M/s. Divine Educational Institute and Social Development Society, New Delhi V. ITO (Exemptions), Ghaziabad

ITA 380/DEL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3134 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 24-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Principle of natural justice; Question of law; Capital receipt; Capital expenditure
• Section: 12A; 12AA

Judgement Text

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH - SMC NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO.380/DEL/2017 ASSESSMENT YEAR : 2012-13 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY, C/O M/S. RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-1, NEW DELHI 110 049 PAN AAAAD4464E VS. ITO (EXEMPTIONS) GHAZIABAD. (APPELLANT) (RESPONDENT) PER BHAVNESH SAINI, JUDICIAL MEMBER ORDER THIS APPEAL BY THE ASSESSE HAS BEEN DIREC TED AGAINST THE ORDER OF LD. CIT(A) GHAZIABAD DATED 3 RD DECEMBER 2015 FOR ASSESSMENT. YEAR 2012-13 ON THE FOLLOWING GROUNDS :- 1.THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.22,76,539/- ON ACCOUNT OF CORPUS DONATION AND HAS FURTHER ERRED IN TREATING THE SAME AS PART OF TOTAL RECEIPTS AND THAT TOO BY RECORDING INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE. ASSESSEE BY : SHRI SOMIL AGGARWAL, SHRI DEEPESH GARG, ADVOCATE DEPARTMENT BY: MS. BEDOBANI, SR.DR DATE OF HEARING 04//05/2017 DATE OF PRONOUNCEMENT 16 /05/2017 ITA NO. 380/DEL/2017 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY VS. ITO PAGE 2 OF 6 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN TAKING THE FIGURE OF DONATION AT RS.22,76,539/- INSTEAD OF RS.22,00,000/-. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSI NG THE ACTION OF LD. AO IN HOLDING THAT ASSESSEE SOCIETY IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE TRUST IS REGISTERED WITH THE REGISTRAR OF SOCIETY, UTTAR PRADESH, THE ASSESSEE H AS CLAIMED EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. THE ASSESSEE PRESENTLY I S RUNNING AN EDUCATIONAL INSTITUTION UNDER THE NAME AND STILE DIVINE PUBLIC SCHOOL AT SIKANDRABAD, DISTT. BULANDSHAHR. THE ASSESSES FILED RETURN OF INCOME DECLARING NIL INCOM E BY CLAIMING EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. ON PERUSAL OF THE AUDITE D ACCOUNTS IT WAS REVEALED THAT ASSESSEE HAS RECEIVED RS. 22,76,539/- ON ACCOUNT OF CORPUS FUND AND REVENUE RECEIPTS OF RS. 96,36,555/-. THE ASSESSING OFFICER THEREFORE NOTED THAT ASSESSEE HAS GROSS RECEIPTS OF RS. 1,19,13,094/- WHICH IS MORE THAN RS . 1 CRORE. THEREFORE PROVISION OF SECTION 10(23C)(IIIAD) WOULD NOT APPLY BECAUSE ASS ESSEE HAS NOT BEEN GRANTED REGISTRATION U/S 12AA NOR REGISTERED U/S 10(23C)(VI ) OF I.T. ACT. THE CLAIM OF ASSESSEE OF DEDUCTION U/S 10(23C) (IIIAD) WAS DISALLOWED AND SURPLUS OF RS. 22,76,539/- WAS TAXED AND ADDED TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSEE REITERATED THE SUBMISSIONS B EFORE LD. CIT(A) AND IT WAS EXPLAINED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE RECEIVED RS. 22 LACS FROM SHRI CHAGANLAL SHARMA, THE FOUNDER MEMBER AGAINST THE CO RPUS FUND FOR MEETING OUT THE CAPITAL EXPENDITURE. THE ASSESSING OFFICER WRONGLY TAKEN DONATION AS RS. 22,76,539/-. THE ASSESSING OFFICER ADDED THE CORPUS FUND AMOUNT TO GROSS REVENUE RECEIPT. SINCE CORPUS FUND WAS RECEIVED WITH SPECIFIC PURPOSE AND USED FOR PURCHASE OF A BUS FOR ITA NO. 380/DEL/2017 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY VS. ITO PAGE 3 OF 6 SCHOOL AND BALANCE AMOUNT HAS BEEN USED AGAINST BUI LDING CONSTRUCTION IN NEXT YEAR. THEREFORE ORDER OF THE ASSESSING OFFICER IS NOT JUS TIFIED. THE ASSESSEE RELIED UPON THE ORDER OF ITAT AGRA BENCH IN THE CASE OF ITO VS. GA UDIYA GRANTH ANUVED TRUST 28 ITR 161 IN WHICH IT WAS HELD THAT DONATION AGAINST CORP US FUND ARE CAPITAL RECEIPT AND ARE NOT LIABLE TO BE TAXED EVEN IF TRUST HAS NOT BEEN G RANTED EXEMPTION U/S 12A OF I.T. ACT. LD. CIT(A) HOWEVER DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND NOTED THE AGGREGATE ANNUAL RECEIPT WOULD NOT ONLY INCLUDE THE REVENUE RECEIPT BUT ALSO THE CORPUS FUND . THE APPEAL OF ASSESSEE WAS ACCORDINGLY DISMISSED. 4. LD. COUNSEL FOR ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE AUTHORITIES BELOW AND RELIED UPON ORDER OF ITAT DELHI G BENCH I N THE CASE OF ITO (E) VS. SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUS T IN ITA NO. 5082/DEL/2010 DATED 19 TH JANUARY, 2011 IN WHICH PARA 10 TO 13 HELD AS UNDE R :- 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSE D THE MATERIAL ON RECORD. THE TRIBUNAL, IN THE ASSESEES OWN CASE FOR ASSESSMENT YEAR 2003-04. VIDE ITS ORDER DATED 30.1.2009 (SUPRA ), HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TRUST FROM ITS SETT LER, TOWARDS INFRASTRUCTURE FUND, WAS NOT TAXABLE IN THE HANDS O F THE ASSESSEE, DESPITE THE FACT THAT THE ASSESSEE TRUST WAS NOT RE GISTERED U/S 12A OF THE ACT IN THAT YEAR. 11. THE HON'BLE DELHI HIGH COURT, VIDE ITS ORDER DATED 23.9.2009, IN ITA NO. 927/09 (SUPRA), HAVE DISMISSED THE DEPARTME NTS APPEAL AGAINST THE AFORESAID TRIBUNAL ORDER, BY OBSERVING AS FOLLOWS :- THE RESPONDENT/ASSESSEE IS ADMITTEDLY A CHARITABL E ORGANIZATION WHICH IS A TRUST REGISTERED UNDER THE INDIAN TRUST ACT WHICH HAS ALSO BEEN GRANTED REGISTRATION UNDER THE INCOME TAX ACT W.E.F. 1.4.2003. THE ASSESSEE RECEIVED CERTAIN DONATIONS T OWARDS ITS CORPUS WHICH HAD BEEN DEPOSITED IN THE BANK AND THE MONEY WAS ADMITTEDLY SPENT FOR ACQUIRING LAND FOR CONSTRUCTIO N OF A COLLEGE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CIT(A) AS WELL AS ITAT RIGHTLY CONCLUDED THAT THE DONATIONS RECEIV ED TOWARDS CORPUS OF THE TRUST WOULD BE CAPITAL RECEIPT AND NO T REVENUE RECEIPT CHARGEABLE TO TAX. NO QUESTION OF LAW ARISES. DISMISSED. ITA NO. 380/DEL/2017 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY VS. ITO PAGE 4 OF 6 12. THE DEPARTMENT CONTENDS THAT THE AFORESAID HIGH COURT ORDER IS UNDER CHALLENGE BEFORE THE HON'BLE SUPREME COURT BY WAY OF A SLP FILED BY THE DEPARTMENT. THIS, HOWEVER, IS NOT PREM ISE ENOUGH TO ALLOW THE DEPARTMENTS APPEAL, PARTICULARLY WHEN TH E HIGH COURT ORDER HAS NOT BEEN SHOWN TO HAVE BEEN STAYED. 13. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING TH E HIGH COURT DECISION (SUPRA) IN THE ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2003-04, THE GRIEVANCE OF THE DEPARTMENT IS REJECTED. 5. HE HAS ALSO RELIED UPON ORDER OF ITAT AGRA BENCH IN THE CASE OF ITO VS. GAUDIYA GRANTH ANUVED TRUST 28 ITR(TR) 161 (AGRA) IN WHICH IT WAS HELD AS UNDER :- CHARITABLE TRUSTS INCOME OF TRUST OR INSTITUTION S FROM CONTRIBUTIONS ASSESSEE- TRUST HAD SHOWN DONATION OF RS. 68,50,000/- FROM BB T, MUMBAI-ASSESSING OFFICER COMPUTED ASSESSMENT ON TOTAL INCOME OF RS. 68,70,000/- REJECTING ASSESSEES CONTENTION THAT DONATIONS WERE RECEIVED TOWARDS CORPUS OF TRUST- CIT(A) DELETED ADDITION OF RS. 68,50,000/- OUT OF A DDITION OF RS. 68,70,000/- MADE BY ASSESSING OFFICER- HELD, FACTS OF CASE UNDE R CONSIDERATION ARE IDENTICAL TO FACTS OF CASE DECIDED BY ITAT DELHI BENCH IN CAS E OF SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUST AND OTHER ORDERS O F ITAT THEREFORE, TO MAINTAIN CONSISTENCY, ORDERS OF ITAT ARE FOLLOWED ORDER OF CIT(A) IS CONFIRMED APPEAL DISMISSED HELD : FACTS OF CASE UNDER CONSIDERATION ARE IDENTICAL TO FACTS OF CASE DECIDED BY ITAT DELHI BENCH IN CASE OF SMT. BASANTI DEVI & SHRI CHA KHAN LAL GARG EDUCATION TRUST AND OTHER ORDERS OF ITAT. THEREFORE, TO MAINT AIN CONSISTENCY, ORDERS OF ITAT ARE FOLLOWED. ORDER OF CIT(A) IS CONFIRMED. AP PEAL DISMISSED. 6. HE HAS ALSO RELIED UPON ORDER OF ITAT CALCU TTA C BENCH IN THE CASE OF SHRI SHANKAR BHAGWAN ESTATE VS. ITO 61/ITD/196 IN WHICH IT WAS HELD :- DONATIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE RELIGIOUS TRUST ARE NOT INCOME ASSESSABLE, U NDER S.2(24) (IIA). 7. ON THE OTHER HAND LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSING OFFICER HAS CORRECTLY TAKE N AGGREGATE ANNUAL RECEIPTS OF THE ITA NO. 380/DEL/2017 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY VS. ITO PAGE 5 OF 6 ASSESSEE TRUST WHICH IS MORE THAN RS. 1 CRORE. THER EFORE EXEMPTION U/S 10(23C) (IIIAD) HAS BEEN CORRECTLY DISALLOWED. 8. I HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ASSESSEE IS AN EDUCATIONAL INSTITUTION EXISTIN G SOLELY FOR EDUCATION PURPOSES. THE ASSESSEE HAS REVENUE RECEIPTS OF RS. 96,36,555/- FR OM RUNNING OF EDUCATIONAL INSTITUTION. ASSESSEE EXPLAINED THE RS. 22 LACS HAV E BEEN RECEIVED AS CORPUS FUND FOR MEETING OUT CAPITAL EXPENDITURE FROM FOUNDER MEMBE R. THIS FACT IS NOT DISPUTED BY THE AUTHORITIES BELOW. THEREFORE THE QUESTION IS WHETHE R THE CORPUS FUND WOULD BE PART OF AGGREGATE ANNUAL RECEIPT OF EDUCATIONAL INSTITUTION . IN THE CASE OF ITO (E) VS. SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUS T (SUPRA), IT WAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TRUST FROM ITS SETT LER TOWARDS INFRASTRUCTURE FUND WAS NOT LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSE E, DESPITE ASSESSEE TRUST IS NOT REGISTERED U/S 12AA OF I.T. ACT. THE ORDER OF TRIBU NAL IS CONFIRMED BY THE HIGH COURT. THE SAME ORDER IS FOLLOWED BY ITAT AGRA BENCH IN T HE CASE OF ITO VS. GAUDIYA GRANTH ANUVED TRUST (SUPRA). THE SAME IS THE VIEW OF CALCU TTA BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SHANKAR BHAGWAN ESTATE VS. ITO (SUP RA). THE ASSESSEE THEREFORE HAS BEEN ABLE TO PROVE THAT CORPUS FUND WAS RECEIVED FO R MEETING OUT CAPITAL EXPENDITURE WHICH ACCORDINGLY TO EXPLANATION OF ASSESSEE HAVE B EEN USED ACTUALLY TO MEET THE CAPITAL EXPENDITURE. FURTHER ASSESSEE SOCIETY IS DI FFERENT FROM EDUCATION INSTITUTION WHOSE AGGREGATE ANNUAL RECEIPTS ARE LESS THAN RS. 1 CRORE. THEREFORE FOLLOWING THE ABOVE ORDERS OF VARIOUS BENCHES OF THE TRIBUNAL, I AM OF THE VIEW THAT CORPUS FUND WHICH IS MEANT FOR SPECIFIC PURPOSE TO MEET OUT CAP ITAL EXPENDITURE COULD NOT BE PART OF ANNUAL RECEIPTS OF EDUCATIONAL INSTITUTION, EVEN I F NO REGISTRATION U/S 12AA HAVE BEEN GRANTED. IF THE CORPUS FUND IS EXCLUDED, THE BALANC E AGGREGATE ANNUAL RECEIPT OF THE ITA NO. 380/DEL/2017 DIVINE EDUCATIONAL INSTITUTE AND SOCIAL DEVELOPMENT SOCIETY VS. ITO PAGE 6 OF 6 ASSESSEES EDUCATIONAL INSTITUTION WOULD BE LESS TH AN RS. 1 CRORE. THEREFORE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION U/S 10(23C)(IIID). IN THIS VIEW OF THE MATTER I SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIRECT THE ASSE SSING OFFICER TO GRANT EXEMPTION TO ASSESSEE U/S 10(23C)(IIID) OF I.T. ACT. 9. IN THE RESULT APPEAL OF ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT. SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER DATED: 16.5.2017 *VEENA* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. PRINCIPAL CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR