The Managing Committee, MANSA V. The Commissioner of Income Tax (Exemption), Chandigarh

ITA 469/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7870 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-08-2017
• Assessment Year: 2015-2016
• Appeal Filed On: 22-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: J.K.GUPTA LD
• Keywords: Charitable institution; TDS
• Section: 10; 201; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.469(ASR)/2016 ASSESSMENT YEAR:2015-16 THE MANAGING COMMITTEE, ARYA HIGH SCHOOL, ARYA SAMAJ GALI, MANSA. PAN: AABTM-4291N VS. CIT (EXEMPTION, CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.K.GUPTA (LD. CA) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 02.08.2017 DATE OF PRONOU NCEMENT: 11.08.2017 ORDER PER N. K. CHOUDHRY: THE ASSESSEE PREFERRED THE INSTANT APPEAL BY FEELING AG GRIEVED AGAINST THE ORDER DATED 31 ST AUGUST, 2016 PASSED BY THE CIT(E), CHANDIGAR, WHILE DEALING OF REGISTRATION U/S 10(23C)( VI). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(EXEMPTION) HAS ERRED IN DENYIN G THE REGISTRATION U/S 10(23C)(VI) OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (EXEMPTION) HAS ERRED IN GIVIN G A FINDING THAT THE TRUST IS NOT DOING CHARITABLE OBJECTS WHEN ASSESSEE IS RUNNING A HIGHER SECONDARY SCHOOL WHICH IS ONE OF THE LIMB OF CHARITABLE PURPOSE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(EXEMPTION) WAS ONLY REQUIRED T O SEE IF THE OBJECTS ARE CHARITABLE AND WHETHER THE SOCIETY IS G ENUINE AND NOTHING MORE. ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 2 4. THAT THE LEARNED AO HAS GIVEN A CLEAR FINDING IN THE ASSESSMENT YEAR 2011-12 THAT THE ASSESSEE IS ENGAGED SOLELY IN EDUCATIONAL ACTIVITIES AFTER SEEING BOOKS OF ACCOUNT. 5. THAT THE ORDER IN QUESTION WAS RECEIVED ON 05 .09.2016. SO, IT IS TIME BARRED. ACCORDINGLY, THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(23C)(VI) OF THE INCOME TAX ACT, 1961. 6. THAT ANY OTHER RELIEF MAY KINDLY BE GRANTED TO THE ASSESSEE TO WHOM IT IS FOUND ENTITLED AT THE TIME OF HEARING OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A RUNNING SCHOOL AND TO ARRANGE ALL KIND OF FINANCIAL HELP TO NEEDY STUDENTS, TO PROMOTE EDUCATIO N (ELEMENTARY AS WELL AS VOCATIONAL EDUCATION) FOR CHILDR EN WITHOUT ANY RESTRICTION OF SEX, CASTE, CREED COMMUNITY AND FAITH OF THE STUDENTS, TO REFORM, SPREAD ALL KINDS OF EDUCATION FOR THE BENEFIT OF PEOPLE OF ARE AND TO START, RUN EXISTING AND/OR NEW SCH OOL, COLLEGE, LIBRARY OR ANY OTHER EDUCATIONAL INSTITUTION/CENTRE K EEPING THERE OBJECTS IN KIND, TO PROVIDE GUIDANCE TO ORGANIZATIONS E NGAGED IN THE PROMOTION OF EDUCATION, DO TO OR TO PERFORM ANY OTHER ACT WHICH MAY BE INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF MAIN OBJECT OF THE SOCIETY. THE APPLICATION U/S. 10(23C)(VI) OF THE I.T. ACT WAS F ILED BEFORE THE LD. CIT(E) ON 13.08.2015 WHILE CLAIMING T HE EXEMPTION UNDER THE SAID SECTION OF THE ACT UP TO F.Y. 2014-15 RE LEVANT TO THE YEAR 2015-16 BECAUSE DURING THAT FINANCIAL YEAR TH E GROSS RECEIPT OF THE SOCIETY EXCEEDED RS.1 CRORE, THEREFORE, T HE SOCIETY APT TO APPLY FOR APPROVAL UNDER THE SAID PROVISION. ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 3 HOWEVER, THE LD. CIT(E), DECLINED TO GRANT REGISTRATI ON U/S 10(23C)(VI) BY HOLDING THAT NO EVIDENCE OF ACCUMULATIO N OF INCOME AFTER FOLLOWING THE DUE PROCESS HAS BEEN ADDUCED E ITHER AND FURTHER THE LD. CIT(E) OBSERVED AS UNDER: 9. VIDE REPLY DATED 08.08.2016 THE APPLICANT SOCIE TY HAS SUBMITTED THAT, NO TDS WAS DEDUCTED OR LIABLE TO BE DEDUCTED, AS THE EMPLOYEES DO NOT FALL IN THE TAX BRACKET. IN THE IN STANT CASE, IT IS FURTHER EVIDENCE THAT MOST OF THE TEACHERS ARE BEIN G PAID PALTRY MONTHLY EMOLUMENTS TO THE EXTENT THAT NONE OF THEM BEGAN THE TAXABLE LIMIT. EVEN THROUGH THE AFFILIATION HAS BEE N TAKEN FROM PUNJAB SCHOOL EDUCATION BOARD SAS NAGAR, MOHALI THE NECESS ARY CONDITIONS OF PAYING TEACHERS AS PER 6 TH PAY COMMISSION HAS NOT BEEN FOLLOWED. THIS NOT ONLY COMPROMISES WITH THE QUALITY OF EDUCA TION BUT ALSO IS A POINTED TOWARDS GENERATING UNREASONABLE SURPLUS. NO SEPARATE BALANCE SHEET OF THE SOCIETY HAS BEEN FILED. 10. TAKING ALL THE AFORESAID INTO CONSIDERATION IT CAN SAFELY BE CONCLUDED THAT EDUCATION NEEDS TO BE AND ALTRUISTIC AND CHARITABLE INTENT WHERE THE FOCUS CANNOT BE IN ANY SENSE SHIFT ED TO PROFIT MAKING AND COMMERCIALIZATION. EVEN THOUGH GENERATION OF RE ASONABLE SURPLUS HAVE BEEN ALLOWED BUT THE SAME ARE REQUIRED TO BE R EDEPLOYED IN EDUCATION AND THE FACTS OF SUCH REDEPLOYMENT WOULD VARY FROM CASE TO CASE. THE APPLICANT IN THIS CASE APART FROM CHAR GING FEES UNDER SEVERAL ADDITIONAL HEADS IN ADDITION TO ADMISSION F EE HAS ALSO RESORTED TO PURSUING SEVERAL OTHER METHODS, WHICH W ERE BETTER LEFT TO COMMERCIAL ENTERPRISES, TO GENERATE INCOME AND PASS ING THEM OFF AS CHARITABLE. NOTWITHSTANDING THE FACT THAT THE ABOVE DOESN'T EXEMPLIFY THE CRITERIA OF SOLELY FOR EDUCATION AND NOT FOR PR OFIT IT IS ALSO TRUE THAT THE APPLICANT IN THIS CASE IS A SOCIETY AND NOT A U NIVERSITY OR OTHER EDUCATIONAL INSTITUTION AND TO THAT EXTENT NOT COVE RED BY THE PROVISIONS OF SECTION 10(23C)(VI). THE APPLICATION UNDER SECTION 10 (23C) (VI) FOR GRANT OF REGISTRATION IS ACCORDINGLY REJECTED. 4. THE ASSESSEE FEELING AGGRIEVED AGAINST THE ORDER P ASSED BY THE CIT(E) PREFERRED THE INSTANT APPEAL WHICH IS UNDER CONSI DERATION AND IN SUPPORT OF ITS CASE SUBMITTED THAT THE ASSESSEE SOCIETY IS RU NNING EDUCATIONAL INSTITUTION UNDER THE NAME AND STYLE OF A RYA SENIOR SECONDARY SCHOOL AT MANSA AND IT EXISTS FOR EXCLUSIVELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PROFIT AND FURTHER SUBMITTED THAT THE OBJECTION ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 4 OF THE CIT(E) ARE WRONG, FALSE AND FRIVOLOUS TO THE E XTENT THAT MOST OF THE TEACHERS ARE BEING PAID PALTRY MONTHLY EMOLUMENTS TO THE EXTENT THAT NONE OF THEM CROSSED THE TAXABLE LIMIT. ALTHOUGH, THE AFFILIATION HAS BEEN TAKEN FROM PUNJAB SCHOOL EDUCATION BOARD, SAS NA GAR, MOHALI BUT THE NECESSARY CONDITIONS OF PAYING TEACHERS AS PER 6TH PAY COMMISSION HAS NOT BEEN FOLLOWED. THIS IS NOT ONLY COMPROMISE WITH THE QUALITY OF EDUCATION BUT ALSO IS A POINTED TOWARDS GENERATING UNR EASONABLE SURPLUS. NO SEPARATE BALANCE SHEET OF THE SOCIETY HAS BEEN FILED. THE CONTRARY TO THE FACTS AS NONE OF THE EMPLOYEE OR SPE CIALLY TEACHER HAS NOT RAISED ANY OBJECTION WITH REGARD TO THE IR PAY STRUCTURE AND VOLUNTARILY THERE ARE DOING THEIR WORK WITH SINCE RITY AND EVEN OTHERWISE THE ASSESSEES SCHOOL IS HAVING HIGH REPUTATION TH EN THE GOVT. SCHOOLS OF VICINITY AND SPREADING THE KNOWLEDGE AMONG T HE STUDENTS FOR THEIR INNER OR OUTER GROWTH. LASTLY THE LD. AR SUBMIT TED THAT NO DOUBT THERE IS A GENERATION OF REASONABLE SURPLUS BUT THE SA ME HAS BEEN UTILIZED FOR THE PURCHASE OF THE LAND FOR FURTHER DEV ELOPMENT OF THE SCHOOL. 5. ON THE CONTRARY THE LD. DR SUBMITTED THAT THE O RDER PASSED BY THE CIT(E) IS LEGAL, REASONABLE, LOGICAL AND SPEAKING O RDER AND DOES NOT REQUIRED TO BE INTERFERED WITH AND DROWN OUR ATTENT ION TO THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF D R. MAHARAJ KRISHANA KAPUR EDUCATIONAL CHARITABLE TRUST & MANAGEME NT SOCIETY VS. ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 5 UNION OF INDIA, [CIVIL WRIT PETITION NO.2047 OF 200 9] CITATION 2010(326 ITR 0385) AND SUBMITTED THAT EXCESS ACCUMULATION HAS TO BE APPLIED FOR THE OBJECTS OF THE SOCIETY AND IF THE PERCENTAGE OF INCO ME APPLIED FOR EDUCATIONAL PURPOSE IS LESS THAN THE LIMIT PRESCRIBED UNDE R CLAUSE-(A) OF THIRD PROVISO TO SEC.10(23C), THEN THE EXEMPTION CAN BE DECLINED. 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTA NCES OF THE CASE SPECIALLY THE DOCUMENTS FILED AND FROM THE DETAILS OF ASSETS AS ON 31 ST MARCH, 2013 IT SHOWS THAT THE ASSESSEE HAS INCURRED EXPENSE S ON THE PURCHASE OF LAND WHICH GOES TO SHOW THAT THE ASSESSEE WAS EARLIER UTILIZED THE FUND FOR THE DEVELOPMENT OF INSTITUTION AND OF ITS EXTENSION. FURTHER ACCORDING TO THE JUDGMENT PASSED BY TH E HONBLE APEX COURT IN THE CASE OF CHIEF COMMISSIONER VS. ST. PETERS E DUCATIONAL SOCIETY, 385 ITR 66 (SC) AS RELIED UPON BY THE ASSESSEE SOCIETY WHEREBY IT WAS HELD THAT THE INSTITUTION MAKES PROFIT DOES NOT NECESSARILY MEAN IT EXISTS FOR PROFIT AND AN OVERALL VIE W IN YEAR IN QUESTION OBJECT WAS TO MAKE PROFIT AS OPPOSED TO EDUCATI NG PERSONS TO BE SEEN. FURTHER, THE HONBLE APEX COURT IN THE CASE OF VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS. ACIT, 384 ITR 37 (SC), WH EREBY IT WAS HELD THAT THERE COULD BE NO MANNER OF DOUBT THAT THE SURPL US ACCUMULATED OVER THE YEARS HAD BEEN PLOUGHED BACK FOR EDUCATIONAL PURPOSES AND IN THE SAID CASE THE HONBLE APEX COURT REMINDED THE CONDI TIONS OF ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 6 PRINCIPLE LAID DOWN IN QUEENS EDUCATION SOCIETY VS. CIT [2015] 372 ITR 699 (SC) WHICH FOR THE SAKE OF BREVITY AND CONVENIENCE ARE REPRODUCED HEREIN BELOW. '11. THUS, THE LAW COMMON TO SECTION 10(23C)(IIIAD) AND (VI) MAY BE SUMMED UP AS FOLLOWS. 1. WHERE AN EDUCATIONAL INSTITUTION CARRIES ON THE AC TIVITY OF EDU- CATION PRIMARILY FOR EDUCATING PERSONS, THE FACT TH AT IT MAKES A SURPLUS DOES NOT LEAD TO THE CONCLUSION THAT IT CEASES TO E XIST SOLELY FOR EDU- CATIONAL PURPOSES AND BECOMES AN INSTITUTION FOR TH E PURPOSE OF MAKING PROFIT. 2. THE PREDOMINANT OBJECT TEST MUST BE APPLIEDTHE PU RPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKIN G MOTIVE. 3. 4. A DISTINCTION MUST BE DRAWN BETWEEN THE MAKING OF A SURPLUS | AND AN INSTITUTION BEING CARRIED ON 'FOR PROFIT'. N O INFERENCE ARISES ' THAT MERELY BECAUSE IMPARTING EDUCATION RESULTS IN MAKIN G PROFIT, IT BECOMES AN ACTIVITY FOR PROFIT. 5. IF AFTER MEETING THE EXPENDITURE, A SURPLUS ARISES INCIDENTALLY FROM THE ACTIVITY CARRIED ONLY THE EDUCATIONAL INST ITUTION, IT WILL NOT; CEASE, TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PU RPOSES. 6. THE ULTIMATE TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER IN THE CONCERNED ASSESSMENT YEAR THE OBJECT IS TO MAKE PROFIT AS OPPOSED TO EDUCATING PERSONS. THE OBSERVATION OF THE CIT(E) IS NOT CORRECT TO THE EXT ENT THAT THE ASSESSEE IS A SOCIETY AND NOT UNIVERSITY OR OTHER EDUCATIONA L INSTITUTION AND TO THAT EXTENT NOT COVERED BY THE PROVISIONS OF SE C.10(23C)(IV) BECAUSE THE ITAT, A BENCH, CHENNAI IN THE CASE OF SENG UTHAT MATRICULATION HIGHER SECONDARY SCHOOL VS. CIT IN ITA NO.2008/MADS/2015 DEALT WITH THE SAME ISSUE BY OBSERVIN G AS UNDER: THE PRIMARY CONDITION U/S.10(23C)(VI), THE ASSESSE E SHALL EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT . THE CHIEF COMMISSIONER OF INCOME TAX WITHOUT OBSERVING THAT THE ASSESSEE N OT SOLELY EXISTING FOR EDUCATIONAL PURPOSE, HE WENT ON PROPOSITION THAT TH E ASSESSEE IS NOT HAVING MEMORANDUM OF ASSOCIATION OR TRUST DEED SO AS TO CA RRY ON THE FUNCTION OF ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 7 THE ASSESSEE. BUT THE FACT BROUGHT ON RECORD SUGGES TS THAT THE ASSESSEE IS AN AOP, MANAGED BY SENGUNTHER EDUCATION BOARD WHI CH IS A REGISTERED BODY UNDER THE SOCIETY REGISTRATION ACT IN THE YEAR 1946 VIDE REGISTRATION NO.S/8/1946. THE ABOVE EDUCATION BOARD IS MANAGING THE ASSESSEE SCHOOL WITH THE COMMITTEE MEMBERS OF THE SAID EDUCATION BO ARD AND CONSTITUTED THE OFFICE BEARERS OF THE INSTITUTION AND DULY FILI NG THE RETURN OF INCOME. IT IS TO BE OBSERVED THAT THERE IS NO EXPRESSED DEFINITIO N FOR INSTITUTION UNDER THE INCOME TAX ACT. HENCE, WE HAVE TO CONSIDER THE GENERAL MEANING DEFINED IN THE WEBSTERS NEW DICTIONARY, THE WORD INSTITUTION MEANS AN ESTABLISHED OR ORGANIZED SOCIETY OR CORPORATION, AN ESTABLISHMENT, ESPECIALLY ONE OF PUBLIC CHARACTER, OR ONE EFFECTIN G A COMMUNITY; A FOUNDATION. FURTHER, THIS TRIBUNAL, DELHI BENCH G BENCH IN I.T.A.NO:3360(DEL) OF 2008 DATED 30.04.20 10 IN DEC IDING THE APPEAL IN THE CASE ST.THOMAS GIRLS SENIOR SECONDARY SCHOOL, NEW D ELHI VS. DIRECTOR OF INCOME TAX(EXEMPTION), NEW DELHI HAVE HELD THAT THE WORD INSTITUTION IS WIDE ENOUGH TO INCLUDE A SCHOOL, WHICH HAS BEEN EST ABLISHED FOR IMPARTING EDUCATION. MERELY BECAUSE THE ASSESSEE SCHOOL DOES NOT HAVE POWER TO PURCHASE, ACQUIRE, OR SELL THE PROPERTY, DOES NOT M EAN THAT THE SCHOOL WILL CEASE TO EXIST AS AN INSTITUTION. THUS THE STATUS OF THE ASSESSEE COULD BE A.O.P. IN THE ABSENCE OF ANY MEMORANDUM OF ASSOCIAT ION OR TRUST DEED. CONSIDERING THE ABOVE DECISION OF THE I.T.A.T, DELH I BENCH, IN THE PRESENT CASE ALSO THE ABOVE MATRICULATION SCHOOL WHICH IS M ANAGED BY EDUCATION BOARD AND GRANTED PERMISSION BY THE DIRECTOR OF SCH OOL EDUCATION AS EARLY AS 07.10.1997 IS AN INSTITUTION QUALIFYING FOR EX EMPTION U/S. 10(23C)(VI) OF THE I.T. ACT. HENCE, THE EXEMPTION SOUGH FOR THE AB OVE INSTITUTION IS TO BE GRANTED. ACCORDINGLY, WE DIRECT THE CCIT TO GRANT E XEMPTION U/S 10(23C) (VI) OF THE ACT. NOW, COMING TO THE INSTANT CASE, AS IT REFLECTS FROM THE D ETAILS OF FOUR ASSESSMENT YEARS I.E. OF 2012-13, 2013,14, 2014-15 & 201 5-16, THAT THE AMOUNT OF RECEIPT HAS BEEN EXCEEDED MORE THAN 1 CR ORE, THEREFORE, THE ASSESSEE PREFERRED THE REGISTRATION U/S 10(23C)(IV) A ND IN THE PREVIOUS YEAR AS IT REFLECTS FROM THE BALANCE SHEET, THE ASSESSEE UTILIZED THE AMOUNT FOR THE PURCHASE OF LAND FOR FURTHER EXTEN SION OF THE SCHOOL BUILDING ETC. THAT CERTAINLY GOES TO PROVE THAT THE SA ME IS BEING UTILIZED FOR THE EDUCATIONAL PURPOSES ONLY BECAUSE THE LD. CIT(E) FAILED TO BRING ON RECORD ANY CONTRARY MATERIAL TO THE FACT. FURTHER A S DISCUSSED ABOVE, THE ASSESSEE IS ALSO COVERED WITHIN THE PROVISIONS OF SEC.10( 23C)(VI) OF THE ACT FOR GRANT OF REGISTRATION BECAUSE IN THE ACT, T HE INSTITUTION HAS ITA NO.469(ASR)/2016 ASST. YEAR: 2015-16 8 NOT BEEN CATEGORIZED AND IT HAS TO BE GIVEN A GENERAL MEANING AS SPECIFIED IN THE DICTIONARY AS OBSERVED BY THE ITAT, BEN CH AT MADSRAS (SUPRA). IN OVERALL CONSIDERATION OF THE FACTS AND MATER IAL AND JUDGMENTS RELIED UPON BY THE PARTIES, WE ALSO FOUND SU PPORT BY THE JUDGMENTS PASSED BY THE HONBLE JURISDICTIONAL HIGH COUR T AS RELIED UPON BY THE LD. DR BECAUSE EXCESS ACCUMULATION IN THE INST ANT CASE HAS CERTAINLY APPLIED FOR THE OBJECTS OF THE SOCIETY ITSELF, THEREFORE, WE DO NOT FIND ANY HESITATION TO ALLOW THE REGISTRATION TO THE ASSESSEE SOCIETY U/S 10 (23C)(VI) OF THE ACT. HENCE, WE DIRECT THE LD. CIT(E) TO GRANT EXEMPTION U/S 10(23C) (VI) OF THE ACT FROM THE DATE OF APPLICATION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.0 8.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11.08.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER