Gandhi College of Pharmacy, Karnal V. ACIT, New Delhi

ITA 3476/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6738 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Charitable institution; Benefit of exemption; Reassessment proceedings
• Section: 143(3); 142(1); 80G; 12A; 12AA; 263; 28; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. C. M. GARG , JM IT A NO. 3476/DEL/2012 : ASSTT. YEAR : 2004 - 05 GANDHI COLLEGE OF PHARMACY, NEA R ITI CHOWK, G. T. ROAD, KARNAL VS ACIT, CIRCLE, KARNAL (APPELLANT) (RESPONDENT) PAN NO. A AA TG5629D ASSESSEE BY : SH. VED JAIN, ADV., & ASHISH GOEL, CA REVENUE BY : SH. AMRIT LAL, SR. DR DATE OF HEARING : 02.12 .201 6 DATE OF PRONOUNCE MENT : 03 .02 .201 7 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 19.03.2012 OF LD. CIT (A) , KARNAL . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APP EAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BO TH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF A.O. IN HOLDING THAT THE ASSESSES IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 2 (II) THAT THE ABOVE SAID ACTION HAS BEEN CONFIRMED DESPITE THE ASSESSEE COMPLYING ALL THE CONDITIO NS FOR BEING ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 10(23C) (IIIAD) OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN ASSESSING THE INCOME OF THE APPELLANT AT RS. 18,93,376/ - AS AGAINST NIL INCOME RETURNED BY THE APPELLANT. 4 . THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3 . FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMATION OF ADDI TION OF RS.18,93,376/ - MADE BY THE AO BY HOLDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 28.10.2004 DECLARING TAXABLE INCOME AT NIL ON THE GROUND THAT THE INCOME DERIVED FROM THE EDUCATIONAL INSTITUTION WAS EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED EXCESS INCOME OVER EXPENDITURE AT RS.18,93,376/ - , AGAINST THE GROSS RECEIPT OF RS.81,11,289/ - . THE AO FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 27.12.2006 TREATING THE INCOME AS EXEMPT U/S 10(23C)(IIIAD) OF THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 3 ACT. LATER ON, THE LD. CIT, KARNAL VIDE ORDER DATED 24.04 .2008 PASSED U/S 263(1) OF THE ACT, DIRECTED THE AO TO MAKE THE ASSESSMENT DE NOVO BY OBSERVING THAT THE ASSESSMENT ORDER DATED 27.12.2006 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE AO THEREAFTER ASKED THE ASSESSEE TO SHOW CAUSE AND EXPLAIN AS TO WHY EXEMPTION CLA IMED U/S 10(23C)(IIIAD) OF THE A CT BE NOT DISALLOWED SINCE THE COPY OF TRUST DEED WAS FILED UNSIGNED, UNWITNESSED AND UNREGISTERED. 5. IN RESPONSE, THE ASSESSEE FILED THE WRITTEN SUB MISSION WHICH HAD BEEN REPRODUC ED VERBATI M BY THE AO IN PARA 4 OF THE ASSESSMENT ORDER DATED 06.08.2009 AND READ AS UNDER: A) THAT DURING THE ASSESSMENT PROCEED INGS FOR AY 2004 - 05, RECORDS, BO OKS OF ACCOUNTS REQUISITIONED BY THE LD. A.O. FROM TIME TO TIME WAS PRODUCED, TE ST CHECKED AND FOUND CO RRECT AND AFTER COMPLETING THE INQUIRIES THE ID. A.O. HAS NOT FOUND THE ASSESSEE VIOL ATING ANY OF THE PROVISIONS OF SE CTION 10(23C)(IIIAD) OF THE ACT. HENCE ALLOWED THE EXEMPTION. B ) THAT YOUR KIND REFERENCE IS INVITED TO THE PROVISIONS OF THE DEFINITION' O F ASSESSEE U/S 2(31), SECTION 10 (23C)(IIIAD) & SECTION 139 (4C)(E) OF THE ACT WHICH ARE NOT REPRODUCED HERE B Y FOR THE SAKE OF REPETITION. I) IT IS RESPECTFULLY SUBMITTED THAT FOR SATISFYING THE CONDITI ONS LAID DOWN U/S 10(23C)(IIIAD) OF THE ACT UNDER W HICH EXEMPTION HAS BEEN CLAIMED BY THE ASSESSEE, THE FOLLOWING CONDITIONS HAS TO BE SATISFIED: - ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 4 A) THE ASSESSEE MUST BE A UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES; B) NOT FOR PURPOSES OF PROFITS. C) AGGRE GATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS PRESCRIBED UNDER RULE 2BC(1 ) WHICH IS RS. 1.00 CRORES. IN THE CASE OF ASSESSEE THE AGGREGATE ANNUAL RECEIPTS DURING THE F.Y. 2004 - 05 WAS RS.81,11,290.00 WHICH IS WITHIN THE LIMITS PRESCRIBED. THERE IS NO ALLEGATION IN THE ASSESSMENT ORDER FOR A.Y. 2003 - 04 DATED 20.12.2005 THAT THE INCOME OF THE ASSESSEE HAS BEEN DIVERTED OR USED BY ITS MEMBERS OR THEIR FAMILY/ASSOCIATES. NOR ANY SUCH ALLEGATION IS ALLEGED IN PRESENT NOTICE. HENCE IT CAN BE SAFELY BE ARGUED THAT THE ACTIVITIES OF THE INSTITUTION IS CARRIED OUR WITHOUT ANY MOTIVE TO EARN PROFITS AND INCOME RESULTANT IS A MERE SURPLUS WHICH IS BEING ACCUMULATED FOR FURTHERANCE OF AIMS & OBJECTS OF THE INSTITUTION, WHICH ARE PREDOMINANTLY EDUCATIONAL. THE ASSESSEE MUST BE A UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES. THE ASSESSEE IS AN INSTITUTION IMPARTING TWO YEAR DIPLOMA COURSE OF PHARMACY & MEDICAL LA B TECHNOLOGY, IT IS RECOGNIZED BY ALL INDIA COUNCIL FOR TECHNICAL EDUCATION, NEW DELHI AND PHARMACY COUNCIL OF HARYANA. REGULAR CLASSES IS BEING HELD AND RELATIONSHIP OF TEACHER & TAUGHT IS PRESENT. THE INSTITUTION CAME INTO EXISTENCE SINCE 1986 . IT IS PE RTINENT TO MENTION HERE THAT DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2003 - 04 & 2004 - 05 NO OTHER ACTIVITIES OTHER TH AN PROVIDING EDUCATION IS NOT EARNED OUT BY THE ASSESSEE, NOR IT HAS BEEN HELD THAT THE ASSESSEE HAD PURSUED ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 5 ANY OTHER OBJECTS OTHER THAN EDUCATION. HENCE THE ASSESSEE IS AN INSTITUTION EXISTING SOLELY FOR THE PURPOSE OF EDUCATION. THE WORD 'INSTITUTION IS NOT DEFINED TIN DER THE INCOME TAX ACT. IN THE OXFORD ENGLISH DICTIONARY, VOL. V AT P. 354, THE WORD 'INSTITUTION' IS DEFINED TO MEAN 'A N ESTABLISHMENT, ORGANIZATION, OR ASSOCIATION, INSTITUTED FOR THE PROMOTION OF SOME OBJECTS, SPECIALLY ONE OF PUBLIC OR GENERAL UTILITY, RELIGIOUS, CHARITABLE, EDUCATIONAL, ETC'. LORD MACHAGHTEN IN MAYOR & CO. OF MACHESTER V. MC ADAM (1896) AC 300: (1896) 3TC 491, 497 (HL) REPRODUCED IN CIT VS. RADHA SWAMI SATSANG SABHA (1954) 25 ITR 472 (ALL) ' IT MEANS, I SUPPOSE, AN UNDERTAKING FORMED TO PROMOTE SOME DEFINED PURPOSE, HAVING IN VIEW, GENERALL Y THE INSTITUTION OF EDUCATION OF THE PUBLIC. IT IS THE BODY (SO TO SPEAK) CALLED INTO EXISTENCE TO TRANSLATE THE PURPOSE AS CONCEIVED IN THE MIND OF THE FOUNDERS INTO A LIVING AND ACTIVE PRINCIPLE'. HENCE THE ASSESSEE IS AN 'INSTITUTION' WITHIN THE ABOVE DEFINITIO N. AND WITH INSTITUTION D OES NOT MEAN A TRUST OR SOCI ETY REGISTERED UNDER THEIR RESPECTIVE LEGISLATION. THEREFORE, THE ASSESSEE FULFILS ALL THE CONDITIONS LAID DOWN U/S 10(23C)(IIIAD) OF THE ACT FOR CLAIM OF EXEMPTION OF INCOME. WHICH WAS RIGHTLY BEING ALLOWED TO THE ASSESSEE PREVIOUSLY . C) HON'BLE SUPREME COURT IN ADITANAR EDUCATIONAL INSTITUTION ETC. ADD CIT (1997) 224 ITR 310(SC) HAS HELD THAT 'THE LANGUAGE OF SECTION 10(22) IS PLAIN AND CLEAR AND THE AVAILABILITY OF EXEMPTION SHOULD BE EVALUATED EACH YEAR TO FIND OUT WHETHER THE INS TITUTION EXISTED DURING THE RELEVANT YEAR SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFITS. 'AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION, IT WILL NOT CEJ.SE TO BE ARE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 6 EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE OBJECT IS NOT ARE TO MAKE PROFITS.' IN VIEW OF LAW LAID DOWN BY HON'BLE SUPREME COURT, THE EXEMPTION HAS TO BE EVALUATED EACH YEAR, WHICH IS BEING DONE BY YOUR GO OD SELF IN A.Y. 2004 - 05 S INCE THE EXEMPTION HAS TO BE EVALUATED EACH YEAR, ON THE BASIS OF FACTS & CIRCUMSTANCES OF THE CASE. THE HON'BLE SUP REME COURT IN ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTU RER ASSOCIATION (1980) 121 ITR 1( SC) HELD AS UNDER: - 'WHEN THE PURPOSE OF A TRUS T OR INSTITUTION IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT IS THAT OBJECT ITSELF AND NOT ITS ACCOMPLISHMENT OR CARRYING OUT WHICH MUST NOT INVOLVE THE CARRYING OF ANY ACTIVITY FOR PROFITS.' MERELY THERE IS AN INCREASE IN ASSETS & FEES OR T HERE IS PROFIT CANNOT BE HELD AS REASON FOR DISALLOWING CLAIM FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. D) THAT YOUR GOOD SELF ASSESSMENT ORDER DATED 27.12.2006 FOR A.Y. 2004 - 05 HAS TAKEN A POSSIBLE VIEW WHICH IS PERMISSIBLY UNDER THE ACT AND THE VIE W IS BEING TAKEN AFTER CONSIDERING FACTS OF THE CASE, .BOOKS OF ACCOUNTS, REGULAR TEACHINGS/CLASS ROOM EDUCATION, AFFILIATION WITH CENTRAL & STATE GOVERNMENT BODIES AND FINAL A CCOUNTS OF THE ASSESSEE. E) RELIANCE IS ALSO PLACED ON THE FOLLOWING DECI S ION IN THE MATTER. I) CITY MOUNTESSORI SCHOOL VS. ACIT (1999) 64 TTJ (ALL) 475 II) ARVIND BHARTIYA VIDYALAYA SAMITI VS. ITO (2005) 94 TTJ (JP) 614. ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 7 III) AJIT GUPTA VS. ITO (2007) 108 TTJ (DEL ) 301 IV) TRIVENI ENGINEERING LTD. VS. DCIT (2004) 87 TT J (DEL.) 93 V) AQUEL CHARITIES (AQUEL SEWA SANG) VS. ITO (1988) 31 TTJ (DEL) 160. VI) BIRLA VIDHYA VIHAR TRUST VS. CIT (1982) 136 ITR 445 CAL. VII) ACIT VS. RAJAST HAN STATE TEXT BOOK BOARD (2000) 244 ITR 667 (RAJ ) VIII) CIT VS. LAGAN KALA U PVAN (2003) 25 9 ITR 489 (DEL) IX) CIT VS. VIDYA VIKAS VIHAR (2004) 265 ITR 489 (BOM) X) GUJ A RAT STATE CO.OP. UNION VS. CIT (1992) 195 ITR 279 (GUJ.) F) THAT UNDER THE ACT, THE INSTITUTION CLAIMING EXEMPTION OF INCOME UNDER SECTION 10(23C)(IIIAD) OF THE ACT WAS REQUIRED TO FILE THEIR RETURN MANDATORILY W.E.F. A.Y. 2006 - 07. IN THE CASE OF ASSESSEE NEITHER ANY NOTICE U/S 142(1) OR 147/148 OF THE ACT WAS ISSUED FOR COMPLIANCE. THE RETURN WAS FILED VOLUNTARILY AS SELF COMPLIANCE, WITHOUT ANY REQUIREMENT UNDER THE LAW. WHICH PROVES GENUINENESS ON PART OF THE ASSESSEE AND ITS ACTIVITIES I.E. EDUCATION. G) THAT THE WITHOUT PREJUDICE TO OUR ABOVE SAID CONTENTION THE INSTITUTIO N ASSESSEE ABOVE WAS ALSO GOT REGISTERED ON 22.01.2007 AS CHARITABLE TRUST WITH ALL CORPUS FUND AND ASS ETS ACCUMULATED AS ON THAT DATE (COPY ENCLOSED). AS PER TRUST DEED 'NONE OF THE OBJECTS OF THE TRUST SHALL' AT ANY TIME INVOLVE CARRYING ON OF ANY ACTIVITY FOR PROFITS; INCOME OR THE ASSETS OF THE TRUST FUND SHALL NOT BE APPL IED OR TRANSFERRED IN WHOLE OR I N PART FOR ANY PURPOSE OTHER THAN CHARITAB LE AND OR EDUCATIONAL PURPOSES; THE INCOME OR ASSETS OF THE TRUST SHALL NOT BE APPLIED OR USED FOR THE BENEFIT OF THE AUTHORS OF ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 8 THE TRUST, OR ANY PERSON WHO MAKES SUBSTANTIAL CONT RIBUTION OR DONATIONS TO THE TRU S T OR ANY TRUSTEE OR MANAGER OF THIS TRUST AND IN THE EVENT OF DISSOLUTION OF THE TRUST THE TRUST FUND OR SURPLUS OF THE FUNDS SHALL NOT BE TRANSFERRED TO THE TRUSTEES IN ANY MANNER. HOWEVER THE SAME SHALL BE TRANSFERRED TO A LIKE MINDED TRUST DULY APPROVED BY NOT LESS THAN OF THE TRUSTEES PRESENT AT THE MEETING. THEREFORE, THE ASSESSEE HAS ALSO COMPLETED THE REQUIREMENT OF A REGISTERED BODY UNDER A STATUTE, ON WHICH MUCH IMPETUS WAS GIVEN BY THE THEN LD. AO AND LD. CIT(A) IN PROCEEDINGS RELATING TO AY 20 03 - 04, THOUGH NOT NECESSARY. IT IS ALSO PERTINENT TO MENTION HERE THAT THE INCOME TAX ACT HAS NO WHERE PROVIDED THAT FOR CLAIM OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) THE EDUCATIONAL INSTITUTION HAS TO BE A REGISTERED BODY UNDER SOCIETIES . REGISTRATION ACT OR INDIAN TRUST ACT UNDER ANY ACT. IN VIEW OF ABOVE IT IS REQUESTED THAT, NO ADDITION IS CALLED FO R DISALLOWANCE OF EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT, AS PROPOSED I N THE NOTICE IN VIEW OF THE FACTS OF THE CASE AND LAW ON THE SUBJECT. 6 . THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT FOR THE ASSESSMENT YEAR 2003 - 04, IT WAS HELD THAT THE ASSESSEE S SOCIETY SOLELY EXITED FOR THE PURPOSE OF PROFIT AND THE EXEMPTION CLAIMED U/S 10(23C)(IIIAD) OF THE ACT AT RS.3,04,893/ - WAS D ENIED. THE AO ALSO REPRODUCED RELEVANT PARA OF THE SAID ASSESSMENT ORDER IN PARA 5 OF THE ASSESSMENT ORDER DATED 06.08.2009, FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. HE FURTHER OBSERVED THAT APPEAL OF THE ASSESSEE FILED AGAINST THE OR DER DATED 24.04.2008 OF THE LD. CIT, KARNAL WAS DISMISSED BY THE ITAT VIDE ORDER DATED ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 9 12.06.2009 IN ITA NO. 2185/DEL/2008. THE AO ALSO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003 - 04, THE ASSESSEE VIDE ITS REPLY D ATED 22.12.2006 ADMITTED THAT NO TRUST DEED WAS EXECUTED, HOWEVER, IT RA N UNDER A MANAGEMENT COMMITTEE WHICH WAS COMMITTED FOR THE CAUSE OF EDUCATION AND HAD BASIC OBJECT OF IMPARTING EDUCATION WITHOUT ANY MOTIVE TO EARN PROFIT AND THAT IT HAD NOT APPLIED FOR THE REGISTRATION U/S 12A OR 80G OF THE ACT SINCE THE INCOME WAS EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. THE AO FURTHE R OBSERVED THAT THE COPY OF TRU ST DEED FILED BY THE ASSESSEE WAS UNSIGNED, UN WITNESSED AND UNRE GISTERED WHICH REVEALED THAT MR. KAPUR SIN GH AND SOME OF HIS RELATIVES MANAGED AN ORGANIZATION, NAMED, SH. SATYA SAIN FARMING MATROLI AND THAT A SUM OF RS.1.25 LAKH WAS SAVED FROM THE FARMING VENTURE BETWEEN 1972 AND 1980 WHICH WAS DISTRIBUTED AS CHARITY, STIPEND AND SCHOLARSHIP. LATER ON, IT WAS RESOLVED BY T HE TRUSTEES, O N 03.03.1983 TO START AN INSTITUTION FOR IMPARTING EDUCATION, BOTH TECHNICAL AND VOCATIONAL WITH THE NAME OF SH. SATYA SAIN EDUCATIONAL AND VOCATIONAL TRUST - MATROLI (KARNAL), BUT THE FOUNDER OF THE TRUSTEES DID NOT SET APART ANY MONEY FOR THE PURPOSE OF TRUST. THEREFORE, IN THE ABSENCE OF ANY TRANSFER OF MONEY ON THE TRUST BY THE FOUNDER, NO TRUST COULD HAVE COME INTO EXISTENCE. THE AO ALSO OBSERVED THAT IN THE PRESENT CASE, IT APPEARS THAT IT WAS RESOLVED TO ADOPT GANDHI COLLEGE OF PHARMACY FOR MANAGEMENT AND CONTROL UNDER THE TRUST BUT IT WAS NOT KNOWN AS TO WHOM THE AFORESAID ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 10 COLLEGE BELONGED PRIOR TO ITS ADOPTION BY THE ASSESSEE TRUST AND THAT THE TRUST DEED DID NOT CONTAIN ANY CLAUSE REGARDING NON - DISTRIBUTION OF PROFIT TO THE FOUNDER OF THE TRUSTEES AND ALSO DID NOT CONTAIN ANY CLAUSE AS TO HOW THE ASSETS WOULD BE DISPOSED OFF IN CASE OF DISSOLUTION OF THE TRUST. HE, THEREFORE, HE LD THAT THE TRUST DID NOT EXIST FOR CHARITABLE PURPOSES. ACCORDINGLY, T HE AO DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE AND REJECT ED THE REPLY BY OBSERVING AS UNDER: 7( II ) AS REGARDS PARA (B) OF REPLY, THE PROVISIONS OF SECTION 10(23C)(IIIAD) PROHIBITS EXEMPTION TO EDUCATIONAL INST ITUTION EXISTING SOLELY FOR THE PURPOSE OF PROFIT. IN THE CASE OF TH E ASSESSEE, OUT OF GROSS RECEIPT OF RS.8111 290/ - NET SURPLUS INCLUSIVE OF ENDOWMENT FUND IS SHOWN AT RS.1893376/ - WHICH IS 23% OF GROSS RECEIPTS. SIMILAR IS THE POSITION FOR ASSESSMENT YEAR 2003 - 04 WHERE ON GROSS RECEIPTS OF RS. 8545052/ - SURPLU S OF RS. 304893 7 / - HAS BEEN SHOWN AND PERCENTAGE OF PROFIT IS 35%. THE ASSESSEE HAS ADVANCED THE FOLLOWING AMOUNTS TO THE TRUSTEES OF THE TRUST WHICH CLEARLY PROVES THAT THE TRUSTEES HAVE COMPLETE CONTROL OVER THE FINANCIAL AFFAIRS OF THE A LLEGED SOCIETY/T RUST. DHARAM VATI 600000/ - SHAMSHER SINGH 200000 / - LALIT MANN 200000/ - THE ABOVE FIGURES OF PROFIT PROVES BEYOND DOUBT THAT THE ASSESSEE IS EARNING SUSTAINED PROFITS AND DIVERTING THE FUNDS OF THE TRUST FOR PERSONAL BENEFITS OF THE TRUSTEES. THE DEFINITION OF INSTITUTION DEFINED IN THE JUDGEMENT RELIED UPON BY THE ASSESSEE MERELY DEFINES THE WORD INSTI TUTION. THERE IS NOTHING IN THE ALLEGED TRUST DEED, PREVENTING THE APPLICATION ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 11 OF PROFITS OR ASSETS OF THE TRUST FOR THE BENEFITS OF FOUNDER OR ANYONE CLAIMING THROUGH THEM THE TRUSTEES. IN THE YEAR UNDER CONSIDERATION, AS MENTIONED ABOVE, ASSETS WORTH RS.10 LACS HAVE BEEN DIVERTED TO THE ALLEGED TRUSTEES. THE TRUST DEED DOES NOT MENTION AGAINST NON - APPLICATION OF PROFIT OR ASSETS F OR THE BENEFIT OF FOUNDER TO TRUSTEES. THERE IS ALSO NO CLAUSE IN THE TRUST DEED REGARDING NON - DISTRIBUTION OF ASSETS IN CASE OF DISSOLUTION OF THE TRUST. IN VIEW OF THESE FACTS IT IS EVIDENT THAT T HE TRUST EXISTED SOLELY FOR THE PURPOSES OF PROFIT AND IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF I.T. ACT. 7(III) IN PARA (C) OF THE REPLY, THE ASSESSEE HAS RELIED UPON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CA S E OF ADITANAR EDUCATIONAL INSTITUTION ETC. VS ADD CIT (1997) 224 ITR 310(SC). FIRSTL Y THIS JUDGEMENT WAS RENDERED ON THE PROVISIONS OF SECTION 10(22) WHEREAS THE CASE OF THE ASSESSEE FALLS U/S 10(23C)(IIIAD). SECONDLY, THE HON'BLE APEX COURT HAS HELD THAT EXEMPTION HAS TO BE EVALUATED EACH - YEAR. IN THE YEAR UNDER CONSIDERATION, THE ASSESS EE TRUST H AS DECLARED PROFITS MORE THAN 15% OF GROSS RECEIPTS AND HAS ADVANCED THE FUNDS OF THE TRUST TO THE ALLEGED TRUSTEES; WH ICH CONFIRMS THAT THE FUNDS CAN BE USED AT THE DISCRETION OF THE 'TRUSTEES AND THE TRUST EXIST FOR THE PURPOSE OF PROFIT. 7 (IV ) REGARDING PARA (D) OF ASSESSEE' S REPLY, AS ALREADY MENTIONED AB OVE THE ASSESSMEN T ORDER DATED 27.12.2006 FOR A.Y. 2004 - 05 HAS BEEN CANCELLED U/S 263 AND AFTER CANCELLATION AND CONFIRMATION BY ITAT, THE ASSTT. ORDER FOR 2004 - 05 CEASES TO EXIT. THUS, THE A SSESSEE CANNOT RELY UPON ANY FINDINGS GIVEN IN THE ASSTT. ORDER FOR 2004 - 05. 7 (V) THE CASE LAWS RE LIED UPON BY THE ASSESSEE IN PARA (E) OF REPLY WERE RENDERED O N THE PROVISIONS OF SEC, 10(22) OF I.T. ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 12 ACT, WHEREAS THE ASSESSEE IS CLAIMING EXEMPTION U/S 10( 23C(IIIAD). SECTION 10(22) OF I.T. ACT DID NOT LIMIT THE GROSS RECEIPTS AS PRESCRIBED UNDER I.T. RULES FOR BEING ELIGIBLE FOR EXEMPTION UNDER SEC. 10(23C)(IIIAD) THE ASSESSEE HAS TO BE ESTABLISHED THAT THE INSTITUTION DOES NOT EXIST FOR THE PURPOSE OF PROF IT. IN THE ASSESSEE'S CASE, THE ASSESSEE HAS ADVANCED FUNDS OF THE TRUST TO THE TRUSTEES WHICH ARE A CLEAR INDICATION THAT THE TRUST EXIST FOR PROFIT. THE CASE LAWS RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 7 (VI) AS REGARDS PARA (F) OF REPLY, THAT RETURN OF INCOME WAS FILED VOLUNTARILY, THAT DOES NOT ALTER THE FACTUAL POSITION OF THE CASE AND DOES NOT AUTOMATICALLY GRANT EXEMPTION TO THE TRUST. 7 (VII) IN REGARD TO CONTENTIONS MENTIONED IN PARA (G) OF REPL Y, REGISTRA TION OF TRUST ON 22.01.2007 CANNOT CORRECT THE HAPPENINGS EARLIER TO THAT DATE. HENCE, THIS GROUND IS ALSO NOT OF ANY HELP TO THE ASSESSEE. 7 . THE AO ALSO MENT I ONED THAT IN THE CASE OF M/S QUEENS EDUCATION SOCIETY VS CIT, THE HON BLE UTTARANCH AL HIGH COURT HAS HELD THAT THE INSTITUTION EXISTING FOR THE PURPOSE OF PROFIT WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. HE, THEREFORE, BY FOLLOWING THE RATIO LAID DOWN IN THE SAID CASE AND CONSIDERING THIS FACT THAT THE ITAT FOR THE AS SESSMENT YEAR 2003 - 04 IN THE CASE OF THE ASSESSEE HAS HELD THAT THE ASSESSEE TRUST EXISTED FOR THE PURPOSE OF PROFIT AND WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 13 ACT , MADE THE ADDITION OF RS.18,93,376/ - WHICH WAS THE EXCESS OF THE INCOME OV ER EXPENDITURE. 8 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO OBSERVED THAT THE ISSUE WAS DISCUSSED WITH THE COUNSEL OF THE ASSESSEE AND IT WAS NOTED AS PER ORDER SHEET ENTRY DATED 25.10.2011 AS UNDER: 'RELIED ON THE SUBMISSIONS ALREADY FILED. THE FACTS STATED TO BE THAT EXEMPTION CLAIMED U/S 10(23C)(IIIAD) WAS DISALLOWED BY THE A.O. IN THE A.Y. 2003 - 04, WHICH WAS CONFIRMED BY THE CIT(A). THE EXEMPTION WAS, HOWEVER, ALLOWED BY THE AO IN THE A.Y. 2004 - 05, WHICH WAS LATER ON CANCEL LED BY THE CIT U/S 263 OF THE ACT. THE ORDER OF THE CI T(A) IN THE A.Y. 2003 - 04 AND U/S 263 IN THE A.Y. 2004 - 05 WAS CHALLENGED BEFORE THE ITAT. THE ITAT IN ITS COMBINED ORDER REJECTED THE APPEAL OF THE APPELLANT FOR BOTH THE YEARS, AGAINST WHICH THE APPELLA NT STATED TO BE IN HIGH COURT, WHICH IS PENDING. AS FAR AS ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION OF AVAIL - ABILITY OF EXEMPTION U/S 10(23C)(IIIAD ) OF THE ACT IS AS SUCH STAND DECIDED IN FAVOUR OF THE DEPARTMENT BY THE ITAT.' 9 . THE LD. CIT(A) HELD THAT THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT WAS NOT AVAILABLE TO THE ASSESSEE AND ACCORDINGLY THE ACTION OF THE AO FOR REJECTING THE SAME AND TAXING THE INCOME AS PER SECTIONS 28 TO 43 OF THE ACT WAS CONFIRMED. 10 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 14 FURTHER SUBMITTED THAT THE ASSESSEE IS RUNNING A COLLEGE OF PHARMACY WHICH IS DULY APPROVED BY THE PHARMACY COUNCIL OF INDIA AS PER NOTIFICATION DATED 24.05.2002 . A REFERENCE WAS MADE TO PAGE NOS. 34 TO 40 OF THE ASSESSEE S PAPER BOOK. IT WAS FURTHER STATED THAT ALL INDIA COUNCIL FOR TECHNICAL EDUCATION ALSO GRANTED APPROVAL VIDE LETTER DATED 13.08.2002 AND THAT THE ASSESSEE IS ALSO REGISTERED AND ACCREDITED INSTI TUTION OF DIRECTORATE OF TECHNICAL EDUCATION, HARYANA AND THE ADMISSIONS ARE MADE IN TERMS OF THE POLICY OF THE SAID DIRECTORATE. A REFERENCE WAS MADE TO PAGE NOS. 42 TO 68 OF THE ASSESSEE S PAPER BOOK WHICH ARE THE COPIES OF THE ADMISSION BROCHURE FROM DI RECTORATE OF TECHNICAL EDUCATION, HARYANA. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNTS AND HAD RECEIVED FEE OF RS.74,24,840/ - FOR THE YEAR UNDER CONSIDERATION , THERE WAS EXCESS OF INCOME OVE R EXPENDITURE OF RS.7,00,876/ - AND THE ASSESSEE BEING ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT CLAIMED EXEMPTION AND THAT THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) OF THE ACT VIDE ORDER DATED 27.12.2006. THEREAFTER, THE SAID ORDER WAS R EVISED BY THE LD. CIT ON THE GROUND THAT THE AO HAD NOT CARRIED OUT NECESSARY INQUIRY BEFORE GRANTING EXEMPTION VIDE ORDER DATED 24.04.2008. AGAINST THE SAID ORDER, THE ASSESSEE PREFERRED AN APPEAL TO THE ITAT WHEREIN VIDE ORDER DATED 12.06.2009, THE ACTIO N OF THE LD. CIT WAS SUSTAINED FOR COMPLETING THE ASSESSMENT BY THE AO AFTER PROPER ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 15 INQUIRY AND THE REASSESSMENT PROCEEDINGS. IT WAS FURTHER STATED THAT T HE ASSESSEE SUBMITTED ALL THE DETAILS AS CALLED FOR BY THE AO AND IT WAS SUBMITTED THAT THERE BEING NO OTHER ACTIVITIES THEN THE EDUCATIONAL ACTIVITY, T HEREFORE, THE INCOME OF THE ASSESSEE WOULD BE EXEMPT U/S 10(23C)(IIIAD) OF THE ACT. HOWEVER, THE AO DID NOT GRANT EXEMPTION INTER ALIA BY RELYING ON THE JUDGMENT OF HON BLE UTTARAKHAND HIGH COURT IN THE CAS E OF QUEENS EDUCATIONAL SOCIETY VS CIT AND THEREAFTER THE LD. CIT (A) INSTEAD OF EXAMINING THE ISSUE AS DIRECTED BY THE ITAT IN A SUMMARILY MANNER DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE EXEMPTION U/S 10(23C)(IIIA D) OF THE ACT WAS NOT AVAIL ABLE, I N SPITE OF THE FACT THAT THE ASSESSEE HAD CLARIFIED EACH OF THE ISSUE ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED AND THE FINDINGS RECORDED AGAINST IT VIDE REVISIONARY ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT AS WELL AS BY THE ITAT IN TH E PRECEDING YEAR. IT WAS ALSO STATED THAT THE AO WRONGLY HELD THAT THERE WAS NO TRANSFER MONEY AS REQUIRED FOR THE FORMATION OF THE TRUST DEED BECAUSE A SUM OF RS.1.25 LAKH HAD BEEN CONTRIBUTED AS CORPUS AND RS.60,000/ - WAS CONTRIBUTED BY THE 6 TRUSTEES TH EREBY MAKING THE CAPITAL OF THE TRUST AT RS.1.85 LAKH AND ON THE SAID BASIS, THE REGISTRATION HAD BEEN GRANTED LATER ON U/S 12AA OF THE ACT. IT WAS POINTED OUT THAT FOR CREATION OF TRUST THERE NEED NOT BE A FORMAL TRUST DEED AND EVEN THE TRUST CAN BE ORAL AND THAT THE INTENTION OF THE AUTHOR IS SUFFICIENT TO CREATE A TRUST. A RELIANCE WAS PLACED ON THE DECISION S OF THE HON BLE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 16 ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SANT BABA MOHAN SINGH REPORTED AT 118 ITR 1015 AND THE HON BLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS TRUSTEES OF SHRI CUTCHI LOHANA PANCHTADE MAHAJAN TRUST REPORTED AT 98 ITR 448. 11. IT WAS FURTHER STATED THAT THE ASSESSEE IS A N EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE EDUCATIONAL PURPOSES AND RUNNING SCHOOL UPTO CLASS 12 AND A COL LEGE FOR IMPARTING EDUCATION INCLUDING POST GRADUATE EDUCATION AND ALSO PROVIDING RESEARCH FACILITIES IN THE FIELD OF EDUCATION. THEREFORE, THE EXEMPTION U/S 10(23) OF THE ACT WAS ALLOWABLE TO THE ASSESSEE, PARTICULARLY WHEN NOTHING WAS BROUGHT ON RECORD T O SUBSTANTIATE THAT THE ASSESSEE WAS DOING ANY ACTIVITY FOR THE P URPOSE OF PROFIT. THE RELIANCE WAS PLACED ON THE DECISION OF THE ITAT AMRITSAR BENCH IN THE CASE OF ITO VS MODEL INSTITUTE OF EDUCATION & RESEARCH (2001) 77 ITD 375. THE LD. COUNSEL FOR THE A SSESSEE FURTHER SUBMITTED THAT THE AO AS WELL AS THE LD. CIT(A) HAD OVER LOOKED THE INCOME AND EXPENDITURE ACCOUNT FOR THE PRECEDING YEARS STARTING FROM ASSESSMENT YEARS 1999 - 2000 TO 2003 - 04 WHEREIN IT WAS EVIDENT T HAT ALL ALONG THE ACTIVITIES HAVE BEE N ED UCATION AND NOT A SINGLE RUPEE HAS BEEN DISTRIBUTED TO ANYONE . I T WAS CONTENTED THAT NONE OF THE OBJECTS OF THE ASSESSEE TRUST, IT WAS STATED THAT THE MONEY CAN BE UTILIZED FOR THE PURPOSES OF OTHER THAN CHARITABLE PURPOSES AND THAT THE ADVERSE INFERENCE D RAWN BY THE AO REGARDING THE ADVANCES GIVEN TO THE OFFICER BEARERS WAS CLARIFIED VIDE LETTER ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 17 DATED 21.12.2006 AND 27.12.2006 (COPIES OF WHICH ARE PLACED AT PAGE NOS. 76 TO 78 ) WHICH CLARIFIED THAT THE ADVANCES WERE GIVEN FOR THE PURPOSE OF PURCHASE OF EQUI PMENT. 12 . AS REGARDS TO THE APPLICATION OF INCOME, IT WAS STATED THAT THE AO AND THE LD. CIT(A) IGNORED THE EXPLANATION SUPPORTED BY THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION VS ADDL. CIT REPORTED AT 224 IT R 310 . IT WAS SUBMITTED THAT THE JUDGMENT RELIED BY THE AO IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VS CIT HAD BEEN OVERRULED BY THE HON BLE SUPREME COURT VIDE ORDER DATED 16.03.2015 REPORTED AT 275 CTR 449 (COPY OF THE ORDER WAS FURNISHED WHICH IS PLACED ON THE RECORD) . IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD COMPLIED WITH ALL THE CONDITIONS FOR CLAIMING THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT AND IT IS AN EDUCATIONAL INSTITUTION DULY RECOGNIZED AND REGISTER ED WHICH APPLIED ITS INCOME ONLY FOR EDUCATION AND HAS NOT DISTRIBUTED ANY PROFITS, I TS RECEIPTS WERE LESS THAN RS.1 CRORE. THEREFORE , IT WAS NOT REQUIRED TO GET ANY APPROVAL FROM ANY INCOME TAX AUTHORITY FOR CLAIMING EXEMPTION U/S 10(23C)(IIIAD) OF THE AC T AND THAT IT IS OPTIONAL TO GET THE REGISTRATION U/S 12AA OF THE ACT IN CASE OF AN EDUCATIONAL INSTITUTION HAVING ANNUAL RECEIPTS OF LESS THAN RS.1 CRORE. IT WAS CONTENDED THAT IT WAS OPTIONAL TO CLAIM EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT OR SECTION 11 OF THE ACT AS THE ASSESSEE IS AN EDUCATIONAL INSTITUTION. THEREFORE, ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 18 THE EXEMPTION CLAIMED U/S 10(23C)(IIIAD) OF THE ACT NEEDS TO BE ALLOWED. IT WAS ALSO POINTED OUT THAT WHEN THE RECEIPTS EXCEEDED RS.1 CRORE, REGISTRATION U/S 12AA OF THE ACT HAS BEEN GRA NTED TO THE ASSESSEE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: QUEEN S EDUCATIONAL SOCIETY VS CIT REPORTED AT 275 CTR 449 VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS ACIT (2016) 4 TMI 874 SC PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. VS UNIO N OF INDIA & ORS. (2010) 327 ITR 0073 13 . IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE DID NOT FURNISH ANY TRUST DEED AND EVEN IT WAS NOT REGISTERED U/S 12AA OF THE ACT AND A TRUST TO BE ELIGIBLE FOR EXEMPTION IS REQUIRED THE REGISTRATION U/S 12AA OF THE ACT, WHICH THE ASSESSEE DID NOT HAVE, MOREOVER, THE ASSESSEE CHARGED THE FEE AND DURING THE YEAR UNDER CONSIDERATION THERE WAS INCREASE IN THE FEE CHARGED FROM STUDENTS A ND THE ASSESSEE WAS MAKING PROFIT , IT WAS RUN F OR THE PURPOSE OF PROFIT MAKING. THEREFORE, THE EXEMPTION U/S 10(23), 11, 12 OF THE ACT WAS NOT AVAILABLE TO THE ASSESSEE AND THE LD. CIT(A) RIGHTLY CONFIRMED THE ACTION OF THE AO IN DENYING THE EXEMPTION TO T HE ASSESSEE U/S 10(23C)(IIIAD) OF THE ACT. 14 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 19 PRESENT CASE, THE FIRST ALLEGATION OF THE AO WHILE DENYING THE EXEMPTION U/S 10(2 3C(IIIAD) OF THE ACT WAS THAT THERE WAS NO WRITTEN TRUST DEED. IN THIS REGARD, IT IS RELEVANT TO POINT OUT THAT THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SANT BABA MOHAN SINGH (SUPRA) HELD THAT A CHARITABLE TRUST MAY BE CREATED BY WORDS SUFFIC IENT TO SHOW THE INTENTION, SO LONG AS THERE IS A CLEAR MANIFESTATION OF INTENTION TO CREATE A CHARITABLE OR RELIGIOUS TRUST AND THERE IS A FORMAL VESTING OF OWNERSHIP OF THE PROPERTY . A SIMILAR VIEW HAS BEEN TAKEN BY THE HON BLE BOMBAY HIGH COURT IN THE C ASE OF TRUSTEES OF SHRI CUTCHI LOHANA PANCHTADE MAHAJAN TRUST REPORTED AT (1975) 98 ITR 448 (SUPRA) WHEREIN IT HAS BEEN HELD THAT A CHARITABLE TRUST NEED NOT BE CREATED BY A FORMAL DOCUMENT AND WHERE THE STATEMENTS IN THE CONVEYANCE DEED CLEARLY SHOWED TH AT THE PROPERTY IS TO BE HELD UNDER LEGAL OBLIGATION FOR CHARITABLE PURPOSE, THE INCOME OF SUCH PROPERTY IS EXEMPT U/S 4(3)(I) OF THE ACT . IN THE PRESENT CASE ALSO THE TRUSTEES AND THE AUTHOR HAD MANIFESTED A SUM OF RS.1.85 CRORE AS CORPUS FUND OF THE TRU ST FOR FULFILLMENT OF ITS AIMS AND OBJECTS. THEREFORE, EVEN IF THE TRUST DEED WAS UNSIGNED AND NOT WITNESSED AS POINTED OUT BY THE AO, THE BENEFIT OF EXEMPTION CANNOT BE DENIED TO THE ASSESSEE. IN THE PRESENT CASE, WHILE DENYING THE EXEMPTION U/S 10(23C)(I IIAD) OF THE ACT TO THE ASSESSEE, T HE AO RELIED ON THE DECISION OF THE HON BLE UTTARAKHAND HIGH COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VS CIT. THE SAID JUDGMENT HAS BEEN OVERRULED BY THE HON BLE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 20 SUPREME COURT VIDE ORDER DATED 16.03.2015 REPORTED A T 275 CTR 449. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS RUNNING A COLLEGE OF PHARMACY WHICH IS DULY APPROVED BY THE PHARMACY COUNCIL OF INDIA AS PER NOTIFICATION DATED 24.05.2002 (COPY OF WHICH IS PLACED AT PAGE NO. 36 OF THE ASSESSEE S PAPER BOOK). THE ASSESSEE IS ALSO REGISTERED AND ACCREDITED INSTITUTION OF DIRECTORATE OF TECHNICAL EDUCATION, HARYANA WHICH IS EVIDENT FROM PAGE NO. 45 OF THE ASSESSEE S PAPER BOOK WHICH IS THE COPY OF THE LIST OF THE INSTITUTION AFFILIATED FOR THE SES SION 2002 - 03 TO THE TECHNICAL EDUCATION, HARYANA AND THE NAME OF THE ASSESSEE IS APPEARING AT SERIAL NO. 9 OF THE SAID LIST. THEREFORE, IT IS CLEAR THAT THE ASSESSEE IS RUNNING A COLLEGE OF PHARMACY AND AS SUCH ENGAGED IN THE EDUCATIONAL ACTIVITIES. THE AS SESSEE HAS RECEIVED FEE OF RS.74,24,840/ - AS MENTIONED IN THE INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31 ST MARCH, 2004 (COPY OF WHICH IS PLACED AT PAGE NO. 4 OF THE ASSESSEE S PAPER BOOK ) . FROM THE AFORESAID FACTS, IT IS CLEAR THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTION WHICH IS DULY RECOGNIZED AND REGISTERED, IT HAS APPLIED HIS INCOME FOR THE PURPOSES OF EDUCATION AND HAD NOT DISTRIBUTED ANY PROFIT. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT . A ND AS THE G ROSS RECEIPTS OF THE ASSESSEE ARE LESS THAN RS.1 CRORE, SO IT IS NOT REQUIRED TO GET THE APPROVAL FROM THE INCOME TAX AUTHORITY FOR CLAIMING THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT . IN OUR OPINION, FOR GETTING THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 21 EXEMPTION UNDER THE SAID SECTION , THER E IS NO CONDITION THAT A REGISTRATION U/S 12AA OF THE ACT IS REQUIRED. IN THE INSTANCE CASE, AS WE HAVE POINTED OUT EARLIER THAT THE AO WHILE DISALLOWING THE CLAIM OF THE ASSESSEE HEAVILY RELIED ON THE DECISION OF THE HON BLE UTTARAKHAND HIGH COURT IN THE CASE QUEENS EDUCATIONAL SOCIETY VS CIT WHICH HAS BEEN OVERRULED BY THE HOB BLE APEX COURT VIDE ORDER DATED 26.03.2015 REPORTED AT 275 CTR 449 WHEREIN THEIR LORDSHIPS IN PARAS 24 & 25 HELD AS UNDER: 24 . THE VIEW OF THE PUNJAB AND HARYANA HIGH COURT HAS BE EN FOLLOWED BY THE DELHI HIGH COURT IN ST. LAWRENCE EDUCATIONAL SOCIETY (REGD.) V. CIT & ANR. (2011) 53 DTR (DEL) 130. ALSO IN TOLANI ED U CATION SOCIETY V. DY. DIT (EXE MPTIONS) AND ORS. [2013] 35 1 ITR 184 , THE BOMBAY HIGH COURT HAS EXPRESSED A VIEW IN LINE WITH THE PUNJAB AND HARYANA HIGH COURT VIEW, FOLLOWING THE JUDGMENTS OF THIS CO URT IN THE SURAT ART SILK CLOTH MFRS. ASSOCIATION CASE ( SUPRA ) AND ADITANAR EDUCATIONAL INSTITUTION CASE ( SUPRA ) AS FOLLOWS: ' ..THE FACT THAT THE PETITIONER HAS A SURPLUS OF INCOME OVER EXPENDITURE FOR THE THREE YEARS IN QUESTION, CANNOT BY ANY STRETCH O F LOGICAL REASONING LEAD TO THE CONCLUSION THAT THE PETITIONER DOES NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES OR, AS THAT CHIEF COMMISSIONER HELD THAT THE PETITIONER EXISTS FOR PROFIT. THE TEST TO BE APPLIED IS AS TO WHETHER THE PREDOMINANT NATURE OF THE A CTIVITY IS EDUCATIONAL. IN THE PRESENT CASE, THE SOLE AND DOMINANT NATURE OF THE ACTIVITY IS EDUCATION AND THE PETITIONER EXISTS SOLELY FOR THE PURPOSES OF IMPARTING EDUCATION. AN INCIDENTAL SURPLUS WHICH IS GENERATED, AND WHICH HAS RESULTED IN ADDITIONS T O THE FIXED ASSETS IS UTILIZED AS THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 22 BALANCE - SHEET WOULD INDICATE TOWARDS UPGRADING THE FACILITIES OF THE COLLEGE INCLUDING FOR THE PURCHASE OF LIBRARY BOOKS AND THE IMPROVEMENT OF INFRASTRUCTURE. WITH THE ADVANCEMENT OF TECHNOLOGY, NO COLLEGE OR INSTITUT ION CAN AFFORD TO REMAIN STAGNANT. THE INCOME - TAX ACT 1961 DOES NOT CONDITION THE GRANT OF AN EXEMPTION UNDER SECTION 10(23C) ON THE REQUIREMENT THAT A COLLEGE MUST MAINTAIN THE STATUS - QUO, AS IT WERE, IN REGARD TO ITS KNOWLEDGE BASED INFRASTRUCTURE. NOR F OR THAT MATTER IS AN EDUCATIONAL INSTITUTION PROHIBITED FROM UPGRADING ITS INFRASTRUCTURE ON EDUCATIONAL FACILITIES SAVE ON THE PAIN OF LOSING THE BENEFIT OF THE EXEMPTION UNDER SECTION 10(23C). IMPOSING SUCH A CONDITION WHICH IS NOT CONTAINED IN THE STATU TE WOULD LEAD TO A PERVERSION OF THE BASIC PURPOSE FOR WHICH SUCH EXEMPTIONS HAVE BEEN GRANTED TO EDUCATIONAL INSTITUTIONS. KNOWLEDGE IN CONTEMPORARY TIMES IS TECHNOLOGY DRIVEN. EDUCATIONAL INSTITUTIONS HAVE TO MODERNISE, UPGRADE AND RESPOND TO THE CHANGIN G ETHOS OF EDUCATION. EDUCATION HAS TO BE RESPONSIVE TO A RAPIDLY EVOLVING SOCIETY. THE PROVISIONS OF SECTION 10(23C) CANNOT BE INTERPRETED REGRESSIVELY TO DENY EXEMPTIONS. SO LONG AS THE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROF IT, THE TEST IS MET.' 25 . WE APPROVE THE JUDGMENTS OF THE PUNJAB AND HARYANA, DELHI AND BOMBAY HIGH COURTS. SINCE WE HAVE SET ASIDE THE JUDGMENT OF THE UTTARAKHAND HIGH COURT AND SINCE THE CHIEF CIT'S ORDERS CANCELLING EXEMPTION WHICH WERE SET ASIDE BY TH E PUNJAB AND HARYANA HIGH COURT WERE PASSED ALMOST SOLELY UPON THE LAW DECLARED BY THE UTTARAKHAND HIGH COURT, IT IS CLEAR THAT THESE ORDERS CANNOT STAND. CONSEQUENTLY, REVENUE'S APPEALS FROM THE PUNJAB AND HARYANA HIGH COURT'S JUDGMENT DATED 29.1.2010 AND THE ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 23 JUDGMENTS FOLLOWING IT ARE DISMISSED. WE REITERATE THAT THE CORRECT TESTS WHICH HAVE BEEN CULLED OUT IN THE THREE SUPREME COURT JUDGMENTS STATED ABOVE, NAMELY, SURAT ART SILK CLOTH, ADITANAR, AND AMERICAN HOTEL AND LODGING, WOULD ALL APPLY TO DETERMIN E WHETHER AN EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. IN ADDITION, WE HASTEN TO ADD THAT THE 13TH PROVISO TO SECTION 10(23C) IS OF GREAT IMPORTANCE IN THAT ASSESSING AUTHORITIES MUST CONTINUOUSLY MONITO R FROM ASSESSMENT YEAR TO ASSESSMENT YEAR WHETHER SUCH INSTITUTIONS CONTINUE TO APPLY THEIR INCOME AND INVEST OR DEPOSIT THEIR FUNDS IN ACCORDANCE WITH THE LAW LAID DOWN. FURTHER, IT IS OF GREAT IMPORTANCE THAT THE ACTIVITIES OF SUCH INSTITUTIONS BE LOOKED AT CAREFULLY. IF THEY ARE NOT GENUINE, OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ALL OR ANY OF THE CONDITIONS SUBJECT TO WHICH APPROVAL HAS BEEN GIVEN, SUCH APPROVAL AND EXEMPTION MUST FORTHWITH BE WITHDRAWN. ALL THESE CASES ARE DISPOSED OF MAKING I T CLEAR THAT REVENUE IS AT LIBERTY TO PASS FRESH ORDERS IF SUCH NECESSITY IS FELT AFTER TAKING INTO CONSIDERATION THE VARIOUS PROVISIONS OF LAW CONTAINED IN SECTION 10(23C) READ WITH SECTION 11 OF THE INCOME TAX ACT. 15 . WE, THEREFORE BY CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED H E REINABOVE AND KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE AFORESAID REFERRED TO CASE OF QUEENS EDUCATIONAL SOCIETY VS CIT (SUPRA) ARE OF THE VIEW THAT THE LD. CIT WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO FOR DENYING THE EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT TO THE ASSESSEE . ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. ITA NO . 3476 /DE L/201 2 GANDHI COLLEGE OF PHARMACY 24 1 6 . IN THE R ESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (O RDER PRONOUNCED IN THE COU RT ON 03 /02 /2017 ) SD/ - SD/ - ( C. M. GARG ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03 /02 /2 017 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR