Param Hans Swami Uma Bharti Mission, Rewari V. ACIT, Haryana

ITA 4154/DEL/2011

• Counselvise Citation: 415420114 RSA 2011
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Assessee Lawyers: G R AGNIHOTRI
• Keywords: Difference of opinion
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.4154/DEL/2011 ASSESSMENT YEAR : 2006-07 PARAM HANS SWAMI UMA BHARTI ACIT, MISSION, C/O SHRI LALA RAM (RECEIVER), CIRCLE REWARI , SWAMI UMA BHARTI SR. SEC. PUBLIC REWARI. SCHOOL, JHAJJAR ROAD, REWARI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAATP AAATP AAATP AAATP- -- -9225 9225 9225 9225- -- -G GG G APPELLANT BY : SHRI G.R. AGNIHOTRI, ADVOCATE. RESPONDENT BY : SMT. VEENA JOSHI, SR. DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 7.7.2011. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT THE LOWER AUTHORITIES HAD ERRED IN DENYING THE EXEMPTION IN RESPECT OF THE ANNUAL INCOME OF THE SCHOOL OF THE CHA RITABLE TRUST FOR THE ASSESSMENT YEAR 2006-07 ON THEIR VIEW TO THE EFFECT THAT THE INTEREST ON FIXED DEPOSITS FORMED PART OF THE ANNUAL INCOME OF THE SCHOOL AND THE AGGREGATE OF THE ANNUAL INCOME OF THE SCHOOL AND THE INTEREST ON FIXED DEPOSITS HAVING EX CEEDED RUPEES ONE CRORE, THE EXEMPTION WAS NOT ELIGIBLE ACCO RDING TO ITA NO4154/DEL/2011 2 THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE INCOM E TAX ACT, 1961 . 2. THAT THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIA TING THAT THE ANNUAL INCOMES OF THE SCHOOL WERE RECURRING, REGULAR AND PROGRESSIVE WHEREAS THE INTEREST ON FIXED DEPOSITS FLUCTU ATED WIDELY FROM YEAR TO YEAR AND AS SUCH THE INTEREST INCO ME DID NOT FORM PART OF THE ANNUAL INCOME OF THE SCHOOL. 3. (I) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIAT ING THAT THE ANNUAL INCOME OF THE SCHOOL HAS NOT BEEN DEFINED IN SECTION 10(23C)(IIIAD) AND AS SUCH IT COULD NOT BE MADE OUT T HAT THE INTEREST INCOME FROM THE FIXED DEPOSITS WOULD BE THE P ART OF THE ANNUAL INCOME OF THE SCHOOL. (II) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIA TING THAT THERE BEING DIFFERENCE OF OPINION AS TO THE MEANING OF TH E ANNUAL INCOME OF THE SCHOOL OF THE APPELLANT AND THE LOWER AUTHORITIES, THE VIEW OF THE APPELLANT SHOULD PREVAIL ACCORDING TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC). 4. THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIATING THAT THE APPELLANT TRUST HAD BONA FIDE BELIEF THAT THE INCOM E OF THE SCHOOL DID NOT INCLUDE THE INTEREST INCOME ON FIXED DEPOSITS AND AS SUCH THE INCOME OF THE SCHOOL EXCLUSIVE OF INTEREST ON FIXE D DEPOSITS BEING ` .97,22,559/- AND BEING LESS THAN ` . ONE CRORE, THE EXEMPTION WAS ADMISSIBLE TO THE APPELLANT FOR THIS YEAR . 5. (I) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIAT ING THAT THE ANNUAL INCOME OF THE SCHOOL EXCLUSIVE OF INTEREST ON F IXED DEPOSITS BEING ABOVE ` .ONE CRORE, THE APPELLANT APPLIED TO THE CHIEF COMMISSIONER OF INCOME TAX, HARYANA REGION, PAN CHKULLA AND THE INCOME OF THE SCHOOL WAS GRANTED EXEMPTION BY THE CCIT FOR THE ASSESSMENT YEAR 2007-08 AND THE EXEMPTION HAS B EEN ITA NO4154/DEL/2011 3 CONTINUED FOR THE SUBSEQUENT ASSESSMENT YEARS AS PER CIRCUL AR NO.7/2010(F.NO.197/21/2010-INCOME TAX ACT, 1961 II ) DATED 27.10.2010. (II) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIA TING THAT THE ANNUAL INCOME OF THE SCHOOL HAS BEEN HELD TO BE EXEMP T IN THE ENTIRE HISTORY OF THE SCHOOL EXCEPT FOR THE ASSESSMENT YE AR 2006- 07. THE ORDERS OF THE LOWER AUTHORITIES BEING ARBITRARY, ERRONEOUS, AND ILLEGAL, IT DESERVES TO BE MODIFIED. THE SAME MAY KINDLY BE MODIFIED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT SOCIETY IS RUNNING A SCHOOL WHOSE ACTIVITIES ARE SUPERVISED BY A RE CEIVER APPOINTED BY THE HON'BLE HIGH COURT. THE APPELLANT FILED NIL INCOME RETURN ON 11.9.2006 CLAIMING WHOLE OF THE INCOME OV ER THE EXPENDITURE AMOUNTING TO ` .45,58,427/- AS EXEMPT U/S 10(23C)(IIIAD) OF THE INCOME TAX ACT, 1961 . THE CASE OF THE ASSESSEE WAS R EOPENED BY THE ASSESSING OFFICER ON PERUSAL OF P&L A/C WHEREIN ANNU AL RECEIPTS OF THE ASSESSEE AMOUNTED TO ` .1,12,96,651/- AND ASSESSING OFFICER NOTED THAT IT EXCEEDED THE LIMIT FIXED BY SECTION 10(23C)( IIAD). THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD NOT OBTAINE D PRIOR APPROVAL OF CCIT, PANCHKULLA WHICH WAS REQUIRED U/S 10(23C)(VI ) OF THE ACT IN CASE OF ASSESSEES HAVING ANNUAL RECEIPTS OF MORE THAN ` . ONE CRORE. IN RESPONSE TO THE NOTICE U/S 148, THE ASSESSEE FILED WRITTEN REPLY ON 25.3.2010 STATING THEREIN THAT THE ORIGINAL RETURN F ILED ON 11.9.2006 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U /S 148 OF THE ACT., COPY OF REASONS RECORDED WAS SUPPLIED TO THE COUNSEL OF ASSESSEE ON 31.5.2010. THE ASSESSEE VIDE WRITTEN REPLY DATED 30.11. 2010SUBMITTED THAT ANNUAL RECEIPTS OF THE TRUST FOR FINANCIAL YEAR 2005-06 RELEVANT TO ITA NO4154/DEL/2011 4 ASSESSMENT YEAR 2006-07 WERE ` .97,22,559/- EXCLUDING FDR INTEREST OF ` .15,47,092/- AND AS THE ANNUAL RECEIPTS OF SCHOOL DO N OT EXCEED ` .ONE CRORE AS ALLEGED IN THE REASONS RECORDED. THEREFORE, EXEMPTION CLAIMED U/S 10(23C)(IIIAD) IS IN ORDER AND MAY BE ALL OWED. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY FILED BY THE ASSESSEE AND HELD THAT SINCE THE ANNUAL RECEIPTS OF THE ASSESSEE I NCLUDING INTEREST EXCEEDED ` . ONE CRORE , THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 10(23C)(IIIAD) AND SINCE THE ASSESSEE HAD N OT OBTAINED PRIOR APPROVAL OF CCIT, PANCHKULLA EXEMPTION U/S 10( 23C)(VI) CAN ALSO NOT BE GIVEN TO THE ASSESSEE. IN VIEW OF THE ABOVE, TH E ASSESSING OFFICER HELD THAT WHOLE OF THE AMOUNT WAS TAXABLE. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD CIT( A) AND SUBMITTED THAT ALL RECEIPTS DO NOT CONSTITUTE AGGREGA TE ANNUAL RECEIPTS AND IT IS ONLY THOSE RECEIPTS WHICH PERTAIN TO PROVID ING OF EDUCATION AND WHICH HAVE AN ELEMENT OF RECURRENCE AND REGULAR ITIES CAN BE REGARDED AS ANNUAL RECEIPTS. OTHER RECEIPTS SUCH AS DONA TION, GRANT, RECEIPT OF CAPITAL NATURE, INTEREST AND RENT ETC. CA NNOT BE TREATED AS ANNUAL RECEIPTS. THE ASSESSEE RELIED UPON THE MEANING OF THE TERM GROSS RECEIPTS USED IN SECTION 44AB GIVEN IN THE GUIDANC E NOTES ISSUED BY ICAI AND TRIED TO DISTINGUISH IT BY THE WORD ANNUA L RECEIPTS. THE LD AR SUBMITTED THAT IN THE SECTION 10(23C)(IIIAD) THE W ORD ANNUAL HAS BEEN WRITTEN INSTEAD OF GROSS RECEIPTS. THE LD AR FURTH ER SUBMITTED THAT AMERICAN DICTIONARY DEFINES ANNUAL AS RECURRING, DONE OR PERFORMED EVERY YEAR. IN VIEW OF THE ABOVE, THE ASSE SSEE SUBMITTED THAT INTEREST ON FDRS DOES NOT FORM PART OF, ANNUAL RE CEIPTS AND THEREFORE THE APPELLANT WAS ELIGIBLE FOR EXEMPTION U /S 10(23C)(IIIAD) OF THE ACT. ITA NO4154/DEL/2011 5 4. THE LD CIT(A), HOWEVER, DID NOT AGREE WITH THE C ONTENTIONS OF THE ASSESSEE AND UPHELD THE ORDER OF ASSESSING OFFICER. THE REL EVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY T HE AR. THE TERM ANNUAL RECEIPTS HAS NOT BEEN DEFINED I N SECTION 10(23C)(IIIAD). SECTION 44AB (A) MENTIONS TOTAL SALES, TURNOVER OR GROSS RECEIPTS AS THE CASE MAY BE, IN BUSINESS IN RESPECT OF MANDATORY TAX AUDIT REPORT. GROSS RECEIPTS IN BUSINESS ME ANS RECEIPTS GENERATED FROM BUSINESS. THIS DISTINCTION HAS NOT BEEN MADE IN THE ACT FOR SECTION 10(23C). THUS, THE DIFFE RENCE BETWEEN ANNUAL RECEIPTS AND GROSS RECEIPTS HAS BEEN MADE BY THE ACT ITSELF. FURTHER INTEREST RECEIVED ON FDRS IS A RECURRING RECEIPT ON THE SURPLUS FUNDS INVESTED BY THE APPELLANT TRUST. THE ARGUMENT OF THE APPELLANT THAT RECEIPTS SUCH AS DONATI ONS, GRANTS ETC. CAN NOT BE REGARDED AS ANNUAL RECEIPTS U/S 10(23C) IS DEVOID OF ANY MERIT AS THESE ARE TO BE TAKEN AS ANNUAL RECEIPTS FOR THE PURPOSE OF ARRIVING AT SURPLUS/DEFICIT. IN VIE W OF THE ABOVE, IT IS HELD THAT INTEREST ON FDRS FORMS PART OF T HE ANNUAL RECEIPTS AND THEREFORE THE ACTION OF THE ASSESSING OFFIC ER IS UPHELD AND THE GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THIS TRIB UNAL. 6. AT THE OUTSET, LD AR ARGUED THAT ASSESSEE WAS REQUIRED TO TAKE APPROVAL ONLY ONCE AND IT WAS NOT REQUIRED TO OBTAIN APPROVAL AGAIN AND AGAIN UNLESS IT IS REJECTED. IN THIS RESPECT HE TOOK US TO PAGE 3 OF ORDER OF CCIT RELATING TO ASSESSMENT YEAR 2007-08 WHERE IN IT WAS PROVIDED THAT ON OR AFTER 1.12.2006, THE APPROVAL U /S 10(23C) (VI) OF SECTION 10(23C) WOULD BE ONE TIME APPROVAL WHICH WOU LD BE VALID TILL IT IS WITHDRAWN. THEREFORE, HE ARGUED THAT APPROVAL WAS VALID FOR 2006-07 ALSO. THE LD AR ALSO RELIED UPON WRITTEN SYNOPSIS ALREA DY FILED WHICH ITA NO4154/DEL/2011 6 READ AS UNDER:- THAT ANNUAL RECEIPTS OF SCHOOL WERE LESS THAN ` . ONE CRORE AND IT EXCEEDED ` . ONE CRORE ONLY WITH THE INTEREST ON FDR AMOUNTING TO ` .15,47,092/- AND THAT INTEREST ON FDR WAS NOT IN THE NATURE OF ANNUAL RECEIPTS OF SCHOOL AND AS SUCH THE ANNUAL RECEI PTS WORKED OUT TO ` .97,22,559/- WHICH WERE LESS THAN ` .ONE CRORE. IT WAS THE BONA FIDE BELIEF OF THE ASSESSEE THAT ANNUAL RECEIPTS EX CLUDING INTEREST ON FDR WAS TO BE CONSIDERED AND IN THIS RESPEC T HE STATED THAT DURING NEXT YEAR ENDING ON 31.3.2007 WHE RE THE ANNUAL RECEIPTS EXCLUDING INTEREST ON FDR EXCEEDED ` . ONE CRORE THE ASSESSEE HAD DULY OBTAINED THE PERMISSION FROM CCIT, PANCHKULLA. HE FURTHER SUBMITTED THAT IN CASE THE ASSE SSEE BELIEVED THAT ANNUAL RECEIPTS EXCEEDED ` . ONE CRORE FOR THE ASSESSMENT YEAR 2006-07, THE APPELLANT WOULD HAVE SOUGHT THE EXEMPTION FROM CCIT AND THE SAME WOULD HAVE BEEN AL LOWED. IN THIS RESPECT RELIANCE WAS PLACED ON THE JUDGMENT OF HO N'BLE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUC TS LTD. 88 ITR 192 (SC) WHEREIN THE HON'BLE SUPREME COURT OBSER VED THAT IF THE COURT FINDS THAT LANGUAGE OF A TAXING PROVISION I S AMBIGUOUS OR CAPABLE OF MORE MEANINGS THEN THE COURT HAS TO ADO PT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMENT IN THE CASE OF CO MMISSIONER OF WEALTH TAX V. TANDON & OTHERS 195 ITR 688. 7. ON THE OTHER HAND, LD DR ARGUED THAT DURING THE YEAR UNDER CONSIDERATION, THE GROSS RECEIPTS WERE MORE THAN ` . ONE CRORE AND THE ASSESSEE WAS REQUIRED TO TAKE PRIOR APPROVAL OF CCIT FOR BEING ELIGIBLE U/S 10(23C)(VI). HE FURTHER ARGUED THAT THE ORDER OB TAINED BY THE ITA NO4154/DEL/2011 7 ASSESSEE AND AS REFERRED TO BY THE LD AR RELATE TO ASSESSMEN T YEAR 2007-08 AND IT IS NOT RETROSPECTIVE ORDER AND IT IS NO T APPLICABLE FOR ASSESSMENT YEAR 2006-07. LD DR FURTHER RELIED UPON THE ORDER OF ASSESSING OFFICER AND LD CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD INCLUDING DETAILED SYNOPSIS. WE FIND THAT SOCIETY IS RUNNING THE SCHOOL UNDE R THE MANAGEMENT OF RECEIVER APPOINTED BY HON'BLE HIGH CO URT. FOR THE ENTIRE YEARS THE INCOME OF THE SCHOOL WAS EXEMPT AND F OR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD OBTAINED PRIOR AP PROVAL OF CCIT, PANCHKULLA FOR EXEMPTION U/S 10(23)(VI). THE R ECEIPTS OF THE ASSESSEE DURING ASSESSMENT YEAR 2006-07 INCLUDING INTEREST ON FDRS EXCEEDED ` . ONE CRORE BUT THE ASSESSEE UNDER BONA FIDE BELIEF THA T INTEREST ON FDR WAS NOT TO BE CONSIDERED FOR ARRIVING AT ANNUAL RECEIPTS DID NOT APPLY FOR PRIOR APPROVAL AND CONTINUED TO C LAIM EXEMPTION U/S 10(23C)(IIIAD). THE BELIEF OF THE ASSESSEE CANNOT BE SU SPECTED BECAUSE IN THE NEXT YEAR WHEN ANNUAL RECEIPTS EXCLUDING INTE REST ON FDR EXCEEDED ` .ONE CRORE, THE PRIOR APPROVAL OF CCIT, PANCHKULLA WAS OBTAINED. TO DECIDE THE CASE OF THE ASSESSEE LET US FIRST UNDERSTAND THE PROVISIONS OF SECTION 10(23C)(IIIAD). THE SAID SECTION READS AS UNDER:- ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTE EXISTIN G SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, I F THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCAT IONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEI PTS AS MAY BE PRESCRIBED. THE PRESCRIBED LIMIT OF ANNUAL RECEIPTS IS ` . ONE CRORE. FROM THE PLAIN READING OF SECTION 10(23C) (IIIAD), I T EMERGES THAT ITA NO4154/DEL/2011 8 LEGISLATURE HAD IN ITS MIND ANNUAL RECEIPTS OF SCHOOL OR UNIVERSITY AS THE CASE MAY BE FOR CONSIDERATION OF EXEMPTION LIMIT AND NOT THAT OF TOTAL INCOME OF SOCIETY RUNNING THAT SCHOOL OR UNIVERSITY. THE PRESENT CASE IS OF A SOCIETY RUNNING A SCHOOL. THE SO CIETY BESIDES INCOME FROM RUNNING OF A SCHOOL IS HAVING OTHER SOURCE S OF INCOME ALSO. IN THE PRESENT CASE, THE INCOME FROM INTEREST ON FDRS IS AN ADDITIONAL INCOME OF SOCIETY AND IT CANNOT BE CONSIDE RED TO BE PART OF ANNUAL RECEIPTS OF THE SCHOOL. THEREFORE, IN OUR CONSI DERED OPINION ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 10(23)(IIIAD) AS A NNUAL SCHOOL RECEIPTS DID NOT EXCEED ` . ONE CRORE. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST DAY O F AUGUST, 2012. SD/- SD/- (I.C. SUDHIR) (T.S. KAPOO R) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 31.8.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO4154/DEL/2011 9 DATE OF HEARING 17.7.2012 DATE OF DICTATION 23.8.2012 DATE OF TYPING 24.8.2012 DATE OF ORDER SIGNED BY 31.8.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 31.8.2012 & SENT TO THE BENCH CONCERNED.