SHRI JAWAHAR SHIKSHAN AVAM PRASHIKSHAN SANSTHAN, Jaipur V. DCIT, BHARATPUR

ITA 61/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5422 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: RAJIV PANDEY; DAKSHAYANI PANDEY
• Keywords: Charitable institution; Opportunity of being heard
• Section: 143(3); 12AA; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 61/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 SHRI JAWAHAR SHIKSHAN AVAM PRASHIKSHAN SANSTHAN, JYOTI NAGAR HOUSING BOARD COLONY, KRISHNA NAGAR, BHARATPUR. CUKE VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAEAS 1709 D VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI RAJIV PANDEY (CA) & MS. DAKSHAYANI PANDEY (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 11/03/2016 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 08/04/2016 VKNS'K @ ORDER PER: T.R. MEENA, AM THIS IS AN APPEAL FILED BY THE APPELLANT AGAINST TH E ORDER DATED 01/12/2014 PASSED BY THE LEARNED CIT(A), ALWAR FOR A .Y. 2010-11. THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE APPELLANT ARE AS UNDER:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD CIT (A) HAS ERRED: ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 2 (I) IN CONFIRMING ORDER PASSED U/S 143(3) OF THE I. T. ACT, 1961, WHICH IS UNJUST AND NOT FOLLOWING PROVISIONS O F LAW AND WHICH DESERVES TO BE ANNULLED; (II) IN NOT ALLOWING EXEMPTION CLAIMED U/S 10(23C)(I IIAD)/ 10(23C)(IIIAB) OF THE INCOME TAX ACT, 1961 AND FURTH ER ERRED IN INCLUDING REIMBURSEMENT OF CAPITAL GRANT I N BUILDING CONSTRUCTION COST MADE BY THE STATE GOVERNMENT AMOUNTING TO RS. 1,23,90,976/- AS INCOME INSTEAD OF CAPITAL GRANT; (III) IN NOT ACCEPTING THE FACT THAT THE SOCIETY IS FULLY FINANCED BY THE STATE GOVERNMENT AND FURTHER IN NOT ACCEPTING THAT THE GROSS RECEIPT OF THE SOCIETY IS LESS THAN RS. 1. CRORE AND THAT THE SOCIETY EXISTS SOLEL Y FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSES OF PROFIT. 2. THE ASSESSEE IS A CHARITABLE TRUST RUNNING EDUCATI ON INSTITUTE IN THE NAME OF SHRI JAWAHAR SHIKSHAN AVAM PRASHIKSHAN SANST HAN, DAUSA. THE RETURN FOR A.Y. 2010-11 WAS FILED ON 15/12/2010 AT N IL INCOME. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT). ALL THE GROUNDS OF THE APPEAL ARE AGAINST NOT SUSTAINING THE ASSESSEES INCOME U/S 10(23C)(IIIAD)/ 10(23C)(IIIAB ) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UND ER CONSIDERATION, THE TRUST HAD SHOWN ANNUAL RECEIPTS OF RS. 28,59,012/- AG AINST THE EXEMPTION OF RS. 43,59,428/- WAS CLAIMED U/S 11 OF THE ACT BY THE ASSESSEE AND NET DEFICIT OF RS. 15,00,416/- WAS SHOWN . IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD RECEIVE D RS. 1,23,90,976/- ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 3 FROM GOVERNMENT OF RAJASTHAN AS SUBSIDY WHICH HAD NO T BEEN SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT AND AGGREGATE AN NUAL RECEIPT AFTER INCLUDING SUCH AMOUNT BECOMES MORE THAN RS. 1.00 CO RE. THEREFORE, THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. FURTHER HE HELD THAT THE ASSESSEE HAD CLAIME D EXEMPTION U/S 11 OF THE ACT. RETURN OF INCOME IN THE SCHEDULE-F, STATEM ENT OF INCOME AND REGISTRATION U/S 12AA OF THE ACT IS APPLICABLE IN H IS CASE W.E.F. 23/6/2011, THEREFORE, HE PROPOSED TO EXEMPTION CLAIMED U/S 11 FOR DISALLOWANCES. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE SOCIETY IS PRIMARILY ENGAGED IN THE FIELD OF PROVID ING EDUCATION. THE SOCIETY WAS FORMED WITH OBJECT OF WORKING IN THE FIELD EDUCATION. NO OTHER ACTIVITIES IS BEING CARRIED OUT BY SOCIETY DU RING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2010-11. AS THE TOTAL INCOME OF SOCIETY IS MUCH LESS THAN THE PRESCRIBED LIMIT OF RS. 1.00 CRORE, T HUS IT IS EXEMPTED U/S 10(23C)(IIIAD) OF THE ACT. THE SOCIETY UNDER ASSESSM ENT WAS COMPLYING THE CONDITIONS OF THE PROVISIONS OF THIS SECTION. TH E SOCIETY WAS QUALIFIED FOR THE EXEMPTION UNDER THE PROVISIONS OF THE IT ACT . DURING THE YEAR, THE STATE GOVERNMENT REIMBURSED RS. 1,23,90,976/- OUT O F BUILDING EXPENSES INCURRED BY THE SOCIETY. IT CANNOT BE TREATED THIS AMOUNT FOR BUILDING CONSTRUCTION OWNED BY THE SOCIETY AND CANNOT BE CON SIDERED AS PART OF ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 4 ANNUAL RECEIPTS AS MENTIONED IN THIS SECTION. IT IS JUST REIMBURSEMENT OF COST OF BUILDING, WHICH IS OWNED BY THE STATE GOVT. A ND THE SOCIETY IS NOT FREE TO USE THE BUILDING ON ITS OWN WILL. THEREFORE, THE GRANT GIVEN BY THE STATE GOVT. IS NOT PART OF THE ANNUAL RECEIPTS. IT IS ALSO ALTERNATIVELY SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE TOT AL RECEIPTS OF THE ASSESSEE IS COVERED U/S 10(23C)(IIIAD) OF THE ACT. THE CLAIM MADE BY THE ASSESSEE U/S 11 IS NOT APPLICABLE AS THE ASSESSEE D ID NOT HAVE REGISTRATION U/S 12AA OF THE ACT AT THE RELEVANT PE RIOD. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAD CLAIMED THESE EXPENSES U/S 11 OF THE ACT BUT IT DOES NOT HAVE REGISTRATION U/S 12AA OF THE ACT. THE SUBSIDY RECEIV ED BY THE ASSESSEE FROM THE STATE GOVT. IS INCLUDABLE IN TOTAL RECEIPT S. IT IS FURTHER OBSERVED THAT AS PER OBJECT OF THE TRUST, ACCORDING TO THE DE ED, SOME OF THE OBJECTS ARE GENERAL, CHARITABLE IN NATURE NOT FOR E DUCATION PURPOSE. THUS THE ASSESSEE IS NOT EXISTING SOLELY FOR EDUCATION P URPOSE. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, THE ALTERNATIVE CLAIM MADE BY THE ASSESSEE WAS ALSO NOT FOUND ACCEPTABLE. THEREFORE, HE ASSESSED THE TOTAL RECEIPT OF TRUST AT RS. 1,52,49,988/-. ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 5 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD DISM ISSED THE ASSESSEES APPEAL BY OBSERVING AS UNDER:- 4.5 I HAVE PERUSED THE ASSESSMENT ORDER, REMAND RE PORT OF THE AO, SUBMISSIONS INCLUDING JUDICIAL CITATIONS AND CR OSS REPLY OF THE APPELLANT AND FIND THAT AN ADDITION OF RS. 1,23,90,976/- HAS BEEN MADE BY THE AO ON ACCOUNT OF RECEIPTS FROM GOVT. OF RAJASTHAN. THESE' RECEIPTS H AVE BEEN CLAIMED AS REIMBURSEMENT OF EXPENDITURE INCURRED BY THE APPELLANT ON CONSTRUCTION OF BUILDING. THE APPELLANT HAS ALSO DECLARED TOTAL EXPENSES OF RS. 43,59,428 AGAIN ST THE RECEIPT OF RS. 28,59,012 FROM THE ACTIVITIES IN THE FIELD OF EDUCATION AND HAS SHOWN A NET DEFICIT OF RS. 15,00,4 16 AFTER CLAIMING EXEMPTION U/S 11 OF THE IT ACT. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY T HE ASSESSING OFFICER THAT REGISTRATION U/S 12AA OF THE IT ACT WHICH HAS BEEN OBTAINED BY THE SOCIETY IS APPLICABLE W.E.F. 23/06/2011. THEREFORE, THE TOTAL RECEIPTS OF THE APP ELLANT HAVE BEEN CONSIDERED AS THE INCOME OF THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION AND ASSESSMENT HAS B EEN COMPLETED IN THE CAPACITY OF AN AOP. 4.6 THE APPELLANT HAS STATED THAT THE RECEIPTS OF RS . 1,23,90,976 ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED ON CONSTRUCTION OF BUILDING AND H AVE ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 6 BEEN RECEIVED FROM THE GOVT. OF RAJASTHAN AND THERE FORE DO NOT FORM PART OF THE TOTAL RECEIPTS OF THE SOCIE TY. THE OTHER RECEIPTS OF THE SOCIETY WERE LESS THAN RS. 1 C RORE AND THEREFORE EXEMPTION U/S 11 OF THE IT ACT WAS CLAIMED. 4.7 IT IS FURTHER-STATED THAT IN THE ALTERNATIVE TH E CLAIM OF THE ASSESSEE MAY BE ALLOWED U/S 10(23C)(IIIAD) OF THE IT ACT BECAUSE AFTER EXCLUDING THE ABOVE RECEIPTS OF RS. 1 .23 CRORES, THE GROSS RECEIPTS ARE LESS THAN RS. 1 CROR E. THEREFORE, THE CLAIM OF THE SOCIETY U/S 10(23C)(IIIA D) OF THE IT ACT MAY BE ALLOWED. THE APPELLANT HAS CITED CERTAIN CASE LAWS TO SUPPORT ITS CONTENTIONS. 4.8 HAVING CONSIDERED THE - MATERIAL AVAILABLE ON R ECORD, I FIND THAT THE APPELLANT HAS FAILED TO APPLY AND OBTAIN REGISTRATION U/S 12AA OF THE IT ACT FOR THE PERIOD U NDER CONSIDERATION. THE RECEIPTS OF RS. 1,23,90,976 ARE F ORMING PART OF THE RECEIPTS OF THE SOCIETY FOR THE PERIOD UNDER CONSIDERATION AND HAVE BEEN RIGHTLY CONSIDERED BY T HE AO AS PART OF THE TOTAL RECEIPTS OF THE SOCIETY. THE AP PELLANT HAS WRONGLY TAKEN THOSE RECEIPTS DIRECTLY TO THE BAL ANCE SHEET AND FAILED TO SHOW THE RECEIPTS IN THE GROSS R ECEIPTS IN THE RECEIPT AND PAYMENT ACCOUNT. THE APPELLANT HA S ALSO FAILED TO SATISFY THE CONDITIONS FOR CLAIM OF EXEMPTION U/S 10(23C)(IIIAD) OF THE IT ACT AS THE GROSS RECEIP TS FOR THE PERIOD UNDER CONSIDERATION EXCEEDS RS. 1 CRORE. THE APPELLANT HAS MERELY REITERATED THE SUBMISSIONS FIL ED EARLIER ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 7 AND HAS FAILED TO BRING ON RECORD ANY MATERIAL TO C ONTROVERT THE FINDINGS GIVEN BY THE AO. 4.9 THE CASE LAWS RELIED UPON BY THE APPELLANT DEAL WITH THE ISSUE OF EARNING OF INTEREST INCOME ON SURPLUS FUND S PARKED IN THE FORM OF FIXED DEPOSITS, WHETHER INTEREST EARN ED WOULD BE PART OF THE RECEIPTS OF THE SOCIETY OR NOT. THEREFORE, IT MAY BE SEEN THAT THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE AND WOULD NOT BE APPLICABLE TO THIS CASE. 4.10 IN VIEW OF THE ABOVE FACTS, I HOLD THAT THE AO WAS JUSTIFIED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED FOR T HE CLAIM OF EXEMPTION U/S 11 OF THE IT ACT AND CONFIRM THE ADDIT ION OF RS. 1,23,90,976 MADE BY THE AO ON ACCOUNT OF REIMBURSEMENT OF EXPENDITURE ON BUILDING CONSTRUCTI ON. I ALSO CONFIRM THE ADDITION OF RS. 28,59,012 MADE BY THE AO ON ACCOUNT OF EXEMPTION CLAIMED U/S 10(23C)(IIIAD) OF THE IT ACT, 1961 BY THE APPELLANT. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS ARGUED THAT THE CAPITAL SUBSIDY GRANT RECEIVED FROM STATE GOVERNMENT OF RAJASTHAN AMOUNTING TO RS.1,23,90,976 /- BY THE APPELLANT SOCIETY ON CONSTRUCTION OF BUILDING, WHICH WAS REIMBURSEMENT OF EXPENSES AND DEDUCTED BY THE SOCIETY FROM ITS AS SETS HAS BEEN TREATED AS REVENUE RECEIPT AND INCLUDED IN CALCULATION OF T OTAL RECEIPTS FOR ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 8 CALCULATION OF THE EXEMPTION LIMIT PRESCRIBED U/S 1 0(23C)(IIIAD) OF THE ACT BY THE LOWER AUTHORITIES. THE LEGISLATIVE INTENTION I S NOT TO INCLUDE CAPITAL SUBSIDY GRANT BUT REVENUE RECEIPT ON ACCOUNT OF TUI TION FEE AND OTHER FEE ETC. THE AMOUNT GIVEN BY THE STATE GOVT. DO NOT POSS ESS THE CHARACTER OF INCOME EARNED BY THE SOCIETY. THE TERM ANNUAL RECEIP T HAS NOT BEEN DEFINED IN SECTION 10(23C)(IIIAD) NOR IN RULE 2BC(1 ) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES), HOWEVER IN SECTION 44AB, THE GROSS RECEIPT FOR THE BUSINESS HAS BEEN GIVEN. THE ASSESSE E RELIED ON THE DECISION IN THE CASE OF PARAM HANS SWAMI UMA BHARTI MISSION VS. ACIT (2013) 140 ITD 429/29 TAXMANN.COM 223 (DELHI TRIB) WHE REIN INTEREST ON FDR HAS NOT BEEN HELD PART OF THE TOTAL RECEIPTS . THE ONLY ANNUAL RECEIPT OF SCHOOL OR UNIVERSITY WOULD BE CONSIDERED FOR DECIDING THE EXEMPTION LIMIT U/S 10(23C)(IIIAD) OF THE ACT. THE G OVT. OF RAJASTHAN HAD PROVIDED THESE LANDS FOR 25 YEARS FREE OF COST BY E XECUTIVE ORDER OF THE DISTRICT COLLECTOR OF DAUSA TO CONSTRUCT WOMENS PO LYTECHNIC. AS PER BALANCE SHEET AS ON 31/3/2010, TOTAL ASSETS WERE RS. 63,66,607/-. TOTAL GRANT GIVEN FOR BUILDING WAS AT RS. 1,23,90,976/- AN D SOCIETY IS SUBSTANTIALLY FINANCED BY THE STATE GOVERNMENT AND ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. THE GROSS RECEIPTS OF THE SOCIETY ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 9 IS LESS THAN RS. 1.00 CRORE, THEREFORE, IT IS COVER ED U/S 10(23C)(IIIAD) OF THE ACT. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS :- (I) DY.DIRECTOR OF INCOME TAX (EXEMPTIONS) VS INDIAN INSTITUTE OF MANAGEMENT (BANGALORE TRIBUNAL) 120 ITD 0351, (200 9) 121 TTJ 0560. (II) DECCAN EDUCATION SOCIETY VS ADDL.CIT (2015) 12 4 DTR 0001 (PUNE) (TRIB), (2015) 172 TTJ 0417 (PUNE). (III) JAT EDUCATION SOCIETY VS ITO (2013) 36 CCH 06 09 DEL TRIB, (2013) 60 SOT 0050 (DELHI (URO). (IV) DY. DIRECTOR OF INCOME TAX (EXEMPTIONS)-III VS MADARASA E- BAKHIYATH-US-SALIHATH ARABIC COLLEGE (2013) 37 CCH 0521 CHEN TRIB (2014) 62 SOT 0001 (CHENNAI). (V) TOLANI EDUCATION SOCIETY VS. ITO 351 ITR 184 AND 327 ITR 121. THE ASSESSEE WRONGLY CLAIMED DEDUCTION U/S 11 OF THE ACT AS THERE WAS NO REGISTRATION U/S 12AA OF THE ACT. THEREFORE, HE PRAYED TO ALLOW THE APPEAL. 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE IS A CHARITABLE INSTITUTION COVERED U/ S 10(23C)(IIIAB) AS WELL AS 10(23C)(IIIAD) OF THE ACT. THE ASSESSEE SUBSTANTI ALLY FINANCED BY THE STATE GOVT., WHICH IS ALSO NOT PART OF THE TOTAL RE CEIPTS AS HELD BY THE ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 10 VARIOUS ITATS AS WELL AS HON'BLE HIGH COURTS. THE AC TUAL RECEIPT FOR THE PURPOSES OF SECTION 10(23C)(IIIAD) IS TO BE EARNED OUT FROM THE EDUCATIONAL ACTIVITY. THE CASE LAW REFERRED BY THE AS SESSEE ARE SQUARELY APPLICABLE. WE HAVE CONSIDERED VIEW THAT THE CAPITAL SUBSIDY RECEIVED FROM THE STATE GOVT. IS NOT PART OF TOTAL RECEIPTS. THE ASSESSEE WRONGLY CLAIMED DEDUCTION U/S 11 AS HE DID NOT HAVE REGISTR ATION U/S 12AA OF THE ACT BUT THE LD ASSESSING OFFICER HAS TO CALCULATE T HE REAL INCOME ON THE BASIS OF MATERIAL AVAILABLE WITH HIM AND IS DUTY BOU ND TO ASSESS THE CORRECT INCOME AS PER LAW. ACCORDINGLY, WE ALLOW THE ASSESSEES APPEAL. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/04/2016. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 08 TH APRIL, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI JAWAHAR SHIKSHAN AVAM PRASHIKSHAN SANSTHAN, BHARATPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT, CIRCLE, BHARATPUR. 3. VK;DJ VK;QDR @ CIT ITA 61/JP/2015_ SHRI JAWAHAR SHIKSHAN AVAM. VS DCIT 11 4. VK;DJ VK;QDR @ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 61/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR