Sherwood Diocesan College Society, Nainital V. ACIT, Nainital

ITA 429/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0835 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 01-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 05-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Assessee Lawyers: TARUN KUMAR KIYALA
• Keywords: Charitable institution
• Section: 143(3); 234B; 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.429/DEL/2009 ASSESSMENT YEAR : 2004-05 SHERWOOD DIOCESAN COLLEGE SOCIETY, SHERWOOD COLLEGE, NAINITAL. PAN NO.AABAA7633K. VS. ASSTT.COMMISSIONER OF INCOME TAX, WARD-3(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARUN KUMAR KIYALA, ADVOCATE. RESPONDENT BY : SHRI GAJANAND MEENA, CIT-DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 21.10.2008 FOR THE AY 2004-05, IN THE MATTER OF ORD ER PASSED U/S 143(3) OF THE IT ACT, BY WHICH EXEMPTION GRANTED U/S 11 WAS WITHDRAW N. FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THAT THE LD.COMM. OF INCOME TAX (APPEALS) ERRED IN DECIDING THE APPEAL WITHOUT GIVING ADEQUATE OPPORTUNITY OF B EING HEARD TO THE APPELLANT WHEN ADDITIONAL FACTS OF THE CASE WERE RE PORTED BY THE LD.ASSESSING OFFICER. 2. THAT THE LD. CIT(APPEALS) ERRED IN LAW AND ON FA CTS IN TAKING INTO CONSIDERATION ADDITIONAL FACTS REPORTED BY THE LD.ASSESSING OFFICER EVEN WHEN THE SAME WERE NOT DISCUSSED IN TH E ASSESSMENT ORDER OR WERE NOT SUBJECT MATTER OF THE APPEAL PROC EEDINGS. 3. THAT THE LD. CIT(APPEALS) ERRED IN LAW AND ON FA CTS IN NOT ALLOWING EXEMPTION U/S 11 OF THE INCOME TAX ACT. 4. THAT THE LD. CIT(APPEALS) ERRED IN LAW AND ON FA CTS IN HOLDING THAT SECTION 2(15) OF THE INCOME TAX ACT, 1961 IS N OT APPLICABLE. ITA-429/D/2009 2 5. THAT THE LD. CIT(APPEALS) ERRED IN NOT CONSIDERI NG THAT THE SURPLUS ARISING FROM IMPARTING EDUCATION REMAINS WI TH THE INSTITUTION FOR ITS DEVELOPMENT AND IS NOT BEING DISTRIBUTED IN ANY FORM WHATSOEVER. 6. THAT THE LD. CIT(APPEALS) ERRED IN LAW IN NOT UN DERSTANDING THAT CONTRIBUTIONS CAN BE MADE BY ONE CHARITABLE TR UST TO ANOTHER CHARITABLE TRUST WITHOUT ANY BAR/CONDITION. 7. THAT THE LD. CIT(APPEALS) ERRED IN CHARGING INTE REST U/S 234B AS THERE WAS NO LIABILITY TO PAY ANY ADVANCE TAX. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE M/S SHERWOOD DIOCESAN CO LLEGE SOCIETY IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 18 60 IN THE YEAR 1952 TO TAKE OVER THE MANAGEMENT OF SHERWOOD DIOCESAN COLLEGE, WHICH WAS STARTED IN 1869. THE SOCIETY IS RUNNING SHERWOOD COLLEGE AT NAINITAL, AF FILIATED TO COUNCIL FOR INDIAN SCHOOL CERTIFICATION EXAMINATION, DELHI. THE SOCIE TY HAS BEEN GRANTED REGISTRATION U/S 12A OF I.T.ACT, 1961 ON 11/11/1975 BY REGISTRATION NO.10/75/BLY. AS PER THE MEMORANDUM, MAIN OBJECTS OF THE SOCIETY ARE TO PROVIDE EDUCATION ON A CHRISTIAN BASIS THROUGH THE MEDIUM OF ENGLISH TO ANGLO INDIANS, OTHER CHRISTIANS AND TO ANY OTHERS IRRESPE CTIVE OF THEIR CASTE OR CREED, WHO VOLUNTARILY JOIN IT AND TO PROVIDE HOSTEL ACCOMMODA TION IF NECESSARY AND POSSIBLE FOR TEACHERS, STUDENTS AND SUCH OTHERS AS ARE ACCEP TABLE TO THE GOVERNING BODY. AS PER THE PROVISIONS OF THE INCOME TAX ACT, THE SOCIE TY FILED THE RETURN OF INCOME FOR THE AY 2004-05 SHOWING NIL INCOME CLAIMING EXEMPTIO N U/S 11 OF THE IT ACT, 1961. BUT THE AO DENIED EXEMPTION U/S 11 AND ASSES SED THE INCOME AT RS.3,06,402/-. THE AO RAISED QUERIES ABOUT THE APP LICABILITY OF SECTION 11 ALLEGING THAT THE RECEIPTS WERE IN THE NATURE OF FE E CHARGED FROM THE STUDENTS WHICH DOES NOT COME IN THE CATEGORIES OF RECEIPTS MENTION ED IN THE RELEVANT SECTION AND THAT HAD CONTRIBUTED SUBSTANTIAL AMOUNT TO ANOTHER TRUST. THE AO HAS ALSO HELD THAT PROVISION OF SECTION 2(15) OF THE ACT ARE NOT APPLICABLE AS IT IS THE CASE OF SOUND BUSINESS PROPOSITION IN WHICH ASSESSEE IS ENG AGED WITH THE MOTIVE OF ITA-429/D/2009 3 EARNING PROFIT AND NOT DOING ANY CHARITY. AS PER A O, THE ASSESSEE IMPARTING EDUCATION IS A BUSINESS AND NOT A CHARITABLE PURPOS E. IN VIEW OF THE ABOVE, THE AO WITHDRAWN THE EXEMPTION GRANTED U/S 11 OF THE IT AC T. 3. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER:- FROM THE ADDITIONAL FACTS OF THE CASE AS REPORTED BY THE AO, IT APPEARS THAT SHERWOOD COLLEGE IS MANAGED BY AGRA DI OCESAN TRUST ASSOCIATION (ADTA) WHICH IS REGISTERED U/S 12A OF I .T.ACT, 1961. THE TRUST PROPERTY WAS TRANSFERRED BY THE SCHOOL FO UNDERS THROUGH IRREVOCABLE TRUST TO LUCKNOW DIOCESAN TRUST ASSOCIA TION (LDTA) IN OCT, 1948. THIS TRUST IS ALSO REGISTERED WITH THE REGISTRAR. DUE TO GEOGRAPHICAL DIVISION OF THE DIOCESE IN THE MID 197 0S, THE MANAGEMENT OF THE SCHOOL WAS TRANSFERRED TO ADTA OS TENSIBLY THROUGH A POWER OF ATTORNEY. IT HAS BEEN ALSO OBSERVED THAT ON 28.04.1993, THE B ISHOP OF AGRA ISSUED A CIRCULAR TO ALL PRINCIPALS AND MANAGERS OF THE SCHOOLS IN THE DIOCESE OF AGRA COMMUNICATING THE DECISION OF THE E XECUTIVE COMMITTEE DIOCESAN EDUCATION BOARD AND ADTA THAT TH E SCHOOLS BE REQUESTED TO PAY 10% OF THEIR TOTAL RECEIPTS AS THE IR CONTRIBUTION TO THE ADTA IN THE FORM OF LICENCE FEE FOR GROUND USE AND OCCUPATIONAL CHARGES. FURTHER IT HAS BEEN HELD THA T THE PRESENT INSTITUTION DOES NOT EXIST SOLELY FOR EDUCATIONAL P URPOSES AND THE INCOME HAS NOT WHOLLY BEEN APPLIED FOR EDUCATIONAL PURPOSES. 4. IT IS CRYSTAL CLEAR FROM THE ORDER OF CIT(A) THA T ADDITIONAL FACTS WERE REPORTED TO HIM DURING THE COURSE OF APPELLATE PROC EEDINGS AND HE HAS ACTED ON THE SAME WITHOUT GIVING PROPER OPPORTUNITY TO THE ASSES SEE. HE ALSO INVOKED PROVISIONS OF SECTION 13(1)(C)(II) ON THE PLEA THAT PART OF THE INCOME OF THE ASSESSEE HAS BEEN APPLIED DIRECTLY OR INDIRECTLY FO R THE BENEFIT OF ANY PERSON REFERRED TO IN SUB SECTION 3 WHICH INCLUDES ANY TRU STEE OF THE TRUST OR MANAGER (BY WHATSOEVER NAME CALLED) OF THE INSTITUTION. THEREF ORE, THE CLAIM OF EXEMPTION U/S 11 OF I.T.ACT IS NOT ADMISSIBLE IN THE CASE OF THE APPELLANT AND THIS RESULTS IN FORFEITURE OF SUCH EXEMPTION. THUS, THE CONCLUSION DRAWN BY CIT(A) TO THE EFFECT ITA-429/D/2009 4 THAT EVEN THOUGH THE ASSESSEE WAS CARRYING ON EDUCA TIONAL OBJECTS BUT IT WAS NOT CARRYING OUT CHARITABLE ACTIVITY MERELY BY RUNNING SCHOOL. THESE FACTS WERE NOT DISCUSSED BY THE AO WHILE FRAMING THE ASSESSMENT AN D THE CIT(A) HAS CONSIDERED THE ADDITIONAL MATERIAL WITHOUT GIVING ADEQUATE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE WHEN THE ADDITIONAL FACTS WERE REPORTED BY THE AO. DURING THE COURSE OF HEARING, BOTH LEARNED AR AND LEARNED DR AGREED FOR RESTORATION OF THE MATTER BACK TO THE AO FOR CONSIDERING ALL THE MATERIAL AGAIN AN D FOR DECIDING THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 1 ST OCTOBER, 2009. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01.10.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR