. A.R OF THE ASSESSEE HAS RELIED UPON THE VARIOUS DECISIONS OF THIS TRIBUNAL WHEREIN THE TRIBUNAL HAS CONSIDERED THE TERM SUBSTA NTIALLY AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE DECISIONS RELIED UPON BY THE LD. A.R ARE AS UNDER: ADIT VS M/S YATEEMKHANA & MADRASA ANJUMAN KHAIRUL I SLAM DATED 19.6.2013 IN ITA NO. 5891/M/2011 ADIT VS M/S VIVEK EDUCATION SOCIETY DATED 7.12.2012 IN ITA NO. 5896/M/2011 ADIT VS TATA INSTITUTE OF SOCIAL SCIENCE DATED 26.9 .2012 IN ITA NO. 4394/M/2011 ITA NO.3115/M/2012 YATEEM KHANA & MADRASA ANUMAN KAIRAL ISLAM 3 4. WE NOTE THAT IN CASE OF ADIT(EXEMPTION) VS VIVEK EDUCATION SOCIETY (SUPRA) WHEREIN ONE OF US JUDICIAL MEMBER IS A PART Y TO THE DECISION, THE TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL IS SUE IN PARA 5 AS UNDER: 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EXEMPTION OF INCOME FROM TAX UNDER SECTION 1O(23C)(IIIAB). UNDER THE SAID SECTION, INCOME OF ANY INDUSTRIAL OR OTHER EDUCATIO NAL INSTITUTION EXISTING SOLELY FOR EDUCATION WHICH IS WHOLLY OR SU BSTANTIALLY FINANCED BY THE GOVERNMENT IS EXEMPTED FROM TAX. TH E ASSESSEE IN THIS CASE FOR THE RELEVANT YEAR HAD EARNED GROSS RECEIPTS OF RS.5,51,94,182/- OUT OF WHICH A SUM OF RS.3,17,17,3 05/- WAS FINANCED FROM GOVERNMENT GRANT. THUS 57.46% OF GROS S RECEIPTS WAS FINANCED BY THE GOVERNMENT. THE A.O TOOK THE VI EW THAT ONLY WHEN AT LEAST 75% OF EXPENDITURE IS MET BY GOVERNME NT GRANT IT CAN BE CONSIDERED AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE A.O FOLLOWED THE PROVISIONS OF COMPTROLLER AND AUDITOR GENERALS (DUTIES, POWERS AND CONDITIONS) OF SERVIC E ACT 1971, AS PER WHICH ANYBODY OR AUTHORITY IN WHICH CASE 75% OF TOTAL EXPENDITURE IS MET BY GOVERNMENT IS DEEMED TO BE SU BSTANTIALLY FINANCED BY THE GOVERNMENT. IN OUR VIEW CIT(A) HAS RIGHTLY HELD THAT PROVISIONS OF COMPTROLLER AND AUDITOR GENERAL S (DUTIES, POWERS AND CONDITIONS) OF SERVICE ACT 1971, ARE NOT APPLICABLE AS IN THAT CASE WHAT CONSTITUTES SUBSTANTIALLY FINA NCED WAS DEFINED WHICH IS NOT SO IN THE PRESENT CASE. CIT(A) HAS FOLLOWED THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN CAS E OF CIT, PANAJI-GOA VS. PARLE PLASTICS LTD. (SUPRA) IN WHICH IT WAS HELD THAT THE SUBSTANTIAL PART DID NOT CONNOTE AN IDEA OF BEI NG A MAJOR PART I.E. MORE THAN 50%, IN WHICH IN THE CONTEXT OF SECT ION 2(22)(E)(II)) IT WAS HELD THAT IN CASE 40% OF ASSETS WERE DEPLOYE D BY WAY OF LOANS AND ADVANCES THEN THE BUSINESS OF MONEY LENDI NG HAS TO BE CONSIDERED AS SUBSTANTIAL PART OF THE BUSINESS O F THE ASSESSEE. CIT(A) ALSO RELIED ON THE JUDGMENT OF HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF INDIAN INSTITUTE OF MANAGEMENT (SUPRA), IN WHICH IT WAS HELD THAT WHEN 37.85% OF T OTAL INCOME WAS FINANCED BY CENTRAL GOVERNMENT IT HAD TO BE CON SIDERED AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. IN CASE O F THE ASSESSEE 57.46% OF GROSS RECEIPTS IS FINANCED BY TH E GOVERNMENT. FURTHER IN THE EARLIER ORDERS SIMILAR F INANCING BY THE GOVERNMENT HAD BEEN CONSIDERED AS SUBSTANTIALLY FIN ANCED AND EXEMPTION ALLOWED TO THE ASSESSEE. WE, THEREFORE SE E NO INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWING THE CL AIM OF THE ASSESSEE WHICH IS BASED ON THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY AND HONBLE HIGH COURT OF KARNATAKA. ORDE R OF CIT(A) IS, THEREFORE, UPHELD. ITA NO.3115/M/2012 YATEEM KHANA & MADRASA ANUMAN KAIRAL ISLAM 4 5. THUS, IT IS CLEAR THAT IN THE SAID CASE 57.46% O F THE GROSS RECEIPTS WERE FINANCED BY THE GOVERNMENT WHICH WAS TREATED A S SUBSTANTIALLY FINANCED BY GOVERNMENT AS PER THE PROVISIONS OF SEC TION 10(23C)(IIIAB) OF THE INCOME TAX ACT. THE TRIBUNAL HAS DECIDED THE IS SUE BY FOLLOWING THE DECISIONS OF HONBLE JURISDICTION HIGH COURT AS WEL L AS HONBLE CALCUTTA HIGH COURT. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL (SUPRA) WE DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF C IT(A) IS UPHELD. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCTOBER 2013 SD/- SD/- ( . ) !' #$ (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 30 TH OCTOBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI