The Income-tax Oficer, Jammu V. M/s. K.C. Educational Society, Jammu

ITA 405/ASR/2012

• Counselvise Citation: 40520914 RSA 2012
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-12-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: P N ARORA
• Keywords: Charitable institution; Capital expenditure
• Section: 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.405(ASR)/2012 ASSESSMENT YEAR:2009-201 PAN :AAAJK0201H THE INCOME TAX OFFICER, VS. M/S. K.C. EDUCATIONAL SOCIETY, WARDS 2(2), JAMMU. AKHNOOR ROAD, MUTHI, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. R.L. CHHANALIA, DR RESPONDENT BY:SH. P.N.ARORA, ADV. DATE OF HEARING: 27/12/2012 DATE OF PRONOUNCEMENT:28/12/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU DATED 28.08.2012 FOR THE ASSESSMENT YEAR 2009 -2010. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE RENT PAID IS NOT EXCESSIV E WHEN THE RENT HAS BEEN PAID TO M/S. K.C. PUBLIC SCHOOL, A PARTNE RSHIP CONCERN OF MEMBERS OF THE SOCIETY. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN HOLDING THAT THE RENT PAID IS NOT EXCESSIV E WHEN THE SAME WAS COMPARED TO THE CASE OF M/S. R.B. JODHAMAL KUTHIALA ITA NO.405(ASR)/2012 2 EDUCATION TRUST WHERE THE RENT PAID IS 50 TIMES LES S THAN THE RENT PAID BY THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF B UILDING REPAIR & MAINTENANCE BEING OF CAPITAL NATURE AS THE BUILDI NG IS THE PROPERTY OF M/S. K.C. PUBLIC SCHOOL, A PARTNERSHIP CONCERN OF MEMBERS OF THE SOCIETY. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF B UILDING REPAIR & MAINTENANCE BEING OF CAPITAL NATURE WHEN THE HON BLE HIGH COURT OF UTTARKHAND IN THE CASE OF CIT VS. QUEEN ED UCATIONAL SOCIETY 233 CTR 395 HAS HELD THAT THE ASSETS PURCHASED/CONSTRUCTED OUT OF INCOME FROM IMPARTING THE EDUCATION WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME. 5. THE APPELLANT CRAVES TO AMEND OR ADD ANY MORE OR MO RE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN EDUCATIONAL SOCIETY REGISTERED U/S 12AA OF THE I.T. ACT SINCE 27.08.2003. DURING THE YEAR ASSESSEE WAS RUNNING THREE EDUCATIONAL INSTIT UTIONS VIZ. M/S. K.C. PUBLIC SCHOOL, M/S. K.C.COLLEGE OF EDUCATION AND M/ S. K.C. LAW COLLEGE . DURING THE ASSESSMENT AO REVISITED CERTAIN ASPECTS OF THE CASE WHICH WERE OTHERWISE ACCEPTED BY THE DEPARTMENT IN ITS ORDER U /S 143(3) OF THE I.T. ACT TILL ASSESSMENT YEAR 2008-09 AND HELD THAT THE ASSE SSEE WAS ENTITLED FOR EXEMPTION. THE AO MADE ADDITIONS OF RS.1,04,05,136 /- TREATING THE EXPENDITURE CLAIMED UNDER THE HEAD BUILDING REPAIRS AS CAPITAL EXPENDITURE HELD THERE WAS A VIOLATION OF SECTION 13 OF THE I.T . ACT AND ADDED ITA NO.405(ASR)/2012 3 RS.78,12,805/- AND RS.5,58,000/- AS EXCESSIVE RENT PAID TO A FIRM M/S. K.C. PUBLIC SCHOOL AND TO ONE M/S. GEETIKA, RESPECTIVELY . 3. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED S UBMISSIONS ALONGWITH PAPER BOOK WHICH WERE SENT TO THE AO FOR COMMENTS TO VERIFY THE SAME AND FROM THE REJOINDER TAKEN FROM THE ASSESSEE, THE LD. CIT(A) VIDE PARA 4 TO 6 ALLOWED THE CLAIM OF THE ASSESSEE FOR THE REASON TH AT THE ASSESSEE IN ALL THE PREVIOUS YEARS HAS BEEN PAYING THE RENT @ RS.1,20, 00,000/- FOR THE ASSESSMENT YEARS 2006-07, 2007-08 & 2008-09 AND THE DEPARTMENT HAS ACCEPTED THE SAME AND THERE IS NO DISPUTE TO THAT E XTENT. IT IS ALSO ON RECORD THAT THERE WAS 10% INCREASE AS PER TERMS OF THE LE ASE DEED AND THE AO HAS ACCEPTED THE SAME IN THE REMAND REPORT. THE RENT OF RS.1,20,00,000/- WAS ACCEPTED BY THE DEPARTMENT IN VIEW OF DIRECTION U /S 144A OF THE ACT WHICH REPORT IS PART OF THE ORDER OF THE LD. CIT(A) AT PA GES 24 -25.. ON MERIT ALSO, THE ASSESSEE HAD GIVEN DETAILS OF TOTAL AREA OF LAN D AND CONSTRUCTED AREA. IN THE PRESENT CASE, THE TOTAL CONSTRUCTED AREA IS 1,3 8,000 SQ. FT. ON A LAND OF 76 KANALS AND RENT COMES TO RS.9.56 PER SQ. FT. WHICH IF COMPARED TO INSTANCES CITED BY THE ASSESSEE BEFORE THE AO ARE AT A MUCH L OWER SIDE AND CANNOT BE SAID TO BE EXCESSIVE. MOREOVER, ALL THE FACTS ARE IDENTICAL TO ASSESSMENT YEAR 2008-09 WHERE AFTER DETAILED DELIBERATIONS THE RENT WAS TREATED AS ACCEPTABLE UNDER DIRECTIONS U/S 144A OF THE ACT, WHICH CANNOT BE DISTURBED ON THE ITA NO.405(ASR)/2012 4 GROUNDS OF CONSISTENCY AS WELL AS MERITS AND IN VI EW OF THE REMAND REPORT OF THE A.O. THERE IS NO VIOLATION OF ANY CLAUSE OF SEC TION 13 OF THE ACT. THE ASSESSEE IS CLAIMING AND GETTING EXEMPTION AND FIR M M/S. K.C. PUBLIC SCHOOL HAS BEEN TAXED AT 30% RATE AND THE COPIES O F RETURNS ARE ON RECORDS. THE RENT CANNOT BE TREATED AS EXCESSIVE AND ON THI S ACCOUNT, THE EXEMPTION CANNOT BE DENIED. 4. AS REGARDS REPAIR EXPENSES, THE LD. CIT(A) FOLL OWING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS VS. UNION OF INDIA REPORTED IN 327 ITR 73 AND DECISION OF ITAT, AMRITSAR BENCH, DATED 11.07.2012 IN THE CASE OF M/S. D.N. MEMORIAL TRUST, UDHAMPUR, JAMMU VS. CI T, JAMMU, IN ITA NO.617(ASR)/2011 AND ANOTHER DECISION DIRECTED THE AO TO TREAT THE SAID REPAIR EXPENSES AS APPLICATION IN FIXED ASSETS FOR CHARITABLE PURPOSES IN FURTHERANCE OF OBJECTS AND PURPOSES OF SOCIETY WHOS E SOLE ACTIVITY IS EDUCATIONAL IN NATURE. ACCORDINGLY, THE LD. CIT(A ) ALLOWED THE APPEAL OF THE ASSESSEE. 5. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF T HE ASSESSING OFFICER. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, MR. P.N. ARORA, AT THE OUTSET RELIED UPON THE ORDER OF THE LD. CIT(A) AND INVITED OUR ATTENTION TO ITA NO.405(ASR)/2012 5 THE SPECIFIC RENT FIXED AT RS.1,20,00,000/- IN THE PRECEDING THREE YEARS WITH A CLAUSE OF 10% INCREASE AFTER EVERY THREE YEARS. THI S FACTS ARE IN THE REMAND REPORT AT PAGE 19 OF THE LD. CIT(A). SAME WAY, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PAGE 21 BEING REM AND REPORT OF AO WHERE THE AO HAS MENTIONED CLEARLY THAT THE ASSESSEE HAD FILED COPIES OF EXPENSES WHICH CONTAINS DETAILS OF GRANITE, TILES, CEMENT, SAND AND BAJARI, HARDWARE MATERIALS ETC.. IT HAS BEEN MENTIONED IN THE REMAND REPORT THAT THE SOCIETY HAS CONSTRUCTED THE BUILDINGS OF K.C. LAW COLLEGE AND K.C. COLLEGE OF EDUCATION ON THE LEASE HOLD LAND . THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, THEREFORE ARGUED THAT NOTHING HAS BEEN B ROUGHT ON RECORD BY THE AO IN THE REMAND PROCEEDINGS THAT ANY EXPENDITURE H AS BEEN INCURRED FOR ANY PERSONAL PURPOSE AND THEREFORE HAVING ACCEPTED BY THE AO IN THE REMAND PROCEEDINGS THAT THE EXPENDITURE HAS BEEN IN CURRED FOR THE BUILDINGS OF K.C. LAW COLLEGE AND K.C. COLLEGE OF EDUCATION. THEREFORE, NO ADDITION ON THIS ACCOUNT CAN BE MADE AND THE ASSESSEE CANNOT BE DENIED EXEMPTION IN THIS REGARD, SINCE THE EXPENDITURE HAS BEEN INCURRE D ONLY FOR FURTHERANCE OF THE OBJECTS AND PURPOSES OF SOCIETY WHICH IS CHARIT ABLE IN NATURE, AS THE ASSESSEE IS ENJOYING EXEMPTION U/S 12AA OF THE ACT SINCE 27.08.2003. THEREFORE, HE PRAYED TO UPHOLD THE ORDER OF THE LD. CIT(A). ITA NO.405(ASR)/2012 6 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACTS THAT THE ASSESSEE IS RUNNING THREE EDUCATIONAL INSTITUIONS I.E. M/S. K.C. PUBLIC SCHOOL, M/S. K.C .COLLEGE OF EDUCATION AND M/S. K.C. LAW COLLEGE. IN THE PRECEDING YEARS THE A SSESSEE HAD BEEN PAYING RS.1.22 CRORE PER ANNUM AS RENT IS A MATTER OF RECO RD. IN THE PRECEDING YEAR, THE AO HAS ACCEPTED THE RENT OF RS.1.20 CRORE UNDER SECTION 144A OF THE ACT. THERE WAS AN INCREASE OF 10% OF THE RENT AFTER EVE RY THREE YEARS. THE ASSESSEE HAVING PAID THE RENT OF RS.1.20 CRORES IN THE PRECEDING YEARS AND INCREASED RENT OF 10% I.E. RS.1,32,00,000/- WAS DEB ITED IN THE P & L ACCOUNT IN THE IMPUGNED YEAR IS A MATTER OF RECORD AND ACCE PTED BY THE AO IN THE REMAND PROCEEDINGS AT PAGE 19 OF CIT(A)S ORDER. TH EREFORE, AS A MATTER OF CONSISTENCY AND IN THE ABSENCE OF ANY ADVERSE REPOR T BY THE AO HIMSELF IN THE REMAND PROCEEDINGS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO THE RENT OF RS.1.32 CRORE. THE AO CANNOT ESTIMATE THE SAME ON S URMISES AND CONJECTURES. 8. AS REGARDS REPAIR AND MAINTENANCE EXPENSES, SAME HAVING BEEN INCURRED AS PER REMAND REPORT OF K.C. LAW COLLEGE AND K.C. COLLEGE OF EDUCATION AT PAGE 21 OF CIT(A)S ORDER, THERE IS N OTHING ON RECORD BY THE AO THAT THE SAME HAVE BEEN INCURRED FOR ANY PERSONA L PURPOSES OF THE TRUSTEES OR FAMILY MEMBERS OF THE TRUSTEES. THEREFO RE, IN VIEW OF THE DECISION ITA NO.405(ASR)/2012 7 RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE MEN TIONED HEREINABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), W HO HAS RIGHTLY DIRECTED THE AO TO TREAT THE SAID AMOUNT APPLICATION IN FIXED AS SETS AS MADE FOR CHARITABLE PURPOSES IN FURTHERANCE OF OBJECTS AND PURPOSES OF SOCIETY WHOSE SOLE ACTIVITY IS EDUCATIONAL IN NATURE. THEREFORE, WE F IND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ALLOWED THE CLAI M OF THE ASSESSEE. THUS, ALL THE GROUNDS OF APPEAL OF THE REVENUE ARE DISM ISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.405(ASR)/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH DECEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28TH DECEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. K.C. EDUCATIONAL SOCIETY, MUTHI, JAMMU. 2. THE ITO WARD 2(2), JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.