Rakhi Vidya Sabha, Muzaffarnagar V. CIT, Muzaffarnagar

ITA 4358/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0082 (ITAT-DELHI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-03-2011
• Assessment Year: misc
• Appeal Filed On: 24-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: PRAKASH NARAIN
• Keywords: Charitable institution
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL I.T.A.NO.4358(DEL)/2010 ASSESSMENT YEAR: N.A RAKHI VIDYA SABHA, C OMMISSIONER OF INCOME-TAX, 203/2, NORTH CIVUK LINES, VS. MUZAFF ARNAGAR. SADAR BAZAR, MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH NARAI N, ADVOCATE RESPONDENT BY : SH RI H.K. LAL, SR. DR ORDER PER K.G. BANSAL : AM THE ASSESSEE HAS TAKEN FIVE GROUNDS IN THE APPE AL, THE SUM AND SUBSTANCE OF WHICH IS THAT THE LD. COMMISSIONER OF INCOME-TAX, MUZAFFARNAGAR ERRED IN NOT GRANTING APPROVAL U/S 8 0G(5)(VI) OF THE INCOME- TAX ACT, 1961. BEFORE US, IT IS SUBMITTED THAT THE ONLY GROUND ON WHICH APPROVAL IS DENIED IS THAT THE SCHOOL RUN BY T HE SOCIETY IS FUNCTIONING ON COMMERCIAL BASIS, I.E., MONIES ARE RECEIVED FROM THE STUDENTS AS FEES, TRANSPORTATION CHARGES ETC. THEREFORE, THE ACTI VITIES ARE NOT IN CONFORMITY WITH THE PROVISION CONTAINED IN SECTION 2(15) OF THE ACT. 2. IT IS SUBMITTED THAT THE ASSESSEE IS REGISTER ED U/S 12A OF THE ACT. IT WAS GRANTED APPROVAL U/S 80-G FOR THE PERIOD 0 7.11.2008 TO 06.01.2010. ITA NO. 4358(DEL)/2010 2 THE SOCIETY IS RUNNING RAKHI PUBLIC SCHOOL. THE INCOME AND EXPENDITURE ACCOUNT SHOWS THAT THE RECEIPTS ARE BY WAY OF DONATIONS, FEES, EXAMINATION FEES, REGISTRATION FEES, TRANSPORTATION CHARGES, INTEREST ON FIXED DEPOSITS AND SAVINGS ACCOUNT, ANNUAL CHARGES, S ALE OF PROSPECTUS AND MISCELLANEOUS INCOME. THE EXPENSES ARE IN CONNEC TION WITH RUNNING THE SCHOOL. HOWEVER, THE ACCOUNTS OF THE SCHOOL SHO W THAT A SUM OF RS. 4,50,000/- HAS BEEN TRANSFERRED TO THE TRUST ACC OUNT. THE ACCOUNT OF THE TRUST SHOWS EXCESS OF INCOME OVER EXPENDITURE OF AN AMOUNT OF ABOUT RS. 6.29 LAKH, WHICH HAS BEEN CARRIED OVER TO ITS B ALANCE-SHEET. THUS, THE WHOLE OF THE INCOME HAS BEEN USED FOR EDUCATION AL ACTIVITIES. THEREFORE, IT IS ARGUED THAT THE LD. COMMISSIONER OF INCOME -TAX OUGHT TO HAVE GRANTED APPROVAL TO THE ASSESSEE. 2.1 IT IS FURTHER SUBMITTED THAT SECTION 2(15), DEFINING THE EXPRESSION CHARITABLE PURPOSE WAS AMENDED BY FINANCE ACT, 2008, WITH EFFECT FROM 01.04.2009, WHEREIN NEW ITEMS WERE ADDED TO THE INCLUSIVE DEFINITION OF THE EXPRESSION. THIS PROVISION WAS FURTHER AMENDED BY FINANCE (NO. 2) ACT, 2009 WITH EFFECT FROM 01.04.2009. THESE AM ENDMENTS ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THEREFOR E, THE TERM HAS TO BE UNDERSTOOD AS IT EXISTED PRIOR TO THE AMENDMEN TS, WHICH INCLUDED IN ITS ITA NO. 4358(DEL)/2010 3 AMBIT RELIEF OF THE POOR, EDUCATION, MEDICAL RE LIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE ASSESSEE WAS NOT PRECLUDED FROM CARRYING ON ANY BUSINESS ACTIVI TY INCIDENTAL TO ATTAINING THE OBJECT, BEING EDUCATIONAL IN THIS CASE PROVI DED THAT THE SEPARATE ACCOUNT BOOKS WERE MAINTAINED FOR SUCH ACTIVITY . THE ASSESSEE HAS MAINTAINED SEPARATE ACCOUNTS FOR RAKHI PUBLIC SCHOOL AND ITS PROFIT AND LOSS ACCOUNT AND BALANCE-SHEET HAD BEEN ENCLOSED WITH THE APPLICATION. THEREFORE, IT IS AGITATED THAT THE COMMISSIONER O F INCOME-TAX MAY BE DIRECTED TO GRANT APPROVAL TO THE ASSESSEE. IN REPLY, THE LD. DR RELIED ON THE ORDER OF THE LEARNED CIT. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. WE HAVE PERUSED THE OBJECTS OF THE AS SESSEE-SOCIETY, WHICH ARE PRIMARILY EDUCATIONAL IN NATURE. THE ASSESSEE HA S NOT INCURRED ANY EXPENDITURE EXCEPT FOR EDUCATIONAL PURPOSE. SUB-S ECTION (4A) OF SECTION 11 PROHIBITS APPLICATION OF SUB-SECTIONS (1), (2), ( 3) OR (3A) IN RELATION TO ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, UNL ESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED FOR SUCH BUSINESS. T HIS SUB-SECTION CLEARLY LEADS TO A CONCLUSION THAT THE CHARITABLE INSTI TUTION CAN CARRY OUT ANY ITA NO. 4358(DEL)/2010 4 BUSINESS INCIDENTAL TO THE OBJECTS PROVIDED SEPARA TE BOOKS ARE MAINTAINED FOR SUCH ACTIVITY. UPON DOING SO, THE BENEFITS UNDER SUB-SECTIONS (1), (2), (3) OR (3A) SHALL BECOME AVAILABLE TO THE ASSESS EE. FURTHER, PRIOR TO THE AMENDMENTS, EFFECTIVE FROM 01.04.2009, THERE WAS N O BAR ON CARRYING ON BUSINESS INCIDENTAL TO THE OBJECTS. IN SUCH CIRC UMSTANCES, IT IS HELD THAT THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN NOT GR ANTING APPROVAL TO THE ASSESSEE U/S 80G(5) OF THE ACT. HE IS DIRECTED TO GRANT THE APPROVAL. 4. IN THE RESULT, THE APPEAL IS ALLOWED. THE APPEAL WAS PRONOUNCED IN THE OPEN COURT ON 2 5 MARCH, 2011. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 25TH MARCH, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- RAKHI VIDYA SABHA, MUZAFFARNAGAR. AO. CIT(A) CIT, MUZAFFARNAGAR. THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.