BHAI MASTANA SINGH INTERNATIONAL EDUCATIONAL & CHARITABLE SOCIETY , MUKTSAR V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIHARH

ITA 485/ASR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3567 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2019
• Assessment Year: 2018-2019
• Appeal Filed On: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP C HAUHAN LD
• Assessee Lawyers: ASHWANI KALIA LD
• Keywords: Set aside
• Section: 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL AMRITSAR BENCH, AMRITSA R BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER A ND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.485/ASR/2018 ASSESSMENT YEAR: NIL BHAI MASTAN SINGH INTERNATIONAL EDUCATIONAL & CHARITABLE SOCIETY MALOUT ROAD, NEAR BUS STAND MUKTSAR [PAN:AABTB 0588R] VS. CIT(EXEMPTIONS) CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KALI A (LD. CA) RESPONDENT BY: SH. SANDEEP CHAUHAN (LD. CIT- DR) DATE OF HEARING: 28.08.2019 DATE OF PRONOUNCEMENT: 29.10.2019 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE APPELLAN T/SOCIETY AGAINST THE ORDER DATED 31.08.2018 IMPUGNED HEREIN PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH, U/S 80G(VI) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WHEREBY THE LD. CIT (EXEMPTIONS) DENIED THE APPROVAL SOUGHT U/S 80G OF THE ACT. ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT HAS M OVED AN APPLICATION ON DATED 21.08.2018 BEFORE THE LD. CIT(E ), CHANDIGARH AND SOUGHT APPROVAL U/S 80G OF THE ACT, WHICH WAS TAKEN INTO CONSIDERATION BY THE LD. CIT(E) BY FIXING THE DATE ON 22.06.2018 AND THEREAFTER DETAILED QUESTIONNAIRE WAS DISPATCHED TO THE APPELLANT FOR FILING REPLY TO THE CERTAIN QUERIES BY 2 ND JULY, 2018 AS DETAILED IN PARA NO.2 OF THE ORDER. THE APPELLANT REPLIED THE QUERIE S, THEREAFTER THE LD. CIT(E) AGAIN RAISED ADDITIONAL QUERIES AS MENTIONED IN PARA NO.3 OF THE ORDER, WHICH WERE ALSO REPLIED BY THE APPELLANT AND ULTIMATELY THE LD. CIT(E) REJECTED THE APPLICATION OF THE APPELLANT SOCIETY U/S 80G OF THE ACT BY HOLDING AS UNDER: THE APPLICANT SOCIETY IN RESPONSE TO THE ABOVE QUE RIES SUBMITTED THE DETAILED REPLY VIDE LETTER DATED 28.08.2018. F URTHER, ON PERUSAL OF THE FINANCIAL STATEMENTS IT WAS SEEN THAT THE AP PLICANT SOCIETY'S AGGREGATE ANNUAL RECEIPT HAS BEEN GRADUALLY INCREAS ING YEAR AFTER YEAR. THE FINANCIAL STATEMENTS ALSO REVEAL THAT THE APPLICANT IS CONTINUOUSLY FOCUSING ON CREATION OF ASSETS. THE QU ANTUM OF THE CURRENT ASSETS AND ADDITION IN FIXED ASSETS ARE IN HUGE AMOUNT THROUGH THE ACCOUNTING PERIOD ENDING ON MARCH, 2015 TO MARCH, 2017, THE TABULATED EXTRACT OF THE SAME IS UNDER:- F.Y. 2014 - 15 2015 - 16 2016 - 17 GROSS RECEIPTS 2,73,54,559/ - 3,04,06,650/ - 3,30,09,970/ - CURRENT ASSETS 84,89,611/ - 1,13,45,962/ - 84,08,802/ - ADD ITIONS IN FIXED ASSETS. 58,56,755/ - 58,46,648/ - 1,01,47,832/ - THE APPLICANT HAS RECEIVED INCOME BY WAY OF ADMISSI ON, EXAMINATION & TUITION FEE TO THE TUNE OF RS. 2,73,5 4,559/-, RS. 3,04,06,650/- & RS. 3,30,09,970/- DURING THE F.Y. 2 014-15, 2015- 16 & 2016-17. THE PURPOSE OF LEGISLATURE TO INCLUDE THIS SECTION IN THE ACT IS TO PROMOTE AND ENCOURAGE PEOPLE FOR MAKI NG DONATIONS TO THE SOCIETIES/TRUSTS WHICH OTHERWISE LACKS FUNDS FO R PERFORMING CHARITABLE ACTIVITIES. ON THE CONTRARY, THE TRUST H AS ACCUMULATED A LARGE FUND IN THE FORM OF CURRENT ASSETS AND FIXED ASSETS. MOREOVER, THE FINANCES ALSO REFLECT NO PALPABLE FINANCIAL STR ESS AS THE SOCIETY IS ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 3 IN RECEIPT OF EXCESS OF RS. 3 CRORES AND CREATED FI XED ASSETS TO THE TUNE OF RS. 1.10 CRORES AND CURRENT ASSETS OF RS. 8 4 LAKHS. 4. FURTHER, THE APPLICANT WAS GRANTED AFFILIATION BY CENTRAL BOARD OF SECONDARY EDUCATION, DELHI. AS PER THE CBSE AFFI LIATION GUIDELINES UNDER THE CLAUSE 11 OF THE BYE LAWS FEES 'NO CAPITATION FEE OR VOLUNTARY DONATIONS FOR GRANTING ADMISSION I N THE SCHOOL OR FOR ANY OTHER PURPOSE SHOULD BE CHARGED/COLLECTED I N THE NAME OF THE SCHOOL' WHICH CLEARLY SHOWS THAT WHILE GRANTING AFFILIATION CBSE SPECIFICALLY PRECLUDES INDULGENCE/ ACCEPTANCE OF DONATION. THE APPLICANT CLAIMING TO PURSUE THE LIMB OF EDUCATION HAS TO ADHERE STRICTLY TO ALL CONDITIONS/REGULATION S RELATED TO THE FIELD OF EDUCATION. IT'S ALSO PERTINENT THAT THE SO CIETIES 'RUNNING SCHOOLS HAVE INVARIABLY CLAIMED AND ACCEPTED AS ANY OTHER EDUCATIONAL INSTITUTION AS PER THE SCHEME OF THE AC T. ALSO, THERE ARE NO PREVIOUS INSTANCES OF DONATION AS WELL EXCEPT RS .6,000/- DURING F. Y. 2016-17. 5. KEEPING, IN VIEW ALL OF THE ABOVE, IT IS S AFE TO CONCLUDE THAT THE APPLICANT FAILED TO PROVIDE A COGENT RATIONALE FOR SEEKING DONATIONS THAT SUBSTANTIATE THE NEED OF DONATIONS IN ABSENCE OF WHICH THE REAL PURPOSE OF THE APPLICANT IS NOT ESTABLISHED. IT IS ALSO PERTINENT TO MENTION THAT EVEN THOUGH THE APPLICANT HAS A 12AA R EGISTRATION, THAT BEING A PRE-CONDITION BUT NOT A SUFFICIENT CONDITIO N FOR APPROVING EXEMPTION TO DONATIONS, THE CASE FOR APPROVAL IS NO T MADE OUT. IN THE LIGHT OF THE ABOVE, I HAVE NO OPTION BUT TO DENY TH E APPROVAL TO THE APPLICANT U/S 80G OF THE INCOME TAX ACT, 1961. 3. BEING AGGRIEVED, THE APPELLANT PREFERRED THE INSTA NT APPEAL AND RAISED THE ARGUMENTS IN SUPPORT OF ITS CASE. 4. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ORDER UNDER CHALLENGE DOES NOT REQUIRE ANY INTERFERENCE AS THE SAME IS BASED ON THE LOGICAL REASONING AND IN ANY SENSE CANNOT BE TERMED AS PERVERSE OR IMPROPER OR ILLEGAL. 5. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(E) MAINLY EMPHASIZED THAT FROM THE FINANCIAL STATEMENTS IT APPEARS THAT THE APPELLANT'S AGGREGAT E ANNUAL RECEIPT HAS BEEN INCREASING GRADUALLY YEAR AFTER YEAR AND THE CONTINUOUSLY FOCUSING ON CREATION OF ASSETS . THE LD. CIT(E) FURTHER OBSERVED THAT THE APPLICANT HAS RECEIVED ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 4 INCOME BY WAY OF ADMISSION, EXAMINATION & TUITION F EE TO THE TUNE OF RS. 2,73,54,559/-, RS. 3,04,06,650/- & RS. 3,30,09,970/ - DURING THE F.Y. 2014-15, 2015-16 & 2016-17 . THE PURPOSE OF LEGISLATURE TO INCLUDE THIS SECTION IN THE ACT IS TO PROMOTE AND ENCOURAGE PEOPLE FOR MAKING DONATION S TO THE SOCIETIES/TRUSTS WHICH OTHERWISE LACKS FUNDS FOR PERFORMING CHARITAB LE ACTIVITIES. ON THE CONTRARY, THE TRUST HAS ACCUMULATED A LARGE FUND IN THE FORM OF CURRENT ASSETS AND FIXED ASSETS. MOREOVER, THE FINANCES ALSO REFLECT NO PALP ABLE FINANCIAL STRESS AS THE SOCIETY IS IN RECEIPT OF EXCESS OF RS. 3 CRORES AND CREATED FIXED ASSETS TO THE TUNE OF RS. 1.10 CRORES AND CURRENT ASSETS OF RS. 84 LAK HS . THE LD. CIT(A) FURTHER OBSERVED THAT THE APPLICANT WAS GRANTED AFFILIATION BY CENT RAL BOARD OF SECONDARY EDUCATION, DELHI. AS PER THE CBSE AFFILIA TION GUIDELINES UNDER CLAUSE 11 OF THE BYE LAWS I.E. FEES NO CAPITATION FEE OR VOLUNTARY DONATIONS FOR GRANTING ADMISSION IN THE SCHOOL OR F OR ANY OTHER PURPOSE SHOULD BE CHARGED/COLLECTED IN THE NAME OF THE SCHO OL WHICH CLEARLY SHOWS THAT WHILE GRANTING AFFILIATION CBSE SPECIALLY PREC LUDES INDULGENCE/ACCEPTANCE OF DONATION . THE LD. CIT(E) FINALLY CONCLUDED THAT IT IS SAFE TO CONCLUDE THAT THE APPLICANT FAILED TO PROVIDE A COGENT RATIONALE FOR SEEKING DONATIONS THAT SUBSTANTIATE THE NEED OF DONATIONS IN ABSENCE OF WH ICH THE REAL PURPOSE OF THE APPLICANT IS NOT ESTABLISHED . 6. WE HAVE APPLIED OUR MIND INDEPENDENTLY TO THE PECUL IAR FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. CIT(E) WHILE DECLIN ING THE APPLICATION U/S 80G OF THE ACT HAS HELD THAT THE APPLICA NT IS CONTINUOUSLY FOCUSING ON CREATION OF ASSETS AND AGGREGATE ANNUAL RECEIPT HAS BEEN GRADUALLY INCREASING YEAR AFTER YEAR A ND HAS ACCUMULATED FUND IN THE FORM OF CURRENT AND FIXED ASSETS AND FROM THE FINANCIAL STATEMENTS, NO PALPABLE FINANCIAL STRESS AS TH E SOCIETY IS IN RECEIPT OF EXCESS OF RS.3 CRORES AND CREATED FIXED ASSETS TO THE TUNE OF RS.1.10 CRORES AND CURRENT ASSETS OF RS.84 LAKHS. ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 5 7. THE APEX COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIE TY VS. CIT [2015] 85 SCC 47 SUMMARIZED THE LEGAL POSITION A S UNDER: 11. THUS, THE LAW COMMON TO SECTION 10(23C) (IIIAD) AND (VI) MAY BE SUMMED UP AS FOLLOWS: WHERE AN EDUCATIONAL INSTITUTION CARRIES ON THE ACT IVITY OF EDUCATION PRIMARILY FOR EDUCATING PERSONS, THE FACT THAT IT MAKES A SURPLUS DOES NOT LEAD TO THE CONCLUSION THA T IT CEASES TO EXIST SOLELY FOR EDUCATIONAL PURPOSES AND BECOME S AN INSTITUTION FOR THE PURPOSE OF MAKING PROFIT. THE PREDOMINANT OBJECT TEST MUST BE APPLIED - THE P URPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKIN G MOTIVE. 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 RESU LTS IN MAKING A PROFIT, IT BECOMES AN ACTIVITY FOR PROFIT. IF AFTER MEETING EXPENDITURE, A SURPLUS ARISES INCI DENTALLY FROM THE ACTIVITY CARRIED ON BY THE EDUCATIONAL INS TITUTION, IT WILL NOT BE CEASE TO BE ONE EXISTING SOLELY FOR EDU CATIONAL PURPOSES. THE ULTIMATE TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER IN THE CONCERNED ASSESSMENT YEAR THE OBJECT IS TO M AKE PROFIT AS OPPOSED TO EDUCATING PERSONS. THE HONBLE APEX COURT CLEARLY HELD THAT A SURPLUS DOES NOT LEAD TO THE CONCLUSION THAT IT CEASES TO EXIST SOLELY FOR EDUCATIONAL PURPOSES AND BECOMES AN INSTITUTION FOR THE PURPOSE OF MA KING PROFIT. THE PREDOMINANT OBJECT TEST MUST BE APPLIED - THE PURPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKIN G MOTIVE. FURTHER THE ACTIVITIES OF THE INSTITUTIONS BE LOOKED AT CAREFULLY AND IF THEY ARE NOT GENUINE, OR ARE NOT BEING CARRIED OU T IN ACCORDANCE WITH ALL OR ANY AND APPROVAL HAS BEEN GIVEN, SUCH APPR OVAL AND EXEMPTION MUST FORTHWITH WITHDRAWN. ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 6 IN OUR CONSIDERED VIEW CREATION OF ASSETS IN THE INSTANT CASE DOES NOT COME INTO PLAY FOR REJECTION OF APPLICATION U/ S 80G OF THE ACT, BECAUSE IT IS NOT THE CASE OF REVENUE DEPARTMENT TH AT CREATION OF ASSETS IS NOT IN SYNC WITH THE PROVISIONS OF THE LAW AS APPLICABLE THERETO AND THE APPELLANT HAS CEASED TO BE O NE EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND THE OBJECT OF THE APPELLANT SOCIETY IS TO MAKE PROFIT AS OPPOSED TO EDUCATI NG PERSONS. 8. NEXT GROUND OF REJECTION BY THE LD. CIT(E) IS THAT A S PER THE CBSC AFFILIATION GUIDELINES UNDER THE CLAUSE 11 OF THE BYE LAWS I.E. FEES WAS THAT NO CAPITATION FEE OR VOLUNTARY DONATIONS FOR GRANT ING ADMISSION IN THE SCHOOL OR FOR ANY OTHER PURPOSE SHOULD BE CH ARGED/COLLECTED IN THE NAME OF THE SCHOOL WHICH CLEARLY SHOWS THAT WHILE GRANTING AFFILIATION CBSE SPECIALLY PRECLUDES INDULGENCE/ACCEPTANCE OF DONATI ON . IN OUR CONSIDERED VIEW THE RESTRICTIONS SET OUT BY THE CBSC BOARD WERE REQ UIRED CONSIDERATIONS IN VIEW OF PROVISIONS OF SEC.80G OF THE ACT, WHICH THE LD. CIT(E) FAILED TO DO SO . THE LD CIT(E) DID NOT ANALYZE THE RELEVANT PRO VISIONS AND PARAMETERS SET OUT FOR CONSIDERATION OF APPLICATION U/S 80G OF THE ACT, HENCE, FOR THE END OF JUSTICE, WE ARE INCLINED TO SET ASIDE THE OR DER PASSED BY THE LD. CIT(E) AND REMAND BACK THIS CASE TO THE FILE OF THE LD. CIT(E) FOR DECISION AFRESH. IN CASE THE LD. CIT(E) WILL FIND GUIDELINES /BYE LAWS OF CBSE BOARD CONTRARY TO SEC.80G OF THE ACT AND IF THE APPLICANT SOCIETY INTENDS NOT TO FOLLOW THE GUIDELINES/BYE LAWS OF CBSE BOARD AND TO FOREGO AFFILIATION OF THE CBSE, THEN THE LD. CIT(E) WOULD BE AT LIBERTY T O CONSIDER THE APPLICATION AS PER PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE. CONSEQUENTLY THE ORDER PASSED BY THE LD. CIT(E) IS SET ASIDE AND THE CASE IS REMANDED TO THE FILE OF THE LD. CIT(E) FOR DECIS ION AFRESH, SUFFICE TO WITHIN 06 MONTHS OF THIS ORDER, WHILE AFFORDING REA SONABLE OPPORTUNITIES OF BEING HEARD TO THE APPELLANT. ITA N0.485/ASR/ 2018 BHAI MASTAN SINGH INT ERNATIONAL EDUCATIONAL & CHARITABLE SOCIET Y VS. CIT(E) 7 9. IN THE RESULT, THE APPEAL FILED BY THE APPELLANT STA NDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/1 0/2019. SD/- SD/- (B.R.BASKARAN) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED:29/10/2019. /PK/ PS. COPY FORWARDED TO: 1.THE APPELLANT 2.THE RESPONDENT 3.THE CIT 4.THEN CIT(APPEALS) 5.SR DR, I.T.A.T. AMRITSAR 6.GUARD FILE TRUE COPY BY ORDER