M/s Board of Secondary Education, Bhopal V. The Assistant Commissioner of Income Tax 1(2), Bhopal

ITA 544/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54013 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 13-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: AJAY K CHHAJED
• Keywords: Charitable institution; Benefit of exemption
• Section: 143(3); 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AADFB3497R I.T.A.NO. 544/IND/2010 A.Y. : 2007-08 BOARD OF SECONDARY EDUCATION, ACIT, 1(2) M.P. BOARD OFFICE, VS BHOPAL SHIVAJI NAGAR BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI AJAY K. CHHAJED, ADV. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR DATE OF HEARING : 18.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 29.07.2009 FOR THE ASSESSMENT YEAR 2007-08, IN THE MATTER OF ORDER PASSED BY THE ASSESSING OFFI CER U/S 143(3) OF THE INCOME-TAX ACT, 1961. -: 2: - 2 2. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE :- 2. THAT LOOKING TO THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-I, BHOPAL HAS ERRED IN NOT CONSIDERING THE CONDITIONS OF TIME LIMIT IMPOSED W.E.F. 1.4.2001 FOR UTILIZATION OF ACCUMULATED SURPLUS INCOME IN EXCESS OF 15% OF THE GROSS RECEIPTS OF THE RECOGNIZED EDUCATIONAL INSTITUTION AS PER THE PROVISIONS OF SECTION 10(23C)(VI) OF THE INCOME- TAX ACT, WITHIN 5 YEARS WHICH COULD BE CLAIMED AS SET OFF AGAINST THE DEFICIT OF SUBSEQUENT YEARS ONLY. IN THE INSTANT CASE THE ACCUMULATED SURPLUS IN EXCESS OF 15% OF THE GROSS RECEIPTS FOR THE ASSESSMENT YEARS 2004-05, 05-06 AND 06-07 IS RS. 1,073.37 LAKHS, OUT OF WHICH RS. 678.63 LAKHS COULD HAVE BEEN SHOWN AS UTILIZED AGAINST THE DEFICIT OF THE ASSESSMENT YEAR 2007-08, HAD THE INCOME BEEN ASSESSED TO THE DEFICIT OF RS. 678.93 SHOWN IN THE RETURN INSTEAD OF RS. NIL. -: 3: - 3 3. THAT LOOKING TO THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-I, BHOPAL, HAS ERRED IN INDIRECTLY DENYING THE BENEFIT OF EXEMPTION OF ACCUMULATED SURPLUS WHICH WOULD BE SET OFF AGAINST THE DEFICIT, DESPITE CITING SOME DECISIONS OF HIGH COURTS IN THIS RESPECT AND CONFIRMED THE ASSESSED INCOME TO RS. NIL INSTEAD OF THE DEFICIT OF RS. 678.69 LAKHS DECLARED IN THE RETURN. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A CHARITABLE TRUST ESTABLISHED BY THE GOVERNMENT OF M ADHYA PRADESH TO REGULATE SECONDARY EDUCATION IN THE STAT E OF M.P. IT CONDUCTS EXAMINATIONS, PUBLISHES RESULTS, GRANTS DIPLOMAS/CERTIFICATES AND TAKES MEASURES TO PROMOTE PHYSICAL, MORAL AND SOCIAL WELFARE OF THE STUDENTS IN THE REC OGNIZED EDUCATIONAL INSTITUTION. THE TRUST HAS BEEN GRANTED APPROVAL AS PER PROVISIONS OF SECTION 10(23C)(VI) OF THE INC OME-TAX ACT, BY THE CHIEF COMMISSIONER OF INCOME TAX. THE ASSESS EE -: 4: - 4 FURNISHED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 26.12.2007 SHOWING A DEFICIT OF RS. 678.63 LAKHS. T HE ASSESSEE HAS CLAIMED EXEMPTIONS U/S 10(23C)(VI) OF THE INCOME-TAX ACT. SINCE, THE INCOME OF THE ASSESSEE W AS EXEMPT U/S 10(23C)(VI). THE AO HAS ASSESSED TOTAL INCOME O F THE ASSESSEE AT RS. NIL VIDE ORDER U/S 143(3) DATED 1.7 .2009. 4. BY THE IMPUGNED ORDER, THE CIT(A)CONFIRMED THE ACTI ON OF AO FOR NOT ACCEPTING THE DEFICIT OF RS. 678.63 L AKHS AND ASSESSING THE INCOME AT NIL AFTER HAVING THE FOLLOW ING OBSERVATIONS :- THUS, THE INCOME FALLING U/S 10(23C)(VI) CANNOT BE INCLUDED IN TOTAL INCOME DETERMINED IN THE ASSESSMENT ORDER U/S 143(30. THE AO MAKES AN ASSESSMENT U/S 143(3) OF THE TOTAL INCOME OR LOSS O F THE ASSESSEE. THE FACTS OF THE CASE LAWS REFERRED B Y THE AR ARE DIFFERENT FROM THE FACTS OF THE INSTANT CASE. IN THOSE CASES, THE ISSUE INVOLVED WAS ASSESSING OF INCOME U/S 11 OF THE ACT WHEREAS IN THE INSTANT CASE, THE INCOME WAS EXEMPT U/S 10(23C)(VI). SINCE, INCOME OR LOSS FALLING U/S -: 5: - 5 10(23C)(VI) CANNOT BE CONSIDERED FOR COMPUTATION OF TOTAL INCOME, THE AO HAS CORRECTLY ASSESSED THE INCOME AT NIL. THUS, THIS GROUND OF APPEAL IS DISMISSED. 5. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND I T WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT PRIOR TO 1.4.2001, THERE WAS NO RESTRICTION OF THE TIME TO U TILIZE THE ACCUMULATED SURPLUS, HOWEVER, BY THE FINANCE ACT, 2 001, IT HAS BEEN PROVIDED THAT IF MORE THAN 25 % OF THE INC OME IS ACCUMULATED ON OR AFTER 1.4.2001, THEN THE AMOUNT E XCEEDING 25 % ( 15% W.E.F. 1.4.2002 BY THE FINANCE ACT, 2002 ) CAN BE ACCUMULATED ONLY FOR A PERIOD OF FIVE YEARS. BY REF ERRING TO CERTAIN CASE LAWS, HE FURTHER SUBMITTED THAT EXCESS DISTRIBUTION OF INCOME OF AN EARLIER YEAR CAN BE AV AILED OFF FOR SET OFF AGAINST THE CURRENT SHORT FALL. AS PER LD. AUTHORIZED REPRESENTATIVE, IF THE DEFICIT OF THE CURRENT YEAR IS NOT ASSESSED AS SUCH AND THE INCOME IS ASSESSED AS NIL, IT WILL TANTAMOUNT TO DENIAL OF SET OFF AND THEREBY INDIRECTLY DENIAL OF EXEMPTION CLAIMED FOR THE YEAR IN WHICH THERE WOULD BE ACCUMU LATED SURPLUS AS THE PRESCRIBED LIMIT FOR THE UTILIZATION OF THE SAME -: 6: - 6 WILL NEVER BE FOLLOWED AND THIS WILL RESULT IN TAXA TION OF UNUTILIZED INCOME AFTER EXPIRY OF THE PRESCRIBED TI ME LIMIT FOR WHICH ASSESSEE MAY NOT BE RESPONSIBLE. HE PLACED RE LIANCE ON THE DECISION OF I.T.A.T. INDORE BENCH IN THE CASE O F SARVAJANIK JANKALYAN PARMARTHIK NYAS VS. ACIT, 15 ITJ 642. 6. ON THE OTHER HAND, IT WAS CONTENDED BY THE LD. CIT DR THAT UNDER THE PROVISIONS OF SECTION 10, INCOME IS ENTIRELY EXEMPT, WHEREAS PROVISIONS OF SECTION 11 & 12 DEAL WITH INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIO US PURPOSES AND INCOME OF TRUST OR INSTITUTION FROM CONTRIBUTIO N AND ALLOW THE SAME SUBJECT TO FULFILLMENT OF VARIOUS CONDITIO NS ATTACHED TO IT. AS PER LD. CIT DR, BOTH THE PROVISIONS ARE E NTIRELY DIFFERENT, THEREFORE, THE CONDITIONS PRESCRIBED FOR TAKING BENEFIT OF ADJUSTMENT IN SUBSEQUENT YEARS, AS PRESCRIBED IN SECTION 11 & 13 CANNOT BE TAKEN IN RESPECT OF INCOME WHICH IS ENTIRELY EXEMPT U/S 10 OF THE INCOME-TAX ACT, 1961. HE SUBMI TTED THAT ASSESSEE IS AN EDUCATIONAL INSTITUTION WHOSE INCOME IS FULLY EXEMPT, THEREFORE, THERE IS NO OCCASION FOR GIVING ANY BENEFIT OF CARRY FORWARD OF EXCESS FUND UTILIZED IN THE EARLIE R YEAR NOR THERE IS ANY REASON FOR ASSESSING THE SAME AT LOSS. HE FURTHER -: 7: - 7 SUBMITTED THAT ALL THE CASE LAWS CITED BY THE LD. A UTHORIZED REPRESENTATIVE RELATE TO PROVISIONS OF SECTION 11 & 12 WHEREIN SET OFF IS ALLOWED SUBJECT TO FULFILLMENT OF CERTAI N CONDITIONS AND EXCESS IS BROUGHT TO TAX IN CASE OF ASSESSEES FAILURE TO UTILIZE THE INCOME FOR THE PURPOSE OF ASSESSEES TR UST TO THE EXTENT PRESCRIBED UNDER THE ACT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE IS AN EDUCATIONAL INS TITUTION ENGAGED FOR CONDUCTING EXAMINATION, PUBLISHING RESU LTS AND ISSUING CERTIFICATES TO PROMOTE PHYSICALLY, MORALLY OR SOCIALLY WELFARE OF THE STUDENTS. ITS ENTIRE INCOME IS EXEMP T UNDER THE PROVISIONS OF SECTION 10(23C)(VI). AS THE INCOME OF THE ASSESSEE WAS NOT LIABLE TO TAX, THE AO ASSESSED THE SAME AT NIL IN PLACE OF DEFICIT OF RS. 678.63 LAKHS CLAIMED IN THE RETUR N OF INCOME. UNDER THE PROVISIONS OF SECTION 10, THERE IS NO CON DITION FOR SPENDING A PARTICULAR PORTION OF THE INCOME COLLEC TED DURING THE YEAR, THE ENTIRE INCOME IS TAX FREE EVEN IF EXP ENDITURE IS ONLY NEGLIGIBLE. HOWEVER, ON THE OTHER HAND, UNDER THE PROVISIONS OF SECTION 11 & 12, THE INCOME FROM PROP ERTY HELD -: 8: - 8 FOR CHARITABLE OR RELIGIOUS PURPOSES OR INCOME OF T RUST FROM CONTRIBUTIONS ARE NOT LIABLE TO TAX SUBJECT TO FULF ILLMENT OF CERTAIN CONDITIONS WITH REGARD TO ITS MANNER AND QU ANTUM OF UTILIZATION. IF THE CONDITIONS MENTIONED IN THESE P ROVISIONS ARE NOT FULFILLED, ENTIRE INCOME OF SUCH CHARITABLE OR RELIGIOUS INSTITUTION ARE NOT EXEMPT FROM TAX. THESE PROVISIO NS ALSO STIPULATED FOR CARRY FORWARD OF CERTAIN PORTION OF INCOME WITHOUT BEING UTILIZING DURING THE YEAR UNDER CONSI DERATION AND IF SUCH INCOME IS UTILIZED IN SUBSEQUENT YEAR A LSO, THE SAME IS NOT LIABLE TO TAX. MEANING THEREBY THE PROV ISIONS OF SECTION 10 CANNOT BE PUT AT BAR WITH PROVISIONS OF SECTION 11 & 12, BOTH ARE INDEPENDENT OF EACH OTHER. SINCE ENT IRE INCOME OF EDUCATIONAL INSTITUTION IS EXEMPT U/S 10, WE DO NOT FIND ANY REASON FOR ALLOWING ANY BENEFIT OF CARRY FORWARD OF DEFICIT TO THE SUBSEQUENT YEAR, IN SO FAR AS EVEN IN THE SUBSEQUEN T YEAR ENTIRE INCOME WILL BE EXEMPT. THE CASE LAWS RELIED ON BY THE LD. AUTHORIZED REPRESENTATIVE IN CASE OF SARVAJANIK JAN KALYAN PARMARTHIK NYAS VS. ACIT, (SUPRA) ALSO RELATES TO T HE PROVISIONS OF SECTION 11 TO 13, THE FACTS OF WHICH ARE ENTIRELY DIFFERENT, THEREFORE, CANNOT BE APPLIED TO THE CASE OF THE -: 9: - 9 ASSESSEE, INCOME OF WHICH IS FULLY EXEMPT U/S 10 OF THE INCOME-TAX ACT, 1961. 8. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO AGREE WITH THE LD. CIT DR, SHRI KESHAV SAXENA THAT THE ASSESSEE WAS NOT ENTITLED TO HAVE ITS INCOME ASSESS ED AT A DEFICIT OF RS. 678.63 LAKHS AND THE BENEFIT OF SUCH DEFICIT CANNOT BE ALLOWED IN THE NEXT YEAR FOR SETTING OFF OF AGAINST ANY INCOME IN THE NEXT YEAR. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2011. CPU* 2110