Adarsh Public School, Noida V. JCIT, Noida

ITA 3782/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3687 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT
• Assessee Lawyers: K C SINGHAL
• Keywords: Business income; Charitable institution; Competent authority
• Section: 143(3); 12A; 10B; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI O. P. KANT, ACCOUNTANT MEMBER I.T.A. NO.3782/DEL/2017 ASSESSMENT YEAR: 2011-12 ADARSH PUBLIC SCHOOL, B-193, SECTOR 52, NOIDA V. JOINT CIT, RANGE-1, NOIDA TAN/PAN: AAATA 6510D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.C. SINGHAL, ADV. RESPONDENT BY: SHRI RAVI KANT, SR.D.R. DATE OF HEARING: 29 01 2018 DATE OF PRONOUNCEMENT: 31 01 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 30/03/2017 PASSED BY TH E LD. CIT (APPEALS)-I, NOIDA FOR THE QUANTUM OF ASSESSMENT PASS ED U/S.143(3) FOR THE ASSESSMENT YEAR 2011-12. THE ASS ESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT (APPEAL) HAS ERRED, IN LAW, IN ISSUING THE NOTICE U/S 251(2) OF THE I.T. ACT 1961. 2. THE LD. CIT (APPEAL) HAS ERRED, IN LAW, IN HOLDING THAT INCOME OF EDUCATIONAL INSTITUTIONS IS TO BE DEALT WITH FOR EX EMPTION FROM THE INCIDENCE OF TAX U/S 10(23)(C) ONLY AND NOT UNDER T HE PROVISIONS OF SECTIONS 11 & 12 OF THE ACT. 3. THE LD. CIT(APPEAL) HAS ERRED, ON FACTS & IN LAW, IN HOLDING THAT INCOME OF THE APPELLANT SOCIETY BY WAY OF FEES & OT HER CHARGES FROM THE STUDENTS CANNOT BE SAID TO BE INCOME FROM PROPERTY HELD UNDER TRUST AND THEREFORE NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. I.T.A. NO.3782/DEL/2017 2 4. THE LD. CIT (APPEAL) HAS ERRED, ON FACTS & IN LAW, IN HOLDING THAT COST OF EDUCATION CANNOT BE RECOVERED BY EDUCATIONA L INSTITUTIONS FROM THE STUDENTS BY WAY OF FEES AND THEREFORE CANNOT BE ADJ USTED AGAINST THE EXPENDITURE INCURRED. 5. THE LD. CIT (APPEAL) HAS ERRED IN HOLDING THAT DON ATIONS RECEIVED BY THE APPELLANT ARE NOT ELIGIBLE TO EXEMPTION BEIN G IN VIOLATION OF THE PROVISIONS OF SECTION 11(1)(D) IN AS MUCH AS SUCH O BSERVATIONS HAVE BEEN MADE CONTRARY TO FACTS & WITHOUT APPLICATION OF MIN D. 6. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT (APPEAL) H AS ERRED, ON FACTS & IN LAW, IN HOLDING THAT INCOME OF THE APPEL LANT CANNOT BE ASSESSED UNDER THE HEAD 'PROFITS & GAINS FROM BUSINESS OR PR OFESSION' EVEN WHERE EXEMPTION U/S 10 OR 11 IS NOT TO BE ALLOWED. 7. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT (APPEAL) HA S ERRED, ON FACTS & IN LAW, IN HOLDING THAT INCOME OF THE APPELLANT H AS TO BE ASSESSED UNDER THE RESIDUAL HEAD 'INCOME FROM OTHER SOURCES' BUT THE EXPENDITURE INCURRED FOR RUNNING THE SCHOOL CANNOT BE ALLOWED A S DEDUCTION U/S 57. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A S OCIETY REGISTERED UNDER REGISTRATION OF SOCIETIES ACT, 1860, WHICH IS CARRYING OUT EDUCATIONAL ACTIVITIES UPTO SENIOR SECOND ARY LEVEL AND A RUNNING SCHOOL IN THE NAME OF ADARSH PUBLIC S CHOOL IN NOIDA. LOOKING TO ITS ACTIVITIES FOR CHARITABLE PURPO SES IN TERMS OF SECTION 2(15), I.E., EDUCATION IT HAS BEEN GRANTE D REGISTRATION U/S.12A BY THE COMMISSIONER OF INCOME TAX, GHAZIABAD , VIDE CERTIFICATE DATED 05.09.2013. ACCORDINGLY, THE ASSESSE E WAS ENTITLED FOR BENEFITS U/SS.11 & 12 OF THE IT ACT. IT HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 08 .08.2011, DECLARING NIL INCOME AFTER COMPUTING THE INCOME AS PER SECTION 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON PERUSAL OF THE ITR AND ANNEXURE THERETO NOTE D THAT, THERE IS NO AUDIT REPORT AS REQUIRED U/S.12A (B) IN FO RM 10B. HE OBSERVED THAT IN ABSENCE OF SUCH REPORT THE BENEFIT OF SECTIONS 11 & 12 CANNOT BE ALLOWED. IN RESPONSE TO THE SHOW CAUSE NOTICE AS TO I.T.A. NO.3782/DEL/2017 3 WHY CLAIM OF EXEMPTION SHOULD NOT BE DISALLOWED, THE ASSESSEE VIDE LETTER DATED 23.01.2014, FILED A COPY OF FORM 1 0B, HOWEVER AS PER THE AO, ASSESSEE DID NOT GIVE ANY EXPLANATION. THE ASSESSING OFFICER ON THE PERUSAL OF THE SAID AUDIT REPORT DATED 18.07.2011 OBSERVED THAT, IT APPEARS TO HAVE BEEN PREPARED RECENT LY AND HAS BEEN BACK DATED JUST TO SHOW THAT THIS AUDIT REPORT WAS OBTAINED IN TIME. IN SUPPORT OF HIS OBSERVATION, HE HAS POINTED OUT CERTAIN DISCREPANCIES WHICH HAVE BEEN HIGHLIGHTED AT PAGES 2 TO 3 OF THE ASSESSMENT ORDER. THUS, HE DENIED THE EXEMPTION U/SS.1 1 & 12 AND TAXED THE SURPLUS INCOME OF RS.6,63,292/- IN THE FOLLOWING MANNER:- GROSS RECEIPTS AS PER INCOME AND EXPENDITURE ACCOUNT DISCLOSED BY THE ASSESSEE : RS .1,04,85,689 (-) APPLICATION OF INCOME : RS .98,22,397 TAXABLE INCOME : RS.6,32,292 3. AGGRIEVED BY THE SAID DENIAL OF BENEFIT OF SECTION 11 FOR THE AFORESAID REASON AND TAXING OF SURPLUS, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A). HOWEVER, THE LD. CIT ( A) VACATED THE FINDING AND THE REASONING OF THE ASSESSING OFFICER THA T AUDIT REPORT IN FORM 10B IS BACK DATED AND ACCEPTED THE ASSESSEE S CONTENTION ON THIS ASPECT, BUT PROCEEDED TO ISSUE A NOTICE OF ENHAN CEMENT U/S.251 (2) MAINLY ON THE FOLLOWING REASONS:- (I) THAT MERE REGISTRATION U/S 12A OF THE ACT IS NOT ENOUGH FOR CLAIMING EXEMPTION U/S 11 UNLESS CONDITIONS SPECI FIED IN SECTIONS 11 TO 13 ARE SATISFIED. ACCORDING TO HIM, THE PERSON CLAIMING EXEMPTION MUST SATISFY THE CONDITION SPECIFIED U/S 11(1) TO THE EFFECT THAT INCOME, SOUGHT TO BE EXEMPT, MUS T BE DERIVED FROM PROPERTY HELD UNDER TRUST. IN OTHER WORDS , I.T.A. NO.3782/DEL/2017 4 INCOME DERIVED BY IT FROM AN ACTIVITY OF RUNNING SCH OOL CANNOT BE SAID TO BE INCOME FROM PROPERTY HELD UNDE R TRUST IN AS MUCH AS SUCH ACTIVITY DOES NOT AMOUNT TO BE A PROPERTY HELD UNDER THE TRUST. ACCORDING TO HIM, BALAN CE SHEET OF THE ASSESSEE DOES NOT DISCLOSE ANY PROPERTY F ROM WHICH ANY INCOME IS DERIVED. (II) SINCE THE APPELLANT IS NOT ELIGIBLE FOR EXEMPTION U/S 1 1, THEREFORE, THE ENTIRE RECEIPTS BY WAY OF FEES AND OTHER CHARGES FROM THE STUDENTS WOULD BE TREATED AS ITS INCO ME FOR THE REASONS THAT, FIRSTLY , SINCE THE APPELLANT IS NOT CLAIMING ANY INCOME U/S 28, THEREFORE, THE QUESTION OF ALLOWING ANY DEDUCTION INCURRED DOES NOT ARISE; AND SECONDLY , ONCE THE INCOME IS FOUND TO BE NOT ELIGIBLE FOR EXEMPTION U/S 1 1, THE PROVISIONS OF CHAPTER IV-D WOULD NOT APPLY. 4. THEREAFTER, THE LD. CIT (A) DISCUSSED IN DETAIL THE CONCEPT AND THEORY OF CHARITABLE PURPOSES AS DEFINED IN SEC TION 2(15) AND CONDITIONS LAID DOWN IN SECTIONS 11 TO 13 FOR GRANTING OF BENEFIT. THE DETAILED DISCUSSION ON PROVISION OF LAW HAS BEE N DISCUSSED FROM PARAGRAPHS 14 TO 60 (PAGES 4 TO 18 OF THE APPELLA TE ORDER), WHICH BEING OF PURE ACADEMIC IN NATURE, HENCE NO DIS CUSSION AS SUCH IS REQUIRED TO BE DEALT WITH. HE HAS ALSO REFERRE D TO FOLLOWING JUDGMENTS AND PROPOSITIONS LAID DOWN BY THE HON'BLE A PEX COURT: (I) ACIT VS. SURAT ART & SILK CLOTH MANUFACTURERS ASSOCIATION, SURAT, (1980) AIR 387 SC. (II) MS MOHINI JAIN VS. STATE OF KARNATAKA AND OTHERS , (1992) AIR 185 SC. (III) UNNIKRISHNAN J.P. & ORS. ETC. VS. STATE OF ANDHRA PRADESH & ORS. (1993) AIR 2178 SC I.T.A. NO.3782/DEL/2017 5 (IV) TMA PAI FOUNDATION & ORS. VS. STATE OF KARNATAK A & ORS., (2002) 8 SCC 481 (V) ISLAMIC ACADEMY OF EDUCATION & ANR. VS. STATE OF KARNATAKA & ORS. (2003) 6 SCC 697. (VI) PA INAMDAR & ORS. STATE OF MAHARASHTRA & ORS. ( 2005) AIR 3226 SC. 5. LD. CIT (A) ALSO DISCUSSED THE PROVISIONS OF SECTI ON 10(23C)(IV) & (V) AND OBSERVED THAT, ONCE THE INCOME OF EDUCATIONAL INSTITUTION ARE EXEMPTED U/S.10(23C), TH EN LEGISLATURE DOES NOT INTEND TO GIVE SAME BENEFIT IN SECTIONS 11 & 12 AGAIN. ACCORDING TO HIM THERE IS NO CONFLICT AND OVERLAPPING BETWEEN THE PROVISION CONTAINED IN SECTIONS 11 TO 12 AND SECTION 1 0(23C). ON THIS GROUND, HE HELD THAT ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/SS.11 AND 12, ONCE THE PROVISION OF SECTION 10(23C) (IV) AND (V) ARE APPLICABLE. THEREAFTER REFERRING TO VARIOUS JUD GMENTS, HE HELD THAT, SINCE IMPARTING OF EDUCATION IS A MATTER OF PURE CHARITY, THEREFORE, THE EDUCATIONAL INSTITUTIONS ARE NOT PERMITTED TO RECEIVE OR RECOVER THE COST OF CHARITY FROM ITS BENEFICIARIES BY WAY OF CHARGING FEES. IN OTHER WORDS, ACCORDING TO HIM, CH ARGING OF FEES WOULD AMOUNT TO UNCHARITABLE ACTIVITIES AND IN THIS CONT EXT HE HAS REFERRED TO THE AFORESAID JUDGMENTS OF HON'BLE SUPREME COURT. IN HIS EXHAUSTIVE AND ELABORATE ORDER, HE HAS DISCUSSE D THE ENTIRE CONCEPT OF CHARITY AS ENSHRINED IN SECTION 2(15) AND PROCEDURE LAID DOWN IN SECTIONS 11 TO 13. HOWEVER, THE RELEVANC E FOR SUCH AN ELABORATE DISCUSSION DOES NOT SEEM TO BE APPROPRIATE ON THE FACTS OF THE ASSESSEES CASE. INTERPRETING THE PROVISION CON TAINED IN SECTION 11, LD. CIT (A) HAS GONE TO THE EXTENT OF HOLD ING THAT THE BENEFIT IS ONLY AVAILABLE TO A TRUST, BECAUSE THE WO RD USED IN SECTION 11(1)(A) IS THAT, INCOME SHOULD BE DERIVED FROM THE PROPERTY I.T.A. NO.3782/DEL/2017 6 HELD UNDER THE TRUST WHOLLY FOR CHARITABLE OR RELIG IOUS PURPOSE . ASSESSEE BEING A SOCIETY AND IS NOT A TRUST, HENCE I T IS NOT ENTITLED FOR BENEFIT U/S.11. ACCORDING TO HIM, SINCE SOURCES O F INCOME ARE STUDENTS, THEREFORE, STUDENTS CANNOT BE RECKONED AS PROP ERTY HELD UNDER THE TRUST AND ACTIVITY OF IMPARTING EDUCATION A LSO CANNOT BE RECKONED AS PROPERTY. IN HIS VIEW, SELF IMPOSED OBL IGATION TO DO CHARITY CANNOT BE HELD TO BE PROPERTY AND DONATION REC EIPT BY THE ASSESSEE CANNOT BE HELD TO BE VOLUNTARILY. AFTER MAKING SUCH OBSERVATIONS HE HELD THAT; FIRSTLY , ASSESSEE IS NOT ENTITLED FOR BENEFIT U/SS.11 AND 12; SECONDLY , ITS INCOME CANNOT BE TAXED AS BUSINESS INCOME, ALBEIT IT HAS TO BE TAXED AS INCOME FROM OTHER SOURCES U/S.56(1); AND LASTLY , THE ASSESSEE IS NOT ENTITLED FOR ANY DEDUCTION AGAINST ITS INCOME UNDER THE PROVISION OF SECTION 57 AN D ACCORDINGLY THE ENTIRE RECEIPTS OF RS.1,04,85,689/- WO ULD BE TAXED. THUS, THE ENTIRE RECEIPTS STOOD TAXED BY THE LD. CIT (A). 6. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE, MR. K. C. SINGHAL, AFTER DRAWING OUR ATTENTION TO THE VARIOUS OBS ERVATIONS OF THE LD. CIT(A), SUBMITTED THAT MAINLY THREE REASONS HAVE BEEN GIVEN BY THE LD. CIT(A) TO TAX THE ENTIRE RECEIPTS:- (I) SINCE THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SP ECIFIC PROVISION OF SECTION 10(23C) THEN IT CANNOT AVAIL EXEM PTION UNDER THE GENERAL PROVISION OF SECTION 11; I.T.A. NO.3782/DEL/2017 7 (II) INCOME DERIVED BY THE ASSESSEE FROM ITS ACTIVITY OF RUNNING SCHOOL CANNOT SAID TO BE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST; (III) CHARGING OF FEES AMOUNTS TO UNDER CHARITABLE ACTIVITIES BECAUSE EDUCATIONAL INSTITUTIONS ARE NOT PERMITTED TO E XTRACT OR RECOVER THE COST OF CHARITY FROM ITS BENEFICIARIES BY WAY OF FEES. 7. IN SUPPORT OF THE AFORESAID REASONING, LD. CIT (A) HAS REFERRED TO CERTAIN JUDGMENTS OF HON'BLE SUPREME COURT WHICH ACCORDING TO LEARNED COUNSEL HAS NO APPLICABILITY AT ALL ON THE FACTS OF THE ASSESSEES CASE, ALBEIT IN PRINCIPLE THEY SUPPORT THE CASE OF THE ASSESSEE. ON THE FIRST ISSUE HE SUBMITTED THAT, NOW THIS ISSUE STANDS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDIAN INSTITUTE OF ENGINEERING SOCIETY (2013) 218 TAXMAN 1 51 (ALLD); AND PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. MAHASABHA GURUKUL VIDHAYPEETH (2010) 326 ITR 26 ( P & H), WHEREIN IN BOTH THE JUDGMENTS IT HAS BEEN HELD THAT CLAI M U/S.11 CANNOT BE DENIED MERELY BECAUSE THE ASSESSEE DID NOT A VAIL EXEMPTION U/S.10(23C). HE FURTHER SUBMITTED THAT SIMILAR OBSERVATION HAS BEEN MADE BY THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. BAR COUNCIL OF MAHARASHTRA, (1981) 130 ITR 2 8 (SC) , WHEREIN THE HON'BLE APEX COURT HELD THAT THERE ARE OTH ER ALLIED PROVISION LIKE 10(23C) WHICH CLEARLY INDICATE THAT LEGISLATURE DID NOT INTEND TO RULE OUT SECTION 11 WHEN EXEMPTION WAS CLAIMABLE UNDER SPECIFIC PROVISION OF SECTION 10. I.T.A. NO.3782/DEL/2017 8 8. SO FAR AS THE ISSUE, WHETHER INCOME DERIVED BY TH E ASSESSEE FROM AN ACTIVITY OF RUNNING SCHOOL CAN BE TR EATED AS INCOME FROM PROPERTY HELD UNDER THE TRUST OR NOT, HE SUBMITTED THAT SECTION 2(24) DEFINES THE SCOPE OF INCOME WHICH ALSO REFERS TO VOLUNTARY CONTRIBUTION RECEIVED BY THE CHARITABLE TRUST OR INSTITUTION AND SECTION 11(1)(D). SECTION 11(1)(D) REFE RS TO VOLUNTARY CONTRIBUTION RECEIVED BY THE CHARITABLE TRUST WHICH FORMS PART OF THE CORPUS WHICH LEGISLATURE HAS CONSIDERED TO BE CAPI TAL RECEIPT NOT CHARGEABLE TO TAX. SECTION 11 REFERS TO VOLUNTARY CO NTRIBUTION OTHER THAN THE ONES FALLING U/S. 11(1)(D) THEREBY TREAT ING IT AS PROPERTY HELD UNDER THE TRUST. FURTHER, SECTION 11 ENVIS AGES THAT REVENUE CONSIDERATION SHALL BE DEEMED TO BE INCOME D ERIVED FROM PROPERTY HELD UNDER THE TRUST. THUS, LD. CIT (A) WAS INCORRECT IN LAW IN HOLDING THAT CONTRIBUTION RECEIVED BY WAY OF FEE S FROM THE BENEFICIARIES IS NOT AN INCOME FROM THE PROPERTY HELD UNDER THE TRUST. HE FURTHER REFERRED TO VARIOUS JUDGMENTS WHEREIN IT HAS BEEN HELD THAT EXEMPTION CANNOT BE DISALLOWED IF THE SOURCE O F INCOME HELD UNDER THE TRUST IS UNDER LEGAL OBLIGATION AND HE RE THE ASSESSEE WAS UNDER OBLIGATION TO APPLY THE INCOME F OR CHARITABLE PURPOSES. THE JUDGMENT RELIED UPON BY HIM ARE AS UND ER:- I. CIT-V- GUJARAT MARITIME BOARD 295 ITR 561 SC II. ALL INDIA SPINNERS ASSOCIATION-V-CIT 12 ITR 482 PC III. CIT-V-ANDHRA CHAMBER OF COMMERCE 55 ITR 722 SC IV. DELHI STOCK EXCHANGE ASSOCIATION LTD-V-CIT 225 ITR 235 SC V. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA-V-DGIT 358 ITR 91 (DEL) 8. MR. SINGHAL SUBMITTED THAT IF THE INTERPRETATION OF LD. CIT(A) IS ACCEPTED, THEN NO EDUCATIONAL INSTITUTION WI LL EVER BE ABLE I.T.A. NO.3782/DEL/2017 9 TO CLAIM EXEMPTION WHICH CERTAINLY CANNOT BE THE INTENTIO N OF THE LEGISLATURE. HE FURTHER SUBMITTED THAT, ASSESSEE CAME IN TO EXISTENCE AS SOCIETY WITH THE SOLE OBJECT OF PROVIDIN G EDUCATION AND HENCE IT WAS UNDER OBLIGATION TO SET UP AN INFRASTRUCTURE FOR THE SAME AND TO CARRY OUT SUCH ACTIVITIES. IN THE MEMORAND UM OF ASSOCIATION, THERE WAS NO CLAUSE UNDER WHICH ANY OF T HE FUND OF THE SOCIETY COULD BE DIVERTED FOR A PRIVATE GAIN AND IN FACT SECTION 14 OF THE REGISTRATION OF SOCIETIES ACT, 1860 SPECIFIC ALLY PROVIDES THAT IN CASE OF DISSOLUTION, THE PROPERTY OF THE SOCIET Y SHALL NOT BE PAID OR DISTRIBUTED TO ANY MEMBER BUT THE SAME SHALL BE GIVEN TO SOME OTHER SOCIETY. AS REGARDS HIS FINDING THAT THE EN TIRE RECEIPTS BY WAY OF FEES AND CHARGING OF FEES WOULD AMOUNT TO UNCHARITABLE ACTIVITIES. HE SUBMITTED THAT, FIRSTLY THE JUDGMENTS RELIED UPON BY THE LD. CIT(A) WERE MOSTLY ON THE ISSUE OF CAPITATION F EES AND NOT THE NORMAL FEES CHARGED BY THE SCHOOL OR INSTITUTION; IN FACT THE HON'BLE SUPREME COURT HAVE HELD THAT CHARGING OF FEES IS ESSENTIAL FOR CARRYING OUT THE EDUCATIONAL INSTITUTIONAL ACTIVITIES . IN SUPPORT, HE DREW OUT ATTENTION IN VARIOUS PARAGRAPHS OF THE JUDGM ENT OF THE HON'BLE SUPREME COURT WHICH WE SHALL DEAL IN THE LATTER PART OF OUR ORDER. 9. LASTLY, ON THE ISSUE OF DENYING EXEMPTION/DEDUCTION U/S.11 AND TAXING THE INCOME UNDER THE HEAD INCOME FR OM OTHER SOURCES, HE SUBMITTED THAT HERE IN THIS CASE THE ASSESSE E HAS BEEN GRANTED REGISTRATION U/S.12A, AND THEREFORE, ITS I NCOME HAS TO BE COMPUTED IN ACCORDANCE WITH SECTION 11 TO SECTION 13 AND NOT ONLY THAT IN THE EARLIER YEARS AS WELL AS IN THE SUBS EQUENT YEARS THE ASSESSEE HAS BEEN GRANTED EXEMPTION U/S.11; AND TH EREFORE, SUCH A FINDING IS NOT ONLY INCORRECT IN LAW BUT ALSO O N FACTS. I.T.A. NO.3782/DEL/2017 10 10. ON THE OTHER HAND, LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE, AFTER REFERRING TO THE VARIOUS OBSERVATIO NS MADE BY THE LD. CIT (A), STRONGLY RELIED UPON THE ORDER AND SU BMITTED THAT THE LD. CIT(A) HAD DEALT WITH THE ISSUE THREADBARE AF TER ANALYZING EACH AND EVERY PROVISION AND JUDICIAL PRECEDENTS AND THEN HAS REACHED TO THE CONCLUSION THAT ASSESSEE WAS NOT ENTITLED FOR CLAIM OF BENEFIT U/S.11. HE THUS, STRONGLY RELIED UPON THE OR DER OF LD. CIT (A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS THE MATERIAL REFERRED TO BEFORE US. WE HAVE ALREADY DISC USSED IN BRIEF VARIOUS FACETS OF THE OBSERVATIONS MADE BY THE LD. CIT (A) WHILE EXERCISING HIS POWER OF ENHANCEMENT U/S.251(2) AND TA XING THE ENTIRE RECEIPTS OF RS.1,04,85,689/- AS INCOME FROM OTH ER SOURCES. IT IS AN ADMITTED FACT THAT ASSESSEE SOCIETY HAS BEEN FO RMED AND REGISTERED UNDER THE REGISTRATION OF SOCIETIES ACT, 186 0, WITH THE SOLE OBJECT OF PROVIDING EDUCATION AND IN PURSUANCE O F SUCH AN OBJECT IT HAS SET UP AN INFRASTRUCTURE IN THE FORM OF SCH OOL WHICH IS NAMED AS ADARSH PUBLIC SCHOOL, FROM WHERE IT IS PR OVIDING EDUCATION UPTO SENIOR SECONDARY LEVEL. LOOKING TO ITS O BJECT WHICH IS FOR CHARITABLE PURPOSE IN TERMS OF SECTION 2(15) AND IS SOLELY FOR IMPARTING EDUCATION, IT HAS BEEN GRANTED REGISTRATION U/ S.12A BY THE COMPETENT AUTHORITY, I.E., LD. CIT GHAZIABAD. ONCE REGISTRATION U/S.12A IS GRANTED, THEN IT IS FAIT ACCOMPLI AND ACCORDINGLY, ALL ITS RECEIPTS / INCOME ARE SUBJECT TO COMPUTATION AND BENEFI T U/S.11 TO 12 AND RESTRICTIONS PROVIDED U/S 13. SUCH A REGISTRATIO N U/S 12A HAS NEITHER BEEN WITHDRAWN NOR HAS ANY ACTION BEEN TA KEN BY THE COMPETENT AUTHORITY TO WITHDRAW SUCH CERTIFICATE OF EXE MPTION GRANTED U/S.12A. THAT IS THE REASON WHY THE ASSESSMENT S HAVE I.T.A. NO.3782/DEL/2017 11 COMPLETED U/S. 143(3) FOR THE SUBSEQUENT ASSESSMENT YE AR, WHEREIN THE ASSESSEE HAS BEEN GIVEN THE BENEFIT OF SE CTION 11. HERE IN THE IMPUGNED ASSESSMENT YEAR THE CASE OF THE AS SESSING OFFICER WAS THAT THE AUDIT REPORT IN FORM 10B WAS NOT FIL ED ALONG WITH RETURN OF INCOME AND THE ONE WHICH WAS FILED DUR ING THE COURSE OF THE ASSESSMENT PROCEEDING WAS BACK DATED. T HIS ALLEGATION OF THE ASSESSING OFFICER HAS BEEN NEGATED BY THE LD. CIT(A) WHO HAS FOUND THAT AUDIT REPORT IN FORM 10B WAS PROPER. THUS, THE GROUND AND THE FINDING OF THE ASSESSING OFFI CER TO DENY THE CLAIM OF BENEFIT OF SECTION 11 HAS BEEN OVERRULED BY THE FIRST APPELLATE AUTHORITY, WHICH FINDING HAS NOW ATTAINED FI NALITY AS REVENUE IS NOT IN APPEAL OR IN CROSS OBJECTION. THE A SSESSING OFFICER HAS ONLY TAXED THE SURPLUS OVER INCOME AND E XPENDITURE ACCOUNT, HOWEVER THE LD. CIT(A) HAS PROCEEDED TO TAX TH E ENTIRE RECEIPT ALBEIT ON DIFFERENT GROUNDS. 12. NOW WE SHALL DEAL IN BRIEF THE VARIOUS OBSERVATIO NS AND FINDINGS OF THE LD. CIT(A) BY WHICH HE HAS DENIED EXEMPTION/BENEFIT OF SECTION 11 TO THE ASSESSEE. COMING TO HIS FIRST OBJECTION THAT ASSESSEE IS NOT ENTITLED FOR BENE FIT/EXEMPTION U/S.11, BECAUSE THERE IS A SEPARATE PROVISION UNDER THE ACT U/S. 10(23C)(IV), (V) AND (VI) WHERE IT COULD HAVE OR CAN CLAIM THE EXEMPTION AND SINCE ASSESSEE HAS NOT AVAILED THE EXEMP TION U/S.10(23C), THEREFORE, IT IS DEBARRED FROM CLAIMING EXEMPTION U/S.11. AT THE OUTSET, SUCH AN OBSERVATION IS AGAINST THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. BAR COUNCIL OF MAHARASHTRA (SUPRA) , WHEREIN THE THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- 6. AT THE OUTSET IT MAY BE STATED THAT WE WERE NOT INCLINED TO PERMIT COUNSEL FOR THE REVENUE TO URGE HIS FIRST CO NTENTION AS IN OUR I.T.A. NO.3782/DEL/2017 12 VIEW THE REVENUE MUST BE DEEMED TO HAVE GIVEN UP TH E SAME. WE MAY POINT OUT THAT PRECISELY THIS VERY CONTENTION W AS RAISED BY THE REVENUE BEFORE THE TRIBUNAL AND WAS NEGATIVE BY IT. THE TRIBUNAL ON A DETAILED ANALYSIS OF THE CONCERNED PR OVISIONS TOOK THE VIEW THAT THE TWO PROVISIONS WERE NOT MUTUALLY EXCLUSIVE BUT OPERATED UNDER DIFFERENT CIRCUMSTANCES, THAT SECTIO N 11 WAS RELATIVELY WIDER IN ITS SCOPE AND AMBIT, THAT WHILE SECTION 10(23A) GRANTED ABSOLUTE EXEMPTION IN RESPECT OF PARTICULAR TYPES OF INCOME, SECTION 11 IMPOSED CERTAIN CONDITIONS FOR T HE EXEMPTION BUT SUCH EXEMPTION WAS AVAILABLE FOR ALL SOURCES, A ND THAT THERE WAS NOTHING INHERENTLY IMPROBABLE OR INCONCEIVABLE ABOUT THE TWO PROVISIONS OPERATING SIMULTANEOUSLY AND AS SUCH THE CLAIM FOR EXEMPTION UNDER SECTION 11 WAS AVAILABLE TO THE ASS ESSEE-COUNCIL PROVIDED IT SATISFIED 11 THE REQUIREMENTS OF THAT P ROVISION. WE MAY POINT OUT THAT THERE ARE OTHER ALLIED PROVISIONS LIKE FOR INSTANCE CLAUSE (23C) IN SECTION 10 WHICH CLEARLY INDICATE THAT THE LEGISLATURE DID NOT INTEND TO RULE OUT SEC TION 11 WHEN EXEMPTION WAS CLAIMABLE UNDER SUCH SPECIFIC PROVISIONS OF SECTION 10. IT WAS AFTER NEGATIVING THE CONTENTION IN THIS MANNER THAT THE TRIBUNAL WENT ON TO CONSIDE R THE CLAIM FOR EXEMPTION MADE BY THE ASSESSEE-COUNCIL UNDER SECTIO N 11 BUT ON MERITS FOUND THAT THERE WAS NO MATERIAL OR EVIDENCE ON RECORD TO SHOW WHETHER OR NOT THE SECURITIES WERE HELD BY THE ASSESSEE- COUNCIL FOR ANY OF THE CHARITABLE PURPOSES AND, THE REFORE, IT REMANDED THE CASE. THE REMAND ORDER WAS NEVER CHALL ENGED BY THE REVENUE BY SEEKING A REFERENCE ON THE GROUND TH AT A REMAND WAS UNNECESSARY BECAUSE SECTION 11 WAS RULED OUT BY REASON OF EXEMPTION HAVING BEEN OBTAINED BY THE ASSESSEE- COU NCIL UNDER SECTION 10(23A) NOR WAS ANY SUCH CONTENTION RAISED WHEN REFERENCE WAS SOUGHT BY THE ASSESSEE- COUNCIL NOR W HEN THE MATTER WAS BEING ARGUED IN THE HIGH COURT. IN THESE CIRCUMSTANCES, IT IS CLEAR TO US THAT THE REVENUE A CQUIESCED IN THE VIEW TAKEN BY THE TRIBUNAL THAT THE CLAIM FOR EXEMP TION UNDER SECTION 11 COULD NOT BE SAID TO BE RULED OUT BY REA SON OF THE PROVISIONS OF SECTION 10(23A). WE, THEREFORE, PROCE ED TO DEAL WITH THE SECOND CONTENTION WHICH WAS PRINCIPALLY ARGUED BEFORE US IN THESE APPEALS. I.T.A. NO.3782/DEL/2017 13 13. THUS, THE AFORESAID OBSERVATION OF THE HON'BLE APE X COURT, MAKES IT VERY CLEAR THAT THERE IS NO BAR OR DISHARMONY BETWEEN SECTION 10(23C) AND SECTION 11; AND EXEMPTION OF SECTIO N 11 CANNOT BE DENIED EVEN WHEN THERE IS A SPECIFIC PROVIS ION OF SECTION 10(23C). THIS PRINCIPLE HAS BEEN REITERATED BY THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDIAN INSTITUTE OF ENGINEERING SOCIETY, REPORTED IN 218 TAXMAN 151 ( ALL), WHEREIN THEIR LORDSHIPS HAD OBSERVED AS UNDER:- 6. SHRI AWASTHI, LEARNED COUNSEL, SUBMITTED THAT AS TH E ASSESSEE CLAIMED EXEMPTION, BEING AN EDUCATIONAL IN STITUTION AS SUCH IT WAS REQUIRED TO OBTAIN EXEMPTION FROM TH E PRESCRIBED AUTHORITY UNDER SECTION 10(23C) OF THE A CT, WHICH IS MANDATORY. SINCE NO EXEMPTION FROM THE PRESCRIBED A UTHORITY UNDER SECTION 10(23C) OF THE ACT HAS BEEN OBTAINED AS SUCH THE ASSESSEE WAS NOT ENTITLED TO CLAIM BENEFITS UND ER SECTION 11 OF THE ACT. THE SUBMISSION IS WHOLLY MISCONCEIVE D. ADMITTEDLY, THE ASSESSEE IS AN EDUCATIONAL INSTITUT ION AND WAS ESTABLISHED FOR CHARITABLE PURPOSES FOR RUNNING EDUCATIONAL INSTITUTIONS AND IMPARTING EDUCATION. S ECTION 10 OF THE ACT DEALS WITH THE INCOME NOT LIABLE TO BE INCL UDED IN TOTAL INCOME OF THE ASSESSEE WHILE SECTION 11 DEALS WITH THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURP OSES. BOTH SECTION 10(23C) AND SECTION 11 OF THE ACT ARE INDEP ENDENT SECTIONS. THE ASSESSEE WAS REGISTERED UNDER SECTION 12A OF THE ACT. AS SUCH THE ASSESSEE WAS RIGHTLY GRANTED B ENEFITS UNDER SECTION 11 OF THE ACT. 14. THIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COUR T CLEARLY NEGATES THE THEORY OF LD. CIT (A). FURTHER HON'BLE PUN JAB AND I.T.A. NO.3782/DEL/2017 14 HARYANA HIGH COURT IN THE CASE OF CIT VS. MAHASABHA G URUKUL VIDHYAPEETH (2010) 2 TAXMANN.COM 283 (P & H) TOO HAV E UPHELD THE SAME PROPOSITION THAT ONCE ALL THE REQUISITE CONDITI ONS FOR EXEMPTION U/S.11 HAVE BEEN MET AND EVEN IF CONDITION U /S. 10(23C) HAVE NOT BEEN COMPLIED WITH, THEN THERE SHOULD BE NO BAR TO SEEK EXEMPTION U/S.11. IN VIEW OF THE AFORESAID BIN DING JUDICIAL PRECEDENTS, WE REJECT THE OBSERVATION AND FINDING OF TH E LD. CIT (A) THAT ASSESSEE CANNOT CLAIM EXEMPTION/BENEFIT OF SECTION 1 1 OR IS NOT ENTITLED FOR BENEFIT U/S 11 AS ASSESSEE WAS ELIGIB LE FOR SUCH AN EXEMPTION U/S. 10(23C). 15. LD. CIT(A) WHILE DENYING THE EXEMPTION OF SECTIO N 11 TO ASSESSEE SOCIETY HAS HELD THAT, SINCE IMPARTING OF ED UCATION IS A MATTER OF PURE CHARITY, THEREFORE, THE EDUCATIONAL INST ITUTION IS NOT PERMITTED TO RECEIVE OR RECOVER THE COST OF CHARITY FRO M ITS BENEFICIARY BY WAY OF FEES, I.E., CHARGING OF FEES ITSELF WOULD AMOUNT UNCHARITABLE ACTIVITY. WE ARE UNABLE TO SUBSCRIBE TO THI S PROPOSITION AT ALL, BECAUSE IF FEES IS NOT CHARGED FR OM THE STUDENTS THEN HOW THE ACTIVITY OF IMPARTING EDUCATION CAN BE CA RRIED OUT. FEES COLLECTED FROM THE STUDENTS ITSELF FEEDS THE CHARITY , UNLESS SOME OTHER CONSIDERATIONS ARE RECEIVED FOR PROFITEERIN G AND PERSONAL GAINS OF TRUSTEES OR MEMBERS OF THE SOCIETY. STRONG RELIANCE HAS BEEN PLACED BY THE LD. CIT (A) UPON THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF ACIT VS. SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION (SUPRA) . IN OUR HUMBLE UNDERSTANDING OF THE SAID JUDGMENT AND THE PRINCIPLE LAID DOWN BY THE CONSTITUTIONAL BENCH OF HON'BLE APEX COURT, NOWHERE T HE HON'BLE APEX COURT HAS HELD THAT THE CHARGING OF FEES OR SOME PROFIT FOR CARRYING OUT CHARITABLE ACTIVITY WOULD BE RECKONED AS NOT CHARITABLE. THE HON'BLE APEX COURT HELD THAT IF PRIMARY OR I.T.A. NO.3782/DEL/2017 15 DOMINANT PURPOSE OF A TRUST OR INSTITUTION IS CHARITAB LE, THEN ANY OTHER OBJECT WHICH BY ITSELF IS NOT CHARITABLE AND IS ME RE ANCILLARY TO THE DOMINANT PURPOSE THEN ALSO IT IS HELD TO BE VALID CHARITY. THE PRIMARY TEST WHICH IS TO BE APPLIED IS, WHETHER TH E MAIN OR PRIMARY OBJECT OF THE TRUST IS CHARITABLE OR NOT. IT IS A N UNDENIABLE THAT UNDER THE INCOME TAX ACT, EDUCATIONAL ACTIVITY HAS BEEN SPECIFICALLY TREATED AS CHARITABLE PURPOSE AND IF THE ENTIRE ACTIVITIES OF THE ASSESSEE IS PURELY FOR CARRYING OUT EDUCATION TH EN THE TEST OF DOMINANT AND MAIN PURPOSE STANDS FULFILLED AS LAID D OWN BY THE HON'BLE APEX COURT. HON'BLE APEX COURT HAS FURTHER HE LD THAT IF ANY ACTIVITY FOR PROFIT IS CARRIED OUT IN THE COURSE OF ACTUAL CARRYING OUT ITS PURPOSE, THEN THE ACTIVITY FOR PROFIT MUST BE INTE RTWINED OR WRAPPED UP WITH OR IMPLIED IN THE PURPOSE OF THE INSTITU TION OR TRUST, IN OTHER WORDS IT MUST BE AN INTEGRAL PART OF SUC H PURPOSE. WHAT IS TO BE LOOKED INTO WHETHER THE ACTIVITY IS PROPELL ED BY A DOMINANT PROFIT MOTIVE AND WHETHER THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE, IF IT IS FORMER THEN THE PURPOSE WOULD NOT BE CHARITABLE, BUT, IF IT IS LATTER THE CHARITABLE CHARACTER OF THE PURPOSE WOULD NOT BE LOST. THUS, IN NO WAY THE PRINCIPLE LAID DOWN BY THE HON'B LE APEX COURT CAN BE INTERPRETED OR UNDERSTOOD IN THE MANNER THAT IF CERTAIN RECEIPT OR INCOME IS GENERATED OUT OF AN ACTIVITY WHIC H IS CHARITABLE AND SUCH A RECEIPT OR INCOME IS WHOLLY APPLIED FOR C ARRYING OUT CHARITABLE PURPOSE, THEN IT CANNOT BE RECKONED FOR NON CHARITABLE PURPOSE. HERE IN THIS CASE, THE CHARGING OF FEES IS A PART OF RECEIPT DURING THE COURSE OF CARRYING OUT EDUCATIONAL ACTIVIT Y WHICH HAS BEEN COMPLETELY APPLIED FOR THAT ACTIVITY ALONE, THER EFORE SUCH A RECEIPT BY WAY OF FEES HAS TO BE SEEN AS AN APPLICATIO N OF INCOME FOR CHARITABLE PURPOSE. AS REGARDS ANOTHER CONSTITUTI ONAL BENCH JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF TMA PAI I.T.A. NO.3782/DEL/2017 16 FOUNDATION AND OTHERS (SUPRA), IT IS SEEN THAT THE HON'BLE APEX COURT IN THE CONTEXT OF CAPITATION FEE AND PROFITEERING , ITSELF CULLED OUT THE EXCEPTION IN THE FOLLOWING MANNER:- 66. IN SUCH PROFESSIONAL UNAIDED INSTITUTIONS, THE MANAGEMENT WILL HAVE THE RIGHT TO SELECT TEACHERS A S PER THE QUALIFICATIONS AND ELIGIBILITY CONDITIONS LAID DOWN BY THE STATE/UNIVERSITY SUBJECT TO ADOPTION OF A RATIONAL PROCEDURE OF SELECTION. A RATIONAL FEE STRUCTURE SHOULD BE ADOPTED BY THE MANAGEMENT, WHICH WOULD NOT BE ENTITLED TO CHARGE A CAPITATION FEE. APPROPRIATE MACHINERY CAN BE DEVISED BY THE STATE OR UNIVERSITY TO ENSURE THAT NO CAPITATIO N FEE IS CHARGED AND THAT THERE IS NO PROFITEERING, TH OUGH A REASONABLE SURPLUS FOR THE FURTHERANCE OF EDUCATION IS PERMISSIBLE. CONDITIONS GRANTING RECOGNITION OR AFFILIATION CAN BROADLY COVER ACADEMIC AND EDUCATIONAL MATTERS INCL UDING THE WELFARE OF STUDENTS AND TEACHERS. [EMPHASIS ADDED IS OURS] 16. THUS, THE HON'BLE APEX COURT HELD THAT IN PRINCIPLE THERE SHOULD BE NO CAPITATION FEE OR PROFITEERING, BUT REAS ONABLE SURPLUS TO MEET THE CAUSE OF EDUCATION AND AUGMENTATION OF FACILITY DOES NOT AMOUNT TO PROFITEERING. NOWHERE THE H ON'BLE APEX COURT HAS HELD THAT EDUCATIONAL INSTITUTION IS DEBARRED FROM TAKING ANY KIND OF FEES FROM THE STUDENTS ALBEIT THEY HAVE EXPRESSED CAUTION IN A LIMITED WAY ON A CAPITATION FEE FOR THE PURPOSE OF PROFITEERING. SIMILARLY IN THE OTHER JUDGME NT RELIED UPON BY THE LD. CIT (A), THAT IS, IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION & ORS VS. STATE OF KARNATAKA (SUPRA), THE HON'BLE I.T.A. NO.3782/DEL/2017 17 APEX COURT AGAIN FOLLOWING THE PRINCIPLE OF THE CONSTI TUTIONAL BENCH IN THE CASE OF TMA PAI FOUNDATION & OTHERS (SUP RA) AND OBSERVED AS UNDER:- 212. SO FAR AS THE FIRST QUESTION IS CONCERNED, IN OUR V IEW THE MAJORITY JUDGMENT IS VERY CLEAR. THERE CAN BE NO FI XING OF A RIGID FEE STRUCTURE BY THE GOVERNMENT. EACH INSTITUTE MUST HAVE THE FREEDOM TO FIX ITS OWN FEE STRUCTURE TAKING INTO CONSIDERATION THE NEED TO GENERATE FUNDS TO RUN THE INSTITUTION AND TO PROVIDE FACILITIES NECESSARY FOR THE BENEFIT OF THE STUDENTS. THEY MUST ALSO BE ABLE TO GENERATE SURPLUS WHICH MUST BE USED FOR THE BETTERMEN T AND GROWTH OF THAT EDUCATIONAL INSTITUTION . IN PARAGRAPH 56 OF THE JUDGMENT IT HAS BEEN CATEGORICALLY LAID DOWN THAT THE DECISION ON THE FEES TO BE CHARGED MUST NECESSARILY BE LEFT TO THE PRIVATE EDUCATIONAL INSTITUTIONS THAT DO NOT SEEK AND WHICH ARE NOT DEPENDENT UPON ANY FUNDS FROM THE GOVERNMENT. EACH INSTITUTE WILL BE ENTITLED TO HAVE ITS OWN FEE STRUCTURE. THE FEE STRUCTURE FOR EACH INSTITUTE MUST BE FIXED KEEPING IN MIND THE INFRASTRUCTURE AND FACILITIES AVAILABLE, THE INVESTMENTS MADE, SALARIES PAID TO THE TEACHERS AND STAFF, FUTURE PLANS FOR EXPANSION AND/OR BETTERMENT OF THE INSTITUTION ETC. OF COURSE THERE CAN BE NO PROFITEERING AND CAPITATION FEES CANNOT BE CHARGED. IT THUS NEEDS TO BE EMPHASIZED THAT AS PER THE MAJORIT Y JUDGMENT IMPARTING OF EDUCATION IS ESSENTIALLY CHARITABLE IN NATURE. THUS THE SURPLUS/PROFIT THAT CA N BE GENERATED MUST BE ONLY FOR THE BENEFIT/USE OF THAT EDUCATIONAL INSTITUTION. PROFITS/SURPLUS CANNOT BE I.T.A. NO.3782/DEL/2017 18 DIVERTED FOR ANY OTHER USE OR PURPOSE AND CANNOT BE USED FOR PERSONAL GAIN OR FOR ANY OTHER BUSINESS OR ENTERPRISERS. [EMPH ASIS ADDED IS OURS] 17. THE AFORESAID JUDGMENT CLEARLY CLINCHES THE ISSUE AND COMPLETELY NEGATES THE VIEW OF THE LD. CIT (A). THUS, NONE OF THE JUDGMENTS AS REFERRED TO BY THE LD. CIT(A) HAVE BEEN ANALYSED IN PROPER PROSPECTIVE RATHER HIS INTERPRETATION OF THE PRIN CIPLES LAID DOWN BY THE APEX COURT ARE INCORRECT AND OUT OF CONTEXT . BEFORE US THE LEARNED COUNSEL HAD SUBMITTED THE TOTAL FEES CHARGED FROM VARIOUS STUDENTS DURING THE YEAR THE DETAILS AND BIFU RCATION OF WHICH IS AS UNDER:- CLASS TUTION FEES MON THS NO. OF STUD ENTS BUS (300*1 2) STUDE NTS TRAVE LLING BY BUS REST ANNUAL ADMISS ION FEES TO TAL NUR 500 12 60 3,60,000 1,000 3,600 5 18,000 60,000 LKG 500 12 78 4,68,000 1,000 3,600 7 25,200 78,000 UKG 500 12 70 4,20,000 1,000 3,600 8 28,800 70,000 1 600 12 69 4,96,800 1,000 3,600 12 43,200 69,000 2 600 12 83 5,97,600 1,000 3,600 15 54,000 83,000 3 600 12 80 5,76,000 1,000 3,600 10 36,000 80,000 4 600 12 78 5,61,600 1,000 3,600 17 61,200 78,000 5 600 12 70 5,04,000 1,000 3,600 15 54,000 70,000 6 700 12 76 6,38,400 1,000 3,600 17 61,200 76,000 700 12 77 6,46,800 1,000 3,600 15 54,000 77,000 8 700 12 79 6,63,600 1,000 3,600 19 68,400 79,000 9 900 12 60 6,48,000 1,000 3,600 17 61,200 60,000 10 900 12 57 6,15,600 1,000 3,600 18 64,800 57,000 11 1,100 12 33 4,35,600 1,000 3,600 7 25,200 33,000 1 2 1,100 12 29 3,82,800 1,000 3,600 5 18,000 29,000 TOTAL 80,14,800 6,73,200 9,99,000 FINE 2,65,095 LATE FEES 27,750 30,500 B/S 82,79,895 B/S 7,00,950 10,29,500 4,70,900 1,04,81,245 I.T.A. NO.3782/DEL/2017 19 18. FROM THE ABOVE DETAILS, IT IS QUITE EVIDENT THAT THE ASSESSEE SCHOOL HAS BEEN CHARGING FEES ONLY FROM ITS STUDENTS AND THERE IS NO CAPITATION FEE AT ALL. SUCH FEES HAVE BEEN CHARGED FROM THE STUDENTS FOR THE RUNNING OF THE SCHOOL AND HAS BEEN APPLIED FOR ITS DOMINANT PURPOSE/OBJECT OF CARRYING OUT EDUCA TIONAL ACTIVITY. IF WE APPLY THE PRINCIPLE AND RATIO LAID DO WN BY THE HON'BLE APEX COURT IN THE AFORESAID CASES, THEN THE FE ES CHARGED BY THE ASSESSEE IS NEITHER FOR PROFITEERING NOR FOR CARRYING ANY ACTIVITY BEYOND ITS DOMINANT OBJECT. THUS, ALLEGATION OF THE LD. CIT (A) ON THIS SCORE ALSO IS HEREBY REJECTED. 19. NOW COMING TO THE OBSERVATION THAT ASSESSEES INCO ME BY WAY OF FEES CANNOT BE HELD TO BE DERIVED FROM PROPER TY HELD UNDER THE TRUST, BECAUSE STUDENTS CANNOT BE TREATED AS PROPERT Y. IF SUCH A PROPOSITION OR VIEW OF LD. CIT (A) IS UPHELD, THEN PROBABLY NO EDUCATION INSTITUTION IN THE COUNTRY WOULD EVER BE ELI GIBLE/ENTITLED FOR EXEMPTION U/S.11 AND PERHAPS WILL DEFEAT THE ENTIRE PURPOSE OF LEGISLATURE AND THE DEFINITION OF CHARITABLE PURPOSE OF EDUCATION AS DEFINED IN SECTION 2(15). SECTION 12 OF THE ACT CLEA RLY PROVIDES THAT ANY VOLUNTARY CONTRIBUTION RECEIVED BY A TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSE, THEN FOR THE PURPOSE OF SECTION 11 IT IS DEEMED TO BE INCOME DERIVED FROM THE PROPERTY HE LD UNDER THE TRUST. SUCH A DEEMING PROVISION OF REVENUE CONTRIBUTION IS HELD AS INCOME DERIVED FROM THE TRUST WHICH IS SUBJECT TO COMPUTA TION AND CONDITIONS LAID DOWN IN SECTION 11 TO 13. IF THE ASSES SEE IS CARRYING OUT ANY OBLIGATION FOR EDUCATIONAL ACTIVITY, THEN IT HAS TO BE TREATED AS THE TRUST UNDER THE PROVISION OF SECTIO N 11; AND THIS PROPOSITION HAS BEEN CLEARLY HELD BY THE HON'BLE SUP REME COURT IN THE CASE OF CIT VS. GUJARAT MARITIME BOARD (SUPRA), THAT IF THE ASSESSEE IS UNDER LEGAL OBLIGATION TO APPLY THE INC OME THEN IT IS I.T.A. NO.3782/DEL/2017 20 ENTITLED TO BE REGISTERED AS CHARITABLE TRUST. IN THE CAS E BEFORE THE HONBLE SUPREME COURT, THE AUTHORITY GUJARAT MARITIME B OARD WAS CARRYING OUT THE DEVELOPMENT OF MINOR PORT WHICH WAS IN THE REALM OF CARRYING OUT OBJECTS OF GENERAL PUBLIC UTILITY. THE HON'BLE APEX COURT HELD THAT SUCH AN AUTHORITY IS TO BE RECKONED AS C HARITABLE TRUST FOR THE PURPOSE OF SECTION 11. IN THIS CASE ONE O F THE MAIN OBJECTION RAISED ON BEHALF OF THE DEPARTMENT WAS THAT SAI D BOARD WAS NOT ENTITLED FOR THE BENEFIT OF SECTION 11 AS IT WAS N OT A TRUST UNDER THE PUBLIC TRUST ACT AND THEREFORE, IT WAS NOT E NTITLED TO CLAIM REGISTRATION U/S. 12A. SINCE IT WAS NOT HELD UNDE R THE TRUST THEREFORE, IT IS NOT ENTITLED FOR EXEMPTION U/S. 11(1)(A ). THE RELEVANT CONTENTION OF THE REVENUE AS WELL AS THE FINDING OF TH E HON'BLE APEX COURT READS AS UNDER:- 12. ONE OF THE OBJECTIONS RAISED ON BEHALF OF THE DEPARTMENT WAS THAT GUJARAT MARITIME BOARD IS NOT ENTITLED TO THE BENEFIT OF SECTION 11 OF THE 1961 ACT AS THE SAID BOARD WAS NOT A TRUST UNDER PUBLIC TRUST ACT AND, THEREFORE, IT WAS NOT ENTITLED TO CLAIM REGISTRATION UNDER SECTION 12A OF THE 1961 ACT. THE DEPARTMENT'S CASE WAS THAT THE MARITIME BOARD WAS A STATUTORY AUTHORITY. IT WAS NOT A TRUST. ITS BUSINE SS WAS NOT HELD UNDER A TRUST. ITS PROPERTY WAS NOT HELD UNDER TRUST. THEREFORE, THE BOARD WAS NOT ENTITLED TO BE REGISTE RED AS A CHARITABLE INSTITUTION. IT WAS THE CASE OF THE DEPA RTMENT THAT THE BOARD WAS PERFORMING STATUTORY FUNCTIONS. DEVEL OPMENT OF MINOR PORTS IN THE STATE OF GUJARAT CANNOT BE TERME D AS THE WORK UNDERTAKING FOR CHARITABLE PURPOSES AND IN THE CIRCUMSTANCES THE COMMISSIONER REJECTED THE BOARD'S APPLICATION UNDER SECTION 12A OF THE 1961 ACT IN TH E LIGHT OF THE ABOVE CASE OF THE DEPARTMENT, WE ARE REQUIRED T O CONSIDER I.T.A. NO.3782/DEL/2017 21 THE EXPRESSION 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' IN SECTION 2 (15) OF THE 1961 ACT. 13. ....... 14. WE HAVE PERUSED NUMBER OF DECISIONS OF THIS COURT WHICH HAVE INTERPRETED THE WORDS, IN SECTION 2(15), NAMELY, 'ANY OTHER OBJECT OF GENERALLY PUBLIC UTILITY'. FRO M THE SAID DECISIONS IT EMERGES THAT THE SAID EXPRESSION IS OF THE WIDEST CONNOTATION. THE WORD 'GENERAL' IN THE SAID EXPRESS ION MEANS PERTAINING TO A WHOLE CLASS. THEREFORE, ADVANCEMENT OF ANY OBJECT OF BENEFIT TO THE PUBLIC OR A SECTION OF THE PUBLIC AS DISTINGUISHED FROM BENEFIT TO AN INDIVIDUAL OR A GR OUP OF INDIVIDUALS WOULD BE A CHARITABLE PURPOSE CIT V. AHMEDABAD RANA CASTE ASSOCIATION [1983] 140 ITR 1 (SC). THE SAID EXPRESSION WOULD PRIMA FACIE INCLUDE ALL O BJECTS WHICH PROMOTE THE WELFARE OF THE GENERAL PUBLIC. IT CANNOT BE SAID THAT A PURPOSE WOULD CEASE TO BE CHARITABLE EV EN IF PUBLIC WELFARE IS INTENDED TO BE SERVED. IF THE PRIMARY PU RPOSE AND THE PREDOMINANT OBJECT ARE TO PROMOTE THE WELFARE O F THE GENERAL PUBLIC THE PURPOSE WOULD BE CHARITABLE PURP OSE. WHEN AN OBJECT IS TO PROMOTE OR PROTECT THE INTEREST OF A PARTICULAR TRADE OR INDUSTRY THAT OBJECT BECOMES AN OBJECT OF PUBLIC UTILITY, BUT NOT SO, IF IT SEEKS TO PROMOTE THE INT EREST OF THOSE WHO CONDUCT THE SAID TRADE OR INDUSTRYCIT V. ANDHRA CHAMBER OF COMMERCE [1965] 55 ITR 722 (SC). IF THE PRIMARY OR PREDOMINANT OBJECT OF AN INSTITUTION IS CHARITAB LE, ANY OTHER OBJECT WHICH MIGHT NOT BE CHARITABLE BUT WHICH IS A NCILLARY OR INCIDENTAL TO THE DOMINANT PURPOSE, WOULD NOT PREVE NT THE INSTITUTION FROM BEING A VALID CHARITYADDL. CIT V. SURAT ART SILK CLOTH MFRS. ASSOCIATION [1980] 121 ITR 1 (SC). I.T.A. NO.3782/DEL/2017 22 15. THE PRESENT CASE IN OUR VIEW IS SQUARELY COVERED B Y THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V. ANDHRA PRADESH STATE ROAD TRANSPORT CORPN. [1986] 159 ITR 1 IN WHICH IT HAS BEEN HELD THAT SINCE THE CORPORATION WAS ESTABL ISHED FOR THE PURPOSE OF PROVIDING EFFICIENT TRANSPORT SYSTEM , HAVING NO PROFIT MOTIVE, THOUGH IT EARNS INCOME IN THE PROCES S, IT IS NOT LIABLE TO INCOME-TAX. 16. APPLYING THE RATIO OF THE SAID JUDGMENT IN THE CAS E OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPN. (SUPRA), WE FIND THAT, IN THE PRESENT CASE, GUJARAT MARITIME BO ARD IS ESTABLISHED FOR THE PREDOMINANT PURPOSE OF DEVELOPM ENT OF MINOR PORTS WITHIN THE STATE OF GUJARAT, THE MANAGE MENT AND CONTROL OF THE BOARD IS ESSENTIALLY WITH THE STATE GOVERNMENT AND THERE IS NO PROFIT MOTIVE, AS INDICATED BY THE PROVISIONS OF SECTIONS 73, 74 AND 75 OF THE 1981 ACT. THE INCOME EARNED BY THE BOARD IS DEPLOYED FOR THE DEVELOPMENT OF MINOR PORTS IN INDIA. IN THE CIRCUMSTANCES, IN OUR VIEW THE JUDGME NT OF THIS COURT IN ANDHRA PRADESH STATE ROAD TRANSPORT CORPN. 'S CASE (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. 17. BEFORE CONCLUDING WE MAY MENTION THAT UNDER THE SCHEME OF SECTION 11(1) OF THE 1961 ACT, THE SOURCE OF INCOME MUST BE HELD UNDER TRUST OR UNDER OTHER LEGAL OBLIGATION. APPLYING THE SAID TEST IT IS CLEAR, THAT GUJARAT MARITIME BOARD IS UNDER LEGAL OBLIGATION TO APPLY THE INCOME WHICH ARISES DIRECTLY AND SUBSTANTIALLY FROM THE BUSINESS HELD UNDER TRUST FOR THE DEVELOPMENT OF MINOR PORT IN THE STATE OF GUJARAT. THEREFORE, THEY ARE ENTITLED TO BE REGISTERED AS 'CHARITABLE TRUST' UNDER SECTION 12A OF THE 1961 ACT. I.T.A. NO.3782/DEL/2017 23 20. THIS PRINCIPLE HAS BEEN REITERATED BY THE HO N'BLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA-V-DGIT, 358 ITR 91 (DEL). THUS, THE ASSESSEE SOCIETY WHICH HAS BEEN REGISTERED UNDER REGISTRATION OF SOCIETIES AC T, 1860 WITH THE SOLE OBJECT OF PROVIDING EDUCATION AND HAS A LEGAL OBLIGATION FOR APPLYING ITS INCOME FOR SUCH CHARITABLE PURPOSE, THEN FOR THE PURPOSE OF SECTION 11 IT HAS TO BE TREATED AS TRUST AN D INCOME DERIVED FROM CARRYING OUT SUCH OBLIGATION HAS TO BE RE CKONED AS INCOME DERIVED FROM PROPERTY UNDER THE TRUST AND THEREFORE, ON THE GROUND ALSO AS RAKED BY THE LD. CIT (A), EXEMPTION U/ S.11 CANNOT BE DENIED. ACCORDINGLY, IN VIEW OF THE FINDING GIVE N ABOVE AND VARIOUS LEGAL PRINCIPLE AS DISCUSSED ABOVE, WE HOLD THAT NONE OF THE OBSERVATIONS AND THE FINDING OF THE LD. CIT(A) AR E SUSTAINABLE AND THE GROUNDS TAKEN AND THE REASONING GIVEN BY HIM TO DENY THE BENEFIT/EXEMPTION U/S.11 TO THE ASSESSEE CANNOT BE UPHE LD EITHER IN LAW OR ON FACTS. 21. ACCORDINGLY, IN VIEW OF OUR FINDING GIVEN ABOVE , THE ENTIRE RECEIPTS WHICH HAS BEEN TAXED UNDER THE HEAD INCOME F ROM OTHER SOURCES IS SET ASIDE AND WE DIRECT THE ASSESSING OFF ICER TO GRANT EXEMPTION U/S.11 AS PER THE INCOME AND EXPENDITURE ACC OUNT SUBMITTED BY THE ASSESSEE. 22 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018. SD/- SD/- [O.P. KANT] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31ST JANUARY, 2018 PKK: