DCIT (Excemption), Bhopal V. Shri Vaishnav Plolytechnic College Govn By VSK Market Tech Education Society, Indore

ITA 469/Ind/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3794 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRISH AGRAWAL; NISHA LAHOTI A RS
• Assessee Lawyers: K G GOEL
• Keywords: Gift; Depreciation; Charitable institution; Maximum Marginal Rate; Benefit of exemption; Revised return; Ignorance of law
• Section: 143(3); 54F; 12A; 143(1); 201; 80HH; 207; 64; 35AB; 13; 22; 10(23C); 54; 10; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.469/IND/2018 ASSESSMENT YEARS: 2014-15 REVENUE BY SHRI K.G. GOEL, SR.DR APPELLANT BY SHRI GIRISH AGRAWAL & MS. NISHA LAHOTI, ARS DATE OF HEARING 08.09 .2020 DATE OF PRONOUNCEMENT 06 . 11 .2020 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF REVENUE PERTAINING TO ASSESSMENT YEAR 2014-15 IS DIRECTED A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II (IN SHOR T LD.CIT], INDORE DATED 15.02.2018 WHICH IS ARISING OUT OF THE ORDER U/S 154 DY. COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL VS. SHRI VAISHNAV POLYTECHNIC COLLEGE GOVN BY VSK MARKET TECH EDUCATIONAL SOCIETY, MOG LINES, INDORE (REVENUE ) (APPELLANT) PAN NO. A A FTS9636P ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 2 OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATE D 02.06.2016 FRAMED BY DCIT-CPC, BANGALORE. 2. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS AN EDUCATIONAL INSTITUTE RUN AND GO VERNED BY SHRI VAISHNAV SAHAYAK KAPDA MARKET TECHNICAL EDUCATION S OCIETY. RETURN OF INCOME DECLARING LOSS OF RS.1,28,86,747 F ILED ON 14.8.2014. GROSS RECEIPTS FOR THE YEAR WERE RS. 5,9 8,24,898 AND AMOUNT OF RS. 7,27,11,645 CLAIMED AS DEDUCTION TOWA RDS APPLICATION OF FUNDS FOR EDUCATIONAL CHARITABLE PU RPOSES. OWING TO LOSS SITUATION, THERE WAS NO OCCASION TO CLAIM EXEM PTION U/S 10(23C)(IIIAB) IN THE RETURN. RETURN WAS PROCESSED U/S 143(1) ON 16.03.2016 WHEREIN INCOME WAS COMPUTED AT RS. 5,98, 24,898 WHICH REPRESENTS THE TOTAL GROSS RECEIPTS OF THE AS SESSEE [7,27,11,645 - 1,28,86,747 = 5,98,24,898]. ASSESSEE FILED TWO RECTIFICATION APPLICATIONS U/S 154 CLAIMING THAT AS SESSEE IS GOVERNED BY PROVISIONS OF SECTION 10(23C)(IIIAB). E XEMPTION UNDER SECTION 10(23C)(IIIAB) IS AVAILABLE TO ANY UNIVERSI TY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATI ONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 3 FINANCED BY THE GOVERNMENT. BOTH THE ABOVE MENTIONE D RECTIFICATION APPLICATIONS WERE REJECTED VIDE ORDER DATED 02.06.2 016 AND 11.12.2016 STATING THAT DETAILS OF REGISTRATION U/S 12A/12AA ARE NOT MENTIONED IN THE RETURN SO FILED. FRESH CLAIM O F ADDITION/REDUCTION OF INCOME OR OTHER DETAILS IN TH E RETURN SHALL NOT BE MADE IN RECTIFICATION REQUEST. IT WAS ALSO STATE D THAT TO CLAIM EXEMPTION U/S 10, DETAILS OF APPROVING/REGISTERING AUTHORITY AND SECTION UNDER WHICH EXEMPTION IS CLAIMED HAS TO BE FURNISHED PROPERLY IN THE RETURN. AGAINST THE ORDER DATED 02. 06.2016 PASSED U/S 154 OF THE ACT ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND SUCCEEDED AS LD. CIT(A) HELD THAT THE ASSESSEE IS E LIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT AND ALSO AL LOWED THE CLAIM OF INCIDENTAL EXPENDITURE OF RS.7,27,11,645/- BEING THE AMOUNT APPLIED BY THE ASSESSEE DURING THE YEAR TO MEET THE OBJECTIVES OF THE EDUCATIONAL INSTITUTION. 3. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE THE TR IBUNAL AGAINST THE ORDER OF LD. CIT(A) DATED 15.02.2018 RAISING FO LLOWING GROUNDS OF APPEAL:- ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 4 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE SOCIETY BENEF IT OF EXEMPTION U/S1 0 (23C) (IIIAB) OF THE INCOME TAX ACT WHEN NO SUCH E XEMPTION U/S 10 WAS CLAIMED IN THE RETURN OF INCOME, MORE SPECIFICALLY , IT WAS NOT CLAIMED IN ROW NUMBER 16 OF PART B-TI OF THE RETURN OF INCOME . THE HON'BLE SUPREME COURT HAS BEEN SPECIFIC ON THIS ISSUE IN THE CASE OF GOETZE (INDIA) LTD VS CIT REPORTED IN 284 ITR 323 SC [2006] AND HELD THA T THE ASSESSEE CANNOT MAKE ANY FRESH CLAIM WHICH WAS NOT MADE IN THE RET URN OF INCOME OTHER THAN BY FILING A REVISED RETURN OF INCOME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE SOCIETY BENEFIT OF EX EMPTION U/S 10(23C)(IIIAB) OF THE INCOME TAX ACT WHEN THE SOCIETY HAS NOT BEEN SUBSTANTIALLY FINANCED BY THE GOVERNMENT DURING THE YEAR AND THE GRANTS RECEIVED ARE LESS THAN 50 OF THE TOTAL RECEIPTS OF THE YEAR. THE HON'BLE ITAT, INDORE HAS ALSO DECIDED THE ISSUE OF WHOLLY OR SUBSTANTIALLY F INANCED AS PRESCRIBED IN THE ACT IN THE CASE OF M.P. RAJYA OPEN SCHOOL, BHOP AL V. DEPUTY COMMISSIONER OF INCOME-TAX-L(2), BHOPAL REPORTED IN [2013] 141 ITD 721 (INDORE - TRIB.). THE ID. ITAT HELD THAT FOR TREATI NG SUBSTANTIALLY FINANCED BY THE GOVERNMENT, THE GROSS RECEIPT BY THE ASSESSEE F ROM GOVERNMENT CANNOT BE LESS THAN 75 OF' TOTAL RECEIPT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN ALTERNATIVELY ALLOWING DEDUCTION OF EXPENSES U/S 57 OF THE ACT WHEN NO SUCH DEDUCTION WAS ) CLAIMED IN THE RETURN OF INCOME (SCHEDULE OS OF THE RETURN), IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD VS CIT REPORTED IN 284 ITR 323 SC [2006]. 4. THE REVENUE RESERVES THE RIGHT TO ADD, URGE OR ALTER ALL OR ANY OTHER GROUND/GROUNDS ON OR BEFORE THE DATE OF HEARING. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 5 4. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D SUPPORTING THE ORDER OF LD. A.O WHICH IN THIS CASE IS ORDER BY CENTRALIZED PROCESSING CENTER (IN SHORT CPC) AND ALSO SUBMITTED THAT THE ASSESSEE HAD NOT FILED THE RETURN PROPERLY IN ORDER TO CLAIM THE BENEFIT U/S 10(23C)(IIIAB) AND ALSO POINTED OUT THAT THE GRANTS RECEIVED DURING THE YEAR WERE NOT RECEIVED WHOLLY F ROM GOVERNMENT BUT FROM OTHER SOURCES ALSO. RELIANCE WAS PLACED O N THE DECISION OF CO-ORDINATE BENCH OF INDORE IN THE CASE OF M.P. RAJYA OPEN SCHOOL BHOPAL V/S DCIT (2012) 28 TAXMAN.COM 29 (INDORE-TRI B). 5. PER CONTRA LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND A LSO THE FINDINGS OF LD. CIT(A). FOLLOWING WRITTEN SUBMISSI ONS WERE ALSO PLACED ON RECORD:- 1. ASSESSEE MADE A LAWFUL CLAIM OF EXEMPTION AVAILABLE TO IT UNDER THE PROVISIONS OF SECTION 10(23C)(IIIAB) BEFORE THE LD. AO AND ALSO BEFORE THE LD. CIT(A) 2, INDORE. ASSESSEE PLACED STRONG RELIANCE ON THE FOLLOWING DECISIONS FOR ITS CLAIM MADE BEFORE THE F IRST APPELLATE AUTHORITY WHICH WAS NOT CLAIMED IN THE RETURN FILED ORIGINALLY OWING TO A LOSS SITUATION. A. HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LIMI TED [2006] 284 ITR 323 [CLPB 31] PARA 4 THE DECISION IN QUESTION IS THAT THE POWER OF THE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961, IS T O ENTERTAIN FOR THE FIRST TIME A POINT OF LAW PROVIDED THE FACT ON THE BASIS OF WHICH THE ISSUE OF LAW CAN BE RAISED BEFORE THE TRIBUNAL. THE DECISION DOES NOT ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 6 IN ANY WAY RELATE TO THE POWER OF THE ASSESSING OFF ICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVI SED RETURN. IN THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE CIVIL APP EAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITE D TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POW ER OF THE INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961. THERE SHALL BE NO ORDER AS TO COSTS. [EMPHASIS SUPPLIED] B. HONBLE BOMBAY HIGH COURT FOLLOWED THE DECISION OF HONBLE APEX COURT IN THE CASE OF GOETZE INDIA (SUPRA) IN PRUTHVI BROKERS & SHAREHOLDERS [2012] 23 TAXMANN.COM 23 (BOM) AND GAV E ITS FINDING ON THE APPLICABILITY CATCH NOTE - AN ASSESSEE IS ENTITLED TO RAISE BEFOR E APPELLATE AUTHORITIES ADDITIONAL GROUNDS IN TERMS OF ADDITION AL CLAIMS NOT MADE IN RETURN FILED BY IT. PARA 23 IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT H OLD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE J URISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGMENT. IN FACT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITE D TO THE POWER OF THE ASSESSING AUTHORITY AND THAT THE JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL UNDER SECTION 254. C. THE ABOVE DECISION OF HONBLE BOMBAY HIGH COURT WAS FOLLOWED BY HONBLE COORDINATE BENCH OF ITAT AHMEDABAD IN THE C ASE OF ZYDUS WELLNESS LTD [2016] 76 TAXMANN.COM 328 (AHD) WITH H ONBLE ACCOUNTANT MEMBER SHRI MANISH BORAD AS ITS AUTHOR PARA 36 ELABORATELY DEALS WITH THE FINDING GIVEN BY HONBL E BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA) AND ITS FINDINGS ARE GIVEN IN PARA 37 RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE APE X COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA), AND THE JUDG MENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS AN D SHAREHOLDERS (SUPRA) WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGH TLY ALLOWED THE JUSTIFIABLE & CORRECT CLAIM OF DEPRECIATION ON 'GOO DWILL' MADE BY THE ASSESSEE THROUGH REVISED COMPUTATION OF INCOME WITH OUT FILING REVISED RETURN OF INCOME DURING THE COURSE OF ASSES SMENT PROCEEDINGS. THEREFORE, NO INTERFERENCE IS CALLED F OR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS DIS MISSED. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 7 2. IN THE FIRST APPELLATE PROCEEDINGS, IT WAS ALSO SUB MITTED THAT A. CBDT VIDE CIRCULAR NO. 14 DATED 11.04.1955 SPECIFICALLY STATES IN PARA 3 THAT IT IS THE DUTY OF THE DEPARTMENT TO ASS IST THE TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS. IT IS ALSO STATED IN THIS CIRCULA R THAT THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WH ERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM/HER. [CLPB 34] PROVISIONS OF SECTION 119(1) REQUIRES EVERY OFFICER TO FOLLOW ORDERS, INSTRUCTIONS AND DIRECTIONS OF CBDT WHICH ARE BINDI NG IN NATURE ON THE TAX AUTHORITIES, EVEN IF THE DIRECTIONS GIVE N BY CBDT ARE AT VARIANCE WITH THE PROVISIONS OF LAW. B. ARTICLE 265 OF THE INDIAN CONSTITUTION EMPOWERS THE GOVERNMENT TO LEVY AND COLLECT ONLY SUCH TAX WHICH CAN BE LEGI TIMATELY COLLECTED FROM THE TAXPAYERS AND IS IN ACCORDANCE TO THE PROV ISIONS OF LAW. IT IS THE DUTY OF THE INCOME TAX AUTHORITIES TO PASS O N ALL THE BENEFITS AS PER THE PROVISIONS OF LAW WHICH ARE AVAILABLE TO THE ASSESSEE. DEPARTMENT IN FACT IS BOUND TO GIVE ALL THE BENEFIT S AND NOT TO TAKE ADVANTAGE OF THE IGNORANCE OF LAW ON THE PART OF TH E ASSESSEE. IF THE RIGHTFUL AND CORRECT RELIEF OR DEDUCTION IS NOT ALL OWED TO THE ASSESSEE, THE PURPOSE AND INTENTION OF THE LAW SHAL L BE DEFEATED. 3. APPEAL FILED BY THE ASSESSEE WAS ALLOWED BY LD. CIT (A) VIDE ORDER DATED 15.02.2018 STATING PARA 2.6 ..I HAVE CAREFULLY GONE THROUGH THE ABOVE DOCUMENTS AND FIND THAT THE ABOVE GRANTS WERE GIVEN BY THE MP GOVERNMENT TO THE APPELLANTS SOCIETY AND THE APPEL LANT HAD ALSO SUBMITTED A COPY OF LETTER OF MINISTRY OF HUMAN RES OURCE DEVELOPMENT RESOURCE DEVELOPMENT IN WHICH THE SAID MINISTRY HAD RELEASED GRANT TO THE POLYTECHNICS DURING F.Y. 2013-14. THE APPELLANT SOCIETY IS AN EDUCATIONAL INSTITUTE. IN THE SAID LETTER, THE GRAN T HAD BEEN RELEASED TO THE 20 POLYTECHNICS COLLEGES OF M.P. GOVERNMENT AND IN THIS LIST THE APPELLANTS COLLEGE NAME IS CLEARLY MENTIONED AT PO INT NO. 35 . THUS, THIS IS CLEAR THAT THE APPELLANT SOCIETY IS AN EDUCATION AL INSTITUTE AND IT WAS FINANCED BY THE GOVERNMENT OF M.P. THEREFORE, IN THE LIGHT OF THE ABOVE JUDICIAL DECISIONS AND DOCUMENTS SO SUBMITTED BY TH E APPELLANT, THESE GROUND OF APPEAL IS HEREBY ALLOWED . THUS, ITS INCOME WAS EXEMPT U/S 10(23C)(IIIAB) OF THE ACT. IN ITS ALTERNATIVE, THE AO IS DIRECTED TO ALLOW BENEFIT OF THE EXPENSES SO CLAIMED BY THE APPELLANT AGAINST THE RECEIPTS. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 8 4. IN ADDITION TO THE ABOVE SUBMISSIONS AND JUDICIAL P RECEDENTS, RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS WHICH MAY PLEASE BE CONSIDERED WHILE DISPOSING THE MATTER A. EXPLANATION TO SECTION 10(23C)(IIIAB) AND 10(23C)(I IIAC) HAS BEEN INSERTED W.E.F. 01.04.2015. THE VAGUENESS ATTRIBUTA BLE TO THE TERM SUBSTANTIALLY FINANCED WAS REMOVED VIDE THIS AMEN DMENT WHICH IS A PROSPECTIVE ONE. PRIOR TO THIS AMENDMENT, WHERE AN INSTITUTE IS FINA NCED FROM THE GOVERNMENT LESS THAN 50% OF TOTAL RECEIPTS, WOULD B E ELIGIBLE FOR EXEMPTION SUBJECT TO FULFILMENT OF OTHER CONDITIONS . IN THE CASE OF THE ASSESSEE, THE GRANT RECEIVED FROM THE GOVERNMEN T OF MADHYA PRADESH IS 45.30% OF THE TOTAL GROSS RECEIPTS AND T HE RELEVANT YEAR IS PRIOR TO THE DATE OF AMENDMENT. THIS ASPECT OF GOVERNMENT FINANCING OF LESS THAN 50 % PRIOR TO AMENDMENT HAS BEEN DEALT BY HONBLE MADRAS HIGH COU RT IN THE CASE OF INDIAN INSTITUTE OF MANAGEMENT [2010] 8 TAX MANN.COM 239 WHEREIN THE GOVERNMENT FINANCING WAS TO THE TUNE OF 37.85% WAS HELD TO BE ENTITLED FOR EXEMPTION U/S 10(23C)(IIIAB ). ALSO, IN THE CASE OF JAT EDUCATIN SOCIETY, ROHTAK [2015] 64 TAXM ANN.COM 312 BY HONBLE PUNJAB & HARYANA HIGH COURT. HONBLE COORDINATE BENCH OF ITAT CHANDIGARH IN THE CASE OF CRM JAT POST GRADUATE COLLEGE [2019] 109 TAXMANN.COM 42 5 DEALT WITH THIS MATTER AND HELD IN FAVOUR OF THE ASSESSEE BY F OLLOWING THE ABOVE REFERRED DECISIONS OF HONBLE MADRAS HIGH COU RT AND HONBLE PUNJAB & HARYANA HIGH COURT, THAT [CLPB 15-26] IN VIEW OF INSERTION OF EXPLANATION BELOW CLAUSE ( IIIAB) AND (IIIAC) OF SUB-SECTION (23C) OF SECTION 10 BY FINANCE ACT, 201 4, PROSPECTIVELY I.E. WITH EFFECT FROM 1-4-2015, PRIOR TO SAID DATE EVEN INSTITUTION GETTING FINANCE LESS THAN 50 PER CENT OF TOTAL RECE IPTS FROM GOVERNMENT, WOULD BE ELIGIBLE FOR EXEMPTION SUBJECT TO FULFILMENT OF OTHER CONDITIONS B. HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF INDORE EDUCATION SOCIETY ITA NO. 468/IND/2018 DATED 19 .11.2019 [CLPB 1 -7] PARA 6 MERELY BECAUSE THE ASSESSEE COULD NOT MAKE CLAIM OF EXEMPTION SHOULD NOT BE A GROUND TO REJECT THE ELIG IBLE CLAIM OF EXEMPTION U/S 10(23C) OF THE ACT . IT IS TRUE THAT IT IS A SETTLED ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 9 POSITION OF LAW THAT THE REVENUE AUTHORITY SHOULD N OT DENY CLAIM OF EXEMPTION, IF IT IS AVAILABLE UNDER THE FACTS OF A PARTICULAR CASE. IN SUCH A CASE, THE ASSESSEE IS REQUIRED TO DEMONSTRAT E THAT HE IS ELIGIBLE FOR THE BENEFIT AVAILABLE UNDER THE LAW. [EMPHASIS SUPPLIED] YOUR HONOURS HAVE DEALT WITH THE SUBJECT MATTER IN THE ABOVE DECISION HOLDING IN FAVOUR OF THE ASSESSEE THAT REV ENUE AUTHORITY SHOULD NOT DENY CLAIM OF EXEMPTION, IF IT IS AVAILA BLE UNDER THE FACTS OF A PARTICULAR CASE. IN THE PRESENT CASE, AS SESSEE HAS DEMONSTRATED EVIDENTLY THAT IT EXISTS SOLELY FOR TH E PURPOSE OF EDUCATION AND NOT FOR THE PURPOSES OF PROFIT AND IS ADEQUATELY FINANCED BY THE STATE GOVERNMENT OF MADHYA PRADESH TO THE EXTENT OF 45.30% IN THE RELEVANT YEAR. C. HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF GURMEET SINGH VILKU [2019] 104 TAXMANN.COM 207 ORDER PRONOUNCED ON 14.02.2019 [CLPB 8 - 12] PARA 33 WE ARE ALSO OF THE OPINION THAT THE VERY INITIATIO N OF THE IMPUGNED SECTION 154 PROCEEDINGS WAS MISCONCEIVED A ND UNCALLED FOR AS THERE WAS NO MISTAKE IN THE PREVIOUS ORDERS REQUIRING RECTIFICATION IN VIEW OF THE ADMITTED AND UNDISPUTE D FACT THAT THE PETITIONER IS ENTITLED TO CLAIM BENEFIT UNDER SECTI ON 89(1) OF THE ACT , AND THAT HIS CLAIM THEREUNDER IS ALLOWABLE. [EMPHASIS SUPPLIED] D. HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF SATISH S. PRABHU [2020] 114 TAXMANN.COM 88 ORDER PRONOUNCED ON 06. 12.2019 PARA 6 THAT BEING THE CASE, THE ASSESSEE IS CERTAINLY ENT ITLED FOR DEDUCTION UNDER SECTION 54 OF THE ACT. MERELY BECAU SE THE ASSESSEE CLAIMED A DEDUCTION UNDER THE WRONG PROVISION, HIS CLAIM CANNOT BE DISALLOWED IF IT IS ALLOWABLE UNDER A DIFFERENT PRO VISION. IN VIEW OF THE AFORESAID, WHILE ADMITTING THE ADDITIONAL GROUN D RAISED BY THE ASSESSEE BEING PURELY A LEGAL GROUND WHICH CAN BE D ECIDED WITHOUT REQUIRING INVESTIGATION INTO FRESH FACTS, WE DIRECT THE ASSESSING OFFICER TO ALLOW ASSESSEE'S CLAIM OF DEDUCTION UNDE R SECTION 54 OF THE ACT IN RESPECT OF THE SECOND FLAT. ADDITIONAL GROUNDS ARE ALLOWED. CONSEQUENTLY, THE GROUND RAISED BY THE ASSESSEE CLA IMING DEDUCTION UNDER SECTION 54F OF THE ACT HAVING BECOME REDUNDAN T IS DISMISSED. [EMPHASIS SUPPLIED] E. RELIANCE PLACED BY THE DEPARTMENT ON THE DECISION I N THE CASE M.P. RAJYA OPEN SCHOOL, BHOPAL [2012] 28 TAXMANN.COM 29 (INDORE) IS DISTINGUISHABLE ON THE ITS OWN PECULIAR SET OF FACT S EVIDENTLY ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 10 TABULATED IN PARA 3.4 OF ITS ORDER. IN THIS CASE, T HE ASSESSEE HAD RECEIVED ONLY INITIAL CAPITAL FROM THE GOVERNMENT O F M.P. I.E. IN AY 1996-97 AND NOTHING THEREAFTER UNTIL YEAR 2009. IN CASE OF THE PRESENT ASSESSEE IN THE INSTANT APPE AL, ASSESSEE HAS BEEN RECEIVING GRANTS FROM THE GOVERNMENT OF MADHYA PRADESH ON YEAR TO YEAR BASIS TO MEET ITS EXPENSES OF SALARY, ALLOWANCES AND OTHERS. CONSIDERING THE ABOVE FACTS, CIRCUMSTANCES OF THE C ASE, SUBMISSIONS MADE, DOCUMENTS ON RECORD AND JUDICIAL PRECEDENTS, APPEAL OF THE DEPARTMENT OUGHT TO BE DISMISSED. 6. LD. COUNSEL FOR THE ASSESSEE REFERRED AND RELIED ON FOLLOWING CASE LAWS:- 1. INDORE EDUCATION AND SERVICE SOCIETY ITA NO.468/IND / 2018 (INDORE TRIB.) 2. GURMEET SINGH VIKHU (2019) 104 TAXMANN.COM 207 (M.P ) 3. SATISH S. PRABHU (2020) 114 TAXMANN.COM 88 (MUMBAI TRIB.) 4. CRM JAT POST GRADUATE COLLEGE (2019) 109 TAXMANN.CO M 425 (CHANDIGARH TRIB.) 5. GOETZE (INDIA) LTD (2006) 157 TAXMAN 1 (SC) 6. CBDT CIRCULAR NO.14 DATED 11.04.95 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISIONS AND JUDGMENTS REFERRED AND RELIED BY BOTH THE PARTIES. REVENUE H AS CHALLENGED THE FINDING OF LD. CIT(A) RAISING FOLLOWING TWO ISSUES :- (I) WHETHER THE LD. CIT(A) IS JUSTIFIED IN ALLOWI NG THE SOCIETY TO CLAIM THE BENEFIT OF EXEMPTION U/S 10(23C)(III AB) OF ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 11 THE ACT WHEN NO SUCH EXEMPTION WAS CLAIMED IN THE RETURN OF INCOME AND ALSO THE SOCIETY HAS NOT BEEN SUBS TANTIALLY FINANCED BY THE GOVERNMENT DURING THE YEAR AND GR ANTS RECEIVED ARE LESS THAN 50% OF THE TOTAL RECEIPTS FOR THE YEAR. (II) WHETHER LD. CIT(A) IS JUSTIFIED IN ALTERNATIV ELY ALLOWING DEDUCTION OF EXPENSES U/S 57 OF THE ACT WHEN NO S UCH DEDUCTION WAS CLAIMED IN THE RETURN OF INCOME. 8. BEFORE DEALING WITH BOTH THE ISSUES WE WILL FIRS T LIKE TO REPRODUCE THE FINDING OF LD. CIT(A) ALLOWING THE CL AIM OF EXPENSES BY THE EDUCATIONAL INSTITUTE AND ALSO ALLOWING THE EXE MPTION U/S 10(23C)(IIIAB) OF THE ACT OBSERVING AS FOLLOWS:- GROUND NO. 1 & 2 2.0 THESE GROUNDS OF APPEAL ARE WITH REGARD TO MAKING ADDITION OF RS 7,27,11,645/ _ ON ACCOUNT OF EXPENSES CLAIMED ON RUNNING OF COLLEGE ON THE GROUND THAT THE SOCIETY WAS NOT REGISTERED U/S 12A. I HAVE CAREFULLY GONE THROUGH T HE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE APPEL LANT IN THIS REGARD. 2.1 THE APPELLANT HAS STATED THAT THE ASSESSEE WAS AN EDUCATIONAL INSTITUTE AND WAS RUNNING A COLLEGE (S HRI VAISHNAV POLYTECHNIC) AT MOG LINES, INDORE. THE APPELLANT HA S ALSO SUBMITTED THAT THE COLLEGE WAS RECEIVING GRANT FROM THE GOVERNMENT OF MADHYA PRADESH AND HAS ALSO COLLECTED FEE FROM THE STUDENTS. SUCH FEE WAS FIXED BY GOVERNMENT OF M ADHYA ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 12 PRADESH AND IT WAS FOLLOWING ALL THE NORMS OF GOVER NMENT OF MADHYA PRADESH REGARDING ADMISSION OF STUDENTS, STA FF STRUCTURE AND MANAGEMENT. THE APPELLANT HAS ALSO SU BMITTED THAT THE EX OFFICER CHAIRMAN OF THE SOCIETY WAS THE COMMISSIONER, INDORE AND THE EX OFFICER CHAIRMAN OF GOVERNING BODY WAS THE COLLECTOR, INDORE. 2.3 THE APPELLANT HAS ARGUED THAT THE EDUCATIONAL INSTI TUTE EXISTED SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. FURTHER, IT WAS ARGUED THAT THE COLLEGE WAS SUBSTANTIALLY FINANCED BY THE GOVERNMENT OF MADHYA PRADESH. ACCOR DINGLY, INCOME OF THE INSTITUTE WAS EXEMPT U/S 10(23C)(IIIA B). THE SOCIETY HAD FILED ITS RETURN OF INCOME SHOWING RECE IPTS UNDER VARIOUS HEADS (NAMELY FEE FROM STUDENTS, G RANT FROM GOVERNMENT OF MP, RENT AND SALE OF TENDER FORM). THE APPELLANT HAS ALSO SUBMITTED A COPY OF AUDIT REPORT. THE DETA ILS OF INCOME AND EXPENDITURE ACCOUNT IS REPRODUCED AS UND ER:- NARRATION AMOUNT NARRATION AMOUNT SALARY AND ALLOWANCES 6,86,28,876 GRANT FROM GOVT. OF MP 2,71,00,000 PROVIDENT FUND 12,34,740 INTEREST 47,64,151 REPAIR AND MAINTENANCE 2,25,947 RENT 2,03,990 ELECTRICITY EXPENSES 11,65,877 SALE OF TENDER FORM 8,800 OTHER EXPENSES 14,56,205 FEE 2,77,47,957 NET DEFICIT FOR THE YEAR 1,28,86,747 TOTAL 7,27,11,645 7,27,11,645 2.4 THE APPELLANT HAS ALSO ARGUED THAT IT HAD CLAIMED DEDUCTION IN RESPECT OF EXPENSES FOR RUNNING COLLEG E (SALARY TO TEACHERS AND STAFF AND OTHER CONTINGENT EXPENSES). THE RETURN OF INCOME WAS FILED DECLARING LOSS OF RS. 1,28,86,7 47/-. COPY OF COMPUTATION OF INCOME WAS ALSO SUBMITTED BY THE APPELLANT. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 13 HOWEVER, ASSESSMENT U/S 143(1) HAD BEEN COMPLETED O N INCOME OF RS. 5,98,24,900/- WHICH REPRESENTS THE GR OSS RECEIPTS OF THE INSTITUTION. 2.5 THE RELEVANT PORTION OF THE APPELLANT'S SUBMISSION IS REPRODUCED HEREUNDER:- 'THE APPELLANT HAS RELIED ON THE DECISION OF DY. DIT (E) VS. PETROLEUM SPORTS PROMOTION BOARD (2014) 88 CCH 0128 DEL HC : (2014) 111 DTR 0055 (DEL) HELD THAT :- WHEREIN, ASSESSEE; A REGISTERED SOCIETY, FORMED FOR PROMOTION OF SPORTS AND HAD CLAIMED ITS ENTIRE INCOME TO BE EXEM PT U/ S 1 1. THE AO HAD DENIED EXEMPTION U/ S 11 ON GROUND THAT ASSESSEE WAS NOT REGISTERED U/ S 12A, ACCORDINGLY AMOUNT RECEIVED BY ASSESSEE AS GRANTS FROM VARIOUS OIL COMPANIES WAS BROUGHT TO TA X UNDER HEAD 'INCOME FROM OTHER SOURCES'. AN ESTIMATED EXPENDITU RE OF RS.1.20 LACKS WAS DEDUCTED AS EXPENDITURE INCURRED IN COLLE CTING GRANT AND ADDITION WAS MADE. THE HONORABLE HIGH COURT HELD TH AT EVEN U/ S 57(III), ANY EXPENDITURE INCURRED FOR PURPOSE OF MA KING OR EARNING INCOME IS ALLOWABLE AS A DEDUCTION. IF INCOME IS AS SESSED UNDER RESIDUAL HEAD FULL PLAY MUST BE ALLOWED TO SECTION 57(III). ASSESSEE IN PRESENT CASE WAS CREATED IN 1979 WITH THE OBJECT OF PROMOTING SPORTS. THERE WAS NO OTHER OBJECT AND ALL ITS CONST ITUENTS WERE GETTING GRANTS/FUNDS ONLY FOR THAT PURPOSE. ASSESS EE WAS MERELY ACTING AS A CUSTODIAN OR CONDUIT TO CONSTITUENTS FOR THE PURPOSE OF PROMOTING SPORTS ACTIVITY INSIDE AND OUTSIDE COUNT RY. EXPENDITURE INCURRED ASSESSEE WAS ONLY FOR PURPOSE OF PROMOTING SPORTS EVENTS AND ACTIVITIES. IF SUCH EXPENDITURE IS NOT ALLOWED, IT MAY AMOUNT TO TAXING GROSS RECEIPTS OF THE ASSESSEE AND NOT THE I NCOME, WHICH IS NOT PERMISSIBLE UNDER THE INCOME TAX LAW. CONTENTION OF REVENUE THAT THE ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 14 ORDER OF THE TRIBUNAL WAS UNTENABLE SINCE IT INDIRECTLY CONFERS THE BENEFIT OF SECTION 11 UPON THE ASSESSEE WAS REJECTED. ALL THAT THE ASSESSEE CLAIMED BEFORE THE CIT (A) WAS THAT THE ENTIRE EXPENDITURE SHOULD BE ALLOWED AS A DEDUCTION SINCE IT WAS INCURRED FOR THE VERY OBJECTS FOR WHICH THE ASSESSEE WAS ESTABLISHED IN 1979 I.E. PROMOTION OF SPORTS AND, THEREFORE, THE AO WAS NOT JUSTIFIED IN RESTRICTING THE ALLOWANCE OF EXPENDITURE TO RS.1,20,000/_ ONLY FOR ALL THE THREE YEARS. IT WAS THIS CLAIM THAT WAS ACCEPTED BY THE CIT (APPEALS). THE OBJECTION OF THE REVENUE THAT SINCE THE GRANTS WERE ASSESSED UNDER THE RESIDUAL HEAD, THERE WAS NO SCOPE FOR ALLOWING THE EXPENDITURE INCURRED ON THE PROMOTION OF THE SPORTS ACTIVITIES WAS NOT ACCEPTABLE SINCE EVEN UNDER SECTION 57(III), ANY EXPENDITURE INCURRED FOR THE PURPOSE OF MAKING OR EARNING THE INCOME IS ALLOWABLE AS A DEDUCTION. IT IS OPEN TO THE INCOME-TAX AUTHORITIES TO DENY THE EXEMPTION UNDER SECTION 11 OF THE ACT IN ABSENCE OF REGISTRATION UNDER SECTION 12A AND IF THEY DO SO, THEN THE ASSESSMENT HAS TO BE COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. IF THE I NCOME IS ASSESSED UNDER THE RESIDUAL HEAD FULL PLAY MUST BE ALLOWED TO SECTION 57(III). THE ASSESSEE IN THE PRESENT CASE WAS CREATED IN 1979 WITH THE OBJECT OF PROMOTING SPORTS; THERE WAS NO OTHER OBJECT AND ALL ITS CONSTITUENTS WERE GIVING GRANTS/ FUNDS ONLY FOR THAT PURPOSE. IN TRUTH AND REALITY THE ASSESSEE WAS MERELY ACTING AS A CUSTODIAN OR CONDUIT TO THE CONSTITUENTS FOR THE PURPOSE OF PROMOTING SPORTS AC TIVITY INSIDE AND OUTSIDE THE COUNTRY. THE EXPENDITURE INCURRED BY T HE ASSESSEE IS ONLY FOR THE PURPOSE OF PROMOTING THE SPORTS EVENTS AND ACTIVITIES AND IN THIS RESPECT THERE IS NO CHALLENGE TO THE FINDING OF FACT RECORDED BY THE TRIBUNAL. IF SUCH EXPENDITURE IS NOT ALLOWED, IT MAY AMOUNT TO TAXING THE GROSS RECEIPTS OF THE ASSESSEE AND NOT T HE INCOME, WHICH IS NOT PERMISSIBLE UNDER THE INCOME TAX LAW.' ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 15 3 . THE LIST OF ITEMS ILLUSTRATED IN CIRCULAR NO. 549 DT. 31 ST OCT., 1989 TC1OS.691 CLEARLY POINTS OUT THAT ONLY ADJUSTMENTS WHICH ARE, ON THE BASIS OF THE RETURN AND DOCUMENTS ACCOMPANYING IT, ALLOWABLE OR DISALLOWABLE, CAN BE ADJUSTED. THUS, UNDER SECTION 143(1( A)(I), IT IS NOT OPEN TO THE ASSESSING OFFICER TO DISALLOW ANY CLAIM FOR DEDUCTION UNLESS HE IS SATISFIED, ON THE INFORMATION WHICH IS AVAILABLE IN THE RETURN AND THE DOCUMENTS ACCOMPANYING IT, THAT SUCH A CLAIM IS INADMISSIBLE. OTHERWISE, HE CANNOT DISALLOW SUCH A CLAIM {OM TRADING CC. VS. SECOND ITO (1991) 94 CTR (KAR) 282: (1991) 188 ITR 641 (KAR). REFERENCE MAY ALSO BE MADE TO THE DECISION OF MAHALAKSHMI GLASS WORKS LTD. &ANR. VS. SUNIL GUPTA &ANR. (1993) 203 ITR 658 (BOM). THE ASSESSING OFFICER IS NOT PERMITTED UNDER THE GUISE OF MAKING ADJUSTMENT TO ADJUDICATE UPON ANY D EBATABLE ISSUE (KAMAL TEXTILES VS. ITO (1991) 189 ITR 339 (MP), KHATAUJUNKAR LTD. VS. K.S. PATHANIA, DY. CIT (1992) 196 TTR 55 (BOM), JKS EMPLOYEES WELFARE FUND VS. ITO (1993) 199 ITR 765 (RAJ). IN TANNA EXPORTS & ANR.VS. U.O. KAMAT&ANR. (1993) 202 ITR 219 (BA M) A SIMILAR VIEW WAS TAKEN. IT WAS OBSERVED THAT WHILE MAKING AN ASSESSMENT UNDER SECTION 143(1){A), RECALCULATION O F DEDUCTION UNDER SECTION 80HHC, A DEBATABLE POINT, IS NOT PERMISSIBL E. IN MARLBOROUGH POLYCHEM LTD. VS. CLT (2009) 221 CTR (RAJ) 771, IT WAS HELD THAT AO IN EXERCISE OF HIS JURISDICTION UNDER S. 143(1){A) COULD HAVE DISALLOWED THE CLAIM LAID BY ASSESSEE TO DEDUCTION UNDER S. 80HH AND 80-1 AS THE ISSUE WAS NO MORE DEBATABLE IN VIEW OF DECISION OF JURISDICTIONAL HIGH COURT ALREADY RENDERED BEFORE THE DATE OF FILI NG RETURN. 4. THE ITO CAN DISALLOW A CLAIM FOR DEDUCTION ONLY IF HE IS SATISFIED, ON THE BASIS OF THE MATERIALS WHICH IS BEFORE HIM, THAT THE ASSESSEE IS NOT ENTITLED TO SUCH A DEDUCTION. THE USE OF THE PH RASE 'PRIMA FACIE ADMISSIBLE' IN CL. (III) TO THE PROVISO, ALSO LEND SUPPORT TO THIS ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 16 INTERPRETATION. IN ITS LITERAL SENSE, 'PRIMA FACIE' MEANS 'ON THE FACE OF IT'. HENCE, ON THE FACE OF THE RETURN AND THE DOCUM ENTS AND ACCOUNTS ACCOMPANYING IT, THE DEDUCTION CLAIMED MUST BE INAD MISSIBLE. ONLY THEN, CAN IT BE DISALLOWED UNDER THE PROVISO TO SEC TION 143(1){A). IF ANY FURTHER ENQUIRY IS NECESSARY, OR IF THE ASSESSING OFFICER FEELS THAT FURTHER PROOF IS REQUIRED IN CONNECTION WITH THE CL AIM FOR DEDUCTION, HE WILL HAVE TO ISSUE A NOTICE UNDER SUB-SECTION (2) OF SECTION 143. I NDEED, IN EVERY CASE WHERE THE REVENUE DESIRES TO H AVE EVIDENCE IN SUPPORT OF ANY CLAIM, A NOTICE CAN ALWAYS BE ISSUED UNDER SECTION 143(2), A REGULAR ASSESSMENT MADE AND THE EXCESS AMOUNT DUE RECOVERED (KHATAU JUNKAR LTD. VS. K.S. PATHANIA, DY . CIT (1992) 196 ITR 55 (BOM), BANK OF AMERICA NT. AND S.A. VS. DY. CIT (1993) 200 ITR 739 (BOM) AND INDIAN RAYON & INDUSTRIES LTD. VS. J.R. KANEKAR, ASSTT. CIT (1993) 200 ITR 747 (BOM). SEE ALSO JKS EMPLOYEES' WELFARE FUND VS. ITO (1993) 199 ITR 765 (RAJ), ADAMAS GENERAL INDUSTRIES LTD. &ANR. VS. SMT. NEELA KRISHNAN (1993) 203 ITR 737 (BOM), SRF CHARITABLE TRUST VS. UNION OF INDIA (1992) 193 ITR 95 (DEL), MAKUM TEA CO. (INDIA) LTD. VS. DY. CIT &ANR. (1999) 235 ITR 484 (GAU), PARIKH ENGINEERING & BODY BUILDING CO. LTD. &ANR. VS. UNION OF INDIA &ORS. (1999) 238 ITR 554 (PAT)). 5. FOR THE PURPOSES OF ADJUSTMENTS UNDER CL. (III) TO THE FIRST PROVISO TO S. 143(I)(A), A DEDUCTION CLAIMED MUST BE INADMISSI BLE ON THE FACE OF THE RETURN; DOCUMENTS AND ACCOUNTS ACCOMPANYING IT WITHOUT ANY SCOPE FOR DOUBT OR DEBATE; QUESTION OF PRIMA FACIE ADJUSTMENT UNDER S. 143(I)(A) HAS TO BE CONSIDERED WITH REFERENCE TO TH E POSITION ON THE DATE ON WHICH THE RETURN IS FILED AND NOT WITH REFERENCE TO THE EVENTS SUBSEQUENT THERETO.[SAMTEL COLOR LTD. VS. UNION OF INDIA &ORS. (2002) 177 CTR (DEL) 289 : (2002) 258 ITR 1 (DEL)}. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 17 SECTION 143(I)(A) CONTEMPLATES THAT POWER COULD BE EXERCISED ONLY : (A)(I) IN RESPECT OF TOSS CARRIED FORWARD, (A)(II) DEDUCTION, OR (A)(III) ALLOWANCE, AND (A)(IV) RELIEF CLAIMED; (B) THE POWE R IN RESPECT OF THE ABOVE FOUR ITEMS SHOULD BE ON THE BASIS OF INFORMAT ION AVAILABLE IN THE RETURN, ACCOUNTS OR DOCUMENTS; (C) THAT THESE ITEMS ARE PRIMA FACIE INADMISSIBLE. THERE MAY BE A CASE WHERE THE R ATE OF TAX IS NOT DISPUTED BUT WHILE CALCULATING THE TAX THERE IS AN ERROR WHICH COULD BE CORRECTED UNDER THIS CLAUSE, I.E., WHILE CALCULA TING THE TAX ON THE NORMAL RATE OR MAXIMUM MARGINAL RATE THERE IS A MISTAKE WHICH COULD BE CORRECTED AND WILL FALL IN THE CATEGORY OF ARITHMETICAL MISTAKE, BUT WHETHER MAXIMUM MARGINAL RATE IS TO BE APPLIED OR THE NORMAL RATE IS APPLICABLE IS NOT COVERED BY ANY OF THE TWO CLAUSES OF THE PROVISO OF SECTION 143(I)(A) OF THE ACT. THE MATTER HAS ALSO TO BE CONSIDERED FROM ANOTHER ANGLE THAT THE W ORD 'PRIMA FACIE' WHICH HAS BEEN USED THEREIN MEANS ON THE FACE OF A ND REFERS TO THE ITEMS, ON WHICH THERE CANNOT BE TWO OPINIONS. IF TH E MATTER IS ARGUABLE ONE OR DEBATABLE THEN SAME CANNOT BE DISALLOWED UNDER THE PROVISO REFERRED TO ABOVE. THUS, ON THE PROPER INTERPRETATION OF THIS SECTION, THE RIGHTS OF THE ITO ARE RESTRICTED WITH REGARD TO THE DISALLOWANCES WHICH ARE PRIMA FACIE INADMISSIBLE. WHETHER THE PROVISIONS OF A PARTICULAR SECTION [SECTION 167B IN THIS CASE} ARE APPLICABLE OR NOT, WILL NOT BE COVERED UNDER THIS SECTION. [JKS EMPLOYEES WELFARE FUND VS. ITO (1992) 107 CTR (RAJ) 161 : (1993) 199 ITR 765 (RAJ)}. SEE ALSO CIT VS. ORBIT TRAVEL & TOURS (P) LTD. (1999) 238 ITR 931 (AP). IN TATA YADOGAWA LTD. VS. CIT (2011) 335 ITR 53 (JHARKHAND), IT WAS HELD THAT AS PRIMA FACIE ADJUSTMENT IS PERMISSIBLE ONLY IN RESPECT OF CLAIMS, THE INCORRECTNESS OF WHICH IS AP PARENT FROM ANY INFORMATION IN THE RETURN AND DEBATABLE CLAIMS ARE NOT LIABLE TO SUCH ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 18 PRIMA FACIE ADJUSTMENTS, AO WAS NOT JUSTIFIED IN MA KING PRIMA FACIE ADJUSTMENTS IN RESPECT OF THE DEDUCTION CLAIMED UN DER S. 35AB TOWARDS INCOME-TAX PAID BY THE ASSESSEE AS PART OF THE LUMP SUM CONSIDERATION FOR ACQUIRING THE KNOW-HOW. IN AMIRUD DIN VS. ITO & ANR. (2001) 240 ITR 550 (MP) IT HAS BEEN HELD THAT WHILE PASSING AN ORDER UNDER S. 143(L)(A) THE AO CANNOT CHANGE THE NATURE OF INCOME OR EXEMPTION. IN CIT VS. MCDOWELL & CO. LTD. (2006) 204 CTR (KAR) 353 IN WHICH DECISION IN GOD GRANITES VS. CBDT &ORS. (1996) 218 ITR 298 (KAR) WAS FOLLOWED AND DECISION IN MADAN GOPAL BAGLA VS. CIT (1956) 30 ITR 174 (SC) WAS DISTINGUISHED, IT WAS HELD THAT ONLY A CLAIM WHICH IS PRIMA FACIE ADMISSIBLE OR INADMISSIBLE CAN BE CONSIDERED UNDER S. 143(L)(A) AND NOT A MATTER THAT REQUIRES A DETAILED CONSIDERATION; ASSESSEE HAVING MADE OUT A PRIMA FAC IE CASE IN RESPECT OF DEDUCTION OF 'CORPORATE GUARANTEE OBLIGATION' AS THERE WAS AN AGREEMENT AND ALSO A GUARANTEE OBLIGATION, CLAIM FO R DEDUCTION OF CORPORATE GUARANTEE OBLIGATION COULD NOT BE DISALLO WED BY WAY OF PRIMA FACIE ADJUSTMENT UNDER S. 143(L)(A). FOLLOWING TYPES OF DISALLOWANCES/ ADDITIONS/ ALTERA TIONS HAVE BEEN HELD TO BE NOT PERMISSIBLE BY RESORT TO SECTION 143 (L)(A): CORPUS DONATIONS RECEIVED BY A TRUST-SRF CHARITABLE TRUST VS. UNION OF INDIA (1991) 100 CTR (DEL) 160: (1992) 193 ITR 95 (DEL) AMOUNT CLAIMED NON-TAXABLE IN THE RELEVANT YEAR-BAN K OF AMERICA NT. & S.A. VS. DY. CIT (1993) 200 ITR 739 (BOM) CREATING TAX DEMAND BY INVOKING SECTION 167B-JKS EM PLOYEES WELFARE FUND VS. ITO (1992) 107 CTR (RAJ) 161 : (1993) 199 ITR 765 (RAJ) (COPY OF ORDER ENCLOSED) ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 19 9. IN CIT VS. KAY KAY FAMILY TRUST (2005) 196 CTR (ALL) 376 ASSESSEE FILED RETURN FOR ASST. YR. 1986-87 IN THE STATUS OF SPECIFIED TRUST BUT THE AO ADOPTED THE STATUS OF AOP WHILE MAKING ASSE SSMENT UNDER S. 143(1). IT WAS HELD THAT THIS ACTION OF AO WAS NOT JUSTIFIE D AND HIS ORDER SHOULD BE DEEMED TO HAVE BEEN PASSED UNDER S. 143(3) AND AS SUCH APPEAL AGAINST THE ORDER WAS MAINTAINABLE UNDER S. 246(L)(A). SEE ALSO CIT VS. KHALSA DEWAN (REGD.) (2009) 221 CTR (P&H) 486 : (2008) 300 ITR 357 (P&H). 10. THAT THE EDUCATIONAL INSTITUTE EXISTS SOLELY FO R EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. COLLEGE IS SUBSTANTIALLY FINANCED BY GOVERNMENT OF MADHYA PRADESH AS MAJOR PART OF RECEI PTS ARE THROUGH GRANTS FROM STATE GOVERNMENT. ACCORDINGLY, INCOME OF THE INSTITUTE IS EXEMPT U/ S 10(23C)(IIIAB). THE APPELLANT HAS NOT BEEN ALLOWED SUCH DEDUCTION. THERE IS NO COLUMN IN THE INCOME TAX RETURN FORM TO FURNISH DETAILS OF EXEMPTION U/ S 10(23C)(IIIAB), THOUGH THERE ARE SPECIFIC COLUMNS IN THE RETURN FORM TO FURNISH DET AILS EXEMPTIONS UNDER OTHER CLAUSES OF SECTION 1 0(23 C). 2.6 THE APPELLANT HAS ALSO SUBMITTED COPIES OF LETTER A S ISSUED BY THE GOVERNMENT OF MP IN RESPECT OF GRANTS SPECIF YING THE PURPOSE OF SUCH GRANTS. THE GRANT HAD BEEN ISSUED F OR PAYMENT OF SALARY, ALLOWANCES AND OTHER EXPENSES AN D HAD BEEN UTILIZED FOR PAYMENT OF SALARY TO STAFF. FURTH ER, ALL THE ABOVE EXPENSES WERE PASSED BY THE AUDITOR APPOINTED BY STATE GOVERNMENT AND WERE INCURRED SUBSEQUENT TO THE SANC TION BY THE STATE GOVERNMENT AUDITORS. THE APPELLANT HAS SU BMITTED ALL THE RELEVANT DOCUMENTS IN SUPPORT OF HIS CASE. I HA VE CAREFULLY GONE THROUGH THE ABOVE DOCUMENTS AND FIND THAT THE ABOVE GRANTS WERE GIVEN BY THE MP GOVERNMENT TO THE APPEL LANT'S SOCIETY AND THE APPELLANT HAD ALSO SUBMITTED A COPY OF LETTER OF ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 20 MINISTRY OF HUMAN RESOURCE DEVELOPMENT IN WHICH THE SAID MINISTRY HAD RELEASED GRANT TO THE POLYTECHNICS DUR ING F.Y. 2013-14. THE APPELLANT SOCIETY IS AN EDUCATIONAL INSTITUTE. IN THE SAID LETTER, THE GRANT HAD BEEN RELEASED TO THE 20 POLYTECHNICS COLLEGES OF M.P. GOVERNMENT AND IN THI S LIST THE APPELLANT'S COLLEGE NAME IS CLEARLY MENTIONED AT PO INT NO. 35. THUS, THIS IS CLEAR THAT THE APPELLANT SOCIETY IS A N EDUCATIONAL INSTITUTE AND IT WAS FINANCED BY GOVERNMENT OF M.P. THEREFORE, IN LIGHT OF THE ABOVE JUDICIAL DECISIONS AND DOCUMENTS SO SUBMITTED BY THE APPELLANT, THESE GROUND OF APPEAL IS HEREBY ALLOWED. THUS, ITS INCOME WAS EXEMPT U/S 10(23C)(IIIAB) OF THE ACT. IN ITS ALTERNATIVE, THE AO IS DIRECTED TO ALLOW BENEFIT OF THE EXPENSES SO CLAIMED BY THE APPELLANT AGAINST THE RE CEIPTS. 9. WE OBSERVE THAT LD. CIT(A) HAS THOROUGHLY ANALYS ED THE FACTS OF THE CASE AND HAS ALSO REFERRED TO THE RELEVANT D ECISIONS AND JUDGMENTS TO ARRIVE AT THE FINDING FAVOURING THE AS SESSEE. 10. WE WILL FIRST TAKE UP THE SECOND ISSUE RAISED B Y THE REVENUE REGARDING THE ALLOWABILITY OF THE EXPENSES CLAIMED IN THE RETURN OF INCOME. WE FIND THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 14.8.2014 SHOWING GROSS TOTAL INCOME AT RS.5,98,24, 898/- AND CLAIMING EXPENDITURE OF RS.7,27,11,645/- AS AN AMOU NT APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING TH E PREVIOUS YEAR. THE NET INCOME FOR THE YEAR IS A LOSS OF RS.1,28,86 ,747/-. THE ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 21 RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND A CO MMUNICATION WAS SENT TO THE ASSESSEE DENYING THE CLAIM OF EXPE NSES OF RS. 7,27,11,645/- ON THE GROUND THAT THE ASSESSEE IS NO T REGISTERED U/S 12A OF THE ACT AND THUS THE AMOUNT APPLIED TO C HARITABLE OR RELIGIOUS PURPOSES ARE DISALLOWED. AGAINST THIS IN TIMATION ASSESSEE FILED RECTIFICATION APPLICATIONS U/S 154 OF THE ACT WHICH WERE REJECTED AND ASSESSEE ALSO TRIED TO FILE REVISED RE TURN OF INCOME WITHIN THE STATUTORY TIME LIMIT PROVIDED IN THE ACT BUT THE SAME COULD NOT BE UPLOADED DUE TO TECHNICAL ERROR. IT W AS ALSO BROUGHT TO OUR NOTICE THAT IN THE RETURN FORM THERE IS NO SPEC IFIC COLUMN TO CLAIM THE EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. ASSESSEES CASE WAS NOT SELECTED FOR SCRUTINY U/S 143(3) OF THE ACT . BOOKS OF ACCOUNTS AND EXPENDITURE DETAILS WERE NEVER CALLED FOR EXAMINATION. THERE IS NO OBSERVATION OF THE REVENUE AUTHORITIES AT ANY STAGE OF THE PROCEEDINGS TO SHOW THAT THE EXPENDITURE CLAIME D BY THE ASSESSEE WERE NOT GENUINE. IT IS ALSO NOT DISPUTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE AUDITED AND MAJOR POR TION OF THE GRANT IS RECEIVED FROM MADHYA PRADESH GOVERNMENT AN D THE CHAIRMAN OF THE GOVERNING BODY OF THE SOCIETY IS CO LLECTOR, DISTRICT, ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 22 INDORE. AS PROVIDED IN THE BYE LAWS FUNDS RECEIVE D BY THE SOCIETY ARE TO BE DEPOSITED IN ANY SUCH BANK OR INVESTED IN SUCH MANNER AS APPROVED BY THE STATE GOVERNMENT AND THE FUND TO BE APPLIED ONLY TOWARDS MEETING THE EXPENSES OF THE SOCIETY. ALL TH ESE FACTS ARE SUFFICIENT ENOUGH TO SHOW THAT THE ASSESSEES CLAIM OF EXPENSES OF RS. 7,27,11,645/- HAS NOT BEEN FOUND TO BE BOGUS OR EXCESSIVE AT ANY STAGE AND LOOKING TO THE CONSTITUTION OF GOVERN ING BODY AND THE CONTROL OF THE STATE GOVERNMENT FOR REALIZING AND S PENDING OF FUNDS PRIME FACIE NO DOUBT CAN BE RAISED FOR THE GENUINENESS OF THE EXPENSES INCURRED. EVEN FOR A WHILE IT IS PRESUMED THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)( IIIAB) OF THE ACT THEN ALSO IN VIEW OF THE JUDGMENT OF HON'BLE HIGH C OURT OF DELHI IN THE CASE OF PETROLEUM SPORTS PROMOTION BOARD (SUPRA) IF THE INCOME IS ASSESSED UNDER THE RESIDUAL HEAD AS THE A.O DENI ED EXEMPTION U/S 11 OF THE ACT FULL PLAY MUST BE ALLOWED TO SEC TION 57(III) OF THE ACT TOWARDS ANY EXPENDITURE INCURRED FOR THE PURPOS E OF MAKING OR EARNING INCOME. 11. IN THE INSTANT CASE ALSO THE ASSESSEE SOCIETY I S A REGISTERED UNDER THE MADHYA PRADESH SOCIETY REGISTRATION ACT 1 959 SINCE ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 23 26.06.1962 WTH THE SOLE PURPOSE OF ESTABLISHING AND RUNNING INSTITUTION TO IMPART TECHNICAL EDUCATION IN CIVIL, MECHANICAL AND ELECTRICAL AND SUCH OTHER BRANCHES OF ENGINEERING. THE ASSESSEE INSTITUTE RUNS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF EARNING PROFITS. MOST OF THE GRANTS ARE RECEIVED FROM GOVERNMENT OF MADHYA PRADESH. IRRESPECTIVE OF THE F ACT THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIA B) OF THE ACT OR NOT EVEN IF THE REVENUE AUTHORITIES WANTED TO TAX R ECEIPTS DURING THE YEAR AS INCOME UNDER THE HEAD INCOME FROM OTHER SOU RCES, THEY WERE NOT JUSTIFIED IN GROSSLY DENYING THE BENEFIT O F GENUINE CLAIM OF INCIDENTAL EXPENDITURE OF RS. 7,27,11,645/- U/S 57( III) OF THE ACT BEING THE EXPENDITURE (NOT BEEN IN THE NATURE OF CA PITAL EXPENDITURE) LAID OUT BY THE ASSESSEE INSTITUTION W HOLLY OR EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SU CH INCOME. WE THUS CONFIRM THE FINDING OF LD. CIT(A) TO THIS EFF ECT AND ALLOW THE CLAIM OF EXPENSES OF RS.7,27,11,645/- U/S 57(III) O F THE ACT AND DISMISS REVENUES GROUND NO.3. 12. NOW WE TAKE UP FIRST ISSUE ABOUT THE ELIGIBILIT Y OF THE ASSESSEE TO CLAIM EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT WH ICH WAS ACCEPTED ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 24 BY LD. CIT(A) BUT CHALLENGED BY THE REVENUE BEFORE US RAISING GROUND NO. 1 & 2. WE FIND THAT THE ASSESSEE FILED ITS RETURN OF INCOME CLAIMING IT TO BE A CHARITABLE EDUCATIONAL S OCIETY AND FILED ITR FORM NO.7. IN THE RETURN DUE TO ABSENCE OF SPE CIFIC COLUMN TO CLAIM THE EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT A SSESSEE HAS PUNCHED THE EXPENDITURE FIGURE OF RS.7,27,11,645/- AS THE AMOUNT APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDI A DURING THE YEAR. THE INTENTION OF THE ASSESSEE WAS VERY MUCH CLEAR T O CLAIM THE EXEMPTION U/S 10(23C)(IIIAB) OF ACT SINCE IT IS ES TABLISHED WITH THE SOLE OBJECT TO RUN FOR THE EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFITS. THE MAIN OBJECTS OF THE ASSESS EE SOCIETY HAVING ITS HEAD OFFICE AT INDORE ARE AS FOLLOWS :- 1. THE NAME OF THE SOCIETY SHALL BE SHRI VAISHNAV SAH AYAK KAPDA MARKET TECHNICAL EDUCATION SOCIETY, INDORE. 2. THE HEAD OFFICE OF THE SOCIETY SHALL BE LOCATED AT INDORE 3. THE OBJECTS OF THE SOCIETY ARE (A) TO ESTABLISH AND RUN AN INSTITUTION OR INSTITUTIONS FOR IMPARTING TECHNICAL EDUCATIONAL IN CIVIL, MECHANICA L AND ELECTRICAL AND SUCH OTHER BRANCHES OF ENGINEERING A S MAY BE DECIDED UPON BY THE SOCIETY. (B) TO DO SUCH OTHER ACTS, AS MAY BE NECESSARY IN ORDER TO ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 25 FURTHER THE SOCIETYS OBJECT OF PROMOTING TECHNICAL EDUCATION. 13. THE COMPOSITION OF THE SOCIETY IS CONSISTING OF FOLLOWING PERSONS:- (A) COMMISSIONER, INDORE DIVISION, INDORE - CHAIRMAN (B) THE ASSTT. EDUCATIONAL ADVISER (T), - MEMBER GOVT. OF INDIA, MINISTRY OF EDUCATION, WESTERN REGION, BOMBAY (C) DIRECTOR OF TECHNICAL EDUCATION, MADHYA PRADESH - MEMBER (D) A PERSON REPRESENTING THE MADHYA - MEMBER PRADESH BOARD OF TECHNICAL EDUCATION TO BE NOMINATED BY THE STATE GOVERNMENT. (E) THE MAYOR OF THE CORPORATION OF INDORE - MEMBER OR THE ADMINISTRATOR, INDORE MUNICIPAL CORPORATION, INDORE (F) A PERSON REPRESENTING THE RURAL LOCAL - MEMBER AUTHORITY OR AUTHORITIES IN THE AREA OF THE SOCIETY, CHOSEN BY THE MEMBER OF SUCH LOCAL BODY OR AUTHORITIES IN SUCH A MANNER AS MAY BE DECIDED BY THE CHAIRMAN. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 26 (G) FOUR PERSONS NOMINATED BY THE VAISHNAV SAHAYAK KAPADA MARKET COMMITTEE, CLOTH MARKET, INDORE 14. THE FUNDS OF THE SOCIETY ARE TO BE MANAGED AS P ER THE CONDITIONS PROVIDED IN THE MEMORANDUM OF ASSOCIATIO N AND BYE LAWS. THE RELEVANT EXTRACT IS MENTIONED BELOW:- (1) THE SOCIETY SHALL MAINTAIN A FUND TO WHICH SHAL L BE CREDITED :- (A) ALL MONEYS RECEIVED FROM THE CENTRAL GOVERNMENT OR (B) ALL FEES AND OTHER CHARGES COLLECTED BY THE INSTITU TIONS AND MADE OVER TO THE SOCIETY (C) ALL MONEYS RECEIVED BY THE SOCIETY BY WAY OF GRANT, GIFTS, DONATIONS BENEFICIATIONS, BEQUESTS OR TRANSFERS; AN D (D) ALL MONEYS RECEIVED BY THE SOCIETY BY IN ANY OTHER MANNER OR FROM ANY OTHER SOURCE. (2) ALL MONEYS CREDITED TO THE FUND SHALL BE DEPOSI TED IN SUCH BANKS OR INVESTED IN SUCH MANNER AS THE SOCIETY MAY , WITH THE APPROVAL OF THE STATE GOVERNMENT DECIDE. (3) THE FUND SHALL BE APPLIED TOWARDS MEETING THE E XPENSES OF THE SOCIETY, GOVERNMENT BODY AND THE INSTITUTION S INCLUDING EXPENSES INCURRED IN THE EXERCISE OF ITS POWERS AND PERFORMANCE OF ITS DUTIES BY OR UNDER THESE REGULAT IONS. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 27 (4) THE INSTITUTIONS SHALL NOT SPEND ANY AMOUNT COL LECTED BY THEM BY WAY OF FEES AND OTHER CHARGES AND SHALL MAK E ONE ALL SUCH REALISATION TO THE GOVERNMENT BODY. (5) THE SOCIETY SHALL EARMARK AN ADEQUATE AMOUNT IN ITS ANNUAL BUDGET TO COVER ALL EXPENSES OF EVERY INSTIT UTION AND NO INSTITUTION SHALL INCUR AN EXPENDITURE IN EXCESS OF THE AMOUNT SO EARMARKED; PROVIDED THAT IN SPECIAL CIRCUMSTANCES, THE SOCIET Y MAY MAKE A SPECIAL GRANT TO MEET ANY UNFORESEEN EXPENDI TURE OF AN INSTITUTIONS. 15. FROM PERUSAL OF THE ABOVE STATED OBJECTIVES, CO MPOSITION OF THE SOCIETY AND THE RULES OF UTILISATION OF FUNDS IT RE MAINS UNDISPUTED THAT THE ASSESSEE SOCIETY IS SOLELY WORKING FOR EDU CATIONAL PURPOSE AND NOT FOR THE PURPOSE OF EARNING PROFITS AND THER E IS COMPLETE CONTROL OF STATE GOVERNMENT OVER THE FUNDS RECEIVE D AND SPEND DURING THE YEAR. 16. NOW FOR CLAIMING THE EXEMPTION U/S 10(23C)(IIIA B) OF THE ACT THE SOCIETY SHOULD BE ANY UNIVERSITY OR OTHER EDUC ATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE S AND NOT FOR THE PURPOSE OF PROFITS, AND WHICH IS WHOLLY OR SUBSTANT IALLY FINANCED BY ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 28 THE GOVERNMENT. IN THE ASSESSEES CASE AS WE HAVE OBSERVED ABOVE THAT IT IS EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFITS. NOW THE ONLY ISSUE REMAINS IS WHETHER THE ASSESSEE SOCIETY IS WHOLLY OR SUBSTANTIALLY FINANCE D BY THE GOVERNMENT. THE INSTANT APPEAL RELATED TO ASSESSMENT YEAR 201 4- 15. HOWEVER THERE WAS AN AMENDMENT INSERTED BY TH E FINANCE ACT 2014 W.E.F. 1.4.2015 READ WITH RULE 2BB OF THE I.T. RULES STATING THAT ANY EDUCATIONAL INSTITUTION OR UNIVERSITY OR HOSPI TAL OR OTHER INSTITUTION REFERRED THEREIN I.E. SUB CLAUSE (IIIAB ) & (IIIAC) OF CLAUSE 23C OF SECTION 10 SHALL BE CONSIDERED AS FUND SUBST ANTIALLY FINANCED BY THE GOVERNMENT FOR ANY PREVIOUS YEAR IF THE GOVE RNMENT GRANT TO SET UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION, HO SPITAL OR OTHER INSTITUTION EXCEEDS 50% OF THE TOTAL RECEIPTS IN CLUDING ANY VOLUNTARILY CONTRIBUTION OF SUCH UNIVERSITY OR OTHE R EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITUTION AS THE CASE MAY BE DURING THE RELEVANT PREVIOUS YEAR. 17. SO AS FAR AS THE ABOVE AMENDMENT IS CONCERNED T HE SAME IS EFFECTIVE FROM 01.04.2015 WHICH IS NOT APPLICABLE O N THE ASSESSEE SINCE WE ARE DEALING WITH THE ASSESSMENT YEAR 2014- 15. SO BEFORE ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 29 THIS AMENDMENT THE ISSUE WAS DECIDED ON THE BASIS O F RELEVANT FACTS. 18. BEFORE US LD. DEPARTMENTAL REPRESENTATIVE REFER RED AND RELIED ON THE DECISION OF CO-ORDINATE BENCH, INDORE IN THE CASE OF M.P. RAJYA OPEN SCHOOL, BHOPAL (SUPRA). HOWEVER THIS DECISION WILL NOT BE RELEVANT IN THE INSTANT CASE BECAUSE IN THIS CASE T HE ASSESSEE WAS FINANCED BY GOVERNMENT ONLY IN THE INITIAL YEAR AND THERE WAS NO GRANT SUBSEQUENTLY INCLUDING THE YEAR UNDER APPEAL BEFORE THE TRIBUNAL WHEREAS IN THE CASE OF ASSESSEE SUBSTANTIA L PORTION OF THE GRANT RECEIVED DURING THE YEAR UNDER APPEAL IS FROM THE MADHYA PRADESH GOVERNMENT. 19. WE FIND THAT SIMILAR ISSUE AS RAISED BEFORE US ALSO CAME UP BEFORE THE CO-ORDINATE BENCH OF CHANDIGARH IN THE C ASE OF JCIT (EXEMPTION) V/S CRM JAT POST GRADUATE COLLEGE(SUPRA ) AND THE ISSUE OF THE INSTITUTION BEING WHOLLY OR SUBSTANTIALLY FU NDS BY THE GOVERNMENT WAS UNDER CONSIDERATION. THE RELEVANT F INDING OF THE TRIBUNAL IS REPRODUCED BELOW:- 9. ADDRESSING THE SECOND ISSUE FRAMED BY US WHERE WE ARE CALLED UPON TO DECIDE WHETHER THE ASSESSEE EDUCATIONAL INSTITUTION CAN BE CONSIDERED TO ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 30 BE ON FACTS SUBSTANTIALLY FINANCED BY THE GOVERNMEN T OF HARYANA AND HENCE THE CASE OF THE ASSESSEE CAN BE SAID TO BE CO VERED U/ S. 10(23C)(IIIAB) OF THE ACT, THE RELEVANT FACTS ON RE CORD ARE THAT THE PERCENTAGE OF GOVERNMENT GRANT IS 60 OF THE TOTAL R ECEIPTS. THIS FINDING OF FACT AVAILABLE ON RECORD REMAINS UNREBUTTED. IN THE ABSENCE OF ANY REBUTTAL ON FACTS, WE FIND NO GOOD REASON TO UPSET THE CONCL USION DRAWN. 9.1 NO DOUBT AS FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED, PERCENTAGE OF RECEIPTS TO BE CONSIDERED AS CROSSING THE STATUTORY THRESHOLD LIMIT BY WAY OF INSERTION OF ,EXPLANATION BELOW CLAUSE 10(23C) WAS NOT AVAILABLE AS IT WAS, INSERTED PROSPECTIVELY AND THE VAGUENESS ATTRIBUTABLE TO THE WORDS ' SUBSTANTIALLY FINANCED' COULD BE SAI D TO T.AVE EXISTED. THE FACT THAT THE INSERTION IN THE EXPLANATION AS INTRODUCED PROSPECTIVE W.E.F. 01.04.2015, IS NOT IN DISPUTE. HOWEVER, EVEN WHEN T HERE WAS A PERCEIVED AMBIGUITY IN THE STATUTORY POSITION, IT CAN BE SEEN FROM THE FOLLOWING DISCUSSION IN THE ORDER THAT THE LEGAL POSITION STO OD WELL ADDRESSED AS THE COURTS HAD STEPPED IN TO FILL THIS GAP.) IT IS PERT INENT TO NOTE THAT EVEN BEFORE THE INSERTION OF THE EXPLANATION BELOW CLAUS E 10(23C)(IIIAB) IN THE ABSENCE OF ANY STATUTORY GUIDANCE THEREON, THERE WE RE DECISIONS OF DIFFERENT COURTS ANTI TRIBUNALS WHERE THE LIMITS OF ABOUT 37% HAVE ALSO BEEN HELD TO BE SUFFICIENT FOR THE SOCIETY TO CLAIM THE BENEFIT OF THE PROVISIONS . REFERENCE MAY BE MADE TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. INDIAN I NSTITUTE OF MANAGEMENT (2010) 8 TAXMANN.COM 239/(2011) 196 TAXMAN 276. IN THE FACTS OF THE SAID CASE, GOVERNMENT FINANCING OF 37.85% WAS HELD TO BE ENTITLED FOR EXEMPTION U/S. 10(23C)(IIIAB) . THE COURT THEREIN FOLLOWED ITS EARLIER DECISION IN CIT V. NATIONAL EDUCATION SOCIETY [IT APPEAL NO. 808 OF 2009]. SIMILARLY IN THE DECISION RENDERED BY THE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT V JAT EDUCATION SOCIETY, ROHTAK [20I5] 64 TAXMANN.COM 312/[2016] 383 ITR 355 (PUNJAB. &. HAR.) CONSIDERING SUB-CLAUSE (IIIAB) OF ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 31 CLAUSE (23C) OF SECTION 10, THE COURT HELD AT PAGE 358 PARA 8 THAT 'A PLAIN READING OF THE SAID CLAUSE SHOWS THAT ANY UNIVERSI TY OR OTHER EDUCATIONAL INSTITUTION EXISTING FOR EDUCATIONAL PURPOSES AND N OT FOR PROFITS AND IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT IS ENTITLED TO CLAIM EXEMPTION FROM INCOME-TAX UNDER THE ACT.' IN THE FA CTS OF THE SAID CASE, IT IS SEEN THAT EVEN THOUGH THE BENEFIT OF THE LEGISLA TIVE INTENT WAS NOT AVAILABLE TO THE HON'BLE HIGH COURT, THE COURT CONS IDERING THE FACT THAT THE TOTAL RECEIPTS WERE RANGING BETWEEN 41% TO 82% ON I NDIVIDUAL INSTITUTION BASIS AND WHEN THE PERCENTAGE FOR THE SOCIETY WAS C ONSIDERED AS A WHOLE, IT WAS FOUND TO BE RANGING BETWEEN 44.52% AND 45.15 % FOR THE TWO YEARS BEING CONSIDERED BY THE JURISDICTIONAL HIGH COURT. THE DEPARTMENTAL APPEAL, ACCORDINGLY WAS DISMISSED HOLDING AS UNDER: 'IN VIEW OF THE ABOVE, THE TRIBUNAL WAS RIGHT IN H OLDING THAT THE AID GIVEN BY THE GOVERNMENT TO THE ASSESSEE CONSTITUTE S SUBSTANTIAL FINANCE BY THE GOVERNMENT WHICH HAD ENTITLED THE A SSESSEE TO CLAIM EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE ACT, NO INFIRMITY OR PERVERSITY COULD BE POINTED OUT BY THE LEARNED COUNSEL FOR THE REVENUE IN THE FINDINGS RECORDED B Y THE TRIBUNAL. THE SUBSTANTIAL QUESTIONS OF LAW AS CLAIMED BY THE REVENUE ARE ANSWERED ACCORDINGLY AND CONSEQUENTLY, FINDING NO MERIT IN THE APPEALS, THE SAME ARE HEREBY DISMISSED.' 9.2 HOWEVER, SINCE TODAY WE HAVE THE BENEFIT OF THE INSERTION OF THE EXPLANATION TO SUB-CLAUSE (IIIAB) AND (IIIAC) INSER TED BY FINANCE (N0.2) ACT, 2014 W . E.F. 0I.04.20I5, IT 'WILL BE APPROPRIATE TO EXTRACT THE RELEVANT PROVISIONS: 'SECTION 1O(23C) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF - (I) (II)..(III)* ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 32 (I I IAB) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTI ON EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PR OFIT, AND WHICH IS WHO/IV OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT; OR (IIIAC) * EXPLANATION.-FOR THE PURPOSES OF SUB-CLAUSES (IIIA B) AND (IIIAC) (IU(LB) AND (ILIAC). ANY UNIVERSITY OR OTHER EDUCATIONAL I NSTITUTION, HOSPITAL OR OR OTHER INSTITUTION REFERRED THEREIN , SHALL BE CONSIDERED AS BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT FOR ANY PREVIOUS YEAR, IF THE GOVERNMENT GRANT TO SUCH UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITUTION EXCEEDS SUCH PERCENTAGE OF THE TOTAL RECEIPTS INCLUDING A NY VOLUNTARY CONTRIBUTIONS, AS MAYBE PRESCRIBED OF SUCH UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION, HOSPITAL OR OTHER INSTITU TION, AS THE CASE MAYBE, DURING THE RELEVANT PREVIOUS YEAR]; (EMPHA SIS SUPPLIED) 9.3 IT ALSO NEEDS TO BE ADDRESSED FOR THE SAKE OF C OMPLETENESS THAT THE STATUTE AS QUOTED HEREINABOVE HAS USED THE EXPRESSION 'EXCEEDS SUCH PERCENTAGE OF THE TOTAL RECEIPTS ....... ' THAT VID E RULE 2BBB (INSERTED W.E.F. 12.12.2014) OF 'HE INCOME. LAX RULES, THE BAR AT TH E MINIMUM THRESHOLD OF 50 HAS BEEN FIXED FOR AN INSTITUTION WHICH HAS TO B E FINANCED BY THE GOVERNMENT FOR CLAIMING BENEFIT OF SECTION 10(23C)( IIIAB). BEFORE THIS DALE, AS NOTED BY WAY OF JUDICIAL STANDARDS SET BY TILE COURTS IN TILE AB SENCE OF ANY STATUTORY GUIDANCE, INSTITUTIONS RECEIVING LESS THAN THIS PERCENTAGE COULD ALSO BE ELIGIBLE. 9.4 ACCORDINGLY, ON A CONSIDERATION OF LAW AS ADDR ESSED BY THE HON'BLE KARNATAKA HIGH COURT IN THE AFORESAID TWO DECISIONS NAMELY INDIAN INSTITUTE OF MANAGEMENT AND NATIONAL EDUCATION SOCI ETY'S CASE (SUPRA) AS WELL AS THE DECISION OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF JAT ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 33 EDUCATION SOCIETY (SUPRA), THE INTERPRETATION OF TH E CHANGE MADE THROUGH THE FINANCE ACT, 2014 W.E.F. 01.04.20 15 BY WAY OF INSERTION OF EXPLANATION BELOW CLAUSE (I I IAB) AND (IIIAC) OF SUB-SECTION (23C) OF SECTION 10 WOULD BE THAT BEFORE 01.04.2015, EVEN INSTITUTI ON GETTING FINANCE LESS THAN 50% OF THE TOTAL RECEIPTS FROM THE GOVERNMENT WOULD BE ELIGIBLE FOR EXEMPTION SUBJECT TO FULFILMENT OF OTHER CONDITIONS . HOWEVER, AFTER 01.04.2.015, IT IS ONLY AN INSTIN.UON GOVERNMENT GRANTS WERE BEYON D THE THRESHOLD LIMIT OF 50% OF THE TOTAL RECEIPTS WHICH WOULD BE ELIGIBLE FOR BENEFIT U/S 10(23C)(IIIAB). IN THE FACTS OF THE PRESENT CASE, THE POSITION ON FACTS AS CONSIDERED AND AVAILABLE ON RECORD IS THAT ABOUT 60 OF THE INSTITUTION'S TOTAL RECEIPTS HAVE BEEN RECEIVED FROM THE GOVERNMENT. THIS FINDING OF FACT AS NOTED HAS N OT BEEN UPSET BY THE REVENUE. THUS, WHERE ON FACTS THE FINDING OF FACT ARRIVED AT BY THE CIT (A) THAT THE ASSESSEE HAS RECEIVED GOVERNMENT AID TO THE TUNE OF 60 OF ITS RECEIPTS REMAINS UNREBUTTED BY THE REVENUE, WE FIND NO MERIT IN THE DEPARTMENTAL APPEAL. 20. ON PERUSAL OF THE ABOVE REFERRED DECISION OF C HANDIGARH TRIBUNAL IN THE CASE OF CRM JAT POST GRADUATE COLLEGE (SUPRA) WE FIND THAT THE TRIBUNAL HAS REFERRED TO THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF INDIAN INSTITUTE OF MANAGEMENT (SUPRA) WHEREIN THE FACTS WERE THAT THE GOVERNMENT FINANCIN G WAS 37.87% OF THE TOTAL CONTRIBUTION RECEIVED DURING TH E YEAR AND THE HONBLE HIGH COURT HELD THE ASSESSEE TO BE ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 34 21. WE ALSO FIND THAT HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CRM JAT POST GRADUATE COLLEGE (SUPRA) HAS ALSO HELD THE ASSESSEE TO BE ELIGIBLE FOR EXEMPTION U/S 10(23C)(I IIAB) OF THE ACT WHERE THE GOVERNMENTS GRANTS WERE RANGING FROM 44. 52% TO 45.15%. WE THUS ARE OF THE CONSIDERED VIEW THAT BEF ORE THE INSERTION OF THE EXPLANATION TO CLAUSE 10(23C)(IIIA B) OF THE ACT W.E.F. 01.04.2015 SETTING OUT MINIMUM THRESHOLD OF 50% HAS BEEN FIXED FOR INSTITUTION WHICH HAS TO BE FINANCED BY GOVERNM ENT FOR CLAIMING BENEFIT OF SECTION 10(23C)(IIIAB) OF THE A CT BUT BEFORE THIS STAGE AS NOTED BY WAY OF JUDICIAL STANDARDS SET BY THE HONBLE COURTS AND THE CO-ORDINATE BENCHES AND IN THE ABSEN CE OF NON STATUTORY GUIDELINES EVEN THE INSTITUTIONS RECEIVIN G SUBSTANTIAL GRANT LESS THAN 50% OF THE TOTAL CONTRIBUTION BY TH E GOVERNMENT CAN ALSO TO BE HELD TO BE ELIGIBLE FOR EXEMPTION U/ S 10(23C)(IIIAB) OF THE ACT. THE WORD HERE IMPORTANT IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 22. BY EXAMINING THE FACTS OF THE INSTANT CASE IN T HE LIGHT OF ABOVE DISCUSSIONS WE OBSERVE THAT FOR THE YEAR UNDER APPE AL THE GROSS RECEIPTS WERE RS. 5,98,24,898/- WHICH COMPRISES OF THE FOLLOWING:- ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 35 1. GRANT FROM GOVERNMENT OF MADHYA PRADESH RS.2,71 ,00,000 2. FESS AND MISCELLANEOLUS INCOME RS.2,77,47,957 3. INTEREST RS. 47,64,151 4. RENT RS. 2,03,990 5. SALE OF TENDER FORM RS. 8,800 TOTAL RS.5,98,24,898 FROM THE ABOVE GROSS RECEIPTS IF WE DEDUCT THE REC EIPT ON ACCOUNT OF INTEREST, RENT AND SALE OF TENDER FROM W HICH ARE NOT EXACTLY IN THE SHAPE OF GRANT/FEES THE REMAINING AM OUNT WILL BE RS. 5,48,47,957/-. THE GOVERNMENT GRANT FOR THE YEAR W AS RS. 2,71,00,000/- WHICH IN PERCENTAGE WILL BE 49.40%. THUS THE GOVERNMENT GRANT IS ALMOST (THOUGH NOT EXACT) 50% O F THE TOTAL RECEIPT OF FEE AND GRANT DURING THE YEAR. UNDOUBTE DLY THE GOVERNMENT GRANT IS SUBSTANTIAL LOOKING TO THE QUAN TUM OF CONTRIBUTION AS WELL AS THE CONTROL OF THE STATE GO VERNMENT IN THE FUNCTIONING OF THE SOCIETY AS WELL AS THE MOVEMENT OF FUNDS. 23. WE, THEREFORE IN THE GIVEN FACTS AND CIRCUMSTAN CES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENTS REFERRED H EREIN ABOVE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE SOCIETY HA S BEEN RIGHTLY ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 36 HELD BY LD. CIT(A) TO BE ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT SINCE ALMOST 50% OF THE GRANTS WERE GIVEN B Y MINISTRY OF HUMAN RESOURCES DEPARTMENT OF MADHYA PRADESH AND FO R THE YEAR UNDER APPEAL THIS GRANT HAS BEEN RECEIVED FOR 20 PO LY TECHNICAL COLLEGES AND THUS THE ASSESSEE EDUCATIONAL INSTITUT E RUNNING SOCIETY SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSE OF EARNING PROFITS AND IS SUBSTANTIALLY FINANCED BY THE GOVERN MENT IS THEREFORE ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE AC . THE FINDING OF LD. CIT9A) STANDS CONFIRMED. GROUND NO.1 & 2 OF RE VENUES APPEAL ARE DISMISSED. 24. GROUND NO.4 ARE GENERAL IN NATURE WHICH NEEDS N O ADJUDICATION. 25. IN THE RESULT APPEAL OF THE REVENUE IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2014-15 STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 06.11.2 020. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 06 NOVEMBER, 2020 /DEV ITA NO.469/IND/2018 SHRI VAISHNAV POLYTECHNIC COLLEGE 37 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE