Indian Academy of Highway Engineers, Noida V. CIT(E), Lucknow

ITA 645/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1313 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 31-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 11; 12A; 12AA; 48; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘C’ : NEW DELHI) (Through Video Conferencing) BEFORE SH. G.S.PANNU, HON’BLE PRESIDENT AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 645 /Del/2021 (Assessment Year : ........) Indian Academy of Highway Engineers A-5, Industrial Area, Sec-62, Noida PAN : AABAI2196K Vs. CIT(Exemptions) Lukhnow, (APPELLANT) (RESPONDENT) Assessee by Sh. Akhilesh Kumar, Adv. Sh. Vipin Garg, Adv. Revenue by Ms. Deepshikha Sharma, CIT(DR) Date of hearing: 10.06.2022 Date of Pronouncement: 30.06.2022 ORDER PER ANUBHAV SHARMA, JM: The appeal has been preferred by the assessee against the order dated 31.03.2021 of Ld. CIT(Exemptions), Lucknow (hereinafter referred to as “Ld. Tax Authority) whereby application of Assessee u/s 10(23C) (vi) of the Income Tax Act 1961(hereinafter referred to as The Act) was rejected. ITA No. 645/Del/2021 Indian Academy of Highway Engineers 2 2. The assessee has challenged the impugned order, raising grounds of appeal, that the Ld. CIT(Exemption), Lucknow erred in law and on facts, and failed to appreciate the facts placed on record, that the appellant society was already exempted u/s 10(23C)(vi) of the Act, vide approval granted by prescribed authority vide order dt 13.02.2008, for AY 2007-08 onwards, which always subsisted thereafter, and the appellant society was regularly assessed duly allowing the exemption u/s 10(23C)(vi) of the Act, and it was only due to change in name of the Appellant and resultant change in PAN, that to effectuate the corresponding changes incorporated in the aforesaid order dt 13.02.2008, the Appellant filed an Application u/s 10(23C)(vi) of the Act, to make the necessary changes in the already subsisting approval order dt 13.02.2008, and without appreciating the aforesaid facts, the CIT (Exemption), in an grossly arbitrary and illegal manner, rejected the application of the Appellant, without application of mind, which is bad in law. It is submitted that the Appellant society is a collaborative body of the Central and State Governments, formed under the administrative control of Ministry of Road Transport & Highway, Government of India with a Governing Body consisting of all ex officio senior nominees from the Government, and thus it is an extended arm of the Government, formed and running with an object to give the technical training and necessary professional grounding in the field of Highway engineering including bridges to ensure an efficient, safe, reliable and economic highway system as in integral part of nation's economy, and without considering these facts on record, the CIT (Exemption) has arbitrarily rejected the application by wrongly inferring that the Appellant Society is not doing any charity and is running on commercial lines only because it has surplus, and thus rejected the application which is grossly illegal, beyond jurisdiction and against the ITA No. 645/Del/2021 Indian Academy of Highway Engineers 3 law and thus. It is further submitted in grounds of appeal that the Ld. CIT (Exemption), Lucknow erred in law and on facts, by rejecting the Application u/s 10(23C)(vi), without appreciating that all the conditions prescribed in sec, 10(23C)(vi) r/w Sec 2(15) of the Act were satisfied by the Appellant. It is thus claimed by the appellant that the impugned order be set aside and the application of the appellant u/s 10(23C) (vi) of the Act be allowed. 3. Heard Sh. Akhilesh Kumar, Adv. & Sh. Vipin Garg, Adv. the counsels for the assessee and Ld. CIT (DR) and perused the records. 4. Ld. Counsel for appellant reasserted the aforesaid submissions of grounds of appeal and has taken the Bench across the paper book submitting that the appellant is an institution established by the Government of India, Ministry of Road Transport and Highway and was previously known by the name National Institute for Training of Highway Engineers (NITHE). It was holding PAN CARD with aforesaid name but the administrative ministry had decided to change its name to Indian Academy of Highway Engineers (IAHE) while broadening its objectives in the field of imparting training and education. Accordingly afresh application was moved u/s 10(23C)(vi) of the Act. It is submitted that the appellant was holding the registration for the purpose of Section 10(23C)(vi) of the Act for previous assessment years. However, the Ld. CIT(E), Lucknow failed to take into account the fact that there was merely a change in the name while the objectives and the functional nature of the appellant institution continued to be same. It was submitted that the Ld. CIT(E), Lucknow has not given any sustainable reasoning to disallow the benefit which was granted for previous assessment years and merely relied the reports called from the Assessing Officers. ITA No. 645/Del/2021 Indian Academy of Highway Engineers 4 4.1. Ld. Counsel for the appellant has relied the following judgments to primarily contend that activities like teaching Yoga conducting examinations teaching music distribution of tax books providing coaching/ guidance to get admissions to professional institutions have all been regarded yield following in the word (education) is limited schools, colleges and similar institutions and does not explain to any other media for such acquisition of knowledge it was also submitted that distinction has been drawn between making of surplus and institution being carried on “for profit”. 1. Patanjali Yogapeeth (Nyas) vs. ADIT (E), Range II, New Delhi (2017) 54 ITR 616 (Delhi-Trib.) 2. CIT(E) vs. Patanjali Yogpeeth (NYAS), 87 taxmann.com54 (Delhi HC) 3. Delhi Musix Society vs. DCIT, 17 taxmann.com 49 (Delhi) 4. Delhi Bureau of Text Books vs. Director of Income Tax(E)] 5. Counsel for the Indian School Certificate Examinations vs. Director General of Income Tax, 20 taxmann.com 505 (Delhi HC) 6. Oxford Academy for Carrer Development vs. Chief Commissioner of Income Tax 7. Investor Financial Education Academy vs. ITO (E) -4, Chennai , 121 taxmann.com 281 (Madras. HC) 8. ITO vs. SRM Foundation of India, 21 ITD 598 (Delhi) 9. ITO, Ward 1, New Delhi vs. Science Olympaid Foundation, 48 taxmann.com 382 (ITAT) ITA No. 645/Del/2021 Indian Academy of Highway Engineers 5 10. Sole Trustee, Lok Shikshana Trust vs. CIT, 101 ITR 234 (SC) 11. Queen’s Education Society vs. CIT, 55 taxmann.com 255 (SC) 12. American Hotel & Lodging Association, Educational Institute vs. Central Board of Direct Taxes 13. Radhasoami Satsang vs. CIT, 60 Taxman. 248 (SC) 14. CIT vs. Excel Industries Ltd., 38 taxmann.com 100 (SC) 5. Ld. DR defended the orders of Ld. CIT(E), Lucknow submitting that the appellant was collecting fees on account of training programmes and was more into commercial education, therefore, there is no illegality in the impugned order. It was submitted that as principle of res judicata is not applicable and also the Ld. DR has submitted that the name was changed due to broadening of objectives so Ld. Tax authority has rightly exercised discretion. 6. Now, giving thoughtful consideration to the arguments of both the sides and perusal of the material on record it can be observed that by order dated 13.02.2008 (page no. 7 of the paper book) for the assessment year 2006-07 to 2008-09 the Director General of Income Tax (Exemption), Delhi had approved the claim of appellant u/s 10(23C)(vii) of the Act. This claim of appellant was approved under the name National Institute for Training of Highway Engineers. 6.1 On 11 th June, 2011 the Chief Engineer (Trg.) Ministry of Road Transport and Highways, Government of India had approved the proposal to change the name of the institute from NITHT to Indian Academy of ITA No. 645/Del/2021 Indian Academy of Highway Engineers 6 Highway Engineers, the copy of this approval dated 11.01.2011 is on record at page no. 23 of the paper book. 6.2 On 14 th June, 2019, the Deputy Director of Indian Academy of Highway Engineers i.e. present appellant had moved application (page no. 85 of the paper book) for approval u/s 10(23C) of the Act. A perusal of same shows it was mentioned as to how the institution came into existence. Its purpose of imparting knowledge to specific set of professionals. This application also mention that the institution has already exemption order in its favour. The application further discloses that the name of the institution has been changed from NITHT to IAHE and accordingly the application was moved for afresh exemption order in the name of new entity. 6.3 Then it can be appreciated that there is a letter dated 09.08.2019 issued by the Commissioner of Income Tax (E), Lucknow to the appellant calling for information in regard to the application. A perusal of this letter which is on record at page no. 87 of the paper book, shows that on a notice is on a Performa by which information or the documents are usually sought to verify the claim of any applicant. There is no specific query, in the light of contents of application of Appellant. 6.4 There after, by letter dated 16.09.2019 (at page no. 94 of the paper book) the appellant has given broadly the scope of its activities and had given specific replies to the 18 pointer questionnaire issued by the Tax Authorities in which it was specifically mentioned that IAHE was established as an autonomous body on the Ministry of Road Transport and Highways by initial corpus contribution. The land was allotted to the society in the name of President of India. Then again, on 10.09.2020 detail account/ ITA No. 645/Del/2021 Indian Academy of Highway Engineers 7 reply was submitted by the appellant to the Tax Authorities submitting specifically that as to how the activities of institution fall into the beneficial provision of Section 10(23C)(vii) of the Act. The copy of this letter dated 10.09.2020 is on record at page no. 89 of the paper book. 7. However, it appears that all these factual aspects with regard to approval for previous years, mere change in the name and formal nature of applicatin due change in the name, had no bearing in the mind of Ld. Tax Authority while passing the impugned order dated 31.03.2021. Not a word is discussed in the impugned order about former approval. It appears that instead of having objective assessment of the facts the Ld. Tax Authority preferred to merely rely upon the reports called from subordinates i.e. Assessing Officer and Joint Commissioner of Income Tax (E), Ghaziabad. It also appears that the Ld. Tax Authority was also influenced by the fact of rejection of application for registration of the appellant u/s 12A of the Act. It appears that Ld. Tax Authority failed to take into consideration the Circular No 14/2015 dated 17/8/2015 of CBDT, which provides by clause 2 of the Circular that Section 10(23C)(vi) of the Act does not prescribe any stipulation which makes the registration u/s 12AA a mandatory pre or post condition. The Ld. Tax Authority merely noticed receipt of 10,93,41,993/- from conduct of training programmes and held that these amounts were received on commercial basis without providing any element of charity to the society and declined the application. 8. Ld. DR has tried to defend the order on the basis of principle non- application res judicata but it is not the question of res judicata being applied to examine the validity of impugned order but to examine as to what were the changed circumstances which were considered by the Ld. Tax Authority. ITA No. 645/Del/2021 Indian Academy of Highway Engineers 8 However, no such changed circumstances or reasons are apparent from the order. 8.1 This bench is rather of considered view that this denial of benefit was actually withdrawal of the exemption which was provided to the assessee with its former name and for such withdrawal there should have been further reasons of misuse of the provision, then just re-examining the nature of activities and eligibility conditions. 8.2 The Ld. DR has submitted that the name was changed due to broadening of objectives so Ld. Tax authority could have denied the sanction. This bench of the considered opinion that broadening of objectives did not in any way change the nature of objectives of the institution or its functionality. It continued to be an institution to give technical training and necessary professional grounding in the field of highway engineers including bridges to ensure an efficient, safe, reliable and economic highway system as an integral part of nation’s economy. 8.3 The Ld. Tax Authority has questioned the charitable objectives of the appellant. An important aspect that is over looked by the Ld. Tax Authority is that appellant is an autonomous institution of a Ministry of Road Transport and Highway, Government of India. The initial funding was from this administrative ministry and even the land for building has been purchased in name of President of India. The Bench is of view that there cannot be a more sacrosanct purpose of an institution like the present appellant which is giving formal training to professionals like highway engineers, who otherwise would not have any training or continued learning, from ordinary academic institutions or Universities. ITA No. 645/Del/2021 Indian Academy of Highway Engineers 9 8.3.1 A self sustaining autonomous institution is rather expected to be generating receipts for its subsistence rather then being dependent on the Government for aid. So, merely collection of fee for training programs cannot make an autonomous institution to be commercial, as observed by the Ld. Tax Authority. 9. A reference needs to be made of the Hob'ble Apex Court judgment in Queens Educational Society vs. CIT, ( Supra) wherein in paras 24 & 25 it has held as under: "24. The view of the Punjab and Haryana High Court has been followed by the Delhi High Court in St. Lawrence Educational Society (Regd.) v. CIT & Anr. (2011) 53 DTR (Del) 130. Also in Tolani Education Society v. Dy. DIT (Exemptions) and Ors. [2013] 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Cloth Mfrs. Association Case (Supra) and Aditanar Educational Institution case (Supra) as follows: ".....The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the Gandhi College of Pharmacy balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in ITA No. 645/Del/2021 Indian Academy of Highway Engineers 10 regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met." 25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue's appeals from the Punjab and Haryana High Court's judgment dated 29.1.2010 and the Gandhi College of Pharmacy judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases ITA No. 645/Del/2021 Indian Academy of Highway Engineers 11 are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act." 9.1 Thus, it is actually imperative for the Tax Authorities examining applications under section 10(23C)(vi) of the Act, to reflect in their orders that matter has been examined on basis of tests recognized by the Hon’ble Apex Court in Queens Educational Society Case to determine whether an educational institution exists solely for educational purposes and not for purposes of profit and which has not been done in present case by the Ld. Tax Authority. 10. The impugned order is not sustainable and same is set aside. The Ld. CIT(E) is directed to issue the exemption certificate to 10(23C)(vi) of the Act for the relevant assessment years. Order pronounced and signed in open court on this day of 30 th June, 2022. Sd/- Sd/- (G.S.PANNU) (ANUBHAV SHARMA) PRESIDENT JUDICIAL MEMBER Date:- 30 th .06.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI