Dy.CIT(EXp), Bhubaneswar V. M/s. Orissa Computer Academy, Bhubaneswar

ITA 427/CTK/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5873 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Assessee Lawyers: P K MISHRA
• Keywords: Charitable institution; Maximum Marginal Rate; Benefit of exemption; Set aside
• Section: 143(3); 201; 43; 13(2); 13; 12; 11

Judgement Text

P A G E 1 | 13 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/ SHRI P .M. JAGTAP, VICE PRESIDENT AND C .M. GARG , JUDICIAL MEMBER ITA NO S . 427 TO 429 /CTK/201 8 ASSESSMENT YEAR S : 2010 - 11, 2013 - 14 & 2014 - 15 DCIT (EXEMPTIONS), BHUBANESWAR. VS. M/S. ORISSA COMPUTER ACADEMY, PRASANTI VIHAR, PUBASASANA, KAUSALYA GANGA, BHUBANESWAR. PAN/GIR NO. AAAAO 0070 D (APPELLANT ) .. ( RESPONDENT ) C.O.NOS.13, 14 & 15/CTK/2020 (IN ITA NO S . 427 TO 429 /CTK/201 8) ASSESSMENT YEAR S : 2010 - 11, 2013 - 14 & 2014 - 15 M/S. ORISSA COMPUTER ACADEMY, PRASANTI VIHAR, PUBASASANA, KAUSALYA GANGA, BHUBANESWAR VS. DCIT (EXEMPTIONS), BHUBANESWAR. PAN/GIR NO. AAAAO 0070 D (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P .K.MISHRA, , AR REVENUE BY : SHRI M.K.GAUTAM CIT DR DATE OF HEARING : 18 / 1 / 20 2 1 DATE OF PRONOUNCEMENT : 28 / 1 /20 2 1 O R D E R PER BENCH M/S. ORISSA COMPUTER ACADEMY P A G E 2 | 13 THESE ARE APPEAL S FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF THE CIT(A),1, BHUBANESWAR ALL DATED 4.9.2018 FOR THE ASSESSMENT YEAR 2010 - 11 UNDER SECTION 143(3)/263 OF THE ACT AND FOR ASSESSMENT YEARS 2013 - 14 & 2014 - 15 U/S.143(3) OF THE ACT . 2. SINCE THE GROUNDS TAKEN BY THE REVENUE IN ALL THESE THREE ASSESSMENT YEARS ARE COMMON AND FACTS AND CIRCUMSTANCES INVOLVED IN THESE APPEALS ARE IDENTICAL, THEREFORE, WE PROCEED TO ADJUDICATE THE APPEAL FOR THE ASSESSMENT YEAR 201 0 - 2011 AND DECISION WILL APPLY MUTATIS - MUTANDIS TO OTHER TWO ASSESSMENT YEARS I.E 2013 - 14 & 2015. 3. GROUNDS RAISED BY THE REVENUE FOR A.Y. 2010 - 2011 ARE AS UNDER: 1. THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S. 11 TO THE ASSESSEE, WITHOUT CONSIDERING THAT THE NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE SUCH AS COLLETING EXORBITANT FEES FROM THE STUDENTS YEAR TO YEAR AND STREAM TO STREAM WHICH CLEARLY INDICATES THE BUSINESS NATURE OF THE ACTIVITY. (3) THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE REGISTRATION U/S.12AA IS ONLY A CONDITION PRECEDENT TO CLAIM EXEMPTION U/S. 11 & 12 AND THE GRANT OF REGISTRATION IS ITSELF WILL NOT AUTOMATICALLY QUA LIFY THE INCOME TO BE EXEMPTED. (4) THE LD. CIT(A) ERRED IN NOT ADJUDICATING ALL THE REASONS RAISED IN SUPPORT OF DENIAL OF THE EXEMPTION U/S. 11 BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BEFORE DIRECTING THE AO TO ALLOW THE EXEMPTION U/S. 11 TO TH E ASSESSEE. (5) THE LD. CIT(A) ERRED IN GIVING DIRECTIONS (AT PARA 4 OF PAGE 10) 'THE AO IS DIRECTED TO DETERMINE THE AMOUNT WHICH WAS PAID BY THE ASSESSEE TO SMT. RATH IN VIOLATION OF THE PROVISIONS OF SECTION 13 AS PER LAW' TO AO WITHOUT ADJUDICATING TH E ISSUE AS THE AMOUNT PAID IS MENTIONED IN THE ASSESSMENT ORDER, AS CIT(A) DO NOT HAVE POWER TO SET ASIDE. M/S. ORISSA COMPUTER ACADEMY P A G E 3 | 13 (6) THE LD. CIT(A) HAS ERRED TO APPRECIATE THAT, IT EMANATES FROM THE ORDER OF CIT(A) THAT HE HAS ACCEPTED THE FACT THAT PAYMENTS HAVE BEEN MADE TO SMT. RATH, WITHOUT ANY SERVICES BEING PROVIDED BY HER TO ASSESSEE, HENCE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S. 11 R.W.S. 13. (7) THE LD. CIT(A) HAS ERRED IN INTERPRETING SECTION 13 WHICH CLEARLY MENTIONS THAT NOTHING CONTAINED IN SECTION 11 & 12 SHALL OPERATE IF ANY PART OF INCOME/PROPERTY OF TRUST IS USED OR APPLIED FOR BENEFIT OF ANY PERSONS REFERRED IN THE SECTION, HENCE AS M ENTIONED IN CIT(A)'S ORDER, SOME BENEFIT HAS GONE TO PERSON SPECIFIED IN SECTION 13, HENCE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION. THIS ALSO EMANATES FROM SECTION 12AA(4). (8) THE APPELLANT CRAVES LEAVE TO ADD, DELETE, SUBSTITUTE AND TO AMEND ANY GROUND O F APPEAL BEFORE AND/OR AT THE TIME OF HEARING. 4. AT THE OUTSET, LD A.R. OF THE ASSESSEE SUBMITTED THAT IN ALL THESE APPEALS, FROM THE GROUNDS OF APPEAL, TWO ISSUES ARE EMANATING I.E. CLAIM OF EXEMPTION U/S.11 & 12 OF THE ACT AND VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT. HE FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2010 - 2011, IN THE MATTER OF ASSESSMENT U/S.143(3) OF THE ACT, IN THE APPEAL FILED BY THE ASSESSEE, THE TRIBUNAL VIDE ITS ORDER DATED 5.7.2018 IN ITA NO.96/CTK/2018 FOR A.Y. 2010 - 11, ITA NO.207 & 208/CTK/2017 FOR A.YS. 2011 - 12 & 2012 - 13 HAS ALLOWED THE CLAIM OF EXEMP TION U/S.11 & 12 OF THE ACT AND IN RESPECT OF VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT, THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE AO FOR FRESH CONSIDERATION. HE SUBMITTED THAT SINCE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010 - 2011 IS UNDER SE CTION 143(3) R.W.S 263 OF THE ACT, AND THE SIMILAR ISSUES ARE INVOLVED FOR THE ASSESSMENT YEARS 2013 - 14 AND 2015 - 16, THE APPEALS MAY BE DECIDED ACCORDINGLY. M/S. ORISSA COMPUTER ACADEMY P A G E 4 | 13 5. REPLYING TO THE SUBMISSIONS OF LD A.R. OF THE ASSESSEE, LD CIT DR AGREED THAT ISSUES ARE COVER ED BY THE DECISION OF THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE AS WELL AS THE DECISION OF THIS BENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2010 - 11 TO 2012 - 13 (SUPRA). WE FIND THAT SIMILAR CLAIM OF EXEMPTION UNDER SECTION 11 & 12 AND PROVISIONS OF SECTION 13 HAD COME UP FOR CONSIDERATION IN THE APPEALS FILED BY THE ASSESSEE AND THE TRIBUNAL HAS DECIDED THE ISSUE AND HELD AS UNDER: 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBS ERVED THAT THE MAIN SOURCE OF INCOME OF THE ASSESSEE WAS FROM FEES FROM STUDENTS SINCE OUT OF TOTAL RECEIPTS OF RS.27,69,01,889.67, THE AMOUNT RECEIVED AS STUDENT FEES WAS RS.27,30,88,254/ - AND THE ASSESSEE INSTITUTION IS RUNNING PROFITABLY, IT HAS BEEN CHARGING EXORBITANT FEES FROM THE STUDENTS AND IT HAS ALL THE INGREDIENTS OF A BUSINESS UNDERTAKING. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE IS CHARGING FEES OVER AND ABOVE THE STIPULATED AMOUNT FIXED BY THE CONCERNED AUTHORITY. THE FINANC IAL RESULTS OF THE EDUCATIONAL INSTITUTIONS SHOW INCREASING SURPLUS FROM YEAR TO YEAR. THE ASSESSEE SOCIETY SPENDS SUBSTANTIAL AMOUNT FOR ADVERTISEMENT FOR SOLICITING STUDENTS. THUS, THE ASSESSING OFFICER CONSIDERED THAT THE ASSESSEE SOCIETY IS RUNNING BUS INESS UNDERTAKINGS IN THE FORM OF EDUCATIONAL INSTITUTIONS FOR WHICH THE RESTRICTIVE PROVISIONS OF SECTION 11(4A) ARE APPLICABLE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE INSTITUTIONS HAVE ALSO ALL THE INGREDIENTS OF BUSINESS UNDERTAKINGS. THE ASSES SEE SOCIETY IS RUNNING EDUCATIONAL INSTITUTIONS LIKE BUSINESS UNDERTAKINGS AS CONTEMPLATED U/S 11(4) AND RUNNING THEM WITH PROFIT MOTIVE. THE ASSESSING OFFICER RELIED ON THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF VODITHALA EDUCATION SOC IETY V. ADIT (EXEMPTION), (2008) 20 SOT 353 (HYD), WHEREIN IT WAS HELD THAT THE ASSESSEE, HAVING COLLECTED MONEY OVER AND ABOVE THE RATE PRESCRIBED BY CONCERNED AUTHORITY, IS NOT A CHARITABLE INSTITUTION U/S.2(15) AS IT IS A CLEAR CASE OF SALE OF EDUCATION AND THE PURPOSE OF ORGANIZATION WAS TO MAKE PROFIT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE SOCIETY CAN BE CONSIDERED AS RUNNING WITH PROFIT MOTIVE. HE OBSERVED THAT THE INSTITUTIONS ARE RUNNING PROFITABLY AND THERE IS M/S. ORISSA COMPUTER ACADEMY P A G E 5 | 13 PROFIT MOTIVE IN VIEW OF D ECISION IN THE CASE OF CIT V. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING & EDUCATIONAL SOCIETY, (2009) 226 CTR (UTTARAKHAND) 582. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 13(1)(C) HAVE BEEN VIOLATED SINCE SUBSTANTIAL AMOUN TS HAVE BEEN PAID TO THE FOUNDING MEMBERS AS UNDER: HONORARIUM OF RS.20,34,004/ - PAID TO FOUNDERS AS UNDER: 1. DR. BHABANI CHARAN RATH : RS.10,57,728/ - 2. SMT. SARMISTHA RATH` : RS. 3,82,456/ - 3. SRI SUBRAT PRASANNA MISHRA: RS. 4,34,561/ - 4. SMT. SANGHAMITRA MISHRA : RS. 1,68,259/ - 6. THE ASSESSING OFFICER OBSERVED THAT THE FOUNDING MEMBERS ARE REQUIRED TO WORK TO ATTEND THE OBJECTS OF THE TRUST AND NOT TO ENRICH THEMSELVES WITH SUBSTANTIAL PAYMENTS FROM THE INSTITUTION. SMT. SARMISTA RA TH HAS ADMITTED TO BE A HOUSE WIFE, HENCE FUNDS OF THE TRUST HAS BEEN MISUSED FOR PAYMENT OF REMUNERATION. 7. THE ASSESSING OFFICER FURTHER OBSERVED THAT ACCORDING TO THE PROVISIONS OF SECTION 11(4), THE RUNNING OF EDUCATIONAL INSTITUTION IS A BUSINESS AN D NOT INCIDENTAL TO THE FULFILMENT OF THE OBJECTIVES OF THE ASSESSEE SOCIETY. HENCE, INCOME FROM SUCH INSTITUTIONS ARE TAXABLE EVEN WHEN SECTION 11 IS VALID. 8. THE ASSESSING OFFICER FURTHER FOUND THAT THE ASSESSEE SOCIETY RUNS FIVE COLLEGES. IT COLLECTS LIFE MEMBER FEES OF RS.5,000/ - AND ORDINARY MEMBER FEES OF RS.500/ - PER YEAR. BALANCE SHEETS OF EDUCATIONAL INSTITUTIONS DO NOT REFLECT COLLECTION OF SUCH AMOUN TS OR ANY SUCH CORPUS FUNDS CREATED. NO SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THE SOCIETY. THE ACCOUNTS OF THE SOCIETY ARE MAINTAINED ALONGWITH EDUCATIONAL INSTITUTION WHICH VIOLATES PROVISIONS OF SECTION 11(4A). SINCE NO SEPARATE BOOKS OF ACCOUNT ARE BEING MAINTAINED, THE RESTRICTIVE PROVISIONS OF SECTION 11(4A) IS ATTRACTED. HENCE, THE BENEFIT OF EXEMPTION U/S.11 IS NOT AVAILABLE. 9. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER: 3. I HAVE CONSIDERED THE MA TTER. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT FACTS OF THE CASE ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2009 - 2010 WHEREIN, RELIEF HAS BEEN ALLOWED PARTLY. HOWEVER, NO ELABORATE SUBMISSIONS HAVE BEEN MADE AND IT IS NOT STATED IN WHAT MANNER THE ISS UES M/S. ORISSA COMPUTER ACADEMY P A G E 6 | 13 ARE SIMILAR. IT IS WELL SETTLED THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN TAXATION MATTERS. FACTS OF THE CASE MAY DIFFER FROM YEAR TO YEAR. THE AO HAS GIVEN A FINDING THAT THE APPELLANT SOCIETY IS SELLING EDUCATION IN THE GUISE OF CHARI TABLE PURPOSE AND IS EXTRACTING EXORBITANT PRICE FROM THE STUDENTS THEREBY THE EDUCATIONAL INSTITUTIONS RUN BY THE APPELLANT SOCIETY IS RUN LIKE COMMERCIAL VENTURE. THE APPELLANT HAS NOT DISPUTED THE OBSERVATIONS OF THE AO THAT THE JUDGMENT DELIVERED IN TH E CASE OF CIT V. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING & EDUCATIONAL SOCIETY BY THE UTTARAKHAND HIGH COURT IS APPLICABLE. THE APPELLANT HAS ALSO NOT DISPUTED THE OBSERVATION OF THE AO THAT THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF VODITHA LA EDUCATION SOCIETY IS APPLICABLE TO THE CASE OF THE APPELLANT. THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF VODITHALA EDUCATION SOCIETY V. ADIT (EXEMPTIONS) II, HYDERABAD, [2008] 20 SOT 353 (HYD.) RELEVANT TO THE APPELLANT'S CASE IS REPRODUCED AS U NDER: '19. UNDER ARTICLE 41 OF THE CONSTITUTION OF INDIA, IT IS THE RESPONSIBILITY OF THE STATE TO PROVIDE EDUCATION TO ALL CITIZENS OF THIS COUNTRY. THE STATE MAY DISCHARGE ITS OBLIGATION THROUGH STATE OWNED OR STATE RECOGNIZED EDUCATIONAL INSTITUTIONS. WHEN STATE/CENTRAL GOVERNMENT GRANTS RECOGNITION TO THE PRIVATE EDUCATIONAL INSTITUTIONS, IT CREATES AN AGENCY TO FULFIL ITS OBLIGATION UNDER THE CONSTITUTION. THEREFORE, THE PRIVATE INSTITUTIONS, ARE FUNCTIONING AS AGENTS OF THE STATE/CENTRAL GOVERNMENT. IT IS THE PRIMARY RESPONSIBILITY AND OBLIGATION OF THE STATE TO PROVIDE EDUCATION TO THE CITIZENS. THEREFORE, THE EDUCATIONAL INSTITUTIONS WHILE ACTING AS AGENTS OF THE STATE HAVE TO COLLECT THE FEES AS PRESCRIBED BY THE GOVERNMENT. THE STUDENTS ARE GIVEN ADMISSION TO THE PRIVATE EDUCATIONAL INSTITUTIONS IN RECOGNITION OF THEIR 'RIGHT TO EDUCATION' UNDER THE CONSTITUTION. THEREFORE, CHARGING OF ANY AMOUNT OVER AND ABOVE THE FEE PRESCRIBED BY GOVERNMENT, EITHER AS CAPITATION FEE OR OTHERWISE, IN CONSIDERATIO N OF ADMISSION TO EDUCATIONAL INSTITUTION, IS A PATENT DENIAL OF A CITIZEN'S RIGHT TO EDUCATION UNDER THE CONSTITUTION. EDUCATION IS IN THE CONCURRENT LIST OF THE CONSTITUTION. THEREFORE, BOTH THE CENTRAL AND STATE GOVERNMENTS ARE COMPETENT TO ENACT LAW WI TH REGARD TO EDUCATION. IN OTHER WORDS, IT IS THE RESPONSIBILITY/OBLIGATION OF BOTH THE CENTRAL AND STATE GOVERNMENTS TO PROVIDE EDUCATION TO ALL THE CITIZENS OF THE COUNTRY. DESPITE VARIOUS CULTURAL AND LINGUISTIC DIFFERENCES, INDIA IS UNITED BECAUSE OF T OLERANCE AND PIOUSNESS OF THE PEOPLE. EDUCATION IS CONSIDERED TO BE PIOUS IN THIS COUNTRY. M/S. ORISSA COMPUTER ACADEMY P A G E 7 | 13 ANCIENT DAYS 'GURUKULAMS' WERE ESTABLISHED TO IMPART KNOWLEDGE TO PEOPLE. DUE TO EFFLUX OF TIME AND CIVILIZATION, THE EARLIER 'GURUKULAMS' ARE NOW CALLED AS SCHOOLS, COLLEGES. IN OTHER WORDS, IT IS KNOWN AS EDUCATIONAL INSTITUTIONS. HOWEVER, THE INDIAN CIVILIZATION CONTINUE TO RECOGNIZE EDUCATION AS ONE OF THE PIOUS OBLIGATION OF THE HUMAN SOCIETY. WHEN THE PEOPLE OF THIS COUNTRY CONSIDERED EDUCATION AS A PIOUS ONE, I T CANNOT BE MADE AS A SALEABLE COMMODITY IN THE GUISE OF ENCOURAGING PRIVATE INSTITUTION TO SUPPORT THE STATE IN THE PROCESS OF ESTABLISHING EDUCATIONAL INSTITUTIONS. TO ESTABLISH AND ADMINISTER EDUCATIONAL INSTITUTIONS, ARE CONSIDERED TO BE A CHARITABLE O BJECT. THE WAY IN WHICH THE EXORBITANT AMOUNTS ARE COLLECTED BY THE ASSESSEE - SOCIETY FOR ADMISSION UNDER THE MANAGEMENT QUOTA, SHOWS THAT THEY ARE NOT ADMINISTERING THE EDUCATIONAL INSTITUTIONS FOR PIOUS AND CHARITABLE PURPOSE, BUT, WITH A PROFIT MOTIVE. W HEN THE ASSESSEE SELLS THE SEAT OF THE PROFESSIONAL COURSE IN THE COLLEGE AND COLLECTS