The Incomet-ax Officer, Jammu V. M/s. J.K. Educational Society, Jammu

ITA 606/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85961 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: P N ARORA
• Keywords: Charitable institution; Capital expenditure
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.606(ASR)/2014 ASSESSMENT YEAR:2009-10 PAN :AABHJ0268C INCOME TAX OFFICER, VS. M/S. J.K. EDUCATIONAL SOCI ETY, WARD-1(1), JAMMU. KUNJWANI, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.V.K.SINGH, DR RESPONDENT BY:SH.P.N.ARORA, ADVOCATE DATE OF HEARING:19/02/2015 DATE OF PRONOUNCEMENT:26/02/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED 18.07.2014 RELATING TO ASSESSMENT YEAR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE INVESTMENT MADE IN CONSTRUCTI ON, ACQUISITION OF LAND & BUILDING WHICH ARE NOT THE AP PLICATION TOWARDS THE EDUCATIONAL PURPOSE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN NOT CONSIDERING THE DECISION IN THE CASE O F CIT VBS. ITA NO.606ASR)/2014 2 M/S. QUEEN EDUCATIONAL SOCIETY 233 CTR 395, WHEREI N THE HONBLE HIGH COURT OF UTTRAKHAND HAS HELD THAT ASSE TS PURCHASED/CONSTRUCTED OUT OF INCOME FROM IMPARTING THE EDUCATION WAS WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME IS NOT ELIGIBLE FOR EXEMPTION. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN ALLOWING APPEAL OF THE ASSESSEE BECAUSE HE HAS TOTALLY IGNORED THE FACT THAT THE DEPARTMENT HAS NOT ACCEPT D THE DECISION OF THE HIGH COURT OF P & H IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST AND SLP HAS BEEN FIL ED BEFORE THE HONBLE SUPREME COURT OF INDIA. ALSO, TRHE APPEAL H AS BEEN FILED BEFORE THE HONBLE HIGH COURT OF JAMMU & KASH MIR IN THE CASE OF M/S. J.K. EDUCATIONAL SOCIETY KUNJWANI, JAMMU FOR THE AY 2010-11. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN NOT CONSIDERING THAT THE APPEAL HAS BEEN F ILED BEFORE THE HONBLE HIGH COURT OF JAMMU & KASHMIR IN THE CASE O F M/S. J.K. EDUCATIONAL SOCIETY KUNJWANI, JAMMU FOR THE A. Y. 2010- 11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A REGISTERED SOCIETY U/S 12AA OF THE ACT. ON PERUSAL OF THE INCOME AND E XPENDITURE ACCOUNT, THE AO OBSERVED THAT THE ASSESSEE HAD MADE THE APPLICAT ION OF MONEY AMOUNTING TO RS.4,88,58,614/-, INCLUDING DEPRECATIO N AS PER INCOME & EXPENDITURE ACCOUNT. THE AO COMPUTED THE APPLICATIO N OF THE MONEY AS UNDER: GROSS RECEIPTS 5,43,06,858 85% AMOUNT REQUIRED TO BE APPLIED AS PER SECTION 11(1) 4,61,60,829 LESS: EXPENDITURE AS PER INCOME & EXPENDITURE ACCOUNT 4,52,28,173 ITA NO.606ASR)/2014 3 AMOUNT NOT APPLIED BY THE ASSESSEE FOR CHARITABLE PURPOSES 9,32,656 3. THE EXEMPTION TO THE EXTENT OF RS.9,32,656/- WA S WITHDRAWN AND ADDED TO THE INCOME OF THE ASSESSEE. 4. THE LD. CIT(A) DELETED THE SAID ADDITION BY OBSE RVING THAT THE CAPITAL EXPENDITURE FOR THE PURCHASE OF ASSETS FOR EDUCAT IONAL INSTITUTION SHOULD BE CONSIDERED FOR CALCULATING 85% EXPENDITURE, IN VIEW OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNIONOF INDIA R EPORTED IN 370 ITR 73 AND RELEVANT FINDINGS OF THE LD. CIT(A) VIDE PARA 4 AT PAGES 10 ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: GROUND OF APPEAL NO. 1 TO 3 RELATES TO WITHDRAWAL OF EXEMPTION CLAIMED U/S 11 OF THE ACT BY THE APPELLAN T ON THE GROUND THAT THE APPELLANT TRUST HAS NOT UTILIZED 85 % OF ITS RECEIPTS FOR EDUCATIONAL & CHARITABLE PURPOSE DURIN G THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ARGUED THAT THE AO HAS NOT CONSIDERED THE AMOUNT UTILIZED IN THE PURCHASE OF FIXED ASSETS FOR THE ACHIEVING THE EDUCATIONAL OBJECTIVES OF THE TRUST AND RELYING ON THE JUDGMENT OF THE HONBLE HIGH COU RT OF UTTARAKHAND IN THE CASE OF QUEENS EDUCATIONAL SOCIE TY, DENIED THE LEGITIMATE EXEMPTION TO THE APPELLANT TRUST. TH E APPLICANT HAS DISCUSSED THE PROVISION OF SECTION 11 AND ARGUE D THAT THE CAPITAL EXPENDITURE FOR THE PURCHASE OF ASSETS FOR THE EDUCATIONAL INSTITUTE SHOULD BE CONSIDERED FOR CA LCULATING 85% EXPENDITURE. THE APPELLANT HAS PLACED RELIANCE ON T HE DECISION OF HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF P INEGROVE INTERNATIONAL CHARITABLE TRUST IN WHICH THE HONBLE COURT HAS DISTINGUISHED THE JUDGMENT IN THE CASE OF QUEENS ED UCATIONAL SOCIETY (SUPRA). I HAVE CONSIDERED THE SUBMISSION O F THE ITA NO.606ASR)/2014 4 APPELLANT AND ASSESSMENT ORDER, IT IS OBSERVED THAT THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF PINE GROVE INTERNATIONAL /CHARITABLE TRUST HAS HELD THAT THE C APITAL EXPENDITURE HAS TO BE DEDUCTED FROM THE GROSS INCOM E OF THE EDUCATIONAL INSTITUTION IN DETERMINING WHETHER 85% OF THE INCOME HAS BEEN APPLIED FOR ITS OBJECTS. FURTHER, T HE JURISDICTIONAL ITAT AMRITSAR BENCH IN THE CASE OF MODERN EDUCATIONAL SOCIETY HAS ALSO RELIED ON THE JUDGMENT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST AND HAS HELD THAT THE AMOUNT INCURRED FOR THE CONSTRUCTION OF BUILDIN G IS THE APPLICATION OF MONEY FOR THE OBJECT OF SOCIETY. THE REFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURI SDICTIONAL ITAT AMRITSAR BENCH AND HONBLE HIGH COURT OF PUNJA B & HARYANA IN THE ABOVE REFERRED CASES, IT IS DIRECTED THAT THE EXPENDITURE INCURRED FOR THE PURCHASE OF FIXED ASSE TS FOR THE PURPOSE OF TRUST BE CONSIDERED AS APPLICATION OF MO NEY AND ACCORDINGLY EXEMPTION U/S 11 BE ALLOWED TO THE APPE LLANT TRUST. THESE GROUNDS OF APPEAL ARE THEREFORE ALLOWED AND A RELIEF OF RS.9,32,656/- IS ALLOWED. 5. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 6. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE, ON THE OTHER HAND, RELIED UPON THE SUBMISSIONS MADE BEFOR E THE LD. CIT(A) AND THE ORDER OF THE LD. CIT(A). HE FURTHER ARGUED THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11, ON IDENTICAL ISSUE, THE IT AT, AMRITSAR BENCH VIDE ORDER DATED 17.01.2014 IN ITA NO.556(ASR)/2013 HAS DISMISSED THE APPEAL OF THE REVENUE. ACCORDINGLY, THE LD. COUNSEL FOR TH E ASSESSEE, MR. P.N.ARORA, PRAYED TO CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.606ASR)/2014 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE MAIN ISSUE IN THE PRESENT APPEAL IS WITH REGARD TO WITHDRAWAL OF EXEMPTION CLAIMED U/S 11 OF THE ACT, SINCE ACCORDIN G TO THE AO, THE ASSESSEE HAS NOT UTILIZED 85% OF HIS RECEIPT FOR EDUCATIONAL AND CHARITABLE PURPOSE DURING THE IMPUGNED YEAR. IN FACT, THE ASSESSEE HAS CLAIMED TO HAVE INCURRED THE EXPENDITURE FOR THE EDUCATIONAL AND CHARITABLE PURPOSE INCLUDING PURCHASE OF FIXED ASSETS FOR ACHIEVING EDUCATIONAL OBJECTIVES OF THE TRUST. THE ASSESSEE CLAIMED THE CAPITAL EXPENDITURE FOR FI XED ASSETS OF THE ASSESSEE- TRUST FOR CONSIDERATION OF EXEMPTION U/S 11 OF THE ACT, IN VIEW OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT , IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST (SUPRA). S IMILAR ISSUE AROSE BEFORE THE ITAT, AMRITSAR BENCH IN THE CASE OF THE ASSESSE E ITSELF FOR THE ASSESSMENT YEAR 2010-11, WHERE THE LD. CIT(A) HAS A LLOWED THE EXEMPTION U/S 11 OF THE ACT AND HAVE CONSIDERED THE CAPITAL EXPENDITURE INCURRED FOR THE PURCHASE OF FIXED ASSETS TOWARDS APPLICATION O F MONEY FOR CHARITABLE PURPOSE, WHICH WAS DEDUCTED FROM GROSS RECEIPTS IN DETERMINING WHETHER 85% OF INCOME HAS BEEN APPLIED FOR THE OBJECTS OF T HE TRUST. THE ITAT, AMRITSAR BENCH HAS DISMISSED THE APPEAL OF THE REVE NUE FOR THE SAID ASSESSMENT YEAR I.E. 2010-2011. THE RELEVANT FINDIN GS OF THE ITAT, AMRITSAR BENCH OF THE ASSESSEE TRUST FOR THE A.Y.2010-11 IN ITA NO.556(ASR)/2013 ITA NO.606ASR)/2014 6 VIDE OUR ORDER DATED 17.01.2014 ARE REPRODUCED HERE INBELOW FOR THE SAKE OF CONVENIENCE: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEW OF THE L D. CIT(A) WHO HAS FOLLOWED THE DECISION OF HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUS T V. UNION OF INDIA (SUPRA), WHERE IT HAS BEEN HELD THE CAPITAL EXPENDI TURE HAS TO BE DEDUCTED FROM THE GROSS INCOME OF THE EDUCATIONAL I NSTITUTION IN DETERMINING WHETHER 85% OF THE INCOME HAS BEEN APPL IED FOR ITS OBJECTS. FURTHER, THE ITAT BENCH IN THE CASE OF MOD ERN SOCIETY HAS ALSO RELIED ON THE JUDGMENT IN THE CASE OF PINEGROV E INTERNATIONAL CHARITABLE TRUST AND HAS HELD THAT THE AMOUNT INCUR RED FOR THE CONSTRUCTION OF BUILDING IS THE APPLICATION OF MONE Y FOR THE OBJECT OF SOCIETY. THE ITAT, AMRITSAR BENCH IN THE CASE OF IT O VS. K.C. EDUCATIONAL SOCIETY IN ITA NO.405(ASR)/2012 AY 2009 -10 HAS HELD IN ITS ORDER DATED 28.12.2012 THAT THE CAPITAL EXPENDI TURE IN REPAIR AND MAINTENANCE OF BUILDING IS AN APPLICATION OF INCOME FOR CHARITABLE PURPOSES IN FURTHERANCE OF OBJECTS AND PURPOSES OF SOCIETY. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AN D THE SAME IS UPHELD. HENCE, ALL THE GROUNDS OF THE REVENUE ARE DISMISSED . 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN I TA NO.556(ASR)/2013 IS DISMISSED. 8. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND OUR DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 REFERRED TO HEREINABOVE, WE ARE OF THE VIEW THAT THE CAPITAL EXPENDITURE INCURRED ON THE PURCHASE OF FIXED ASSETS IS THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES IN FURTHERANCE OF THE OBJECTS AND PURPOSES OF ASSES SEE TRUST AND THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ITA NO.606ASR)/2014 7 ALLOWED EXEMPTION U/S 11 OF THE ACT. THUS, ALL THE GROUNDS OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.606(ASR)/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH FEBRUARY, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26TH FEBRUARY, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. J.K. EDUCATIONAL SOCIETY, KUNJWAN I, JAMMU 2. THE ITO WARD 1(1), JAMMU. 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR. ]