M/s. Kanya Maha Vidyalaya, Jalandhar V. The Income-tax Officer, Jalandhar

ITA 41/ASR/2013

• Counselvise Citation: 4120914 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Charitable institution; Competent authority
• Section: 12A; 144; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER ITA NOS.39 & 40(ASR)/2013 ASSESSMENT YEARS:2006-0 7 & 2007-08 PAN: AAAAD4109L M/S. DOABA COLLEGE, VS. INCOME TAX OFFICER, TANDA ROAD, JALANDHAR. WARD 2(3), JALANDHAR. (APPELLANT) (RESPONDENT) ITA NOS.41, 42 & 89(ASR)/2013 ASSESSMENT YEARS:2006-0 7, 2007-08 & 2009-10 PAN: AAAJK0681R M/S. KANYA MAHA VIDAYALAYA, VS. INCOME TAX OFFICE R, TANDA ROAD, JALANDHAR. WARD 2(1), JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. Y.K. SUD, CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING:29/01/2015 DATE OF PRONOUNCEMENT:20/03/2015 ORDER PER A.D. JAIN, JM: ITA NO.39(ASR)/2013, FOR ASSESSMENT YEAR 2006-07, IS ASSESSEES APPEAL AGAINST THE ORDER DATED 03.12.2010, PASSED B Y THE CIT(A), JALANDHAR, ITA NO.39(ASR)/2013 2 HOLDING THE ASSESSEE NOT ENTITLED TO EXEMPTION U/S 10(23)(III)(AB) OF THE INCOME TAX ACT, 1961 (THE ACT, FOR SHORT). 2. THE ASSESSEE CLAIMED EXEMPTION U/S 10(23C)(III(A B) OF THE ACT. THE AO WORKED OUT THE PERCENTAGE OF THE GRANT AT 34.3% AND SHOW CAUSED THE ASSESSEE AS TO WHY THE EXEMPTION CLAIMED MAY NOT BE DENIED, AS THE GRANT WAS ONLY 34.3% AND IT WOULD NOT AMOUNT TO SUBSTANTI AL FUNDING BY THE GOVERNMENT. IN REPLY THE ASSESSEE CONTENDED THAT 9 5% DEFICIT ON THE SALARY PAID TO STAFF WAS COVERED UNDER THE SCHEME AND WAS PAID BY THE GOVERNMENT. THE ASSESSEE SUBMITTED VARIOUS CALCULAT IONS AS PER WHICH, THE PERCENTAGE OF GOVERNMENT FUNDING WAS SHOWN TO BE IN THE RANGE OF 48.63% TO 69.40%. THE AO FURTHER ISSUED A SHOW CAUSE NOTIC E THAT EVEN IF SHE CONSIDERED THE DETAILS OF SALARY PAID BY THE ASSESS EE AND THE AMOUNT REIMBURSED BY THE GOVERNMENT, THE PERCENTAGE CAME T O 36.77% ONLY. THE ASSESSEE FILED FURTHER EXPLANATION AND STATED THAT DETAILED WORKING OF PERCENTAGE FUNDING BY THE GOVERNMENT WAS ALREADY GI VEN. THE AO DENIED THE EXEMPTION AND TAXED THE ENTIRE INCOME BY HOLDIN G AS UNDER: AS PER THE DETAILS OF STAFF MEMBERS FILED, IT IS APPARENT THAT OUT OF TOTAL 160 STAFF MEMBERS, ONLY 83 STAFF MEMBERS ARE COVERED UNDER 95% DEFICIT BALANCE 77 ST AFF MEMBERS ARE NOT COVERED UNDER 95% DEFICIT SCHEME. H ENCE IT CAN NOT BE SAID THAT THE INSTITUTION IS WHOLLY OR S UBSTANTIALLY FUNDED. ITA NO.39(ASR)/2013 3 EXEMPTION U/S 10(23C) (IIAB) IS AVAILABLE TO THOSE INSTITUTIONS ONLY WHO ARE WHOLLY OR SUBSTANTIALLY A IDED. THE WORD SUBSTANTIALLY MEANS CONSIDERABLY FOR THE MOST PART, MAINLY. AS THE ASSESSEE IN HIS REPLY DATED 11.12.08 HAS HIMSELF STATED THAT THE GRANT IS RECEIVED AGAINST EXPENSES AND NOT AGAINST THE RECEIPTS. NOW, AFTER OBTAINING CLARIFIC ATION FROM THE ASSESSEE REGARDING TWO DIFFERENT RECEIPTS & PAYMENT S ACCOUNTS FILED ALONGWITH THE RETURN AS DISCUSSED ABOVE, I AD OPT THE FIGURE OF EXPENSES MADE BY THE INSTITUTION AT RS.3,98,75,2 48/- (RS.4,15,43,214-16,67,966/- SHOWN AS INCOME IN THE RETURN) AS STATED BY THE ASSESSEE IN HIS REPLY DATED 11.12.08. THE FACT IS THAT THE GRANT RECEIVED BY THE INSTITUTION DURING T HE YEAR IS ONLY RS.1,11,36,000/- AS AGAINST RECEIVABLE AT RS.1,53,5 4,000/-. IT ALSO GOES TO PROVE THAT THE ASSESSEE IS IN NO WAY S UBSTANTIALLY AIDED AS THE GRANT RECEIVED IS MUCH BELOW THE EXPEN DITURE MADE. FURTHER, IT IS SEEN FROM RECORD THAT THE INSTITUTIO N HAS APPLIED FOR GRANT OF EXEMPTION U/S. 10(23C)(VI) OF THE I.T.ACT,1961 FOR THE FINANCIAL YEAR 2006-07 RELEVAN T TO THE ASST. YEAR 2007-08, ON THE PLEA THAT THOUGH THE INS TITUTION IS SUBSTANTIALLY AIDED BY THE GOVT. AS IT IS GETTING 9 5% DEFICIT GRANT, BUT DUE TO SHORTAGE OF FUNDS AND FINANCIAL C RUNCH FACED BY THE GOVT., THE GRANTS ARE NOT FORTHCOMING. FROM THIS FACTS ALSO, IT IS CLEAR THAT THE INSTITUTION ITSELF ADMIT S THAT IT IS NOT COVERED UNDER SECTION 10(23C)(IIIAB) OF I.T. ACT, 1 961. 3. THE LD. CIT(A), IN THE IMPUGNED ORDER, OBSERVED AS FOLLOWS: 15. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, S UBMISSIONS FILED BY THE ASSESSEE ON VARIOUS OCCASIONS, COMMENT S OF AO, THE ORDER OF CHIEF COMMISSIONER OF INCOME TAX, LUDHIANA ON AP PLICATION OF ASSESSEE U/S 10(23C) (VI) OF IT ACT, AND THE MATERI AL ON RECORDS. 16. THE ASSESSEE DURING THE YEAR CLAIMED EXEMPTION U /S 10(23)(IIIAB) OF IT ACT AND THE BASIS BONE OF CONTENTION BETWEEN ASSESSEE AND THE REVENUE WAS WHETHER THE GRANT RECEIVED BY THE A SSESSEE WAS SUBSTANTIAL OR NOT. FOR THIS VARIOUS CALCULATIONS A ND WORKINGS WERE RELIED ON BY THE ASSESSEE AND AO. THERE IS EXT ENSIVE ITA NO.39(ASR)/2013 4 DISCUSSION VIA SUBMISSIONS, COMMENTS AND COUNTER CO MMENTS FROM BOTH THE SIDES. SINCE THE MATERIAL FACTS IN THE CAS E ARE NOT ALTERED THE FINDINGS OF CHIEF COMMISSIONER OF INCOME TAX, L UDHIANA IN ORDER U/S 10(23C)(VI) OF IT ACT ARE QUITE RELEVANT EVEN THROUGH THE ORDER IS PASSED ON 19.08.2011 I.E., DURING THE PEND ENCY OF APPEAL AS IT RAISE QUESTION OF VITAL IMPORTANCE AS TO WHET HER THE INSTITUTION WAS EXISTING SOELY FOR EDUCATIONAL PURPOSE OR NOT. THIS IS THE PRE- REQUISITE IN BOTH THE SECTION I.E. 10(23)(IIAD) AND SECTION 10(23C)(VI)- SECTION 10(23C)(IIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATION PURPOSE A ND NOT FOR PURPOSE OF PROFIT AND WHICH IS WHOLLY OR SUBSTA NTIALLY FINANCED BY THE GOVERNMENT; SECTION 10(23C)(VI) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE S AND NOT FOR PURPOSES OF PROFIT, OTHER THAN THOSE MENTIO NED IN SUB-CLAUSE (IIIAB) OR SUB-CLAUSE (IIIAD) AND WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY. 17. ON BARE READING OF THE PROVISIONS OF BOTH TH E SECTION IT IS CLEAR THAT PRIMARY CONDITION TO BE SATISFIED IS THAT THE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PROFITS. SECTION 10(23C) (VI) OF IT ACT EXCLUDES THE INSTITUTIONS AS MENTION ED IN SECTION 10(23C) (IIIAD) AND (IIIAC) OF IT ACT BUT THE PRIM ARY CONDITIONS HAS TO BE SATISFIED IN AL THE CASES. ONCE THIS THRESHOLD I S CROSSED THE CONSIDERATION AS TO WHETHER THE INSTITUTION WAS SUB STANTIALLY FUNDED OR NOT WILL COME INTO PLAY. THUS, THE CASE HAS NOW COM E TO THE CONSIDERATION WHETHER THE INSTITUTION EXISTED SOLEL Y FOR EDUCATIONAL PURPOSE AND NOT FOR PROFIT AND OTHER ISSUES CAN COM E ONLY AFTER THIS. WHEN THIS ISSUE WAS RAISED BEFORE THE LD. COUNSEL, IN REPLY DATED 08.11.2012 HE REITERATED THAT THE ISSUE TO BE DECID ED WAS WHETHER THE INSTITUTION WAS SUBSTANTIALLY FINANCED BY GOVERNMEN T OR NOT. AFTER DISCUSSING THE PROVISIONS OF SECTIONS 10(23C)(IIAD) AND 10(23C)(VI) AS ABOVE, I CANT AGREE WITH THE LD. COUNSEL OF ASSESS EE. THE PRIMARY ITA NO.39(ASR)/2013 5 CONSIDERATION NOW BEFORE US HAS CHANGED HUE AND FIR ST AND FOREMOST REQUIREMENT TO BE SATISFIED WHICH IS WIDER THAN DEC IDING WHETHER THE INSTITUTE WAS SUBSTANTIALLY FUNDED OR NOT. IN THE R EPLY DATED 08.11.2012 THE LD. COUNSEL FURTHER SUBMITTED THAT E VEN IF IT IS ACCEPTED THAT THE COLLEGE PROMOTES CLASSICAL SANSKRIT AND VE DAS, IN VIEW OF THE DECISION OF KERALA HIGH COURT IN CASE OF THE M/S ST . MARRYS CONTENDED THAT WITHOUT PREJUDICE, IF THE EXEMPTION CLAIMED IS DENIED, THE GRANTS RECEIVED SHOULD BE EXCLUDED FROM THE INC OME IN VIEW OF THE DECISION OF HONBLE HIGH COURT OF PUNJAB AND HARYAN A IN CASE OF PUBJAB STATE-E-GOVERNANCE SOCIETY IN ITA NO.75 OF 2 011 DATED 21.04.2011 (A COPY OF WHICH IS ON RECORDS). 17. THE CONTENTIONS TAKEN ARE DISCUSSED ONE BY ONE. APP ROPOS, THE SUBMISSIONS DATED 08.11.2012, IT IS WELL ACCEPTED T HAT COMMISSIONER OF INCOME TAX (APPEALS) HAS TO GIVE HI S INDEPENDENT FINDINGS BUT IN ABSENCE OF EXPLANATION FROM THE SIDE OF ASSESSEE ON THE MOST VITAL ISSUE, IN THE LIGHT OF T HE ORDER OF CHIEF COMMISSIONER OF INCOME TAX, LUDHIANA WHICH WAS DULY CONFRONTED TO ASSESSEE, A LITTLE SCOPE IS LEFT TO H OLD OTHERWISE. THERE IS NO EXPLANATION TO THE ISSUE OF RELIGIOUS O BJECTIVES OF THE INSTITUTION. IT IS CONTENDED THAT NO EXPENSE ON THE SE OF RELIGIOUS OBJECTIVES OF THE INSTITUTION. IT IS CONTENDED THAT NO EXPENSE ON THESE ACTIVITIES INCURRED BUT THE EXISTENCE OF THES E OBJECTIVES WHICH ARE OF ARYA SHIKSHA MANDAL, LIKE TO TEACH VEDIC DHA RMA, BRAHMACHARYA, ARYAN CULTURE, CLASSICAL SANSKRIT NND VEDAS ARE NOT DENIED. AS LONG AS THESE OBJECTIVES EXIST IT IS OPEN TO ASSESSEE TO IMPLEMENT THEM AND THE NATURE OF THE INSTITUTION WOULD REMAIN RELIGIOUS IN NATURE. 19. MOREOVER, NO REPLY TO THE ISSUE OF SURPLUS EXCEEDIN G 15% IS GIVEN. THE DECISION OF HONBLE PUBJAB AND HARYANA HIGH COU RT IN CASE OF DR. MAHARAJA KRISHNA KAPUR EDUCATIONAL CHARITABL E TRUST AND MANAGEMENT SOCIETY IN CWP NO. 2407 DATED 10.02000 IS ALSO NOT DISTINGUISHED BY THE LD. COUNSEL. FURTHER, WHAT THE HONBLE SUPREME COURT IN CASE OF M/S P.A INAMDA AND ORS. 6 SCC 537 HAS HELD DEFINING PROFITS AND REASONABLE SURPLUS IS ALSO NOT ITA NO.39(ASR)/2013 6 REBUTTED. IN VIEW OF THE INFERENCE WHICH IS OBVIOUS BY GOING BY THE ABOVE DISCUSSIONS THAT THE INSTITUTION WAS NOT SOLE Y FOR EDUCATIONAL PURPOSE OR NOT FOR PROFIT AND THE EXEMPTION AS CLAI MED FALLS AT THE THRESHOLD ITSELF. HERE IT MAY ALSO BE MENTIONED THA T THE CONTENTION RAISED BY THE APPELLANT THAT IN RESPECT OF AY.06-07 THE CHIEF COMMISSIONER OF INCOME TAX, LUDHIANA HAS ACCEPTED T HAT THE APPELLANT WAS ENTITLED TO EXEMPTION U/S 10(23C)(III AD) OF IT ACT IS NOT ENTIRELY TRUE. AT THE TIME THE ASSESSEE APPLIED FOR APPROVAL U/S 10(23C)(VI) OF IT ACT AND IT WAS CLAIMED IN THE APP LICATION FILED THAT THE INSTITUTION U/S 10(23C)(VI) WAS FILED BY T HE CHIEF COMMISSIONER OF INCOME TAX. THIS FILING OF APPLICAT ION CANT BE EQUATED TO GRANT OF EXEMPTION, NEITHER IT CAN BE CA LLED A CONSIDERED DECISION OF GRANTING ANY EXEMPTION. IT W AS ONLY IN RESPECT OF FRESH APPLICATION FILLED FOR AY.10-11, A DETAILED AND CONSIDERED ORDER HAS BEEN PASSED BY THE CHIEF COMMI SSIONER OF INCOME TAX, DENYING EXEMPTION ON THE GROUND DISCUSS ED THEREIN. 20. IN VIEW OF THE ABOVE, I HOLD THAT THE ASSESSEE IS N OT ENTITLED TO EXEMPTION U/S 10(23C)(IIIAD) AS CLAIMED FOR REASONS AS ABOVE OR EVEN U/S 10(23C)(VI) AS NO APPROVAL FROM COMPETENT AUTHORITY IS AVAILABLE. GROUND NO. 4 RELATES TO NON ISSUING OF DIRECTIONS B Y THE ADDL. CIT U/S 144 A OF IT ACT. SECTION 144-A OF IT ACT IS PAR T OF PROCEDURAL SECTION FOR ASSESSMENT AND READS AS UNDER: A [JOINT COMMISSIONER] MAY, ON HIS OWN MOTION OR ON A REFERENCE BEING MADE TO HIM BY THE [ASSESSING] OFFI CER OR ON THE APPLICATION OF AN ASSESSEE, CALL FOR AND EXAMIN E THE RECORD OF ANY PROCEEDING IN WHICH AN ASSESSMENT IS PENDING AND, IF HE CONSIDERS THAT, HAVING REGARD TO THE NATURE OF THE CASE OR THE AMOUNT INVOLVED OR FOR ANY OTHER REASON, IT IS NECE SSARY OR EXPEDIENT SO TO DO, HE MAY ISSUE SUCH DIRECTIONS AS HE THINKS FIT FOR THE GUIDANCE OF THE [ASSESSING] OFFICER TO ENAB LE HIS TO COMPLETE THE ASSESSMENT AND SUCH DIRECTIONS SHALL B E BINDING ON THE [ASSESSING] OFFICER: PROVIDED THAT NO DIRECTIONS WHICH ARE PREJUDICIAL TO THE ASSESSEE SHALL BE ISSUED BEFORE AN OPPORTUNITY IS G IVEN TO THE ASSESSEE TO BE HEARD. ITA NO.39(ASR)/2013 7 4. BEFORE US, BESIDES MAKING ORAL ARGUMENTS, THE RE PRESENTATIVES OF BOTH THE PARTIES HAVE FILED WRITTEN SUBMISSIONS. 5. IN ITS WRITTEN SUBMISSIONS DATED 08.10.2013, THE DEPARTMENT HAS CONTENDED THAT THE ASSESSEE HAD EARLIER GIVEN AN A PPLICATION FOR APPROVAL U/S 10(23C)(VI) OF THE ACT BEFORE THE LD. CCIT WHO, VID E ORDER DATED 24.02.2010 AND 18.08.2011 HAD HELD THAT THE ASSESSEE WAS NOT A N INSTITUTION EXISTING EXCLUSIVELY FOR EDUCATION; THAT THE ASSESSEE HAS FI LED A WRIT PETITION AGAINST THE SAID ORDER OF THE LD. CCIT BEFORE THE HONBLE H IGH COURT, WHICH IS HITHERTO PENDING DECISION; AND THAT AS SUCH, THE PR ESENT APPEAL BE ADJOURNED SINE DIE TO AWAIT THE DECISION OF THE HONBLE HIGH COURT ON THE SAID WRIT PETITION, SINCE THE ISSUE AS TO WHETHER THE ASSESSE E. INSTITUTION IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES OR NOT, IS PENDING BEFORE THE HONBLE HIGH COURT. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS OPPOSED THIS REQUEST OF THE DEPARTMENT. 7. THE ISSUE BEFORE US IS AS TO WHETHER THE ASSESSE E IS ENTITLED FOR EXEMPTION U/S 10(23)(III)(AB) OF THE ACT. TRUE, THE LD. CCITS ORDER IS UNDER CHALLENGE BEFORE THE HONBLE HIGH COURT (THIS HAS N OT BEEN DISPUTED ON BEHALF OF THE ASSESSEE). HOWEVER, THE ISSUE INVOLVE D THEREIN IS ENTITLEMENT OF THE ASSESSEE TO EXEMPTION U/S 10(23C)(VI) OF THE AC T. IT MIGHT BE THAT THE ITA NO.39(ASR)/2013 8 OBSERVATIONS THEREIN ALSO IMPINGE ON THE QUESTION A S TO WHETHER THE ASSESSEE INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES, BUT THE DEPARTMENT HAS NOT PRODUCED ANY STAY ORDER PASSED BY THE HONBLE HIGH COURT. THE ISSUE REGARDING ENTITLEMENT OF THE ASSESSEE TO EXEMPTION U/S 10(23)(III)(AB) OF THE ACT IS, THEREFORE, REQUIRED TO BE DECIDED AS IT I S THE SUBJECT MATTER OF APPEAL BEFORE US. 8. RELIANCE BY THE DEPARTMENT ON CIT, GUJRAT-II VS . SURENDRA GULABCHAND MODI, 140 ITR 517 (GUJ.) IS OF NO AVAIL . THEREIN, THE ISSUE WAS WHETHER THE ASSESSEE HUF WAS DISRUPTED PENDING DECI SION BEFORE THE HONBLE SUPREME COURT. THE AO MADE A PROTECTIVE ASS ESSMENT. THE ASSESSEE REQUESTED THE TRIBUNAL FOR ADJOURNMENT OF PROCEEDINGS TILL THE DECISION BY THE SUPREME COURT. THE TRIBUNAL SET AS IDE THE PROTECTIVE ASSESSMENT ON THE GROUND THAT THE MATTER WAS VERY O LD. THE HONBLE HIGH COURT HELD THAT WHEN THE VALIDITY OF THE ALLEGED P ARTITION WAS THE VERY QUESTION WHICH WAS PENDING BEFORE THE SUPREME COUR T, THE OUTCOME OF THE APPEAL BEFORE THE TRIBUNAL DEPENDED THE ULTIMATE D ECISION OF THE SUPREME COURT; THAT THE REQUEST OF THE ASSESSEE TO BLOCK TH E MATTER BY ADJOURNING IT TILL THE APPEAL IS PENDING IN THE SUPREME COURT WAS FIN ALLY DISPOSED OF, WAS A LEGITIMATE REQUEST; THAT IF THIS PRAYER WAS NOT GRA NTED, THE PARTIES WOULD BE REQUIRED OR OBLIGED TO CHALLENGE THE DECISION REND ERED BY THE TRIBUNAL BY ITA NO.39(ASR)/2013 9 APPLYING FOR A REFERENCE TO THE HIGH COURT AND CAR RYING THE MATTER FURTHER TO THE SUPREME COURT; THAT WHEN MULTIPLICITY OF PRO CEEDING CAN BE AVOIDED AND PARTIES CAN BE SAVED FROM UNNECESSARY EXPENDITU RE, IT IS LEGAL AND PROPER AS ALSO PRAGMATIC TO GRANT THE REQUEST TO BLOCK THE PROCEEDING AND TO ADJOURN THE MATTER AWAITING THE DECISION OF THE SUPREME COU RT ON A CRUCIAL QUESTION ON WHICH THE DECISION OF THE APPEAL WOULD ULTIMATE LY TURN; AND THAT THE MERE FACT THAT THE MATTER WAS OLD AND WOULD HAVE REMAINE D ON THE FILE OF THE TRIBUNAL WAS NO LEGAL OR VALID GROUND FOR DRIVING T HE PARTIES TO A NUMBER OF AVOIDABLE PROCEEDINGS IN HIGHER COURTS AND OBLIGING THEM TO INCUR AVOIDABLE EXPENDITURE. 9. THESE, CLEARLY ARE NOT THE FACTS BEFORE US. THE DISPUTE BEFORE THE HONBLE HIGH COURT IS ENTIRELY DIFFERENT FROM THA T BEFORE US. BEFORE US, TO REITERATE, THE ENTITLEMENT TO EXEMPTION U/S 10(23) (III)(AB) OF THE ACT IS UNDER CHALLENGE, WHEREAS IN THE WRIT PETITION BEFORE THE HONBLE HIGH COURT, THE DISPUTE PERTAINS TO ENTITLEMENT TO EXEMPTION U/S 10 (23C)(VI) OF THE ACT. THEREFORE, REJECTING THE REQUEST OF THE DEPARTMENT, WE HAVE HEARD THE PARTIES ON THE MATTER AT ISSUE AND WE ARE PROCEEDING TO DEC IDE IT. 10. SECTION 10(23C)(III)(AB) OF THE ACT READS AS FO LLOWS: ITA NO.39(ASR)/2013 10 ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EX ISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT , AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 11. THUS, THERE ARE TWO REQUIREMENTS FOR ENTITLEMEN T TO EXEMPTION U/S 10(23)(III)(AB) OF THE ACT, I.E., THAT THE INSTITU TION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND THAT IT IS WHOLLY OR SUBST ANTIALLY FINANCED BY THE GOVERNMENT. THE AO DECIDED ONLY THE SECOND LIMB OF THE SECTION, I.E., AS TO WHETHER THE ASSESSEE INSTITUTION WAS WHOLLY OR SU BSTANTIALLY FINANCED BY THE GOVERNMENT. THE ISSUE AS TO WHETHER IT EXISTED SOL ELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT, WAS NO T ADJUDICATED. THE LD. CIT(A), ON THE OTHER HAND, OBSERVED THAT IT WAS THE FIRST LIMB, I.E., EXISTENCE OF THE INSTITUTION SOLELY FOR EDUCATIONAL PURPOSES , WHICH WAS TO BE DECIDED FIRST AND THAT THE OTHER ISSUE WOULD BE DECIDED THE REAFTER. 12. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ITO IN DENYING THE EXEMPTION CLAIMED BY THE APPELLA NT U/S 10(23C) (IIAB) OF THE INCOME TAX ACT,1961 ON ERRONE OUS AND INSUFFICIENT GROUNDS. 2. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUPPORTING THE DENIAL OF EXEMPTION ON A NEW GROUND THAT THE APPELLANT INSTIT UTION WAS NOT COVERED BY THE PROVISIONS OF SEC.10(23C)(VI) OF THE INCOME TAX ACT. HE HAS FAILED TO APPRECIATE THAT THE ITO C OULD NOT HAVE GONE INTO THIS QUESTION IN VIEW OF THE ORDER OF THE CCIT, LUDHIANA DATED 25.03.2008 WHEREBY THE APPELLANTS AP PLICATION FOR REGISTRATION U/S 11 HAD BEEN FILED ON THE GROUN D THAT THE ITA NO.39(ASR)/2013 11 APPELLANT WAS COVERED BY THE PROVISIONS OF SE. 10(2 3C)(IIAB) OF THE ACT. THIS FINDING COULD NOT HAVE BEEN REVIEWED OR REVISED EVEN BY THE SUCCESSOR CCIT. 3. THAT THE CIT(A) MISCARRIED HIMSELF BY RELYING ON THE FINDINGS OF THE CCIT REGARDING SYSTEMATIC PROFITS AND OTHERS CONDITIONS WHICH WERE ONLY APPLICABLE TO 10(23C)(VI) AND NOT 10(23C)(IIAB). 4. THAT THE CIT(A) HAS FAILED TO RECORD HIS OWN FIN DINGS ON THE BASIS OF THE WRITTEN SUBMISSIONS MADE BEFORE HIM AN D HAS BLINDLY FOLLOWED THE ORDER OF THE CCIT, LUDHIANA DA TED 18.2.11 IN RESPECT OF ASST. YEAR 2010-11. 5. THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THA T SOME OF THE OBJECTS OF THE APPELLANT WERE RELIGIOUS IN NATURE A ND THEREFORE THE APPELLANT WAS NOT COVERED FOR EXEMPTION U/S 10( 23C) OF THE ACT. AT ANY RATE THE EXEMPTION COULD NOT BE DENIED AS NO INCOME HAD BEEN APPLIED TO SUCH PURPOSES. 6. THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THA T THE ADDL. CIT WAS NOT OBLIGED TO ISSUE DIRECTIONS U/S 144A OF THE INCOME TAX ACT, WHEN SUCH DIRECTIONS HAD BEEN SPECIFICALLY SOU GHT BY AN APPELLANT BY FILING AN APPLICATION BEFORE HIM. 7. THAT THE CIT(A) WAS NOT JUSTIFIED IN REJECTING T HE ASSESSEES CLAIM FOR EXEMPTION IN RESPECT OF 95% DEFICIT GRANT RECEIVED FROM THE GOVT. IN THE LIGHT OF THE JUDGMENT OF THE PB & HARYANA HIGH COURT IN CASE OF M/S. PUNJAB STATE E-GOVERNANC E SOCIETY IN ITA NO.75 OF 2011 DATED 21.4.2011. 8. THAT THE CIT(A) HAS NOT EVEN BOTHERED TO DISCUSS THE JUDGMENTS OF THE VARIOUS HIGH COURTS BROUGHT TO HIS NOTICE WH ICH SHOWS THE SCANT REGARD THAT HE HAS FOR THE SUPERIOR COURT S. 9. THAT THE ORDERS OF THE CIT(A) AND THE ITO ARE AG AINST LAW AND FACTS OF THE CASE. ITA NO.39(ASR)/2013 12 13. APROPOS GROUNDS NO. 1 & 2, ON BEHALF OF THE ASS ESSEE, IT HAS BEEN CONTENDED THAT SIMULTANEOUS WITH CLAIMING EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT, THE ASSESSEE APPLIED FOR REGISTRATION U/S 10(23C)(VI) OF THE ACT, BEFORE THE LD. CHIEF COMMISSIONER OF INCOME TAX, LU DHIANA. THE LD. CCIT, LUDHIANA, VIDE ORDER DATED 25.03.2008 (COPY PLACED AT PB-5), HAS OBSERVED THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 10( 23C)(IIIAB) OF THE ACT AND, THEREFORE, NO APPROVAL WAS REQUIRED FOR GETTING REG ISTRATION U/S 10(23C)(VI) OF THE ACT. THE APPLICATION FOR REGISTRATION U/S 10 (23C)(VI) OF THE ACT WAS, AS SUCH, FILED BY THE LD. CCIT. IT IS THE CONTENTION OF THE ASSESSEE THAT HENCE, THE AO OUGHT TO HAVE GRANTED EXEMPTION TO THE ASSE SSEE IN VIEW OF THE ORDER OF THE LD. CCIT, LUDHIANA, AS THE SAID ORDER WAS BI NDING ON THE AO. THE ASSESSEE HAS POINTED OUT THAT IN SIKKIM MANIPAL UN IVERSITY VS. ACIT REPORTED IN 148 TTJ 645 ( ITAT, KOLKATA) (COPY PLA CED ON RECORD), IT HAS BEEN HELD THAT THE REVENUE AS A WHOLE SHOULD NOT BE PERMITTED TO BLOW HOT AND COLD IN THE SAME BREATH. APPLYING ASSTT. COLLE CTOR OF CENTRAL EXCISE VS. DUNLOP INDIA LTD., REPORTED IN 154 ITR 172 (SC), I T WAS HELD UNDER SIMILAR CIRCUMSTANCES THAT THE LD. CCIT WAS EXERCISING QUA SI-JUDICIAL POWERS VESTED IN HIM U/S 10(23C) OF THE ACT, WHICH APPEARED THE CORRECT VIEW OF THE DEPARTMENT IN GRANTING EXEMPTION TO THE ASSESSEE U/ S 10(23C)(IIIAB) OF THE ACT. THE ASSESSEE CONTENDS THAT THIS WAS BROUGHT TO THE KNOWLEDGE OF THE LD. ITA NO.39(ASR)/2013 13 CIT(A) VIDE LETTER DATED 15.10.2012 (COPY PLACED O N RECORD). HOWEVER, THE LD. CIT(A) WRONGLY DID NOT TAKE THE SAME INTO CONSI DERATION. 14. THE ASSESSEE HAS FURTHER PLACED RELIANCE ON RO YAL CALCUTTA TURF CLUB VS. DCIT 76 ITD 237 (CAL), WHEREIN IT HAS BEEN HEL D THAT IF A VERY HIGH AUTHORITY OF THE INCOME TAX DEPARTMENT LIKE CHIEF COMMISSIONER COMES OUT WITH AN OPEN COMMITMENT, RELATIVE TO ADMINISTRA TION OF THE ACT AND IF THE INSTRUCTIONS ARE NOT CONTRARY TO LAW, SUCH INSTRUC TIONS ARE REQUIRED TO BE ACCEPTED AND NOT DISOBEYED. 15. THE ASSESSEE HAS FURTHER CONTENDED THAT THE AO ERRED IN OBSERVING THAT THE ASSESSEE WAS NOT SUBSTANTIALLY FINANCED BY THE GOVERNMENT, SINCE 95% DEFICIT GRANT FROM THE GOVERNMENT AMOUNTED TO JUS T 38.50% OF THE TOTAL EXPENDITURE. IT HAS BEEN SUBMITTED THAT THE AO WRON GLY CONSIDERED THE GRANT OF RS.1,53,54,000/- AGAINST THE GRANT OF RS.2,02,05 ,822/-; THAT IF THE OTHER GRANT OF RS.9,90,000/- WAS ADDED TO THIS GRANT, TH E TOTAL PERCENTAGE AMOUNTED TO 53.16%, CONSIDERING THE PERIOD OF FIVE YEARS. A CHART IN THIS REGARD HAS BEEN PLACED ON RECORD. 16. THE ASSESSEE HAS FURTHER SUBMITTED THAT THE WOR D SUBSTANTIAL HAS NOT BEEN DEFINED IN SECTION 10(23C)(IIIAB) OF THE ACT A ND THE AO WRONGLY HELD THE PERCENTAGE OF GRANT AT 53.16% TO BE NOT SUBSTA NTIAL. ITA NO.39(ASR)/2013 14 17. IT HAS BEEN CONTENDED THAT VIDE SUBMISSION DATE D 7.10.2011 (COPY FILED ON RECORD), IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT AS PER CIT VS. PARLEY PLASTICS LTD. AND OTHERS, 322 ITR 63 (BOM.) , SUBSTANTIAL DOES NOT MEAN MORE THAN 50% AND IT CAN BE 10% OR 20% , DEPEN DING ON THE OTHER TERMS AND CONDITIONS; THAT IF THE LEGISLATURE HAD A NY PERCENTAGE MORE THAN 50% IN MIND, IT WOULD HAVE BEEN SO PROVIDED FOR . A COPY OF PARLEY PLASTICS LTD. AND ANOTHER (SUPRA), HAS ALSO BEEN PLACED ON RECORD. 18. RELIANCE HAS ALSO BEEN PLACED ON CIT VS. DESIA VIDYASHALA SAMITI SHIMOGA, ITA NO.1133 OF 2008, DATED 02.08.2011, THE HONBLE KARNATAKA HIGH COURT, VIDE JUDGMENT DATED 08.02.2011 (COPY PL ACED ON RECORD) PASSED IN ITA NO.1133 OF 2008, HELD THAT THE GOVERNMENT G RANT AMOUNTING TO 34.33% AMOUNTS TO SUBSTANTIAL FINANCING AND EXEMPTI ON U/S 10(23C)(IIIAB) OF THE ACT IS ALLOWABLE. IT IS POINTED OUT THAT THE HONBLE KARNATAKA HIGH COURT HAS RELIED ON ITS EARLIER JUDGMENT IN CIT V S. NATIONAL EDUCATIONAL SOCIETY , WHEREIN, GRANT OF 36.42% OF THE TOTAL REVENUE WAS HELD TO CONSTITUTE SUBSTANTIAL FINANCIAL AID FROM THE GOVER NMENT FOR THE PURPOSE OF GRANT OF EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. 19. THE ASSESSEE HAS FURTHER CONTENDED THAT IT WAS ESTABLISHED IN THE YEAR 1941 AND WAS GRANTED BENEFIT U/S 10(23C)(IIIAB) OF THE ACT TILL 01.04.1999 AND THEREAFTER, CONSISTENTLY U/S 10(23C) OF THE ACT AND THAT IT WAS ONLY FOR ITA NO.39(ASR)/2013 15 THE ASSESSMENT YEAR 2006-07, I.E., THE YEAR UNDER C ONSIDERATION, THAT THE SAID EXEMPTION WAS DENIED TO THE ASSESSEE, DESPITE THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES, LIKE THE GOVERNMENT AID AN D CONTROL REMAINING THE SAME. IN THIS REGARD, RELIANCE HAS BEEN PLACED ON NOPANY EDUCATION TRUST VS. ADDL. DIRECTOR OF INCOME TAX (EXEMPTION), 92 T TJ (CAL) (TM) 1143. 20. ON THE OTHER HAND, ON BEHALF OF THE DEPARTMENT, IT HAS BEEN CONTENDED THAT THE LD. CCIT HAS NOT HELD THAT THE ASSESSEE IS COVERED BY SECTION 10(23C)(IIIAB) OF THE ACT; THAT IN FACT, THE LD. CC IT HAD ONLY OBSERVED THAT SINCE THE ASSESSEE WAS GETTING 95% OF ITS FUNDS FRO M THE GOVERNMENT, IT WAS COVERED BY THE PROVISIONS OF SECTION 10(23C(IIIAB) OF THE ACT AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO MAKE AN APPLICATI ON U/S 10(23C)(VI) OF THE ACT, THAT AS SUCH, THE ONLY ISSUE BEFORE THE LD. CC IT WAS THE MAINTAINABILITY OR OTHERWISE OF THE APPLICATION FILED BY THE ASSESS EE U/S 10(23C)(VI) OF THE ACT AND NOT AS TO WHETHER THE ASSESSEE WAS COVERED U/S 10(23C)(IIIAB) OF THE ACT; THAT IN THIS CASE, THE OBSERVATION OF THE LD. CCIT, TO THE EFFECT THAT THE ASSESSEE IS COVERED BY THE PROVISIONS OF SECTION 10 (23C)(IIIAB) OF THE ACT, IS ONLY OBIER AND NOT A RATIO; THAT ACTUALLY, THE LD. CCIT DID NOT HAVE ANY OCCASION TO CONSIDER AS TO WHETHER THE ASSESSEE WAS OR NOT COVERED BY THE PROVISIONS OF SECTION 12(23C)(IIIAB) OF THE ACT AND THIS OBSERVATION WAS MADE MERELY ON THE BASIS OF THE ASSESSEES CLAIM TH AT IT HAD BEEN RECEIVING ITA NO.39(ASR)/2013 16 95% OF ITS FUND FROM THE GOVERNMENT; THAT OTHERWISE TOO, MERELY BECAUSE 95% OF THE FUNDS OF THE ASSESSEE COME FROM THE GOVE RNMENT, THIS DOES NOT MAKE IT SUBSTANTIALLY FINANCED WITHIN THE MEANING OF SECTION 10(23C)(IIIAB) OF THE ACT; THAT AN INSTITUTION CAN BE SAID TO BE W HOLLY FINANCED, IF 100% FINANCING IS DONE BY THE GOVERNMENT AND IT WILL BE SAID TO BE SUBSTANTIALLY FINANCED, IF NOT 100%, BUT ALMOST 100% FINANCING IS DONE BY THE GOVERNMENT; THAT IN THE CASE OF THE ASSESSEE, AS WO RKED OUT BY THE AO, THE FINANCING BY THE GOVERNMENT COMES TO LESS THAN 50% AND THEREFORE, THE ASSESSEE-INSTITUTION CANNOT BE SAID TO BE SUBSTANTI ALLY FUNDED OR FINANCED BY THE GOVERNMENT. 21. APROPOS THE CASE LAWS RELIED ON BY THE ASSESSEE , IT HAS BEEN SUBMITTED ON BEHALF OF THE DEPARTMENT THAT THE DECISION IN SIKKIM MANIPAL UNIVERSITY VS. ACIT (SUPRA), IS DISTINGUISHABLE ON FACTS; THA T IN THAT CASE, THE LD. CCIT HELD THAT THE ASSESSEE WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT, WHEREAS IN THE PRESENT CASE, THE LD. CCIT MERELY O BSERVED THAT A PERUSAL OF THE APPLICATION FOR EXEMPTION U/S 10(23C)(VI) OF TH E ACT FILED BY THE ASSESSEE REVEALED THAT THE ASSESSEE GOT 95% OF IT S FUNDS FROM THE GOVERNMENT AND THAT THEREFORE, THE EXEMPTION WAS CO VERED U/S 10(23C)(IIIAB), FOR WHICH, NO APPROVAL FROM LD. CC IT WAS REQUIRED; THAT THE OBSERVATION OF THE LD. CCIT IN THE PRESENT CASE DOE S NOT AMOUNT TO A FINDING ITA NO.39(ASR)/2013 17 TO THE EFFECT THAT THE ASSESSEE WAS COVERED U/S 10( 23C)(IIIAB) OF THE ACT; THAT IN SIKKIM MANIPAL UNIVERSITY (SUPRA), THE DECISIO N OF THE HONBLE SUPREME COURT IN ASSTT. CCE VS. DUNLOP INDIA LTD. & ORS., 154 ITR 172 (SC) WAS RELIED ON, WHICH DECISION, IN THE FACTS OF THE ASSESSEES CASE, ALSO CANNOT BE INVOKED. WITH REGARD TO ROYAL CALCUTTA T URF CLUB (SUPRA), IT HAS BEEN SUBMITTED THAT THIS DECISION ALSO DOES NOT HA VE ANY RELEVANCE TO THE FACTS OF THE PRESENT CASE. 22 CONCERNING PARLEY PLASTICS LTD. (SUPRA), IT H AS BEEN STATED THAT ALTHOUGH THEREIN, IT WAS HELD THAT THE WORD SUBSTA NTIAL DOES NOT MEAN MORE THAN 50% AND THAT IT CAN BE 10% OR 20% DEPENDING UP ON THE OTHER TERMS AND CONDITIONS, THE SAID JUDGMENT IS IN THE CONTEXT OF SECTION 2(22)(E) OF THE ACT AND NOT OF SECTION 10(23C)(IIIAB). 23. QUA DESHIYA VIDYA SHALA SAMITI (SUPRA), IT HA S BEEN SUBMITTED THAT THE SAID JUDGMENT IS PER INCURIAN IN ASMUCH AS THEREIN, THE HONBLE KARNATAKA HIGH COURT HAD NOT CONCERNED ITSELF WITH THE CONTEXT IN WHICH THE WORD SUBSTANTIALLY HAS BEEN USED IN THE PROVISION S OF SECTION 10(23C)(IIIAB) OF THE ACT AND HAS ERRONEOUSLY ALLO WED ITSELF TO BE LED BY THE WORD SUBSTANTIAL INTEREST AS DEFINED AT VARIOUS P LACES IN THE INCOME TAX ACT AND HAS FURTHER ALLOWED ITSELF TO BE LED BY INT ERPRETATION BY VARIOUS COURTS AS TO WHAT CONSTITUTES SUBSTANTIAL INTEREST ; THAT THE WORDS WHOLLY ITA NO.39(ASR)/2013 18 AND SUBSTANTIALLY, AS APPEARING IN SECTION 10(23C) (IIIAB), HAS TO BE READ IN CONJUNCTION AND CANNOT BE SEPARATED WITH EACH OTHER AS HAS BEEN DONE BY THE HONBLE KARNATAKA HIGH COURT; THAT WHEN THE SECTION ITSELF PROVIDES FOR, WHOLLY AND MITIGATES THE RIGOUR BY ADDING SUBSTA NTIALLY, IT DOES NOT MEAN THAT THE INTENDMENT OF THE LEGISLATURE WAS TO COVER SUCH CASES IN WHICH FINANCING BY THE GOVERNMENT IS AS LOW AS 10% OR 2 0%. 24. IN THE REJOINDER SUBMISSIONS, THE ASSESSEE HAS REITERATED ITS STAND. IT HAS BEEN SUBMITTED THAT THE APPLICATION FOR GRANT O F REGISTRATION U/S 10(23C)(VI) OF THE ACT WAS MADE IN THE PRESCRIBED F ORM N. 56D AND WAS ACCOMPANIED BY THREE YEARS AUDITED INCOME AND EXPE NDITURE ACCOUNT AND BALANCE SHEET AND IT WAS AFTER EXAMINATION THEREOF THAT THE LD. CCIT GAVE A FINDING THAT THE ASSESSEE FALLS U/S 10(23C)(IIIAB) OF THE ACT, FOR WHICH, NO APPROVAL IS REQUIRED FROM THE LD. CCIT AND THAT THE REFORE, IT CANNOT BE SAID THAT THE FINDING OF THE LD. CIT(A) WAS MERELY AN OB SERVATION. 25. IN THIS REGARD, IT IS SEEN THAT THE AO DECIDED THE ISSUE ONLY AS TO WHETHER THE INSTITUTION WAS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE CIT(A), PER-CONTRA, HELD THAT THE D ECISION OF THIS ISSUE COULD ONLY SUCCEED THE DECISION ON THE ISSUES AS TO WHETHER THE ASSESSEE INSTITUTION EXISTED SOLELY FOR EDUCATIONAL PURPOSES . ITA NO.39(ASR)/2013 19 26. IN PARA 10 OF THE IMPUGNED ORDER, THE LD. CIT(A ) HAS NOTED THAT THE ASSESSEE HAD BEEN ASKED, IN THE APPELLATE PROCEEDIN GS, TO FILE THE SCHEME OF 95% DEFICIT GRANT AND THAT THIS WAS FILED ON 28.10. 2011 ALONGWITH FURTHER SUBMISSIONS ON BEHALF OF THE ASSESSEE. THESE FURTH ER SUBMISSIONS OF THE ASSESSEE HAVE BEEN REPRODUCED VERBATIM AT PAGES 9 TO 11 OF THE ORDER UNDER APPEAL. IN PARA 11, THE LD. CIT(A) STATES THAT THE COMMENTS OF THE AO ON THE SAID WRITTEN SUBMISSIONS OF THE ASSESSEE WERE CALL ED FOR AND THESE WERE SUBMITTED BY THE AO VIDE LETTER DATED 17. 11.2011. THESE SUBMISSIONS OF THE AO HAVE BEEN REPRODUCED AT PAGES 11 TO 14 OF TH E ORDER UNDER APPEAL. 27. IN RESPONSE, A FURTHER SUBMISSION WAS FILED BY THE ASSESSEE ON 15.10.2012, WHICH HAS BEEN QUOTED BY THE LD. CIT(A) AT PAGES 13 TO 14 OF THE ORDER, IN PARA 12 THEREOF. 28. THE LD. CIT(A) HAS FURTHER OBSERVED, IN PARA 13 , THAT THE ASSESSEE WAS SUPPLIED WITH A COPY OF ORDER OF THE CHIEF COM MISSIONER OF INCOME TAX, LUDHIANA, PASSED IN THE CASE OF AN ASSOCIATE COLLEGE OF THE ASSESSEE- INSTITUTION, I.E., KANYA MAHA VIDYALYA, ON AN APPLI CATION FILED U/S 10(23C)(VI) OF THE ACT. THE LD. CCIT DENIED SUCH E XEMPTION VIDE ORDER DATED 18.12.2011. THE LD. CCITS SAID ORDER STAND S REPRODUCED AT PAGES 14 TO 17, IN PARA 13, OF THE IMPUGNED ORDER. ITA NO.39(ASR)/2013 20 29. IN PARA 14 OF THE LD. CIT(A)S ORDER, THE CIT(A ) STATES THAT THE ASSESSEE FILED AN EXPLANATION DATED 08.11.2012. THI S EXPLANATION HAS ALSO BEEN REPRODUCED. 30. IN THE FINDING PORTION OF THE LD. CIT(A)S ORDE R, HE HAS OBSERVED, INTER-ALIA, TO THE EFFECT THAT IT IS THE ISSUE OF T HE ASSESSEE-INSTITUTION BEING SUBSTANTIALLY FUNDED OR NOT, WHICH NEEDS TO BE DECI DED FIRST AND THAT OTHER ISSUES COULD ONLY COME AFTER. 31. THE FIRST ISSUE IS AS TO WHETHER THE LD. CCITS ORDER IS MERELY IN THE NATURE OF OBITER DICTA. A COPY OF THE ORDER DATED 2 5.03.2008, ISSUED BY THE OFFICE OF THE CHIEF COMMISSIONER OF INCOME TAX, RIS HI NAGAR, LUDHIANA, IS AT APB-5, AND IT IS AS FOLLOWS: THE PRINCIPAL. DOABA COLLEGE, TANDA ROAD, JALANDHAR. SIR, SUB: APPLICATION FOR GRANT OF EXEMPTIONS U/S 10(23C)(VI) OF THE I.T.ACT, 1961 FOR F.Y.2006-07 REGARDING. KINDLY REFER TO APPLICATION DATED 30.03.2007 IN THE ABOVE CITED SUBJECT. 2. PERUSAL OF YOUR APPLICATION FOR EXEMPTION U/S 10(23C)(VI) OF THE I.T.ACT, 1961 IN FORM NO.56D, RE VEALS THAT INSTITUTION GETS 95% OF THE FUNDS FROM THE GOVT. TH E EXEMPTION IS THEREFORE COVERED U/S 10(23C)(IIIB) FOR WHICH NO APPROVAL OF THE CHIEF COMMISSIONER OF INCOME TAX IS REQUIRED. 3. IN VIEW OF THESE FACTS, I HAVE BEEN DIRECTED TO CONVEY THAT THE WORTHY CHIEF COMMISSIONER OF INCOME TAX, LUDHIA NA HAS ITA NO.39(ASR)/2013 21 FILED YOUR APPLICATION FOR EXEMPTION U/S10(23C)(VI) OF THE I.T.ACT. YOURS FAITHFULLY, SD/- (RAVINDER MITTAL) ASSTT. COMMISSIONER OF INCOME TAX (JUDL.), O/O THE CHIEF COMMISSIONER OF INCOME TAX LUDHIANA. COPY OF THE COMMISSIONER OF INCOME TAX, JALANDHAR W .R.T. HIS OFFICE LETTER NO.4198 DATED 17.03.2008 FOR INFORMAT ION. SD/- (RAVINDER MITTAL) ASSTT. COMMISSIONER OF INCOME TAX (JUDL.), O/O THE CHIEF COMMISSIONER OF INCOME TAX LUDHIANA. 32. THUS, THE APPLICATION OF THE ASSESSEE FOR GRAN T OF EXEMPTION U/S 10(23C)(VI) OF THE ACT FOR THE ASSESSMENT YEAR 2006 -07, WAS FILED. SINCE THE SAID APPLICATION REVEALED THAT THE ASSESSEE GOT 95 % OF ITS FUNDS FROM THE GOVERNMENT AND THAT IT WAS, THEREFORE, COVERED U/S 10(23)(IIIAB) OF THE ACT FOR WHICH, NO APPROVAL OF THE CCIT WAS REQUIRED. HE NCE, EVEN THOUGH, THE APPLICATION OF THE ASSESSEE U/S 10(23(VI) OF THE AC T WAS FILED BY THE CCIT, IT WAS SO DONE ON THE BASIS THAT THE CCIT FOUND THE E XEMPTION TO BE COVERED U/S 10(23C)(IIIAB) OF THE ACT. THAT BEING SO, IN TH E FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT THIS OBSERVATION IS MERELY OBITER DICTA APROPOS THE ISSUE AS TO WHETHER THE ASSESSEE WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT. ITA NO.39(ASR)/2013 22 33. NOW, IN SIKKIM MANIPAL UNIVERSITY (SUPRA), I T HAS BEEN HELD, APPLYING DUNLOP INDIA LTD. & OTHERS (SUPRA), THAT THE CCIT WAS EXERCISING QUASI-JUDICIAL POWER; AND THAT WHEN THE CCIT HAS SP ECIFICALLY RECORDED THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(23)(II AB) OF THE ACT, SINCE IT WAS BEING GRANTED 95% OF ITS FUNDS FROM THE GOVERNMENT AND THAT FOR EXEMPTION THEREUNDER, NO APPROVAL OF THE CCIT WAS REQUIRED, T HE LD. CIT(A) OUGHT TO HAVE TAKEN NOTE OF SUCH OBSERVATION OF THE CCIT AND OUGHT TO HAVE FOLLOWED THE SAME. 34. THIS, TO US, IS ALSO THE PURPORT OF ROYAL CAL CUTTA TRUF CLUB (SUPRA). 35. THE ASSESSEE GOT 95% OF ITS FUNDS FROM THE GOVERNM ENT AND IT WAS THUS, THAT THE EXEMPTION WAS COVERED U/S 10(23C)(II IAB) OF THE ACT, FOR WHICH NO APPROVAL OF THE CCIT WAS REQUIRED. 36. SO FAR AS REGARDS THE ISSUE AS TO WHETHER THE A SSESSEE WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT, THE AO NOTED THAT 95% O F THE ASSESSEES GRANT, WHICH CAME FROM THE GOVERNMENT, AMOUNTED TO A MERE 38.50% OF THE TOTAL EXPENDITURE. THE ASSESSEE MAINTAINED THAT THE AO W AS WRONG IN OBSERVING THAT SUCH GRANT WAS OF RS.1,53,54,000/- ONLY; THAT IN FACT, THIS GRANT WAS OF RS.2,02,05,822/-, AS NOTED EVEN BY THE AO HERSELF, AT PAGE-2 OF THE ASSESSMENT ORDER. THIS IS FOUND TO BE CORRECT. AT P AGE 2 OF THE ASSESSMENT ORDER, THE AO HAS NOTED THAT TOTAL GRANT FUNDED BY THE GOVERNMENT : ITA NO.39(ASR)/2013 23 RS.2,02,05,822/-. THE AO HAS NOTED THE AMOUNT OF R S.1,53,54,000/- TO BE GRANT RECEIVED DURING THE YEAR. 37. ACCORDING TO THE ASSESSEE, IF THIS GRANT OF RS. 2,02,05,822/- IS ADDED WITH THE OTHER GRANT OF RS.9,90,000/-, IT COMES TO 55.16%. THE ISSUE IS AS TO WHETHER THIS PERCENTAGE AMOUNTS TO SUBSTANTIALLY FI NANCING BY THE GOVERNMENT, ATTRACTING THE PROVISIONS OF SECTION 10 (23C)(IIIAB) OF THE ACT. 38. IN PARLEY PLASTICS LTD. (SUPRA), IT HAS BEEN HELD THAT SUBSTANTIAL DOES NOT MEAN MORE THAN 50% AND IT CAN BE 10% OR 20 %, DEPENDING ON THE OTHER TERMS AND CONDITIONS; AND THAT HAD THE LEGIS LATURE HAD ANY PERCENTAGE MORE THAN 50% IN MIND, IT WOULD HAVE BEEN SO PROVID ED FOR. THE CONTENTION OF THE DEPARTMENT IN THIS REGARD IS THAT THIS JUDG MENT IS WITH REGARD TO SECTION 2(22)(E) OF THE ACT AND NOT CONCERNING SECT ION 10(23C)(IIIAB) THEREOF, AND THAT THEREFORE, IT IS NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE. HOWEVER, IT HAS NOT BEEN SHOWN AS TO HOW THE MEANIN G OF SUBSTANTIAL IS ANY DIFFERENT BETWEEN THE TWO PROVISIONS INTER SE, SECTION 2(22)(E) OF THE ACT TALKS OF SUBSTANTIAL INTEREST OF SHAREHOLDER OR PAR TNER OF A COMPANY. SECTION10(23C)(IIIAB), ON THE OTHER HAND, CONCERNS ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THEREFORE, ON A PLAIN READING OF BOTH THESE PROVISIONS, IT IS EVIDENT THAT THE WORD SUBSTANTIAL IN BOTH HAS BEEN USED TO DENOTE THE P LAIN GRAMMATICAL MEANING ITA NO.39(ASR)/2013 24 OF SUBSTANTIAL, I.E., ENOUGH. THEREFORE, FOR OUE PR ESENT PURPOSE, IN OUR CONSIDERED OPINION, PARLEY PLASTICS LTD. (SUPRA), IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. 39. THEN, IN DESIA VIDYASHALA SAMITI (SUPRA), THE HONBLE KARNATAKA HIGH COURT HAS HELD GOVERNMENT GRANT OF 34.33% TO B E SUBSTANTIALLY FINANCE WITHIN THE MEANING OF SECTION 10(23C)(IIIAB) OF THE ACT. NOTICEABLY, IN THIS CASE, AN EARLIER JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN NATIONAL EDUCATIONAL SOCIETY (SUPRA), WHEREIN GRANT OF 36.4 2% WAS HELD TO CONSTITUTE SUBSTANTIAL FINANCIAL AID FROM THE GOVERNMENT FOR T HE PURPOSES OF SECTION 10(23C)(IIIAB) OF THE ACT, WAS RELIED ON. 40. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. AS SUCH, WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE D EPARTMENT THAT SUBSTANTIAL FINANCING BY THE GOVERNMENT MUST NECE SSARARILY MEAN ALMOST 100% FINANCING. 41. IN VIEW OF THE ABOVE, GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE ACCEPTED. 42. COMING TO GROUND NOS. 3 TO 5, THE ASSESSEE MAIN TAINS THAT THE LD. CIT(A) WENT WRONG IN DEVIATING FROM THE DISPUTE AND ERRED IN RELYING ON THE CCIT ORDER DATED 18.10.2011 IN THE ASSESSEES C ASE FOR THE ASSESSMENT YEAR 2009-10. ITA NO.39(ASR)/2013 25 43. THE DEPARTMENT, ON THE OTHER HAND, HAS REBUTTED THIS. IN THE SUBMISSION, IT HAS BEEN CONTENDED THAT THE LD. CIT( A) DID NOT FOLLOW THE CCIT ORDER. 44. IN THIS REGARD, IT IS SEEN THAT IN THE IMPUGNE D ORDER, AT PAGE 20, PARA 18, THE LD. CIT(A) HAS OBSERVED THAT APROPOS, THE SUBMISSIONS DATED 08.12.2011, IT IS WELL ACCEPTED THAT COMMISSIONER O F INCOME TAX (APPEALS) HAS TO GIVE HIS INDEPENDENT FINDINGS BUT IN THE AB SENCE OF EXPLANATION FROM THE SIDE OF ASSESSEE ON THE MOST VITAL ISSUE, IN TH E LIGHT OF THE ORDER OF CHIEF COMMISSIONER OF INCOME TAX, LUDHIANA, WHICH WAS DUL Y CONFRONTED TO THE ASSESSEE, A LITTLE SCOPE IS LEFT TO HOLD OTHERWISE. 45. FROM THE ABOVE OBSERVATION, IT IS AMPLY CLEAR T HAT THE LD. CIT(A) DID FOLLOW THE CCITS ORDER. 46. THE ASSESSEE HAS FURTHER OBJECTED TO THE LD. CI T(A)S FINDING THAT THERE IS NO EXPLANATION BY THE ASSESSEE TO THE ISSUE OF RELIGIOUS OBJECTIVES OF THE INSTITUTION. THE LD. CIT(A) OBSERVED THAT THOUGH, I N THIS REGARD, THE ASSESSEE HAD CONTENDED THAT NO EXPENSE HAD BEEN INCURRED ON RELIGIOUS ACTIVITIES, THE VERY EXISTENCE OF RELIGIOUS OBJECTIVES OF ARYA SHI KSHA SANSKRIT MANDAL, THE GOVERNING BODY OF THE ASSESSEE, LIKE TEACHING VEDIC DHARMA, BRAHMACHARYA, ARYAN CULTURE, CLASSICAL SANSKRIT AND VEDAS REMAINED UNREBUTTED. THE LD. CIT(A) EXPRESSED THE OPINION T HAT AS LONG AS THESE ITA NO.39(ASR)/2013 26 OBJECTIVES EXISTED, IT WAS OPEN TO THE ASSESSEE TO IMPLEMENT THEM AND THEREFORE, THE NATURE OF THE INSTITUTION WOULD REMA IN RELIGIOUS. 47. THE ASSESSEE CONTENDS IN PARA C(I) AT PAGE 15 O F THE WRITTEN SUBMISSION DATED 31.07.2013, THAT VIDE LETTER DATED 8.11.2012 FILED BEFORE THE LD. CIT(A), THE ASSESSEE HAD CONTENDED THAT DES PITE THE EXISTENCE OF THE OBJECTS OF THE MEMORANDUM OF ARYA SHIKSHA MANDAL, T HE ASSESSEE HAD NOT ENGAGED IN PROMOTION OF THESE OBJECTS AND THAT IT O NLY IMPARTED THE EDUCATIONAL COURSES APPROVED BY GURU NANAK DEV UNIV ERSITY, AMRITSAR. IT IS THE ASSESSEES CONTENTION THAT THE LD. CIT(A) NEITH ER MET THIS ASSERTION, NOR DEALT WITH CIT VS. ST. MARYS MALANKARA SEMINARY, REPORTED IN 348 ITR 69 (KERALA), WHICH WAS CITED BY THE ASSESSEE BEFORE T HE LD. CIT(A) . 48. HERE, IT IS SEEN THAT INDEED, VIDE LETTER DATED 8.11.2012, COPY AT APB 67-68, THE ASSESSEE HAD MADE THE AFORESAID SUBMISSI ON BEFORE THE LD. CIT(A) AND HAD RELIED ON CIT VS. ST. MARYS MALANKARA SEM INARY (SUPRA). HOWEVER, THE LD. CIT(A), HAS ERRONEOUSLY NOT DEALT WITH EITHER THIS CONTENTION OF THE ASSESSEE, NOR THE RATIO LAID DOWN IN CIT VS. ST. MARYS MALANKARA SEMINARY (SUPRA). 49. THUS, NOTHING HAS BEEN BROUGHT ON RECORD TO SHO W THAT THE ASSESSEE CARRIED OUT THE OBJECTIVES CONTAINED IN THE MEMORAN DUM OF ITS GOVERNING BODY, I.E., ARYA SHIKSHA MANDAL. THE LD. CIT(A) BAS ED HIS DECISION ONLY ON ITA NO.39(ASR)/2013 27 THE POSSIBILITY OF THE ASSESSEE BEING ABLE TO IMPLEMENT SUCH OBJE CTIVES. ACCORDING TO HIM, THIS POSSIBILITY RENDERED THE ASS ESSEE TO BE AN INSTITUTION RELIGIOUS IN NATURE. 50. THEN, IN CIT VS. ST. MARYS MALANKARA SEMINARY (SUPRA), IT HAS BEEN HELD THAT THERE IS NOTHING TO INDICATE THAT SE CTION 10(23C)(IIIAB) OF THE ACT REQUIRES THE EDUCATIONAL INSTITUTION REFERRED TO THEREIN TO IMPART EDUCATION IN ANY PARTICULAR SUBJECT OR IN ANY MANNE R WHATSOEVER. THAT THE PROVISIONS OF SECTION 10(23C)(IIIAB) ARE IN PARI MA TERIAL, FOR OUR PRESENT PURPOSES, WITH THOSE OF SECTION 10(23C)(IIIAD) REMA INS UNDISPUTED. THE HONBLE HIGH COURT ALSO OBSERVED THAT THE TERM EDU CATION SHOULD ENJOY WIDE CONNOTATION COVERING ALL COACHING AND TRAIN ING CARRIED ON IN A SYSTEMATIC MANNER LEADING TO PERSONALITY DEVELOPMEN T OF AN INDIVIDUAL. IT WAS OBSERVED IN THE CASE OF ST. MAYS MALANKARA SE MINARY (SUPRA), THAT STUDENTS ON COMPLETION OF THEIR STUDIES, ARE MADE PRIESTS, WHO HEAD CHURCHES AS RELIGIOUS LEADERS PRACTICING AND PROPA GATING RELIGION AS A PROFESSION. IT WAS FURTHER HELD THAT RELIGIOUS TEAC HING IN THE SEMINARY IS ALSO EDUCATION AND THE SEMINARY IS, THEREFORE, AN EDUC ATIONAL INSTITUTION ENTITLED FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. 51. AS NOTED, THE LD. CIT(A) HAS NOT MET THE RATIO OF ST. MAYS MALANKARA SEMINARY (SUPRA) AND IN THE ABSENCE OF A NY DECISION TO THE ITA NO.39(ASR)/2013 28 CONTRARY, THE FINDINGS THEREIN ARE SQUARELY APPLICA BLE HERE TOO. THAT SAID, NO RELIGIOUS TEACHINGS, BY THE WAY, HAS NOT BEEN DIS ENTITLED BY THE ASSESSEE AS EDUCATION, THEREBY MEETING THE REQUIREMENT OF SECTI ON 10(23C)(IIIAB) OF THE ACT ON THIS COUNT TOO. 52. ERGO, THE LD. CIT(A) HAS ERRED IN THIS REGARD ALSO. 53. THE NEXT OBSERVATION OF THE LD. CIT(A), WHICH O BSERVATION/FINDING HAS BEEN OBJECTED TO BY THE ASSESSEE, IS THAT THERE WAS A SURPLUS OF MORE THAN 15% IN THE CASE OF THE ASSESSEE, WHICH REMAINED UNE XPLAINED. THE LD. CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE HAD NOT DISTINGUISHED OR REBUTTED THE DECISION OF DR. MAHARAJ KRISHNA KAPUR EDUCATIO NAL CHARITABLE TRUST AND MANAGEMENT SOCIETY VS. UNION OF INDIA AND OTHER S, PASSED BY THE HONBLE PUNJAB & HARYANA HIGH COURT ON 10.02.2000 I N CWP NO.2047 AND P.A. INAMDA & OTHERS, 6 SCC 537. THE ASSESSEE MA INTAINS THAT THE LD. CIT(A), IN THIS REGARD, HAS WRONGLY FOLLOWED THE OR DER DATED 18.12.2011 PASSED BY THE CCIT, TO THE EFFECT THAT THE ASSESSEE WAS MAKING SYSTEMATIC PROFIT; THAT HE GOT CARRIED AWAY WITH THE SURPLUS GENERATED, AS AVAILABLE FROM THE ASSESSEES INCOME & EXPENDITURE ACCOUNT, WHILE FAILING TO APPRECIATE THAT THERE WAS NO ACTUAL SURPLUS, IF THE GRANTS REC EIVED BY THE ASSESSEE FROM THE GOVERNMENT, NOT CONSTITUTING INCOME OF THE ASSE SSEE, WERE IGNORED, ITA NO.39(ASR)/2013 29 SHOWING A HUGE DEFICIT IN THE INCOME & EXPENDITURE ACCOUNT. THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS: I) TOLANI EDUCATION SOCIETY VS. DY.DIRECTOR OF IN COME TAX (EXEMPTIONS) & OTHERS, 351 ITR 184 (BOM.). II) ORISSA TRUST OF TECHNICAL EDUCATION & TRAININ G VS. CCIT & ANR., 254 CTR (ORI) 269. III) PINEGROVE INTERNATIONAL TRUST & ORS. VS. UNI ON OF INDIA, 230 CTR (P&H) 477. IV) CITY MONTESSORI SCHOOL (REGD) VS. UNION OF IN DIA AND OTHERS, 315 ITR 48 (ALL.) V) HARYANA STATE COUNSELLING SOCIETY VS. CCIT, 2 33 CTR (P&H) 402. VI) VANITA VISHRAM TRUST VS. CCIT & ANOTHER, 327 ITR 121 (BOM.). VII) SANATAN DHARAM SHKSHA SAMITI VS. CCIT, 253 CTR (P&H) 518. VIII) AMERICAN HOTEL & EDUCATIONAL INSTITUTION, 301 ITR 86 (SC). 54. APROPOS DR. MAHARAJA KRISHNA KAPUR EDUCATIONAL CHARITABLE TRUST AND MANAGEMENT SOCIETY (SUPRA), IT HAS BEEN CONTEN DED THAT NO COPY OF THIS UNREPORTED DECISION WAS PROVIDED TO THE ASSESSEE B Y THE LD. CIT(A). IT HAS BEEN SUBMITTED THAT HOWEVER, THIS DECISION IS APPL ICABLE ONLY FOR GRANTING REGISTRATION U/S 12A / 10(23C)(VI) OF THE ACT, WHER EIN IT IS MANDATORILY STIPULATED THAT 85% RECEIPTS ARE TO BE SPENT DURING THE YEAR. ITA NO.39(ASR)/2013 30 55. THE DEPARTMENT, PER CONTRA, HAS CONTENDED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUCCESSFULLY REBUT THE FACTUM OF ITS MAKING SYSTEMATIC PROFIT; THAT EACH YEAR, DESPITE EARNING HUGE PROFIT, THE AS SESSEE HAS BEEN RAISING ITS FEE STRUCTURE, AS AVAILABLE FROM TABLE A AT PAGE 10 OF THE ASSESSMENT ORDER IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2009 -10. IT HAS BEEN STATED THAT WHEN THE ASSESSEE IS RECEIVING HUGE GRANT TO THE EX TENT OF 95% OF THE SALARY OF THE TEACHING AND NON-TEACHING STAFF, IT REMAINS UNEXPLAINED AS TO WHY IT HAS ADOPTED SUCH A HIGH FEE STRUCTURE; THAT THIS F EE STRUCTURE, WHEN COMPARED TO THAT OF A GOVERNMENT COLLEGE, AS AVAILABLE AT TA BLE B AT PAGE 10 OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2010-11, I S TOO HIGH; THAT THE FACT THAT THE ASSESSEE HAS BEEN INCREASING ITS FEES DES PITE ACCRUAL OF HUGE SURPLUS IN EACH YEAR CLEARLY SHOWS THAT SUCH HUGE SURPLUS I S THE RESULT OF THE ASSESSEES INTENTION OF MAKING PROFIT OUT OF EDUCAT IONAL ACTIVITIES AND THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE IS I N EXISTENCE SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR MAKING PROFIT. IT IS MAINTAINED THAT IN VIEW OF THESE SUBMISSIONS, ALL THE CASE LAWS SOUGHT TO B E RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE. 56. IN ITS COUNTER, THE ASSESSEE HAS SUBMITTED THAT THE FINDINGS, OF THE AO FOR THE ASSESSMENT YEAR 2010-11 CANNOT BE APPLIED T O ASSESSMENT YEARS 2006- 07 TO 2009-10. IT IS FURTHER MAINTAINED THAT AS SUB MITTED EARLIER, THE FEE ITA NO.39(ASR)/2013 31 CHARGED FROM THE STUDENTS BY THE ASSESSEE IS REGULA TED BY THE UNIVERSITY AND AS SUCH, IT CANNOT BE CONSIDERED TO BE EXORBITANT F EE. IT IS STATED THAT MOREOVER, CHARGING OF FEE IS THE PREROGATIVE OF THE ASSESSEE COLLEGE, RATHER THAN THAT OF THE INCOME TAX DEPARTMENT AND THAT TH E AO, FOR THE ASSESSMENT YEAR 2010-11, HAS ILLEGALLY COMPARED THE FEE CHARG EABLE BY THE ASSESSEE WITH THAT CHARGEABLE BY THE GOVERNMENT COLLEGE, HO SHIARPUR, THE TWO BEING IN-COMPARABLE, IN THE LIGHT OF THE FACT THAT THE I NFRASTRUCTURE IN A GOVERNMENT COLLEGE IS PROVIDED BY THE GOVERNMENT, W HEREAS THAT OF A PRIVATE COLLEGE IS SELF FUNDED. 57. IN THIS REGARD, IT IS SEEN THAT INDEED, IF THE GRANT RECEIVED BY THE ASSESSEE, FROM THE GOVT., WHICH GRANT DID NOT CONST ITUTE INCOME OF THE ASSESSEE IS IGNORED, THERE REMAINS NO SURPLUS WITH THE ASSESSEE. THIS ASPECT OF THE MATTER HAS REMAINED OBLIVIOUS TO THE LD. CIT A) AND THEREFORE, IT HAS WRONGLY BEEN OBSERVED THAT THERE REMAINED A SURPLUS OF MORE THAN 15% AND THAT SUCH SURPLUS REMAINED UNEXPLAINED. 58. IN TOLANI EDUCATION SOCIETY (SUPRA), IT HAS B EEN OBSERVED THAT IN A CASE OF AN INSTITUTION WHICH EXISTS SOLELY FOR EDUC ATIONAL PURPOSES, EXISTENCE OF INCIDENTAL SURPLUS IS NOT A GROUND FOR DENIAL OF EXEMPTION U/S 10(23C)(VI) OF THE ACT. THE PROVISIONS OF SECTION 1 0(23C)(VI) BEING IN PARI ITA NO.39(ASR)/2013 32 MATERIA, MUTATIS MUTANDIS, WITH THOSE OF SECTION 10 (23C)(IIIAB), THIS JUDGMENT IS SQUARELY APPLICABLE. 59. IN ORISSA TRUST OF TECHNICAL EDUCATION & TRAIN ING (SUPRA), IT HAS BEEN HELD THAT FEES COLLECTED FOR EDUCATIONAL INST ITUTION UNDER THE HEAD PLACEMENT AND TRAINING IS WITHIN THE SCOPE OF LAW AS PRESCRIBED BY THE STATE GOVT. AND IF THE INCOME SO EARNED IS UTILIZED FOR EDUCATIONAL PURPOSES, THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(23C)(VI) O F THE ACT, WHERE NO COMMERCIAL ARE ACTIVITIES CARRIED OUT BY THE COLLEG E. IN THE PRESENT CASE, NO COMMERCIAL ACTIVITIES HAVE BEEN SHOWN TO HAVE BEEN CARRIED OUT BY THE ASSESSEE. THEREFORE, THIS DECISION IS ALSO ATTRACTE D. 60. IN CITY MONTESSORI SCHOOL (REGD) (SUPRA), IT HAS BEEN HELD THAT WHERE THE SOCIETY NOT ONLY PROVIDED TRADITIONAL ED UCATION, BUT WAS ALSO PREPARING STUDENTS BY PROVIDING THEREWITH GUIDELINE S TO GET ADMISSION IN PROFESSIONAL INSTITUTIONS TO PURSUE THEIR HIGHER S TUDIES, THE SOCIETY WAS ENGAGED IN EDUCATIONAL ACTIVITIES AND WAS SATISFYI NG ALL THE STATUTORY REQUIREMENTS FOR EXEMPTION U/S 10(23C)(VI) OF THE A CT AND THERE WAS NO MATERIAL TO PROVE ANY SURPLUS EARNED, WHICH THE ASS ESSEE UTILIZED FOR PERSONAL PROFIT OR GAIN OF ANY ONE, EXEMPTION U/S 1 0(23C)(VI) WAS AVAILABLE. IN THE PRESENT CASE, THE ASSESSEE IS PROVIDING EDUC ATION AND THERE IS NO SURPLUS AVAILABLE. ITA NO.39(ASR)/2013 33 61. IN PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS, IT HAS BEEN HELD THAT IF THERE REMAINS A SURPLUS IN THE HANDS OF TH E EDUCATIONAL INSTITUTION, IT WOULD BE ENTITLED TO EXEMPTION U/S 10(23C)(VI) OF T HE ACT, PROVIDED THE EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATIO NAL PURPOSES. 62. THUS, EVEN IF, FOR THE SAKE OF ARGUMENT, IT IS TAKEN THAT THERE DOES EXISTS A SURPLUS WITH THE ASSESSEE SOCIETY, IT IS ENTITLED TO THE EXEMPTION CLAIMED. 63. IN HARYANA STATE COUNSELLING SOCIETY (SUPRA), IT HAS BEEN HELD THAT MERELY BECAUSE THE SOCIETY HAS EARNED SOME PROFIT, THIS DOES NOT MAKE THE SOCIETY DISENTITLED FOR THE EXEMPTION U/S 10(23)(VI ), SINCE IT IS SET UP BY THE GOVERNMENT OF HARYANA AND NEITHER THE GOVERNMENT OF HARYANA, NOR THE SOCIETY INDULGED IN ANY COMMERCIAL ACTIVITY AND MER ELY BECAUSE THE SOCIETY HAS ACCUMULATED SOME PROFIT, IT DOES NOT MEAN THAT THE SOCIETY IS NOT ACHIEVING ITS OBJECT AND THAT THEREFORE, REFUSAL OF EXEMPTION WAS NOT JUSTIFIED. 64. IN VANITA VISHRAM TRUST (SUPRA), IT HAS BEEN HELD THAT IN THE CASE OF A CHARITABLE TRUST, WHOSE SOLE ACTIVITY WAS RUNNING EDUCATIONAL INSTITUTIONS FOR EIGHTY YEARS AND ITS PRIMARY OBJECT WAS TO PROV IDE EDUCATION FOR WOMEN, THE FACT THAT OTHER OBJECTS WERE MENTIONED IN THE T RUST DEED WAS NOT RELEVANT ITA NO.39(ASR)/2013 34 AND INVESTMENT OF SURPLUS FROM ACTIVITIES WAS FOR EDUCATIONAL PURPOSES, REJECTION OF APPROVAL U/S 10(23C)(VI) WAS NOT VALI D. 65. IN SANATAN DHARAM SHIKSHA SAMITI (SUPRA), IT HAS BEEN HELD THAT AN EDUCATIONAL INSTITUTION WOULD NOT CEASE TO EXIST SO LELY FOR EDUCATIONAL PURPOSES, MERELY BECAUSE IT HAS GENERATED SURPLUS I NCOME. 66. IN THE ABOVE DECISIONS, MAINLY, THE RATIO LAID DOWN IN AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUT E (SUPRA), HAS BEEN FOLLOWED. THEREUNDER, INTER-ALIA, IT HAS BEEN HELD THAT ONCE AN APPLICANT INSTITUTE EXISTS SOLELY FOR EDUCATIONAL PURPOSES A ND NOT FOR PROFIT, THE MERE EXISTENCE OF PROFIT/SURPLUS DOES NOT DISQUALIFY THE INSTITUTION. 67. SO FAR AS REGARDS DR. MAHARAJ KRISHNA KAPUR ED UCATIONAL CHARITABLE TRUST AND MANAGEMENT SOCIETY (SUPRA), THIS DECISIO N PERTAINS TO GRANT OF REGISTRATION. THIS DECISION HAS BEEN STATED TO BE P ERTAINING TO GRANT OF REGISTRATION U/S 12A READ WITH SECTION 20(23C)(VI) OF THE ACT AND THIS HAS BEEN ACCORDINGLY STATED TO BE NOT APPLICABLE. THIS DECISION IS STATED BY AN UNREPORTED DECISION AND NO COPY THEREOF HAS BEEN FI LED. THE LD. CIT(A) HAS ALSO NOT DILATED THEREUPON IN THE IMPUGNED ORDER, T HOUGH IT HAS BEEN CITED AND THE ASSESSEE HAS BEEN STATED NOT TO HAVE CONTRA DICTED IT. THE ASSESSEE SUBMITS, AS NOTED ABOVE, THAT IT WAS NEVER CONFRONT ED WITH THIS DECISION BY THE CITA). ITA NO.39(ASR)/2013 35 68. APROPOS THE DEPARTMENTS CONTENTION THAT THE AS SESSEE HAS BEEN RAISING ITS FEE FROM YEAR TO YEAR, IT HAS NOT BEEN DISPUTED THAT THE FEES TO BE CHARGED BY THE ASSESSEE FROM ITS STUDENTS IS REGULA TED BY THE UNIVERSITY. THAT APART, THE QUESTION OF THE QUANTUM OF FEES IS OF N O CONCERN OF THE DEPARTMENT AND IT IS THE SOLE PREROGATIVE OF THE A SSESSEE. 69. FOR THE ABOVE DISCUSSION, GROUND NOS. 3 TO 5 AR E ALSO ACCEPTED. 70. TURNING TO GROUND NO.6, THE ASSESSEE CONTENDS T HAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ADDL. CIT WAS NOT OBLIGED TO ISSUE ANY DIRECTION U/S 144A OF THE ACT, WHEN SUCH DIRECTION HAD BEEN SPECIFICALLY SOUGHT FOR BY THE ASSESSEE, BY VIRTUE OF AN APPLICA TION. 70. IN THIS REGARD, IT IS SEEN THAT THE LANGUAGE O F SECTION 144A IS AMPLY CLEAR AND AS PER THIS LANGUAGE, IT IS THE DISCRETIO N OF THE AO TO ISSUE DIRECTIONS THEREUNDER, AS HE THINKS FIT, IF HE CONS IDERS THAT IT IS NECESSARY OR EXPEDIENT TO DO SO. WE DO NOT SEE HOW THE LD. CIT(A ) IS WRONG IN THIS REGARD. THE USE OF WORD MAY IN THE SECTION, IN TH E ABSENCE OF ANYTHING TO THE CONTRARY, MAKES IT AMPLY CLEAR THAT THE MATTER IS DISCRETIONARY. THEREFORE, GROUND NO. 6 REJECTED. 71. APROPOS GROUND NO.7, AS PER THE ASSESSEE, THE C IT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM FOR EXEMPTION IN R ESPECT OF 95% DEFICIT GRANT ITA NO.39(ASR)/2013 36 RECEIVED FROM THE GOVT. SINCE GROUND NOS. 2 TO 5 HA VE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AS ABOVE, THIS GROUND IS REJ ECTED AS INFRUCTUOUS. 72. GROUND NOS. 8 AND 9 ARE GENERAL. 73. SINCE ALL THE OTHER APPEALS INVOLVE ISSUES IDE NTICAL TO THE ONES HEREIN, OUR ABOVE OBSERVATIONS ARE, MUTATIS MUTANDIS, APPLI CABLE TO THESE APPEALS ALSO. 74. IN THE RESULT, ALL THE APPEALS ARE PARTLY ALLOW ED AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH, 2015. (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEES: I) M/S. DOABA COLLEGE, TANDA ROAD, J ALANDHAR AND (II) M/S. KANYA MAHA VIDAYALAYA TANDA ROAD, JALANDH AR., 2. THE ITO 2(1)/2(3), JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.