MONEY, CAN WE SAY THERE IS NO PROFIT MOTIVE. IN OTHER WORDS, WHEN THE ASSESSEE ADMITS STUDENTS UNDER MANAGEMENT QUOTA IN CONSIDERATION OF AN AMOUNT, WHICH IS OVER AND AB OVE THE FEES PRESCRIBED BY THE GOVERNMENT, CAN WE SAY THERE IS NO PROFIT MOTIVE? THE OBVIOUS ANSWER TO THIS QUESTION IS IN NEGATIVE. WHEN THE ASSESSEE COLLECTS MONEY OVER AND ABOVE THE FEES PRESCRIBED BY GOVERNMENT, IT CLEARLY EXPOSES THE INTENTION OF THE ASSESSEE TO EARN PROFIT. IT IS ALSO TO BE REMEMBERED THAT COLLECTION OF CAPITATION FEES FOR ADMISSION TO ANY EDUCATIONAL INSTITUTION IS MADE AS AN OFFENCE PUNISHABLE IN THIS COUNTRY. IN SPITE OF THAT, THE ASSESSEE WAS BOLD ENOUGH IN COLLECTING THE MONEY OV ER AND ABOVE THE FEES PRESCRIBED BY THE GOVERNMENT. 20. THE APEX COURT IN THE CASE OF T.M.A. PAL FOUNDATION V. STATE OF KARNATAKA [2002] 8 SCC 481 HAD AN OCCASION TO CONSIDER THE RIGHT OF THE AIDED AND UNAIDED PRIVATE EDUCATIONAL INSTITUTIONS. THE CONSTIT UTIONAL BENCH OF THE SUPREME COURT ELABORATELY CONSIDERED THE RIGHT OF ESTABLISHING PRIVATE EDUCATIONAL INSTITUTIONS AND FOUND THAT COLLECTION OF CAPITATION FEES BEING THE WORST PART OF MAL - ADMINISTRATION, CAN PROPERLY BE SUBJECT - MATTER OF REGULATORY CONTR OL OF A STATE. THE APEX COURT FURTHER OBSERVED THAT RECEIVING DONATIONS BY EDUCATIONAL INSTITUTIONS CONNECTED WITH ADMISSION OF STUDENTS HAS TO BE TREATED AS COLLECTION OF CAPITATION FEES. THE APEX COURT OBSERVED THAT THE RIGHT TO ADMIT STUDENTS BEING AN E SSENTIAL FACET OF THE RIGHT TO ADMINISTER EDUCATIONAL INSTITUTIONS OF THEIR CHOICE, THE STATE GOVERNMENT/UNIVERSITY MAY NOT BE ENTITLED TO INTERFERE M/S. ORISSA COMPUTER ACADEMY P A G E 8 | 13 WITH THEIR RIGHT SO LONG AS THE ADMISSION TO THE UNAIDED EDUCATIONAL INSTITUTION IS ON A TRANSPARENT BASIS AND MERIT IS R 3* \ ADEQUATELY TAKEN CARE OF. IT WAS ALSO OBSERVED THAT THE UNAIDED INSTITUTIONS CANNOT BE REGULATED WITH REGARD TO CHARGING OF FEES, HOWEVER, SUCH INSTITUTION SHALL NOT CHARGE CAPITATION FEES. THIS JUDGMENT WAS CONSIDERED BY ANOTHER BENCH OF THE APEX COURT IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION (SUPRA). THE MAJORITY JUDGES OF THE APEX COURT AFTER CONSIDERING THE JUDGMENT IN THE CASE OF TMA PAI FOUNDATION (SUP RA), OBSERVED THAT THERE CAN BE NO FIXING OF 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 NEC ESSARY FOR THE BENEFIT OF THE STUDENTS. THE EDUCATIONAL INSTITUTIONS MUST ALSO BE ABLE TO GENERATE SURPLUS WHICH MUST BE USED FOR THE BETTERMENT AND GROWTH OF THAT EDUCATIONAL INSTITUTION. IT WAS FURTHER OBSERVED THAT THE SURPLUS FUNDS CANNOT BE DIVERTED F OR ANY OTHER USE OR PURPOSE AND CANNOT BE USED FOR PERSONAL GAIN OR FOR ANY OTHER BUSINESS OR ENTERPRISE. THE APEX COURT FURTHER DIRECTED ALL THE STATE GOVERNMENTS AND CONCERNED AUTHORITIES TO SET UP COMMITTEE HEADED BY A HON'BLE RETIRED HIGH COURT JUDGE W HO SHALL BE NOMINATED BY THE HON'BLE CHIEF JUSTICE OF THE HIGH COURT. FOR THE PURPOSE OF CONVENIENCE, WE REPRODUCE THE DIRECTION OF THE APEX COURT AS REPORTED IN PAGES 720 - 722 OF ISLAMIC ACADEMY OF EDUCATION'S CASE (SUPRA).' IT IS ALSO SEEN THAT THE REGIS TRATION U/S.1O(23C) HAS BEEN DENIED TO THE APPELLANT BY THE CCIT, BHUBANESWAR FOR THE EXEMPTION OF INCOME FROM THE EDUCATIONAL INSTITUTIONS RUN BY THE APPELLANT. THE AO HAS ALSO APPLIED THE RESTRICTIVE PROVISIONS OF SECTION 11(4) AND 11(4A) TO DENY BENEFI TS OF SECTION 11 TO THE APPELLANT. THE AO OBSERVES THAT THE ACCOUNTS OF THE SOCIETY AND EDUCATIONAL INSTITUTIONS HAVE NOT BEEN MAINTAINED SEPARATELY. THUS, THE ASSESSEE IS NOT SATISFYING THE CONDITION OF SECTION 11(4A), HENCE INELIGIBLE FOR BENEFITS OF SEC TION 11. THESE OBSERVATIONS OF THE AO HAVE NOT BEEN CONTRADICTED BY THE APPELLANT. THE AO HAS GIVEN HIS FINDING THAT AN AMOUNT OF RS.3,82,456/ - WAS PAID TO SMT. SARMISTA RATH, FOUNDER AND MEMBER OF THE APPELLANT SOCIETY FOR NO SERVICES RENDERED. SMT. RATH HAS ADMITTED IN POST SEARCH, THAT SHE IS A HOUSEWIFE AND NOT INVOLVED IN ANY VOCATION OR PROFESSION. THE SUBMISSIONS MADE BY THE APPELLANT BEFORE M/S. ORISSA COMPUTER ACADEMY P A G E 9 | 13 THE AO DO NOT CONTRADICT THE FINDINGS OF THE AO THAT SHE WAS GIVEN THE SALARY/HONORARIUM FOR THE REASON THAT SHE IS THE WIFE OF THE FOUNDER MEMBER/CHAIRMAN OF THE SOCIETY. THE FINDING OF THE AO THAT SHE HAS BEEN PAID SALARY WITHOUT RENDERING ANY SERVICE IS CORRECT, HENCE VIOLATES PROVISIONS OF SECTION 13(1)(C). IN CASE OF A CHARITABLE TRUST, IF IT IS FOUND THAT P ROVISIONS OF SECTION 13(1)(C)(II) READ WITH SECTION 13(3) ARE NOT FOLLOWED, TRUST WOULD LOSE ITS EXEMPTION IN ENTIRETY, WITH RESULT THAT ASSESSMENT OF ITS INCOME WILL BE MADE ACCORDING TO PROVISIONS OF THE ACT AS HELD BY HON'BLE DELHI HIGH COURT IN DIRECTO R OF INCOME - TAX (EXEMPTION) V. CHARANJIV CHARITABLE TRUST [ 2014 ] 43 TAXMANN.COM 300 (DELHI). IT WAS HELD THAT; 27. IN THE AFORESAID VIEW OF THE MATTER, WE HOLD THAT THE FINDINGS OF THE TRIBUNAL ON THIS ASPECT CANNOT B E UPHELD. WE UPHOLD THE FINDINGS OF THE AO AND HOLD THAT IN ADVANCING THE AMOUNT OF RS.8,60,16,000/ - TO APIL THE ASSESSEE COMMITTED A VIOLATION OF THE PROVISIONS OF SECTION 13(1) (C)(II) READ WITH SECTION 13(2) AND SECTION 13(3) OF THE ACT. THE TRUST WA S ACCORDINGLY NOT ELIGIBLE FOR THE EXEMPTION UNDER SECTION 11 OF THE ACT FOR BOTH THE YEARS. ACCORDINGLY, THE EXCESS OF INCOME OVER EXPENDITURE IS TAXABLE AND AT THE SAME TIME THE AMOUNT PAID TO SMT. RATH IS LIABLE TO BE TAXED AT THE MAXIMUM MARGINAL RATE . IN VIEW OF THE ABOVE DISCUSSION AND FOR THE FINDING OF THE AO THAT THE EDUCATIONAL INSTITUTIONS ARE RUN LIKE COMMERCIAL ORGANISATIONS, THE VIOLATION OF PROVISIONS OF SECTION 11(4) AND 11(4A), NON - REGISTRATION U/S.10(23C) AND FOR VIOLATION OF PROVISIONS OF SECTION 13(1)(C) THE DETERMINATION OF INCOME BY THE O IS CONFIRMED I.E. EVEN IF THE APPELLANT ENJOYS BENEFIT OF SECTION 11, THE EXCESS OF INCOME OVER EXPENDITURE IS TAXABLE IN VIEW OF VIOLATION OF VARIOUS PROVISIONS OF THE ACT AS NARRATED. 10. LD A.R. OF THE ASSESSEE ARGUED AND SUBMITTED THAT IN THE ASSESSMENT YEAR 2009 - 2010, THE CIT(A) HAS ALLOWED DEDUCTION U/S.11 OF THE ACT TO THE ASSESSEE ON THE VERY SAME SET OF FACTS. THE REVENUE CHALLENGED THE ORDER OF THE CIT(A) BEFORE THE TRIBUNAL AND THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE VIDE ORDER DATED 11.1.2013 IN IT(SS) NO.71,72 AND 73/CTK/2012 FOR THE ASSESSMENT YEARS 2005 - 06, 2007 - 08 AND 2009 - 2010 AND ITA NO.575/CTK/2012 FOR THE ASSESSMENT YEAR 2006 - 07 BY OBSERVING AS UNDER: AS THE LD CIT DR WAS NOT ABLE TO POINT OUT ANY CONTROVERTING MATERIAL INSOFAR AS THE LD CIT(A) HAS IN HIS WELL REASONED ORDER M/S. ORISSA COMPUTER ACADEMY P A G E 10 | 13 CONSIDERED THE ISSUES IN ITS TOTALITY TO DELETE THE ADDITION SO MADE BY THE AO WHEN THE CRUX OF THE ISSUE RELATED TO EXPENDITURE HAVE BEEN INCU RRED UNDER THE PROVISIONS OF SECTION WAS CLAIMED ON THOSE YEARS INCOMES WHICH HAS BEEN DELETED BY THE LD CIT(A) ON THE FACT FINDING AS NOTED BY THE AO. IN OTHER WORDS, COMPLIANCE TO SECTION 11 SUCCEEDS THE JUSTIFICATION HOLDING EXEMPTIONS U/S.12A WHICH HA S NOT BEEN ESTABLISHED OTHERWISE BY THE REVENUE AS OF NOW. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDERS OF THE LD CIT(A) FOR ALL THE AYS UNDER CONSIDERATION, WHICH WE UPHOLD AND DISMISS THE APPEALS OF THE REVENUE. THE AD DITIONS AS MADE BY THE AO AND CONSIDERED BY THE LD CIT(A) REPRODUCED DO NOT REQUIRE FURTHER DELIBERATION BEING SELF EXPLANATORY AS ALSO POINTED OUT BY THE LD COUNSEL FOR THE ASSESSEE ARE COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. THE LD CIT DR HAS NOT BEEN ABLE TO BRING OUT ANY FURTHER CONTROVERTING MATERIAL FOR OUR CONSIDERATION. WE, THEREFORE, UPHOLD THE IMPUGNED ORDERS OF THE LD CIT(A) AND DISMISS THE APPEALS OF THE REVENUE. 11. LD A.R. FURTHER ARGUED AND SUBMITTED THAT IN THE ASSESS MENT YEAR 2015 - 16, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION U/S.11 OF THE ACT TO THE ASSESSEE ON THE VERY SAME SET OF FACTS VIDE ORDER DATED 12.10.2017 PASSED U/S.143(3)OF THE ACT. 12. ON THE ABOVE STATED FACTS, IT WAS THE SUBMISSION OF LD A.R. OF THE ASSESSEE THAT THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THE APPEALS OF THE ASSESSEE SHOULD BE ALLOWED ALLOWING DEDUCTION U/S.11 OF THE ACT TO THE ASSESSEE IN THE YEARS UNDER APPEAL. 13. ON THE OTHER HAND, LD D.R. COULD NOT CONTROVERT THE ABOVE SUBMIS SION OF LD A.R. OF THE ASSESSEE. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY DULY REGISTERED U /S.12AA OF THE ACT. THE REGISTRATION U/S.12AA OF THE ACT STANDS ENFORCED FOR ALL THE YEARS UNDER APPEAL. IN THE YEARS UNDER APPEAL, THE ASSESSEE IS ENGAGED IN RUNNING FOUR EDUCATIONAL INSTITUTIONS. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXEMPTION U/S.11 & 12 OF THE ACT IN THE YEARS UNDER APPEAL, WHICH WAS ALSO CONFIRMED BY THE CIT(A). 15. WE OBSERVE THAT ON SIMILAR FACTS, THE ASSESSEE WAS HELD ENTITLED FOR EXEMPTION U/S.11 & 12 OF THE ACT BY THE TRIBUNAL FOR THE ASSESSMENT YEARS 2000 - 2001 TO 2009 - 2010 CONSISTENTLY. FURTHER, IN SUBSEQUENT ASSESSMENT YEAR I.E. 2015 - 16, THE ASSESSING OFFICER HIMSELF HAS HELD IN AN ASSESSMENT MADE M/S. ORISSA COMPUTER ACADEMY P A G E 11 | 13 U/S.143(3) OF THE ACT THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S.11 & 12 OF THE ACT. 16. IN VIEW OF THE ABOVE CONSIST ENT DECISIONS OF THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS AND THE DECISION OF THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2015 - 16, WE FIND FORCE IN THE ARGUMENTS OF LD A.R. OF THE ASSESSEE THAT THERE IS NO REASON TO TAKE A DIFFERENT VIEW IN THE THREE ASSESSMENT YEARS UNDER APPEAL. 17. LD D.R. COULD NOT POINT ANY DISTINGUISHABLE FACTS WHICH WERE EXISTING IN THESE THREE YEARS AND NOT EXISTED IN THE EARLIER YEARS OR IN THE ASSESSMENT YEAR 2015 - 16. WE, THEREFORE, FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE ITSELF IN THE ASSESSMENT YEARS 2000 - 2001 TO 2009 - 2010 DIRECT THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S.11 & 12 OF THE ACT TO THE ASSESSEE IN ACCORDANCE WITH LAW. 18. FURTHER, BE IT STATED THAT THE ASSESSING OFFICER OBS ERVED IN THE ASSESSMENT YEARS UNDER APPEAL, THAT CERTAIN PAYMENTS WERE MADE TO THE RELATIVES OF FOUNDER MEMBERS WITHOUT RENDERING OF ANY SERVICE BY THEM IN VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT. THE AMOUNTS WHICH HAVE BEEN PAID IN VIOLATION OF THE PROVISIONS OF SECTION 13 OF THE ACT ARE TO BE CHARGED TO TAX AT MAXIMUM MARGINAL RATE. FROM THE ORDERS OF THE LOWER AUTHORITIES, IT IS NOT CLEAR THAT HOW MUCH PAYMENT WAS MADE IN VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT. WE, THEREFORE, FOR TH IS LIMITED PURPOSE, RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DETERMINE THE AMOUNT WHICH WAS PAID BY THE ASSESSEE IN VIOLATION TO PROVISIONS OF SECTION 13 OF THE ACT AND THEREAFTER COMPLETE THE ASSESSMENT AFRESH AS PER LAW. 7. IN VIE W OF ABOVE AND AS AGREED BY BOTH THE PARTIES AT BAR THAT THE ISSUES UNDER CONSIDERATION ARE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2010 - 11, 2011 - 12 & 2012 - 13 (SUPRA). WE ALSO FIND THAT THE CIT(A) HAS ALLOWE D THE CLAIM OF EXEMPTION U/S.11 & 12 OF THE ACT AND IN RESPECT OF VIOLATION OF PROVISIONS OF SECTION 13, THE CIT(A) HAS DIRECTED THE AO TO DETERMINE THE AMOUNT AS PER LAW IN VIEW OF THE DECISION OF THE TRIBUNAL (SUPRA). IN THE ASSESSMENT YEAR 2010 - 11, AS PER THE DIRECTION OF THE TRIBUNAL, THE AO HAS ALREADY VERIFIED AND WHILE M/S. ORISSA COMPUTER ACADEMY P A G E 12 | 13 PASSING APPEAL EFFECT ORDER DATED 24.1.2019, HAS ACCEPTED THE CLAIM OF THE ASSESSEE. HENCE, THE APPEAL FOR THE ASSESSMENT YEAR 2010 - 2011 IS DISMISSED. 8. COMING TO ASSESSMENT YEARS 2013 - 14 & 2014 - 15, THERE ARE TWO ISSUES INVOLVED I.E. DISALLOWANCE OF EXEMPTION U/S.11 & 12 OF THE ACT AND VIOLATION OF SECTION 13 ON THE LOAN TO KRUPAJALA TRUST. 9. THE CIT (A) FOLLOWING THE ORDER OF THIS TRIBUNAL HAS ALLOWED THE EXEMPTION U/S.11 & 12 OF THE ACT. FURTHER, FOLLOWING THE ORDER OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT (EXEMPTIONS) VS ALARIPPU, 244 ITR 146 (DEL) AND DIT (EXEMPTIONS) VS ACME EDUCATIONAL SOCIETY, 326 ITR 146 (DEL) HAS HELD THAT THE LOAN GIVEN BY ONE CHARITABLE SOCIE TY TO ANOTHER SOCIETY HAVING SIMILAR OBJECTS CANNOT BE TREATED AS EITHER AN INVESTMENT OR A DEPOSIT SO AS TO ATTRACT THE MISCHIEF OF SECTION 13(1)(D) READ WITH SECTION 11(5) OF THE ACT AND FOLLOWING THE SAME, THE LD CIT(A) HELD THAT THERE IS NO VIOLATION O F SECTION 13 OF THE ACT TO DENY EXEMPTION U/S.11 OF THE ACT. 10. DURING THE COURSE OF HEARING, LEARNED REPRESENTATIVES OF BOTH PARTIES HAVE AGREED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT AND THE DECISION OF THIS BENCH IN ASSESSEE;S OWN CASE (SUPRA). HENCE, WE DISMISS THE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEAR 2013 - 14 & 2014 - 15 . M/S. ORISSA COMPUTER ACADEMY P A G E 13 | 13 11 . THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE IN SUPPORT OF THE ORDER OF THE LD CIT(A). SINCE, WE HAVE DISMISSED THE APPEALS OF THE REVENUE, CROSS OBJECTIONS HAVE BECOME INFRUCTUOUS AND HENCE, DISMI SSED. 12 . IN THE RESULT, APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 28 /1 /20 2 1 . S D/ - SD/ - ( C .M. GARG ) ( P .M. JAGTAP ) JUDICIAL MEMBER VICE PRESIDENT CUTTACK; DATED 28 / 1 /20 2 1 B.K.PARIDA, SPS (OS) COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE ASSESSEE : M/S. ORISSA COMPUTER ACADEMY, PRASANTI VIHAR, PUBASASANA, KAUSALYA GANGA, BHUBANESWAR 2. THE R EVENUE: DCIT (EXEMPTIONS), BHUBANESWAR. 3. THE CIT(A) - 1 , BHUBANESWAR 4. PR.CIT - 1 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//