M/s Madhya Pradesh State Open School, Bhopal V. THE ACIT 1(2), Bhopal

ITA 600/IND/2013

• Counselvise Citation: 60022714 RSA 2013
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: H P VERMA; N D PATWA S
• Keywords: Charitable institution; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MUKU L KR. SHRAWAT, JUDICIAL MEMBER PAN NO. AAAAM1067A ITA NO. 600/IND/2013 A.Y. : 2010-11 MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL VS. ACIT, 1(2), BHOPAL (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.P.VERMA AND SHRI N. D. PATWA, ADVOCATES REVENUE BY : SHRI R. A. VERMA, SR. DR / // / DATE OF HEARING : 10.09.2014 /DATE OF PRONOUNCEMENT:19.09.2014 / O R D E R PER P.K.BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 12.07.2013. 2. AT THE OUT-SET, THE LD. AUTHORIZED REPRESENTATIVE STATED THAT THE SIMILAR ISSUE HAS ARISEN IN THE ASSESSMENT YEARS 2003- 04 TO 2008-09 AND THE TRIBUNAL HAS TAKEN A VIEW IN I.T.A.NOS. 193 TO 198/IND/2012 AGAINST THE ASSESSEE. 3. THE LD. SENIOR DR WAS FAIR ENOUGH TO CONSIDER THE POSITION. MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 2 4. AFTER HEARING THE RIVAL CONTENTION AND GOING THROUG H THE ORDER OF THE INCOME-TAX ACT, 1961, IN I.T.A.NOS. 19 3 TO 198/IND/2012 NOTED THAT THE ISSUE INVOLVED IN THIS APPEAL ARE DULY AGAINST THE ASSESSEE. HON'BLE I.T.A.T. VIDE IT S ORDER DATED 8.11.2012 UPHELD THE ORDER OF THE LOWER AUTHORITIES BY HOLDING AS UNDER :- 3.2 WE FIND THAT WHILE COMING TO A PARTICULAR CONCLUSION, THE LEARNED CIT(A) DISCUSSED THE DECISI ONS IN IIM, BANGALORE VS. CIT (2009) 121 TTJ (BANG) 560 ; MAHARASHTRA RAJYA SAHKARI SANGH V. ITO (2011) 7 ITR 675 (ITAT), ACIT VS. GOLD MINES SHARES & FINANCE PV T. LTD. (2008) 302 ITR (AT) 208 AND QUEENS EDUCATIONAL SOCIETY, ETC. ALONG WITH OTHERS. IT IS NOTED THAT T HE HONBLE BOMBAY HIGH COURT IN A LATER DECISION DATED 6 TH MAY, 2010 IN VANITA VISHRAM TRUST DISTINGUISHED THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN QUEEN S EDUCATION SOCIETY; 319 ITR 160 AND CONSIDERED VARIO US DECISIONS LIKE ADITANAR EDUCATIONAL INSTITUTION VS. ADDL. CIT; 224 ITR 310 (SC), PINEGROVE INTERNATIONAL CHARITABLE TRUST; 327 ITR 73 (P&H), TRUSTEES OF VA NITA VISHRAM VS. CIT (280 ITR 345) (BOM) AND HELD THAT MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 3 PETITIONER WILL BE ENTITLED TO SUCCEED BY ENLIGHTEN ING ON THE SCOPE OF SECTION 10(23C) WHEREIN INVESTMENT OF SURPLUS FROM ACTIVITIES APPLIED FOR EDUCATIONAL PUR POSES, REJECTION OF APPROVAL U/S 10(23C)(VI) WAS HELD TO B E NOT VALID. WE HAVE CAREFULLY GONE THROUGH THE ORDER FRO M HONBLE DELHI HIGH COURT AS REPRODUCED HEREINABOVE. THE BASIC CRUX OF THE ORDER BY THE HONBLE HIGH COU RT IS THAT THE OPINION EXPRESSION BY THE RESPONDENT THAT THE EDUCATIONAL INSTITUTIONS SEEKING EXEMPTION SHOULD N OT GENERATE ANY QUANTITATIVE SURPLUS IS LEGALLY UNTENA BLE AND INCORRECT AND AS SUCH THE LEARNED CCIT ERRED IN ASSUMING THAT FOR EXEMPTION, THERE SHOULD NOT BE AN Y SURPLUS OTHERWISE THE INSTITUTION SOCIETY EXISTS FO R PROFIT AND NOT FOR CHARITY I.E. EDUCATION IN THE PRESENT C ASE. THE ISSUE WAS SENT FOR FRESH ADJUDICATION TO THE COMPETENT AUTHORITY IN ACCORDANCE WITH LAW. EVEN OTHERWISE, TO DECIDE ENTITLEMENT OF AN INSTITUTION FOR EXEMPTION U/S 10(23C)(VI) TEST OF PREDOMINANT OBJEC T OF ITS ACTIVITY HAS TO BE APPLIED BY POSING QUESTION WHETHER IT EXISTS SOLELY FOR EDUCATION AND NOT TO E ARN PROFIT AND MERELY BECAUSE PROFITS HAVE RESULTED FRO M MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 4 ACTIVITY OF IMPARTING EDUCATION, WITHIN PRESCRIBED LIMIT, WOULD NOT RESULT IN CHANGE OF CHARACTER OF AN INSTI TUTION THAT IT EXISTS SOLELY FOR EDUCATIONAL PURPOSES. IF AFTER MEETING EXPENDITURE, A SURPLUS RESULTS INCIDENTALLY FROM AN ACTIVITY LAWFULLY CARRIED ON BY EDUCATIONAL INSTITUTION, IT WOULD NOT CEASE TO BE ONE WHICH IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES WHERE OBJE CT IS NOT TO MAKE PROFIT. IF THE INSTITUTION OR THE TRUS T EXISTS SOLELY FOR EDUCATIONAL PURPOSES, THE FACT THAT IT H AS OTHER OBJECTS WOULD NOT DISENTITLE IT TO EXEMPTION SO LONG AS THE ACTIVITIES CARRIED OUT BY IT IN THAT ASSESSM ENT YEAR WERE THAT OF RUNNING AN EDUCATIONAL INSTITUTIO N AND NOT FOR PROFIT. ONLY THE APPLICATION OF INCOME AS REQUIRED UNDER THE ACT AND THE PREDOMINANT OBJECTS HAVE TO B E KEPT IN MIND WHILE GRANTING OR REFUSING SUCH EXEMPT ION. 3.3 IF THE FACTS OF THE CASE OF THE ASSESSEE AVAILA BLE ON RECORD ARE PERUSED, THE ASSESSEE IS TRYING TO BRING ITS CASE WITHIN THE AMBIT OF SEC. 10(23C)(IIIAB) OF THE ACT, THEREFORE, WE ARE REPRODUCING THE SAME HEREUNDER: 10(23C)(IIIAB): ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 5 EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT; 3.4 IF THE LANGUAGE USED IN SUB-SECTION IS ANALYSED , IT SPEAKS ABOUT ANY EDUCATIONAL INSTITUTION WHICH IS S OLELY EXISTING FOR EDUCATIONAL PURPOSES AND NOT FOR PROFI T AND AT THE SAME TIME, WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. WE HAVE ASKED THE ASSESSEE TO PRODUCE ITS PURPOSES AND FINANCIAL POSI TION. THE LD. COUNSEL FOR THE ASSESSEE PROVIDED THE SAME, THEREFORE, WE ARE SUMMARIZING SUCH RECEIPTS HEREUND ER: (AMOUNTS IN LACS) AY/FY GROSS FEES/OTHER INCOME GROSS EXPENSES ADVANCE TO EXAM CARTERS CONSIDER AS EXP. SURPLUS EXPENSES BORN BY GOVT. DIRECTLY (ESTIMATED) INITIAL CAPITAL BY GOVT. OF MP 1996-97 50 LACS FY31.3.04 1017.87 407.05 101.17 509.65 82.50 NO GR ANT FY31.3.05 973.15 451.91 107.13 414.11 82.50 NO GRANT FY31.3.06 879.38 1028.85 33.80 -183.27 82.50 NO GRANT FY31.3.07 1039.08 346.54 16.08 676.46 82.50 NO GRANT FY31.3.08 1666.98 1240.82 25.47 400.69 82.50 NO GRANT FY31.3.09 2459.67 384.77 77.79 19997.11 82.50 NO GRANT IF THE LANGUAGE USED IN THE SECTION IS ANALYSED, IT SPEAKS ABOUT EDUCATIONAL PURPOSES AND NOT FOR THE MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 6 PURPOSES FOR PROFIT AND AT THE SAME TIME, IT SHOULD BE WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVT. IF T HE AFORESAID CHART IS ANALYSED, ONE FACT IS CLEARLY OO ZING OUT THAT THERE IS HUGE PROFIT GENERATED WHICH IS AS ON 31.3.2009 AT RS.1997.11 LACS. SO FAR AS THE NEXT CONDITION OF WHOLLY AND SUBSTANTIALLY FINANCED BY T HE GOVT., WE FIND THAT ONLY DURING 1996-97, THE AMOUNT OF RS.50 LACS WAS GRANTED BY THE GOVT. AND THEREAFTER THERE IS NO GRANT. THE FIGURES MENTIONED IN THE EXP ENSES BORNE BY THE GOVT. ARE ALSO NOT ACTUAL AND ARE NOTI ONAL, MEANING THEREBY, THESE WERE NOT ACTUALLY RECEIVED B Y THE ASSESSEE. HUGE SURPLUS HAS BEEN GENERATED BY TH E ASSESSEE, THEREFORE, IT CAN BE SAID THAT THE PROFIT MOTIVE OF THE ASSESSEE IS CLEARLY ESTABLISHED. DURING HEAR ING, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE WORD SUBSTANTIALLY WILL BE MADE EVEN IF THE GRANT S ARE 10%. WE ARE NOT AGREEING WITH THIS PROPOSITION BECA USE THE WORD IS WHOLLY OR SUBSTANTIALLY, MEANING THER EBY, EITHER IT CAN BE 100% OR NEAR TO 100% BUT IN ANY CA SE MAY NOT BE LESS THAN 75% BECAUSE IT HAS BEEN USED WITH THE WORD WHOLLY AND NOT SINGULARLY. ADMITTEDLY , MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 7 THERE IS NO CLEAR CUT FORMULA REGARDING PERCENTAGE IN THE ACT BUT SOME FIGURE MAY BE ADOPTED UNDER THE FACTS AND CIRCUMSTANCES AVAILABLE ON RECORD. 3.5 WE ARE ANALYZING THIS ISSUE WITH RESPECT TO SEC TION 10(23C)(IIIAD) OF THE ACT WHICH IS REPRODUCED HEREU NDER: 10(23C)(IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DOES NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED; THE LANGUAGE USED SPEAKS ABOUT EXISTENCE OF SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PR OFIT IF THE ANNUAL RECEIPTS DO NOT EXCEED THE PRESCRIBED LIMIT. HOWEVER, IF THE AFORESAID CHART/INCOME IS ANALYSED, WE FIND THAT A HUGE ABNORMAL PROFIT HAS BEEN CREATED/EARNED BY THE ASSESSEE AND THE AMOUNTS ARE DEFINITELY BEYOND THE PRESCRIBED LIMIT. VIDE RULE 2 BC, THE AMOUNT PRESCRIBED IS RS. 1 CRORE WHEREAS THE SURPLUS GENERATED BY THE ASSESSEE IS IN CRORES. ON QUESTIONING FROM THE BENCH REGARDING CONDUCTING OF MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 8 EXAMINATION, IT WAS CANVASSED BY THE ASSESSEE THAT VARIOUS SCHOOLS OF THE GOVT. ARE USED BY THE ASSESS EE AS EXAMINATION CENTERS FREE OF COST, THEREFORE, IT MAY BE CONSIDERED AS A GRANT. WE ARE NOT AGREEING WITH THI S PROPOSITION ALSO BECAUSE THESE SCHOOLS ARE ALREADY IN EXISTENCE AND ACTUALLY CLAIMED EXPENSES ARE NOT INCURRED, THEREFORE, THERE IS NO FORCE IN THE ARGUM ENTS OF THE ASSESSEE. THE CASES RELIED UPON BY THE ASSESSEE HAVE ALREADY BEEN CONSIDERED BY THE LD. CIT(A), THEREFORE, THE SAME ARE NOT BEING REPEATED. WHEN TH E LANGUAGE OF THE PROVISION IS CLEAR AND UNAMBIGUOUS, WE ARE NOT EXPECTED TO LOOK INTO THE INTENTION. THE ME ANING OF WORDS USED BY THE LEGISLATURE IS TO BE ANALYSED FROM ITS PLAIN AND NATURAL MEANING. SO FAR AS THE DECISI ONS IN THE CASE OF SECONDARY BOARD OF EDUCATION VS. ITO (8 6 ITR 408), CIT VS. KSHETRIYA GIRLS SCHOOL MANAGING BOARD (109 TAXMAN 77) (MAD), GOVERNING BODY OF RANGACHARYA MEDICAL COLLEGE (117 ITR 284) (AP) ARE CONCERNED, THE ISSUE OF WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVT. WAS NOT INVOLVED IN THESE CAS ES. THE CASE OF SHRI SAKET MAHAVIDYALAYA SAMITI VS. DCI T MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 9 (2010) 132 TTJ (LUCKNOW) 39 WAS ON DIFFERENT FACTS AS THERE WAS NO MUCH SURPLUS OR PROFIT. THE CASE OF AC IT VS. BANK OF INDIA (ITA NO.468/IND/2009) WAS ALSO ON DIFFERENT FACTS. IF THE TOTALITY OF FACTS ARE ANALY SED, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT COMPLIED WITH TWO ESSENTIAL CONDITIONS AS STIPULATED IN THE ACT, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION D RAWN IN THE IMPUGNED ORDER. IT IS UPHELD. FINALLY, ALL THESE APPEALS ARE DISMISSED. 5. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE DISMISS THE APPEAL TAKEN BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. SD/- SD/- (MUKUL KR. SHRAWAT) (P. K. BANSAL) JUDICIAL MEMBER ACCOUNTANT M EMBER INDORE; DATED 19/09/2014 CPU*SPS MADHYA PRADESH STATE OPEN SCHOOL, BHOPAL. I.T.A.NO. 600/IND/2013 A.Y. 2010-11 10 / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' # # ( / CONCERNED CIT 4. # # ( ( ) / THE CIT(A), INDORE 5. +,# &' , # # &' , -.% / DR, ITAT, INDORE 6. ,/0 1 / GUARD FILE. / BY ORDER, -# -# -# -# $2 $2 $2 $2 (ASSTT.REGISTRAR) ITAT, IN DORE 1. DATE OF DICTATION- 11.09.2014 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.09.2014 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.09.2014 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER