M/s Shiv Shakti Education Society, Panipat V. ITO (Exemptions), Ambala

ITA 578/CHANDI/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3347 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 18-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: K C ANEJA ITP
• Keywords: Capital asset; Opportunity of being heard; Maximum Marginal Rate; Capital receipt; Capital expenditure
• Section: 143(3); 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT ITA NO.578/CHD/2018 ASSESSMENT YEAR: 2013-14 SHIV SHAKTI EDUCATION SOCIETY VS. THE ITO EXEMPTI ONS C/O BHASKAR INTERNATIONAL SCHOOL AAYAKAR BHAWAN MANNA MAJRA V& PO KAIRANA 2 ND FLOOR, ROOM NO. 208B.C BAZAR, AMBALA CANTT,. PAN NO. AAHAS9930R (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. K.C. ANEJA,ITP REVENUE BY : SMT. CHANDRAKANTA, SR. DR DATE OF HEARING : 19/02/2019 DATE OF PRONOUNCEMENT : 19/02/2019 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 06/02/2018 OF LD. CIT(A), KARNAL. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1 THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CAS E LEARNED CIT(A) ERRED IN NOT ASSIGNING THE STATUS OF AOP TRUST. 2 THAT THE PREDOMINANT OBJECT OF THE APPELLANT SOCIET Y IS IMPARTING EDUCATION AND IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AS THE SOCIETY IS REGISTERED WITH THE REGISTRAR OF SOCIETIES AND AFFILIATED WITH C.B.S.E. DELHI & KURUKSHETRA UNIVERSITY HARYANA. 3 THAT ENTIRE RECEIPT OF THE YEAR HAVE BEEN SPENT ON CONSTRUCTION OF THE SCHOOL BUILDING APPROVED BY THE DISTRICT EXECUTIVE OFFICER B&R SHAMLI. 4. THAT THE LEARNED CIT(A) ERRED IN NOT ALLOWING EX EMPTIONS U/S 11 OF THE IT ACT 1961 BEING NOT REGISTERED U/S 12 AA OF THE IT ACT 1 961 WHICH IS NOT PRECONDITION FOR ALLOWING EXEMPTIONS U/S 11 OF THE IT ACT 1961. 5. THE APPELLANT CRAVES FOR LEAVE TO ADD OR AMEND A NY GROUNDS OF APPEAL BEFORE THE HEARINGS. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/2013 DECLARING AN INCOME OF RS. 11,662/-, LAT ER ON THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER DURING THE COUR SE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD RECEIVED DONATION AND CONTRIBUTION FROM MEMBERS OF THE SOCIETY TO THE TUNE OF RS. 1,86,24,1 76/- WHICH WAS CLAIMED TO BE THE CAPITAL RECEIPTS OUT OF WHICH THE ASSESSEE PURC HASED LAND FOR RS. 1,58,10,200/- AND SPENT RS. 21,22,230/- ON THE CONS TRUCTION OF BUILDING. THE 2 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NO T REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER RED TO AS ACT), AND THE APPLICATION WAS FILED ON 07/03/2016 IN FORM NO. 10A FOR THE REGISTRATION UNDER SECTION 12AA OF THE ACT. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS OF THE BILLS OF CONST RUCTION OF BUILDING. HE, THEREFORE BROUGHT TO TAX THE SURPLUS OF RS. 28,25,638/- OUT O F THE TOTAL RECEIPT OF RS. 1,86,35,638/- ALONG WITH INTEREST INCOME OF RS. 11, 662/-. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 1. THE APPELLANT, SOCIETY CAME IN TO EXISTENCE IN T ERMS OF MEMORANDUM & RULES, DULY REGISTERED UNDER SOCIETY REGISTRATION ACTL860, PUNJAB R.W. PUNJAB AMENDMENT ADHINIYAML968 ONL9.06.2012AT S.NO.32/2012 -13 WITH ZILA REGISTRAR FIRMS & SOCIETIES, PANIPAT AND LATER AGAIN REGISTER ED AT S.NO. 00382/2014 ON 06.03.2014. THE A.O. HAS ACCEPTED THE AIMS & OBJECT S OF THE SOCIETY WHEN HE REPRODUCED THE MAIN OBJECTS IN PARA(2)OF ASSESSMENT ORDERDT.23.03.2016 PASSED U/SL43(3)OF THE I T ACT. SOCIETY IS ALSO AFFILIATED WITH CENTRAL BOARD OF SCHOOL EDUCATION DELHI VIDE AFFILIATION CODE ALLOTTED TO S CHOOL IS 2132186 DT. 22.03.2016 COPIES OF CERTIFICATE & AFFILIATION ATTACHED. 2. THE MAIN OBJECTS OF THE SOCIETY ARE TO RUN EDUCATIO NAL INSTITUTES, SCHOOLS COLLEGES AND TO PROVIDE FREE OR CONCESSIONAL FACILI TIES TO THE POOR & NEEDY STUDENTS, WHICH ARE IN CONFORMITY WITHIN THE MEANIN G OF 'CHARITY' DEFINED U/S 2(15)OF THE ACT. 3. THE APPELLANT SOCIETY HAD RECEIVED DONATIONS/CONTRI BUTIONS FROM THE MEMBERS OF SOCIETY TO THE TUNE OF RS.L,86,24,176/-A ND CLAIMED THE SAME TO BE 'CAPITAL RECEIPTS' AS THE SAME WERE RECEIVED FOR PU RPOSE OF ACQUISITION OF LANDS AND CONSTRUCTION OF BUILDING THERE ON, WHICH IS ESS ENTIAL PRECONDITION TO RUN SCHOOL, BUILDING AND PROVIDE EDUCATION TOWARDS OBJE CTS OF THE SOCIETY. THE SAID RECEIPTS WERE INVESTED IN THE FOLLOWINGS: PURCHASE OF LAND AND CHANGE OF LAND USE FROM AGRICU LTURE TO NON AGRICULTURE PURPOSES. 15810200 AMOUNT INVESTED IN CONSTRUCTION OF SCHOOL BUILDING IN THE F.Y. 2012-13 RELEVANT TO A.Y. 13-14 (CONSTRUCTION STILL IN PROGRESS) 212223 0 17932430 APART FROM ABOVE APPLICATION OF CONTRIBUTIONS, CERT AIN INVESTMENTS WERE MADE TOWARDS PURCHASE OF LIBRARY BOOKS AND SECURITY DEPO SITS WITH EDUCATION DEPARTMENT ETC., AS THE CHARITABLE ACTIVITIES WERE NOT COMMENCED IN THE PREVIOUS YEAR RELEVANT TO A. Y.2013-14(UNDER APPEAL ). COPIES OF LIBRARY BOOKS AND SECURITY PAID ATTACHED AND PRELIMINARY EXPENSES ATTACHED 4. RETURN U/S 139(1) WAS FILED IS THE STATUS OF A.O.P. UNDER MISCONCEPTION OF FACTS, WHERE IN'INTEREST INCOME' EARNED FROM FIXED DEPOSITS KEPT IN BANK FOR TEMPORARY PERIOD WERE OFFERED AS INCOME BUT IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(2) THE APPELLANT VIDE LETTER DT . 22.02.2016 CLAIMED THAT VOLUNTARY CONTRIBUTIONS RECEIVED FOR THE SPECIFIC P URPOSE ARE NOT TAXABLE AND TAXFREE RECEIPTS FOLLOWING PART OF RECEIPTS AS DEFI NED U/S2(45) OF THE ACT & TNE SAME COULD NOT BE BROUGHT TO TAX. THE DONATIONS WER E WITH SPECIFIC PURPOSES U/S2(24)(ILA)OF THE ACT AND DO NOT ATTRACT TAX LIAB ILITY. RELIANCE WAS PLACED ON A DECISION FROM HON'BLE IT AT BANGLORE BENCH IN THE C ASE OF ITO WARD 2, HASSAN V/S M/S VOKKALIGARA SANGHA BALUR DISTT. HASAN 3 5. THE APPELLANT IN CONTINUATION OF THE ABOVE, ALSO PL ACED RELIANCE IN SUPPORT OF HIS CONTENTION VIDE LETTERDT. 18.03.2016 ON A DE CISION FROM HON'BLE ITAT CHANDIGARH BENCH IN ITO DHARMASHALA V/S CHI MA GATS AL LING MONASTERY SIDHBARI, DHARAMSHALA IN ITANOS.216TO219/CHD/2012 F OR THE A.Y.2005-06 TO2008-09 AND CLAIMED EXEMPTION IN RESPECT OF VOLUNTARY CONTR IBUTIONS RECEIVED IN THE AMOUNT OF RS. 1,86,24,176/- WHICH STOOD INVESTED IN ACQUISITION OF LAND & CONSTRUCTION OF BUILDING THERE ON BESIDES OTHER INC IDENTAL. 6. THE A.O.IN THE ORDER PASSED U/S 143(3) DT.23.03. 2016 STATED THAT THE CORPUS DONATION ARE EXEMPT U/SLL(L)(D) OF THE ACT AND SUB JECT TO PRECONDITION, FOR THE APPLICATION OF THE SECTION 11 OF THE ACT, THE INSTI TUTION MUST BE REGISTERED U/S 12AA OF THE ACT. THE A.O. HOWEVER STATED THAT APPEL LANT SOCIETY IS NOT REGISTERED U/S 12AA AS ON DATE, BUT HAS LED EVIDENCE TO THE EF FECT THAT THE NECESSARY APPLICATION IN FORM 10A HAS BEEN FILED ONL5.03.2016 AND IS YET PENDING WITH CLT(EXEMPTION). 7. THE A.O. NOTING THE ABOVE POSITION OF LAW AND TA KING IN TO CONSIDERATION THE TRIBUNAL DECISION REFERRED TO ABOVE HAS GRANTED EXE MPTION IN RESPECT OF RS. 15810200/- ,THE SUM SPENT IN ACQUISITION OF LAND, B UT WRONGLY DECLINED EXEMPTIONS IN RESPECT OF BALANCE AMOUNT OF RS.2825638/-WHICH C OMPRISES OF RS. 21,22,230/- UTILIZED IN CONSTRUCTION OF SCHOOL BUILDING FOR WAN T PRODUCTION OF BILLS/VOUCHERS IN SUPPORT (DESPITE THERE IS NO DOUBT THAT SCHOOL BUIL DING WAS CONSTRUCTED AND OTHERWISE VERIFIABLE) RS.619946/- UTILIZED FOR INCI DENTAL MATTERS AND IN ADDITION 11662/-BEING THE INTEREST EARNED AND WRONGLY OFFERE D TOWARDS INCOME IN THE RETURN FILED. JUDGMENTS REFERENCES :- HON'BLE HIGH COURT OF MADRAS IN THE CASE OF COMMISS IONER OF INCOME TAX V/S WORKING WOMEN'S FORUM 2014, 365 ITR 352 (MADRAS) HA VE HELD THAT THE DENIAL OF EXEMPTIONS SHOULD ONLY BE TO THE EXTENT OF THE INCO ME WHICH IS VIOLATIVE OF SECTION 13(1) (D) AND NOT THE TOTAL DENIAL OF EXEMP TION UNDER SECTION 11 OF THE I T ACT 1961. FROM THE FACTS & CIRCUMSTANCES IT IS VISIBLE THAT N O VIOLATION HAS BEEN MADE BY THE APPELLANT C.B.D.T CIRCULAR NO. 387 DATED 06.07.1984 PARA 86.6 ALSO SU PPORTED THIS VIEW. HON'BLE ORISSA HIGH COURT HAVING RELIANCE OVER VARI OUS HIGH COURT & SUPREME COURT JUDGMENTS IN THE CASE OF CIT V/S SILICON INST ITUTE OF TECHNOLOGY 2015, 370 ITR 567 (ORISSA HELD). CAPITAL EXPENDITURE INCURRED BY A TRUST FOR ACQUIRI NG/CONSTRUCTING CAPITAL ASSET WOULD BE APPLICATION OF MONEY AND THE ASSESSEE WOUL D BE ENTITLED TO EXEMPTION U/S 11 OF THE ACT. THEREFORE RESPECTFULLY IT IS PRAYED THAT THE APPELL ANT BEING EDUCATIONAL CHARITABLE SOCIETY IS LIABLE TO FULL EXEMPTIONS OF DONATIONS RECEIVED FOR THE OBJECT AND SAME MAY VERY KINDLY BE GRANTED. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF T HE ASSESSEE CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UND ER: I HAVE EXAMINED THE FACTS OF THE CASE AND THE MATER IALS ON RECORD. IT IS SEEN THAT THE OBJECTS OF THE APPELLANT SOCIETY IS TO RUN EDUC ATION INSTITUTES, SCHOOLS AND COLLEGES AND TO PROVIDE FREE OR CONCESSIONAL FACILI TIES TO POOR AND NEEDY STUDENTS. THE MAIN THRUST OF THE APPELLANT'S AGREEM ENTS RELATE TO THE FACT THAT EXEMPTION SHOULD BE ALLOWED ON THE ENTIRE SUM INVES TED IN CONSTRUCTION OF SCHOOL BUILDING, PURCHASE OF BOOKS, DEPOSITS OF SECURITY W ITH THE EDUCATION DEPARTMENT AND THAT THE SOCIETY SHOULD BE TREATED AS A TRUST I NSTEAD OF AOP. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS TAXED ONLY RS. 28,25,638/- OUT OF TOTAL RECEIPTS OF RS. 1 ,86,35,638/- DUE TO NON-PRODUCTION OF BILLS. THE REMAINING AMOUNT HAS BEEN ALLOWED. TH E ACTION OF THE AO IS CORRECT GIVEN THE FACT THAT NECESSARY EVIDENCES WERE NOT SU BMITTED. INTEREST INCOME OF RS. 11,662/- HAS ALSO BEEN CORRECTLY TAXED. TAXING AT THE MAXIMUM MARGINAL RATE 4 IS IN KEEPING WITH THE FACT THAT THE APPELLANT IS N OT REGISTERED U/S 12AA WHICH HAS NOT BEEN GRANTED TILL DATE. HENCE, THE PROVISIONS O F SECTION 11 AND 12 OF THE I.T. ACT CANNOT BE APPLIED. IN MY OPINION, THE FACTS OF THE CASE CANNOT BE RELATED TO THE CASE LAWS CITED IN THE ABSENCE OF REGISTRATION UNDER SECTION 12A OF THE I.T. ACT. I, THEREFORE, CONFIRM THE SAID ADDITIONS. 6. NOW THE ASSESSEE IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE UTILIZED THE TOTAL AMOUNT RECEIVED FOR THE CONSTRUCTION OF BUILDING AN D MAINTAINED, THE COMPLETE DETAILS ALONG WITH VOUCHERS FOR THE SAME WERE FURNI SHED, THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 8. IN HER RIVAL SUBMISSIONS THE LD. SR. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION BY OBSERVING THA T THE ASSESSEE FAILED TO PRODUCE THE BILLS AND VOUCHERS FOR THE CONSTRUCTION OF BUILDING. ON THE CONTRARY THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE WAS T HAT ALL THE BILLS AND VOUCHERS WERE PROPERLY MAINTAINED AND THE AMOUNT RECEIVED FR OM THE CONTRIBUTION AS WELL AS DONATION FROM THE MEMBERS OF THE SOCIETY WA S UTILIZED FOR THE PURCHASE OF LAND AND CONSTRUCTION OF THE BUILDING. SINCE THE CLAIM OF BOTH THE PARTIES ARE CONTRADICTORY TO EACH OTHER, I THEREFORE, IN THE AB SENCE OF CLEAR FACTS ON RECORD DEEM IT APPROPRIATE TO SET ASIDE THIS CASE BACK TO THE FILE OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH, IN ACCORDANCE WIT H LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2019.) SD/- (N.K. SAINI) VICE PRESIDENT PLACE: CHANDIGARH DATED : 19/02/2019 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR