The Income tax Officer, Kathua V. M/s. Modern Educational Society, Kathua

ITA 491/ASR/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0618 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Keywords: Gift; Charitable institution; Capital expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.491(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :AAAM9060F THE INCOME TAX OFFICER, VS. M/S. MODERN EDUCATIONA L SOCIETY, KATHUA. PATEL NAGAR, KATHUA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. R.L. CHHANALIA, DR RESPONDENT BY:SH. JOGINDER SINGH, CA DATE OF HEARING: 02/01/2013 DATE OF PRONOUNCEMENT: 03/01/2013 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT (A), JAMMU, DATED 15.10.2010 FOR THE ASSESSMENT YEAR 200 7-08. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.8, 42,000/- MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION U/S 10(23C)(IIIAD) IN VIEW OF THE DECISION OF THE HONBLE UTTARAKHAND HIGH COURT IN T HE CASE OF ITA NO.491/ASR/2010 2 CIT VS. QUEENS EDUCATIONAL SOCIETY, HALDWANI AND CI T VS. ST. PAULS SR. SECONDARY SCHOOL, KATHGODAM DATED 24.09.2 007. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT APPRECIATING THE FACT THAT THERE ARE JUDICIAL PRONOUNCEMENTS BOTH IN FAVOUR OF ASSESSEE AS WELL AS IN FAVOUR OF REVENUE ON THE ISSUE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN PLACING RELIANCE ON THE DECIS ION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROV E INTERNATIONAL CHARITABLE TRUST AND OTHERS VS. UNION OF INDIA (2010) 230 CTR 477 (P&H) AS IT IS NOT THE JURISDICT IONAL HIGH COURT IN THE CASE OF THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN EDUCATIONAL INSTITUTION AT NASCENT STAGE. THE ASSESSEE SOCIETY IS REGISTERED WITH REGISTRAR OF SOCIETIES J & K. THE OBJECTS OF THE SOCIETY AS STATED ARE TO PROMOTE THE EDUCATIONAL, ECONOMIC, MORAL AND SOCIAL STANDARDS O F THE INHABITANTS OF THE AREA, TO ALLEVIATE POVERTY, TO START, ENCOURAGE ASS IST AND CARRY ON SUCH OTHER EDUCATIONAL ACTIVITIES ETC. DURING THE YEAR THE ASS ESSEE HAS RECEIVED A SUM OF RS.8,42,000/- AS GIFT, MEMBERSHIP FEES AND DONATION S. THE AO NOTICED THAT THIS AMOUNT IS SHOWN AS INCOME IN INCOME & EXPENDI TURE ACCOUNT. AGAINST THE INCOME THE ASSESSEE HAS SHOWN EXPENDITURE OF RS .750/- ONLY WITH SURPLUS OF RS.8,41,250/-. IN THE RECEIPT AND PAYMEN T A/C A SUM OF RS.8,37,718/- HAS BEEN SHOWN AS EXPENDITURE ON BUI LDING CONSTRUCTION. THE AO HAS GIVEN A SHOW CAUSE NOTICE TO ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. ITA NO.491/ASR/2010 3 3. THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTIC E SUBMITTED THAT THE AMOUNT OF RS.8,41,250/- WAS SPENT FOR CONSTRUCTION OF BUILDING WHICH WAS FOR THE PURPOSE OF EDUCATION AND WHICH IS ESSENTIAL FOR RUNNING INSTITUTION. THE ASSESSEE ALSO RELIED UPON THE DECISIONS OF VARI OUS COURTS OF LAW, AVAILABLE AT PAGE 5-6 OF AOS ORDER. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND RELYING UPON THE DECISION OF HO NBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOC IETY, HELD THAT INCOME OF THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OR EXEMP TION U/S 11 OR 10(23C)(IIIAD) OF THE ACT. THE SURPLUS WAS SHOWN IN THE INCOME AND EXPENDITURE IS TAXED AS INCOME OF THE AOP. 4. THE LD. CIT(A) AFTER CONSIDERING THE OBJECTS OF THE SOCIETY ESPECIALLY THE OBJECTS REPRODUCED AT PAGE 8 OF HIS ORDER WHICH REFERS TO THE OBJECTS TO ACQUIRE BY GIFTS, PURCHASES, LEASE ON HIRE OR OTHER WISE HOWEVER, ANY LAND, BUILDINGS AND ANY PROPERTY MOVEABLE AND/OR MOVEABLE FOR ANY ESTATE OR INTEREST FOR THE FURTHERANCE OF ALL OR ANY OF THE O BJECTS OF THE SOCIETY AND RELYING UPON THE JUDGMENT OF THE HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRU ST & ORS VS. UNION OF INDIA & ORS 230 CTR 477 HELD THAT THE ASSESSEE HAS APPLIED MORE THAN 85% OF ITS RECEIPTS TOWARDS CAPITAL EXPENDITURE AS IS ALSO ADMITTED BY THE AO DURING THE REMAND PROCEEDINGS AND ALLOWED THE CLAIM OF THE ASSESSEE. ITA NO.491/ASR/2010 4 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, MR. JOGINDER SINGH, CA, ARGUED THAT THE DECISION OF UTTRAKHAND HIGH COURT I S NOT BINDING IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOCIETY, HALDWANI. T HE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS VS. UNION OF I NDIA & ORS REPORTED IN 327 ITR 73 IS APPLICABLE IN WHICH IT WAS HELD THAT CAPITAL AND EXPENDITURE IS TO BE DEDUCTED FROM THE GROSS INCOME OF THE EDUCAT IONAL INSTITUTION IN DETERMINING WHETHER 85% OF THE INCOME HAS BEEN APPL IED FOR ITS OBJECTS. HE ALSO RELIED UPON THE DECISION OF THE ITAT, AMRITSAR BENCH IN THE CASE OF M/S. D.N. MEMORIAL TRUST VS. COMMISSIONER OF INCOME TAX, PASSED IN ITA NO.617(ASR)/2011 AND M/S. PRASHANT EDUCATIONAL TRUST VS. COMMISSIONER OF INCOME TAX, PASSED IN ITA NO.618(AS R)/2011 DATED 11.07.2012 WHERE THE ITAT, AMRITSAR BENCH HAS ALSO OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. CIT THAT THE ACTIVITIES OF THE TRUST ARE FOR NON-CHARITABLE PURPOSE OR FOR PERSONAL PURPOSES OF THE TRUSTEES ETC. RATHER WHATEVER FUNDS WERE ACQUIRED BY THE TRUST H AVE BEEN UTILIZED FOR THE PURPOSE OF EDUCATIONAL ACTIVITIES OF THE INSTITUTIO N AND IN THE ABSENCE OF ANY ADVERSE MATERIAL BROUGHT ON RECORD BY THE LD. CIT, THE APPLICATION BY THE ASSESSEE CAN NOT BE REJECTED. ITA NO.491/ASR/2010 5 6. MR. JOGINDER SINGH CA FURTHER ARGUED THAT THE FA CTS IN THE PRESENT CASE ARE IDENTICAL AS IN THE CASE OF D.N.MEMORIAL T RUST VS. CIT (SUPRA) AND IN THE DECISION OF HONBLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNION OF INDIA (SUPRA). THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE, MR. JO GINDER SINGH, CA, PRAYED TO CONFIRM THE ORDER OF THE LD. CIT(A). 7. THE LD. DR, SH. R.L.CHHANALIA, ON THE OTHER HAND , RELIED UPON THE ORDER OF THE AO AND THE DECISION OF THE HONBLE UTT RAKHAND HIGH COURT IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOCIETY (SUP RA) AND PRAYED TO REVERSE THE ORDER OF THE LD. CIT(A) BY CONFIRMING T HE ORDER OF THE A.O. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE FACT S OF THE CASE. IN THE PRESENT CASE, THE ASSESSEE IS HAVING INVESTED A SU M OF RS.8,41,250/- TOWARDS CONSTRUCTION OF BUILDING. THE SAID CONSTRUCTION OF BUILDING IS FOR THE PURPOSE OF EDUCATION AND WHICH IS THE MAIN OBJECT OF THE IN STITUTION. THERE IS NOTHING ON RECORD BROUGHT BY THE AO THAT THE SAID EXPENDITU RE HAS BEEN INCURRED FOR PERSONAL PURPOSES OF THE MEMBERS OR TRUSTEES OF T HE ASSESSE INSTITUTION AND THEIR FAMILY MEMBERS AND NOT FOR THE OBJECTS OF THE INSTITUTION. THEREFORE, THE SAID AMOUNT OF RS.8,41,250/- INCURRED FOR CONSTRUCT ION OF BUILDING IS AN APPLICATION OF MONEY FOR THE OBJECTS OF THE SOCIETY AND IN VIEW OF OUR DECISION IN THE CASE OF D.N. MEMORIAL TRUST VS. CIT (SUPRA) AND IN THE ITA NO.491/ASR/2010 6 DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNION OF INDIA ( SUPRA). THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HA S RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THUS, ALL THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.491(ASR)/2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD JANUARY, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3RD JANUARY, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. MODERN EDUCATIONAL SOCIETY,KATHUA 2. THE ITO KATHUA 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.