THE SHRIRAM GRAM VIKAS SHIKSHA SANSTHA, Nagpur V. TAX RECOVERY OFFICER, RANGE-6, Nagpur

ITA 346/NAG/2013

• Counselvise Citation: 34623914 RSA 2013
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: M MANI
• Keywords: Charitable institution
• Section: 147; 10; 11

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL-E -BENCH, NAGPUR ! ! ' ! /(THROUGH VIDEO CONFERENCE AT MUMBAI) # # # # $ $$ $ % %% % . . , '& '& '& '& $ $$ $ '!() '!() '!() '!() , ! !! ! . . BEFORE S/SH.H.L.KARWA,PRESIDENT AND RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.346/NAG/2013 # # # # *# *# *# *# / ASSESSMENT YEAR 2006-07 SHRIRAM GRAM VIKASH SHIKSHA SANSTHA C/O NIS ACEDEMY 47, GANGA BUILDING, BETWEEN RAVI NAGAR TO RAMNANGAR, SEQUARE, GOKULPETH,NAGPUR-440010 PAN: AAATT8853E VS. TAX RECOVERY OFFICER, RANGE-6, 3 RD FLOOR, AAYAKAR BHAVAN, CIVIL LINES,NAGPUR -440001 ( +, / APPELLANT) ( -.+, / RESPONDENT) /. ITA NO.347/NAG/2013 # # # # *# *# *# *# / ASSESSMENT YEAR 2008-09 SHRIRAM GRAM VIKASH SHIKSHA SANSTHA C/O NIS ACEDEMY 47, GANGA BUILDING, BETWEEN RAVI NAGAR TO RAMNANGAR, SEQUARE, GOKULPETH,NAGPUR-440010 PAN: AAATT8853E VS. TAX RECOVERY OFFICER, RANGE-6, 3 RD FLOOR, AAYAKAR BHAVAN, CIVIL LINES, NAGPUR-440001 ( +, / APPELLANT) ( -.+, / RESPONDENT) ASSESSEE BY : M.MANI REVENUE BY : NARENDRA KANE / 0 / DATE OF HEARING : 22- 01 -201 4 1* / 0 /DATE OF PRONOUNCEMENT : 04 - 02 -201 4 , 1961 254 )1( ! !! ! (/#/ (/#/ (/#/ (/#/ 2!3 2!3 2!3 2!3 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM - ! ! ! ! 24 24 24 24 , '!() '!() '!() '!() ! !! ! : CHALLENGING THE ORDERS DATED 26.08.2013 OF THE CIT- (A)-II,NAGPUR,ASSESSEE HAS RAISED SIMILAR GROUNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS: 1.THE CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSES SING OFFICER. 2.THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS A CHARITABLE INSTITUTION AND EXISTING FOR PROFIT. 3.THE CIT(A)ERRED IN RELYING ON THE ORDER OF HIS PR EDECESSOR IN THE CASE OF WANGANGA BAHUUDDESHIYA VIKAS SANSTHA.WHICH IS AN ORDER ALREADY REVERSED BY THE TRIBUNAL AND REGISTRATION ALREADY GRANTED U/S 12A. 4. ANY OTHER GROUND THAT MAY BE TAKEN UP AT THE TIM E OF HEARING. ASSESSEE HAS ALSO FILED FOLLOWING ADDITIONAL GROUND OF APPEAL: THE CASE IS ALSO COVERED U/S 10(23C)(IIIAD) AS THE ANNUAL RECEIPT OF EACH OF THE INSTITUTION RUN BY SOCIETY IS LESS THAN 1 CRORE. WE FIND THAT THE ADDITIONAL GROUND IS ARISING OUT O F THE ORDER OF THE AO AND IS A PURE LEGAL ISSUE, 2 ITA NOS. 346 & 347/NAG/2013 SHRIRAM GRAM VIKASH SHIKS HA SANSTHA . THEREFORE SAME IS ADMITTED.EFFECTIVE GROUND OF APPE AL FOR BOTH THE YEARS IS ABOUT CLAIM MADE BY THE ASSESSEE U/S.10(23C)OF THE ACT. ITA/346/NAG/2013-AY 2006-07: 2. RETURN OF INCOME IN THIS CASE WAS FILED BY THE ASSE SSEE ON 19.12.2007 DECLARING TOTAL INCOME AT RS.NIL AFTER CLAIMING EXEMPTION U/S L0(23C)(IIIAB) AMOUNTING TO RS.23,20,656/-. THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT. AO FOUND THAT THE ASSESSEE TRUST HAD BEEN GRANTED R EGISTRATION U/S.12A OF THE ACT W.E.F. 05.10. 2010,THAT THE TRUST HAD FILED RETURN FOR THE A.Y.20 06-07 SHOWING NIL INCOME EVEN THOUGH THE TRUST HAD SUBSTANTIAL SURPLUS INCOME DURING THE YEAR,THAT PERUSAL OF THE BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT REVEALED THAT DURING THE YEAR I T HAD SURPLUS OF RS.23,20,656/-AGAINST GROSS RECEIPTS OF RS.1,38,65,319/-(INCLUDING DONATION OF RS.23,94,000/-),THAT THE TRUST HAD CLAIMED EXEMPTION U/S.L0(23C)(IIIAB) OF THE ACT 1961 SINCE IT WAS SUBSTANTIALLY FINANCED BY THE GOVT.,THAT THE ASSESSEE TRUST WAS RUNNING A NUMBER OF EDUCATIO NAL INSTITUTIONS DURING THE YEAR (SHRIRAM VIDYALAYA,B.M. TIDKE COLLEGE OF EDUCATION B.M.TIDKE D. ED. COLLEGE, LATE MADHAVRA O TIDKE B.P.EDCOLLEGE,SMT. RAJKAMAL TIDKE SENIOR COLLEGE AN D SMT. RAJKAMAL TIDKE JUNIOR COLLEGE), THAT THE ASSESSEE-TRUST WAS IN RECEIPT OF GRANT IN AID FROM GOVERNMENT FOR THE FOLLOWING EDUCATIONAL INSTITUTIONS ONLY DURING THE YEAR UNDER CONSIDERATION SHRIRAM VIDYALAYA,SMT. RAJKAMAL TIDKE SENIOR COLLEG E,SMT. RAJKAMAL TIDKE JUNIOR COLLEGE. HE FUTHER HELD THAT THE GOVERN MENT FINANCED ONLY 3 EDUCATIONAL INSTITUTIONS OUT OF 6 RUN BY THE TRUST DURING THE YEAR UNDER CONSIDERATION,THAT GOVT .GRANT CONTRIBUTED ONLY 41.2% (RS.57,21,381/-) OF THE TOTAL RECEIPTS OF RS.1,38,65,819/-,WHEREAS F EES FROM STUDENTS CONTRIBUTED 41.3% (RS.57, 25,310/-),THAT DONATION CONTRIBUTED 15%(RS.23,94,00 0/-) OF THE TOTAL RECEIPTS,THAT MAXIMUM CONTRIBUTION OF THE TOTAL RECEIPTS CAME FROM FEES F ROM STUDENTS AND NOT FROM GOVERNMENT GRANT, THAT IT COULD NOT BE SAID THAT THE TRUST WAS SUBSTA NTIALLY FINANCED BY THE GOVERNMENT,THAT THE WORD SUBSTANTIAL HAS NO FIXED MEANING W.R.T.PERCENTAGE AND THE SAME IS NOT QUANTIFIED ANYWHERE IN THE ACT,THAT THE TRUST HAD BEEN GRANTED REGISTRATION U/ S.12 A OF THE ACT W.E.F. 05.10.2010 ONLY,THAT DICTIONARY MEANING OF THE WORD SUBSTANTIAL WAS TERM ED AS LARGE,IMPORTANT, CONSIDERABLE, WEIGHTY,MAJOR PORTION, SIGNIFICANT, HEAVY,ABUNDANT, VOLUMINOUS ETC.FINALLY IT WAS HELD THAT THE TRUST WAS NOT WHOLLY OR SUBSTANTIALLY FINANCED BY T HE GOVERNMENT AND HENCE IT WAS NOT COVERED WITHIN THE MEANING OF CLAUSE (IIIAB) OF SEC.10(23C) OF THE ACT,THAT EXEMPTION CLAIMED BY THE ASSESSEE UNDER THE SAID SECTION,AMOUNTING TO RS,23, 20,656/- WAS TO BE WITHDRAWN. 3. AGGRIEVED BY THE ABOVE,ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER,HE HELD THAT THERE WAS A SURPLUS OF RS.23,20,656/-DURING THE YEA R UNDER APPEAL,THAT IT WAS CLEAR FROM THE SAID SURPLUS THAT THE ACTIVITY CARRIED ON BY THE ASSESSE E HAD RESULTED IN PROFITS,IT WAS DIFFICULT TO CONCLUDE THAT THE ASSESSEES EXISTENCE WAS SOLELY F OR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFIT,THAT IT WAS NOT CLEAR AS TO WHAT PURPOSE THE SAID SURPLUS HAD BEEN UTILISED,THAT THE ACCUMULATION OF PROFIT FOR THE PURPOSE OF OBJECTS O F THE TRUST WAS ALLOWED IN CASES OF TRUST THAT HAD OBTAINED REGISTRATION U/S.12AOF THE ACT AND WHEN OT HER RELATED PROCEDURAL COMPLIANCES WERE ENSURED,THAT IN THE ABSENCE OF REGISTRATION U/S.12A OF THE ACT AND NON-FILING OF FROM NO.10B IT COULD NOT BE CONCLUDED THAT THE INSTITUTION DID NO EXIT FOR PROFIT.HE REFERRED TO THE CASE OF WAINGANGA BAHUUDDESHIYA VIKAS SANSTHA OF A.Y.2005-0 6,WHEREIN THE SIMILAR ISSUE WAS DECIDED AGAINST THE SANSHA BY THE CIT(A)-I NAGPUR. FAA HELD THAT THE CONDITIONS REQUIRED FOR CLAIMING EXEMPTION U/S.10(23C)(IIIAB)HAD NOT BEEN COMPLIED W ITH. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTEDTHA T THE ASSESSEE-TRUST WAS AN EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT COMING WITHIN THE MEANING OF SEC.10(23C) (IIIAB) OF THE ACT,THAT 42% OF TOTAL RECEIPTS IS FINANCED BY THE GOVERN 3 ITA NOS. 346 & 347/NAG/2013 SHRIRAM GRAM VIKASH SHIKS HA SANSTHA . -MENT,THAT 42 % CONTRIBUTION WAS SUBSTANTIAL AMOUNT ,THAT THE INSTITUTION EXISTED ONLY BECAUSE IT WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT AND WI THOUT IT THE INSTITUTION WOULD NOT HAVE EXISTED AT ALL,THAT THE TRUST HAD TO SOLICIT DONATI ON FOR CONSTRUCTION OF BUILDING AND OTHER ASSETS FO R ITS DAY TO DAY WORKING,THAT IT WAS COVERED BY SECTI ON 10(23C) (IIIAB) OF THE ACT,THAT THE DONATIONS AND THE GOVERNMENT GRANTS WERE THE FOUNDATION AND T HE BASIS FOR ITS SURVIVAL.HE FURTHER SUBMITTED THAT THE WORD SUBSTANTIAL CAME TO BE INTERPRETED BEFORE THE HONBLE SUPREME COURT IN THE CASES OF SHREE MENAKSHI MILLS LTD.MADURAI(AIR 1955SC13) A ND CHARATRAM FOUNDATION (250 ITR 64), THAT THAT THE EXPRESSION SUBSTANTIAL CONTRIBUTION H AD TO BE UNDERSTOOD IN ITS ORDINARY OR POPULAR SENSE,THAT THE FINANCE OF THE GOVERNMENT IN THE CAS E OF THE ASSESSEE WAS SUBSTANTIAL ON ANY STANDARD THAT THE CASE WAS ENTIRELY COVERED UNDER SECTION 10(23) (IIIAB) OF THE ACT,THAT ONCE IT WAS CONSIDERED THAT THE CASE FELL UNDER SECTION 10(23C) (IIIAB) OF THE ACT THEN THE PROVISIONS OF SECTION 11 TO 13 DID NOT APPLY,THAT DEPARTMENT CIRCULAR NO. 712 DATED 25.7.1995 ENDORSED THE VIEW OF THE ASSESSEE.HE RELIED UPON THE CASES OF JAT EDUCATION SOCIETY(58DTR188)AND CHILDRENS EDUC -ATION SOCIETY(92DTR158),DELIVERED BY THE DELHI TRI BUNAL AND THE HONBLE KARNATAKA HIGH COURT RESPECTIVELY. WITH REGARD TO THE ADDITIONAL GROUND IT WAS SUBMITT ED THAT EXEMPTION SHOULD BE ALLOWED THE ASSESSEE U/S.10(23C)(IIIAD),THAT CONTRIBUTION RECEI VED BY THE ASSESSEE FOR EACH OF THE INSTITUTION WAS LESS THAN RS. 1 CRORES.DEPARTMENTAL REPRESENTAT IVE(DR)SUPPORTED THE ORDERS OF THE AO AND THE FAA AND STATED THAT TOTAL RECEIPT BY THE ASSESS EE WAS MORE THAN RS.ONE CRORES AND HENCE IT COULD NOT CLAIM EXEMPTION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.IN THIS CASE ASSESSEE IS RUNNING SIX EDUCATIONAL INSTITUTION AND IS RECEIVIN G GRANTS IN AID FROM THE GOVERNMENT.AS PER THE AO THE DONATION AND FEES FROM STUDENTS CONTRIBUTED 56% OF THE ASSESSEES INCOME AND THUS IT WAS NOT GETTING SUBSTANTIAL GRANT FROM THE GOVERNME NT.ASSESSEE HAS CLAIMED THAT IT WAS GETTING 42% OF ITS INCOME BY WAY OF GOVT.-GRANT.IN THE ADD ITIONAL GROUND THE ASSESSEE HAS SUBMITTED THAT IT IS COVERED BY THE PROVISIONS OF SECTION 10(23C)( IIIAD) BECAUSE THE INSTITUTION EXISTED SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT AND THE AGGREGATE ANNUAL RECEIPTS OF THE INSTITUTION DID NOT EXCEED THE AMOUNT OF ANNUAL REC EIPTS AS PRESCRIBED I.E.RS.1 CRORES.AS FAR AS PROVISIONS OF 10(23C)(IIIAD)ARE CONCERNED IT IS CLE AR THAT CEILING OF RS.1 CRORES IS FOR ONE INSTITUTION AND NOT FOR OVERALL GRANT IN AID RECEIV ED BY AN ASSESSEE WHICH RUNS MANY A INSTITUTIONS. IN THE CASE OF JAT EDUCATION SOCIETY(SUPRA)DELHI TR IBUNAL HAS DISCUSSED THE ISSUE AS UNDER: FROM THE PROVISIONS OF S.10(23C)(IIIAB) IT IS SEEN THAT THE POSITION ON THE BASIS OF INDIVIDUAL INSTITUTION HAS TO BE EXAMINED AND NOT WITH RESPECT TO AN ASSESSEE SOCIETY HAVING SEVERAL EDUCATIONAL INSTITUTIONS BEING RUN BY IT.HENCE, THE RE IS NO MISTAKE IN THE ORDER OF THE CIT(A) OR IN THE ORDER OF THE AO AS PER WHICH THEY PROCEEDED ON THE BASIS OF EACH EDUCATIONAL INSTITUTION SEPARATELY BEING RUN BY THE ASSESSEE SOCIETY.FOR TH E PURPOSE OF S.10(23C)(IIIAD),THE ANNUAL GROSS RECEIPTS OF THREE EDUCATIONAL INSTITUTIONS BEING RU N SEPARATELY BY THE ASSESSEE SOCIETY CANNOT BE CLUBBED TOGETHER FOR EXAMINING THE FULFILMENT OF TH E CONDITIONS OF RECEIPT BEING LESS THAN THE PRESCRIBED LIMIT OF ANNUAL GROSS RECEIPTS. IF THE A NNUAL GROSS RECEIPTS OF THREE EDUCATIONAL INSTITUTIONS ARE CONSIDERED SEPARATELY, THE SAME IS BELOW RS. 1 CRORE IN EACH YEAR FOR EACH OF THESE EDUCATIONAL INSTITUTIONS.AS PER THE PROVISIONS OF S UB-CL.(IIIAD) OF CI. (23C) OF S. 10, THE TERM AGGREGATE ANNUAL RECEIPTS OF EACH EDUCATIONAL INS TITUTION IS RELEVANT AND IF ANY ASSESSEE IS HAVING MORE THAN ONE EDUCATIONAL INSTITUTION THEN T HE. AGGREGATE ANNUAL RECEIPT OF EACH OF SUCH EDUCATIONAL INSTITUTION HAS TO BE CONSIDERED SEPARA TELY BECAUSE THIS SUB-CL. (IIIAD) OF CI. (23C) OF S . 10 DOES NOT SAY THAT IF AN ASSESSEE IS HAVING MORE THAN ONE EDUCATIONAL INSTITUTION THEN THE GROSS ANNUAL RECEIPT OF ALL OF THEM SHOULD BE CONSIDERED TOGETHER. THE TERM AGGREGATE ANNUAL RECEIPTS IN THIS SUB-CLAUSE DOES NOT SAY THAT AGGREGATE OF A LL EDUCATIONAL INSTITUTIONS SHOULD BE CONSIDERED TOGETHER.THIS TERM IS USED HERE TO AGGREGATE ANNUAL RECEIPTS OF EACH EDUCATIONAL INSTITUTION FROM ALL SOURCES AND ON ALL ACCOUNTS AND HENCE, THE AGGR EGATE GROSS RECEIPT OF EACH EDUCATIONAL INSTITUTION HAS TO BE CONSIDERED SEPARATELY AND IF THAT IS DONE, EACH OF THEM IS HAVING ANNUAL GROSS RECEIPTS OF LESS THAN RS. 1 CRORE IN EACH OF THE YE ARS, WHICH ARE UNDER CONSIDERATION. THE APPLICABILITY OF SUB-CL. (IIIAD) OF CI. (23C) OF S. 10 WAS NOT EXAMINED BY THE A0 OR BY THE CIT(A).IN 4 ITA NOS. 346 & 347/NAG/2013 SHRIRAM GRAM VIKASH SHIKS HA SANSTHA . FACT, THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SUB- CL. (IIIAB) OF CI. (23C) OF S. 10 AND THE ASSESSEE ALSO DID NOT CLAIM EXEMPTION UNDER SUB-CL. (ILIAD) OF CI. (23C) OF S. IO: THE AO AND THE CIT(A) HAVE CONSIDERED THE APPLICABILITY OF CL. (VI) OF CI. (23 C) OF S. 10 BUT THEY HAVE ALSO NOT DISCUSSED REGARDING APPLICABILITY OF SUB-CL. (IIIAD) OF CI. ( 23C) OF S. 10 ALTHOUGH THE AO HAS WORKED OUT THE GROSS RECEIPTS OF THESE THREE INSTITUTIONS TAKEN TO GETHER AT ABOVE RS. 1 CRORE AND HAS HELD THAT THEREFORE, THE ASSESSEE WAS REQUIRED TO OBTAIN THE APPROVAL OF CHIEF CIT UNDER SUB-CL. (VI) OF CI. (23C) OF S. 10 WHICH MEANS THAT HE IS IMPILEDLY RUL ING OUT THE APPLICABILITY OF SUB-CL. (IIIAD) OF CL. (23C) OF S. 10. REGARDING THIS REQUIREMENT OF THIS SUB-CLAUSE THAT THE AGGREGATE ANNUAL RECEIPT BELOW RS. 1 CRORE HAS TO BE SEEN FOR EACH EDUCATION AL INSTITUTION SEPARATELY AND FOR THAT PURPOSE, THE ANNUAL GROSS RECEIPTS OF ALL THE THREE EDUCATIO NAL INSTITUTIONS { 141 TTS316 } CANNOT BE CONSIDERED COLLECTIVELY TO BE ELIGIBLE FOR EXEMPTIO N UNDER SUB-CL. (IIIAD) OF CI. (23C) OF S.10.THE AO HAS NOT RAISED ANY OBJECTION ABOUT ANY OTHER REQ UIREMENT I.E., THE EDUCATIONAL INSTITUTION SHOULD BE EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. HENCE, THE INCOME OF THESE THREE INSTITUTIONS IS ALSO EXEMPT U NDER SUB-CL. (IIIAD) OF CI. (23C) OF 5. 10 BECAUSE AGGREGATE INCOME OF EACH OF THESE INSTITUTIONS IN E ACH OF THESE TWO YEARS IS BELOW RS. 1 CRORE. THE REQUIREMENT OF APPROVAL OF CHIEF CIT UNDER SUB-CL. (VI) OF CI. (23C) OF S. 10 IS FOR THOSE WHO ARE NOT COVERED BY SUB-CL. (IIIAB) OR (IIIAD) OF CI. (2 3C) OF S. 10. SINCE THESE THREE INSTITUTIONS ARE COVERED BY SUB-CL, (IIIAD), SUB-CL. (VI) IS NOT APP LICABLE. THEREFORE, INCOME OF THESE THREE INSTITUTIONS IS ALSO EXEMPT.IF ANY ASSESSEE IS HAVI NG MORE THAN ONE EDUCATIONAL INSTITUTION, THE AGGREGATE ANNUAL RECEIPTS OF EACH OF SUCH EDUCATION AL INSTITUTIONS HAVE TO BE CONSIDERED SEPARATELY AND CANNOT BE CLUBBED TOGETHER FOR EXAMI NING THE FULFILMENT OF THE CONDITION OF PRESCRIBED ANNUAL GROSS RECEIPTS FOR THE PURPOSE OF S 10(23C)(IIIAD), SINCE THE INSTITUTIONS ARE COVERED BY SUB-CL (IIIAD), SUB-CL (VI) OF S 10(23C) IS NOT APPLICABLE AND THEREFORE, THERE IS NO REQUIREMENT OF APPROVAL OF CHIEF CIT. WE FIND THAT IN THE MATTER OF CHILDRENS EDUCATION SOCIETY(SUPRA),HONBLE HIGH COURT OF KARNATAKA HAS DISCUSSED THE WORD AGGREGATE IN LE NGTH AND HAS HELD THAT EACH INSTITUTION HAS TO BE HELD A SEPARATE ENTITY.HONBLE COURT HAS HELD AS UNDER: FIRSTLY,IF THE WORD AGGREGATE ANNUAL RECEIPTS OF OTHER EDUCATIONAL INSTITUTION IS TO BE UNDER STOOD AS CLUBBING OF ANNUAL RECEIPTS OF ALL EDUCATI ONAL INSTITUTIONS RUN BY AN ASSESSEE SOCIETY, THEN IT WILL ALSO INCLUDE THE ANNUAL RECEIPTS OF AN EDUC ATIONAL INSTITUTION WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. IF THAT W AS INTENTION OF THE LEGISLATURE, THEY WOULD NOT HAVE INTRODUCED SEPARATE SUB-CLAUSES AS (III)(AB) A ND (III)(AD). IF SUCH INTERPRETATION IS PLACED, SUB-CLAUSE (III)(AB) BECOMES OTIOSE THEREFORE, IT I S NOT POSSIBLE TO PLACE SUCH AN INTERPRETATION IF AN ASSESSEE SOCIETY IS RUNNING SEVERAL EDUCATIONAL INSTITUTIONS, IF SOME OF THEM ARE WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT IN TERMS O F SUB-CLAUSE (III)(AB), THE INCOME ON BEHALF OF SUCH EDUCATIONAL INSTITUTION RECEIVED BY THE ASSESS EE IS EXEMPTED FROM BEING COMPUTED THE TOTAL INCOME OF THE ASSESSEE IF THE ASSESSEE IS RUNNING O THER EDUCATIONAL INSTITUTIONS WHICH ARE NOT WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT, THEN THE BENEFIT OF THAT EXEMPTION IS ALSO EXTENDED TO THE INCOME DERIVED FROM SUCH EDUCATIONA L INSTITUTIONS AND RECEIVED BY THE ASSESSEE UNDER SUB-CLAUSE (III)(AD) READING WITH SUB-CLAUSE (III)(AD) ALONG WITH RULE ??? IT WAS CONTENDED, THE LEGISLATURE USED THE WORD AGGREGATE ANNUAL REC EIPT AND AMOUNT OF ANNUAL RECEIPTS AND THEREFORE, THE PROVISIONS ARE NOT ONE AND THE SAME, THE WORD AGGREGATE HAS BEEN DEFINED IN CHAMBERS 21ST CENTURY DICTIONARY AS UNDER: AGGREGATE - NOUN MEANS A COLLECTION OF SEPARATE UN ITS BROUGHT TOGETHER, A TOTAL TAKEN ALTOGETHER, BRING TOGETHER. IN WHARTONS LAW LEXICON, IT IS DEFINED AS THUS A COLLOCATION OF INDIVIDUALS, UNITS OR THINGS IN O RDER TO FORM A WHOLE 22.SIMILARLY RELYING ON THE JUDGMENT OF THE APEX CO URT ,IN THE CASE OF ADITANAR EDUCATI - ONAL INSTITUTION VS .ADDITIONAL COMMISSIONER OF INC OME-TAX, IT WAS CONTENDED THE WORD OTHER EDUCATIONAL INSTITUTION REFERS TO THE ASSESSEE SOCIETY AND NOT TO THE INDIVIDUAL EDUCATIONAL INSTITUTION IF THE INTENTION OF THE LEG ISLATURE WAS TO CLUB THE ANNUAL RECEIPTS OF ALL EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOCIET Y, THEY COULD HAVE SAID SO IN CLEAR TERMS ON CONTRARY WHAT IS STATED IN THE SAID SECTION IS THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR SUCH EDUCATIONAL INSTITUTION REFERRING TO OTHER EDU CATIONAL INSTITUTION OTHER EDUCATIONAL INSTITU - TION IS TO BE UNDERSTOOD WITH THE CONTEXT OF THE FI RST WORD I.E. THE UNIVERSITY.BOTH IN THE UNIVERSITY 5 ITA NOS. 346 & 347/NAG/2013 SHRIRAM GRAM VIKASH SHIKS HA SANSTHA . END ANY EDUCATIONAL INSTITUTIONS, EDUCATION IS IMPA RTED THE UNIVERSITY IS A STATUTORY BODY BUT THERE ARE A NUMBER OF EDUCATIONAL INSTITUTIONS WHIC H ARE NOT RUN BY A STATUTORY AUTHORITY WHICH ARE IMPARTING EDUCATION, THE WORD OTHER EDUCATIONAL IN STITUTION HAS TO BE UNDERSTOOD IN THE CONTEXT OF OTHER THAN ANY UNIVERSITY IF SO UNDERSTOOD, ALL THAT IT MEANS IS EVERY EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT, IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH EDUCATIONAL INSTITUTION EXCEEDS RS 1 CRORE, THEN THE INCOME FROM SUCH EDUCATIONAL INSTITUTION RECEIVED BY THE ASSESSEE IS EXCLUDED FR OM HIS TOTAL INCOME. IN AN EDUCATIONAL INSTITUTION THE AMOUNT ARE CALCULATED PERIODICALLY.IT MAY BE CA LCULATED UNDER DIFFERENT HEADS AS SUCH AMOUNT RECEIVED CONSTITUTED RECEIPTS AND THOSE RECEIPTS MA Y BE RECEIVED THROUGHOUT THE YEAR THEREFORE,THE WORD ANNUAL HAS BEEN INSERTED.BUT TO BE ELIGIBLE FOR EXEMPTION, AGGREGATE OF ANNUAL RECEIPTS SHOULD NOT EXCEED RS 1 CRORES THE TOTAL ANNUAL REC EIPTS OF A YEAR IF IT DOES NOT EXCEED RS1CRORE,THEN THE INCOME DERIVED FROM SUCH EDUCATIO NAL INSTITUTION IN THE HANDS OF THE ASSESSEE CANNOT BE TAKEN INTO CONSIDERATION TO COMPUTE THE I NCOME OF THE ASSESSEE. 23.NO DOUBT,EDUCATION HAS BECOME A BUSINESS, A VERY PROFITABLE BUSINESS ALSO.BUT IT REQUIRES HUGE INVESTMENT.IT IS THE DUTY OF THE GOVERNMENT TO PROV IDE EDUCATION TO ALL ITS CITIZENS, AS THE GOVERNMENT IS NOT ABLE TO SHOULDER THE RESPONSIBILI TY COMPLETELY.THEREFORE,THE FIELD OF EDUCATION IS NOW THROWN OPEN TO PRIVATE ORGANISATIONS.BUT FOR TH ROWING OPEN THE FIELD TO THE PRIVATE OPERATORS, PROBABLY, THE COUNTRY WOULD NOT HAVE ACHIEVED IN TH E FIELD OF EDUCATION WHAT IT HAS ACHIEVED.THEREFORE, LOT OF FUNDS ARE INVESTED IN RU NNING THESE EDUCATIONAL INSTITUTIONS, EITHER BY CREATING A SOCIETY OR A TRUST IN COURSE OF TIME,THE Y HAVE EXPANDED THEIR ACTIVITY PROVIDING COURSE IN VARIOUS SUBJECTS AT VARIOUS LEVELS AND FOR THAT PURPOSE THEY HAVE ESTABLISHED MORE THAN ONE EDUCATIONAL INSTITUTION.EACH EDUCATIONAL INSTITUTIO N IS A SEPARATE ENTITY .. THUS,IT IS CLEAR THAT FOR CLAIMING EXEMPTION U/S.10 (23C)(IIIAD)THE ASSESSEE HAS TO PROVE THAT IN A PARTICULAR YEAR GRANT RECEIVED BY IT SHOULD NOT EXC EED RS.1 CRORES.IN THE CASE UNDER APPEAL IT IS NOT THE CASE OF THE AO THAT EACH OF THE INSTITUTIONS RU N BY THE ASSESSEE HAD RECEIVED MORE THAN RS. 1 CORES AS GRANT FROM THE GOVERNMENT.TOTAL GRANT RECE IVED BY ALL THE THREE INSTITUTIONS IN THE YEAR DOES NOT EXCEED THE PRESCRIBED MONETARY LIMIT.THUS, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S.10 (23C)(IIIAD) AS IT IS FULFILLING ALL THE CON DITIONS STIPULATED IN THE SECTION.SO, ADDITIONAL GROUND FILED BY THE ASSESSEE STANDS ALLOWED. NOW,WE WOULD LIKE TO DISCUSS THE ISSUE OF SUBSTANT IALLY FINANCED INSTITUTION.WE FIND THAT WORD SUBSTANTIAL HAS NOT BEEN DEFINED IN THE ACT,BUT,IN THE TWO CASES RELIED UPON BY THE AR- SHREE MENAKSHI MILLS LTD.MADURAI(SUPRA) AND CHARATRAM FOU NDATION (SUPRA)-,HONBLE COURTS HAVE TRIED TO DEFINE IT.IN THE CASE OF RAGHUVANSHI MILLS LTD.(41ITR613),WORDS SUBSTANTIALLY INTERESTED HAVE BEEN DISCUSSED WITH REFERENCE TO THE PROVISION S OF SECTION 2(22)(E)OF THE ACT.IN THAT MATTER HONBLE APEX COURT HAS HELD AS UNDER : THE EXPLANATION TO SECTION 23A(1) OF THE INCOME-TA X ACT (PRIOR TO ITS AMENDMENT IN 1955), WHICH PROVIDES WHEN A COMPANY SHALL BE DEEMED TO BE A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, LAYS DOWN, AMONG THE TESTS, THE MINIMUM INTEREST WHICH CAN BE CALLED 'SUBSTANTIAL' BY SAYING THAT SHARES OF THE COMPANY CARRYING NOT LESS THAN 25 PER CENT., OF THE VOTING POWER MUST BE ALLOTTED UNCONDITIONALLY TO, OR ACQUIRED UNCONDITIO NALLY BY, THE PUBLIC AND THEY MUST BE BENEFICIALLY HELD BY THE PUBLIC..FROM THE ABOVE I T IS CLEAR THAT WORD SUBSTANTIAL HAS BEEN GIVEN A WIDE MEANING CONSIDERING THE CONTEXT OF THE MATTE R. IN THE MATTER BEFORE US,AO AND THE FAA HAVE GONE BY THE PERCENTAGE OF GRANT RECEIVED AND FEES/DONATION COLLECTED.WE FIND THAT SIMILAR ISSUE HAD ARISEN THE CASE OF BANGALORE UNIVERSITY (ITA/398/BANG/2007).VIDE IT ORDER DATED MARCH 28,20 08,TRIBUNAL HELD THAT IN CASE IN A YEAR,FEES COLLECTED FROM THE STUDENTS EXCEED THE GRANTS RECEI VED FROM THE GOVERNMENT IT WILL NOT RENDER THAT INSTITUTION OUTSIDE THE PURVIEW OF BEING AN EDUCATI ONAL INSTITUTION EXISTING SOLELY FOR EDUCATION PURPOSE.IN THAT MATTERS OF MAA SARASWATI EDUCATIONA L TRUST,(353ITR312), TOLANI EDUCATION SOCIETY(351ITR184)HONBLE HIGH COURT S OF HIMACHAL PRADESH AND BOMBAY,WHILE DISCUSSING THE PROVISIONS OF SECTION 10(23C) OF THE ACT HAVE HELD THAT BASIC QUESTION TO BE DECIDED UNDER THE SAID SECTION IS TO LOOK IN TO THE PURPOSE AND OBJECT OF THE INSTITUITION.IF IT PRIMARILYEXITS FOR IMPARTING 6 ITA NOS. 346 & 347/NAG/2013 SHRIRAM GRAM VIKASH SHIKS HA SANSTHA . EDUCATION,IT CANNOT BE DENIED EXEMPTION.IF WE CONSI DER THE ACTIVITIES OF THE TRUST,IT BECOMES CLEAR THAT IT IS ENGAGED IN EDUCATIONAL ACTIVITIES.THEREF ORE,CONSIDERING THE PECULIAR FACTS AND CIRCUMSTAN -CES OF THE CASE WE ARE OF THE OPINION THAT TRUST W AS SUBSTANTIALLY FINANCED BY THE GOVERNMENT GRANT AND IS ENTITLED TO CLAIM EXEMPTION U/S.10(23C ) (IIIAB) ALSO. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA/347/NAG/2013-AY2008-09: FACTS OF THE CASE FOR THE YEAR UNDER APPEAL ARE IDE NTICAL TO THE FACTS OF AY-2006-07-THE ONLY EXCEPTION IS ABOUT PERCENTAGE OF GOVERNMENT GRANT R ECEIVED BY THE ASSESSEE.DURING THE YEAR UNDER APPEAL 34% OF TOTAL RECEIPTS WAS FINANCED BY THE GOVERNMENT AND BALANCE WAS RECEIVED BY THE ASSESSEE AS DONATION/FEES FROM THE STUDENTS.WHI LE DECIDING THE APPEAL FOR THE AY 2006-07 WE HAVE HELD THAT ASSESSEE IS ENTITLED TO CLAIM EXEMPT ION U/S 10(23C)(IIIAD).FOLLOWING OUR ORDER FOR THAT YEAR,WE ALLOW THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE AS THE INSTITUTION IS MAINLY ENGAGED IN IMPARTING EDUCATION AND GRANT RECEIVED B Y THE DIFFERENT INSTITUTIONS IS NOT MORE THAN RS.1 CRORE. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR BO TH THE YEARS STANDS ALLOWED. 5 /6 #5/ 7 2 8 '9 ' / ;. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2014. 2!3 1* ! ( 4 =0 , 2014 . SD/- SD/- (H.L.KARWA/ % %% % . . ) ( '!() '!() '!() '!() / RAJENDRA) PRESIDENT/ '& ! ! ! ! 24 24 24 24 /ACCOUNTANT MEMBER / MUMBAI, 2 /DATE: 04.02.2014 SK 2!3 2!3 2!3 2!3 -/ -/ -/ -/ >!*/ >!*/ >!*/ >!*/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / +, 2. RESPONDENT / -.+, 3. THE CONCERNED CIT(A)/ ? @ , 4. THE CONCERNED CIT / ? @ 5. DR ITAT,NAGPUR BENCH/ A -/ , . . ( . - . 6. GUARD FILE/ # = . . / -/ //TRUE COPY// 2!3 / BY ORDER, B / ' DY./ASST. REGISTRAR , /ITAT, MUMBAI.