The ACIT, 1(1), V. M/s Kinder Garten Management Society,

ITA 711/IND/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1515 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-11-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 19-11-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R C BAHETI
• Keywords: Charitable institution; Benefit of exemption
• Section: 80G; 12A; 12AA; 64; 12; 10; 11

Judgement Text

PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.711/IND/2007 AY: 1999-00 ACIT-1(1), BHOPAL ..APPELLANT V/S. KINDER GARTEN MANAGEMENT SOCIETY, E-2/75-1, ARERA COLONY, BHOPAL ..RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN, SR. DR ASSESSEE BY : SHRI R.C. BAHETI, CA ORDER PER JOGINDER SINGH, JM THIS APPEAL, FILED BY THE REVENUE, IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-I, BHOPAL, DATED 4.9.2007, WHEREIN, THE SOLE GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING THE BENEFIT OF EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T. ACT, 1961 AND RELIEF OF RS.33,86,833/- AGAINST THE ADDITION M ADE BY THE ASSESSING OFFICER. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD MRS . APARNA KARAN, LD. SR. DR AND SHRI R.C. BAHETI, LD. CHARTER ED ACCOUNTANT FOR PAGE 2 OF 14 THE ASSESSEE. THE CRUX OF THE ARGUMENTS ON BEHALF O F THE REVENUE IS THAT THE ASSESSEE SOCIETY IS NOT REGISTERED U/S 12A OF THE ACT, THEREFORE, NOT ENTITLED TO RELIEF U/S 11 & 12 OF TH E ACT. IT WAS CLAIMED THAT THE ASSESSEE SHOWED GROSS INCOME OF RS .72,66,079/- AND HAS NOT FULFILLED THE CONDITIONS CONTAINED IN S EC. 10(23C)(IIIAD) OF THE ACT AS THE ASSESSEE IS NOT WHOLLY FOR CHARIT ABLE PURPOSES RATHER IS FOR THE PURPOSES OF PROFIT. A STRONG PLEA WAS RAISED THAT DURING THE IMPUGNED YEAR, THE ASSESSEE WAS HAVING 4 6.6% OF INCOME, SHOWING SURPLUS OF RS.33.86 LACS. OUR ATTEN TION WAS INVITED TO VARIOUS PAGES OF THE ASSESSMENT ORDER TO THE FACT THAT THE ASSESSEE SOCIETY WAS CREATED FOR THE PURPOSES O F EARNING PROFIT ONLY BY FURTHER INVITING OUR ATTENTION TO SEC. 10(2 3C)(IIIAD) OF THE ACT. IT WAS CANVASSED THAT THE ASSESSEE HAS NOT FUL FILLED THE TWIN CONDITIONS CONTAINED IN THE IMPUGNED SECTION FOR CL AIMING EXEMPTION. A STRONG RELIANCE WAS PLACED UPON THE DE CISION FROM HONBLE UTTRAKHAND HIGH COURT IN CIT VS. QUEENSS E DUCATIONAL SOCIETY (2009) (223 CTR (UK) 395) BY CLAIMING THAT THE FACTS ARE IDENTICAL TO THE FACTS OF THE PRESENT APPEAL. 3. ON THE OTHER HAND, THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE ASSESSEE SOCIETY IS REGISTERED UNDER THE S OCIETIES REGISTRATION ACT HAVING TWO SCHOOLS AND THE OBJECTS OF THE SOCIETY ARE ONLY EDUCATION. IT WAS PLEADED THAT SURPLUS OF THE FUND IS NOT PAGE 3 OF 14 THE CRITERIA FOR GETTING THE EXEMPTION. HOWEVER TO THE ASSERTION OF THE LD. SR. DR, IT WAS FAIRLY AGREED BY THE LD. COU NSEL FOR ASSESSEE THAT THE ASSESSEE SOCIETY IS HAVING SURPLUS OF 46.6 %. HOWEVER, ADDED THAT SUCH AMOUNT ALSO INCLUDES INTEREST INCOM E WHICH WAS EARNED FROM FIXED DEPOSITS MADE BY THE ASSESSEE SOC IETY FROM THE SURPLUS FUNDS AVAILABLE WITH IT. THE INTEREST INCOM E WAS CLAIMED TO BE RS.7,84,245/-. RELIANCE WAS PLACED UPON THE DECI SIONS IN THIAGARAJAR CHARITIES VS. ADDL. CIT (225 ITR 1010) (SC), ADITNAR EDUCATIONAL INSTITUTION ETC. VS. ADDL. CIT/CIT (224 ITR 310) (SC), BIRLA VIDYA VIHAR TRUST VS. CIT (136 ITR 445) (CAL) , GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. ITO (117 ITR 284) (AP). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS A RE GISTERED SOCIETY REGISTERED UNDER MP SOCIETY REGISTRATION ACT, 1973 VIDE REGISTRATION NO. 7745 DATED 23.4.1979. THE ASSESSEE SOCIETY IS RUNNING TWO SCHOOL NAMELY, SCHOLAR HOME PUBLIC SCHO OL AND KINDER GARTEN SCHOOL. THE OBJECTS OF THE SOCIETY AR E MAINLY TO IMPART EDUCATION. AS PER THE ASSESSEE, IT DERIVED R ECEIPT FROM TUITION AND OTHER FEES FROM STUDENTS AND BANK INTER EST (ON SURPLUS FUNDS, INVESTED IN FDR). DURING THE YEAR UNDER APPE AL, THE ASSESSEE SOCIETY RECEIVED TUITION FEE ETC. TO THE T UNE OF PAGE 4 OF 14 RS.64,81,835/- AND BANK INTEREST OF RS.7,84,245/- ( TOTAL RS.72,66,080/-). THE STAND OF THE REVENUE IS THAT T HE ASSESSEE SOCIETY IS NOT SOLELY FOR EDUCATION BUT IT IS FOR E ARNING PROFIT, CONSEQUENTLY, THE SURPLUS AMOUNT OF RS.3386833/- WA S TAXABLE UNDER THE NORMAL PROVISIONS OF THE ACT, CONSEQUENTL Y, THE IMPUGNED AMOUNT WAS RIGHTLY ADDED TO THE TOTAL INCO ME. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY DECIDED I N FAVOUR OF THE ASSESSEE WHICH IS UNDER CHALLENGE BEFORE THE TRIBUN AL. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUN DER THE RELEVANT PORTION OF SEC. 10(23C) OF THE ACT: 10(23C) ANY INCOME RECEIVED BY ANY PERSON ON BEHAL F OF ( I ) THE PRIME MINISTERS NATIONAL RELIEF FUND; OR ( II ) THE PRIME MINISTERS FUND (PROMOTION OF FOLK ART) ; OR ( III ) THE PRIME MINISTERS AID TO STUDENTS FUND; 32 [OR] 33 [( IIIA ) THE NATIONAL FOUNDATION FOR COMMUNAL HARMONY; OR] 34 [( IIIAB ) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 35 EXISTING 35 SOLELY 35 FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF P ROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GO VERNMENT; OR ( IIIAC ) ANY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTI ON AND TREATMENT OF PERSONS SUFFERING FROM ILLNESS OR MENTAL DEFECTI VENESS OR FOR THE RECEPTION AND TREATMENT OF PERSONS DURING CONVALESC ENCE OR OF PERSONS REQUIRING MEDICAL ATTENTION OR REHABILITATION, EXIS TING SOLELY FOR PHILANTHROPIC PURPOSES AND NOT FOR PURPOSES OF PROF IT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT; OR ( IIIAD ) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 35 EXISTING 35 SOLELY 35 FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PR OFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL I NSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRES CRIBED 36 ; OR ( IIIAE ) ANY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTI ON AND TREATMENT OF PERSONS SUFFERING FROM ILLNESS OR MENTAL DEFECTI VENESS OR FOR THE RECEPTION AND TREATMENT OF PERSONS DURING CONVALESC ENCE OR OF PERSONS REQUIRING MEDICAL ATTENTION OR REHABILITATION, EXIS TING SOLELY FOR PHILANTHROPIC PURPOSES AND NOT FOR PURPOSES OF PROF IT, IF THE AGGREGATE PAGE 5 OF 14 ANNUAL RECEIPTS OF SUCH HOSPITAL OR INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED 36 ; OR] 37 [( IV ) 38 ANY OTHER FUND OR INSTITUTION ESTABLISHED FOR CHARI TABLE PURPOSES 39 [WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY 40 ], HAVING REGARD TO THE OBJECTS OF THE FUND OR INSTITUTION AND ITS I MPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES; OR ( V ) 41 ANY TRUST (INCLUDING ANY OTHER LEGAL OBLIGATION) OR INSTITUTION WHOLLY FOR PUBLIC RELIGIOUS PURPOSES OR WHOLLY FOR PUBLIC RELIGIOUS AND CHARITABLE PURPOSES, 42 [WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY 43 ], HAVING REGARD TO THE MANNER IN WHICH THE AFFAIRS OF THE TRUST OR INSTITUTION ARE ADMINISTERED AND SUPERVISE D FOR ENSURING THAT THE INCOME ACCRUING THERETO IS PROPERLY APPLIED FOR THE OBJECTS THEREOF; 44 [( VI ) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 45 EXISTING 45 SOLELY 45 FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PR OFIT, OTHER THAN THOSE MENTIONED IN SUB-CLAUSE ( IIIAB ) OR SUB-CLAUSE ( IIIAD ) AND WHICH MAY BE APPROVED 46 BY THE PRESCRIBED AUTHORITY 47 ; OR ( VIA ) ANY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTION AND TREATMENT OF PERSONS SUFFERING FROM ILLNESS OR MENTAL DEFECTI VENESS OR FOR THE RECEPTION AND TREATMENT OF PERSONS DURING CONVALESC ENCE OR OF PERSONS REQUIRING MEDICAL ATTENTION OR REHABILITATION, EXIS TING SOLELY FOR PHILANTHROPIC PURPOSES AND NOT FOR PURPOSES OF PROF IT, OTHER THAN THOSE MENTIONED IN SUB-CLAUSE ( IIIAC ) OR SUB-CLAUSE ( IIIAE ) AND WHICH MAY BE APPROVED 48 BY THE PRESCRIBED AUTHO-RITY 49 :] PROVIDED THAT THE FUND OR TRUST OR INSTITUTION 50 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 51 OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION] REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) 50 [OR SUB- CLAUSE ( VI ) OR SUB-CLAUSE ( VIA )] SHALL MAKE AN APPLICATION IN THE PRESCRIBED FORM 52 AND MANNER TO THE PRESCRIBED AUTHORITY 53 FOR THE PURPOSE OF GRANT OF THE EXEMPTION, OR CONTINUANCE T HEREOF, UNDER SUB- CLAUSE ( IV ) OR SUB-CLAUSE ( V ) 54 [OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA )] : 55 [ PROVIDED FURTHER THAT THE PRESCRIBED AUTHORITY, BEFORE APPROVING ANY FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION, UNDER SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ), MAY CALL FOR SUCH DOCUMENTS (INCLUDING AUDITED ANNUAL ACCOUNTS) OR INFORMATION FROM THE FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION, AS THE CASE MAY BE, AS IT THINKS NECESSARY IN ORDER TO SATISFY ITSE LF ABOUT THE GENUINENESS OF THE ACTIVITIES OF SUCH FUND OR TRUST OR INSTITUT ION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OT HER MEDICAL INSTITUTION, AS THE CASE MAY BE, AND THE PRESCRIBED AUTHORITY MA Y ALSO MAKE SUCH INQUIRIES AS IT DEEMS NECESSARY IN THIS BEHALF:] PROVIDED ALSO THAT THE FUND OR TRUST OR INSTITUTION 56 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 57 OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION] REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) 56 [OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA )] PAGE 6 OF 14 58 [( A ) APPLIES ITS INCOME, OR ACCUMULATES IT FOR APPLICAT ION, WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTA BLISHED AND IN A CASE WHERE MORE THAN FIFTEEN PER CENT OF ITS INCOME IS A CCUMULATED ON OR AFTER THE 1ST DAY OF APRIL, 2002, THE PERIOD OF THE ACCUMULATION OF THE AMOUNT EXCEEDING FIFTEEN PER CENT OF ITS INCOME SHA LL IN NO CASE EXCEED FIVE YEARS; AND] 59 [( B ) DOES NOT INVEST OR DEPOSIT ITS FUNDS, OTHER THAN ( I ) ANY ASSETS HELD BY THE FUND, TRUST OR INSTITUTION 60 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 61 OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION] WHERE SUCH ASSETS FORM PART OF THE CORPUS OF THE FUND, TRUST OR INSTITUTION 62 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION] AS ON THE 1ST DAY OF JUNE, 1973; 63 [( IA ) ANY ASSET, BEING EQUITY SHARES OF A PUBLIC COMPAN Y, HELD BY ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION WHERE SUCH ASSETS FORM PART OF THE CORPUS OF ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION AS ON THE 1ST DAY OF JUNE, 1998 ;] ( II ) ANY ASSETS (BEING DEBENTURES ISSUED BY, OR ON BEH ALF OF, ANY COMPANY OR CORPORATION), ACQUIRED BY THE FUND, TRUST OR INSTITUTION 64 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION 65 OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION] BEFORE THE 1ST DAY OF MA RCH, 1983; ( III ) ANY ACCRETION TO THE SHARES, FORMING PART OF THE CORPUS MENTIONED IN SUB-CLAUSE ( I ) 66 [AND SUB-CLAUSE ( IA )], BY WAY OF BONUS SHARES ALLOTTED TO THE FUND, TRUST OR INSTITUTION 64 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OT HER MEDICAL INSTITUTION] ; ( IV ) VOLUNTARY CONTRIBUTIONS RECEIVED AND MAINTAINED I N THE FORM OF JEWELLERY, FURNITURE OR ANY OTHER ARTICLE A S THE BOARD MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY, FOR ANY PERIOD DURING THE PREVIOUS YEAR OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB- SECTION (5) OF SECTION 11 :] PROVIDED ALSO THAT THE EXEMPTION UNDER SUB-CLAUSE ( IV ) OR SUB- CLAUSE ( V ) SHALL NOT BE DENIED IN RELATION TO ANY FUNDS INVE STED OR DEPOSITED BEFORE THE 1ST DAY OF APRIL, 1989, OTHERW ISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OF SECTION 11 IF SUCH FUNDS DO NOT CONTINUE TO REMAIN SO INVESTED OR DEPOSITED AFTER THE 30TH DAY OF MARCH, 67 [1993] : 68 [ PROVIDED ALSO THAT THE EXEMPTION UNDER SUB-CLAUSE ( VI ) OR SUB- CLAUSE ( VIA ) SHALL NOT BE DENIED IN RELATION TO ANY FUNDS INVE STED OR DEPOSITED BEFORE THE 1ST DAY OF JUNE, 1998, OTHERWI SE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECT ION (5) OF SECTION 11 IF SUCH FUNDS DO NOT CONTINUE TO REMAIN SO INVESTED OR DEPOSITED AFTER THE 30TH DAY OF MARCH, 2001 :] PAGE 7 OF 14 69 [ PROVIDED ALSO THAT THE EXEMPTION UNDER SUB-CLAUSE ( IV ) OR SUB- CLAUSE ( V ) 68 [OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA )] SHALL NOT BE DENIED IN RELATION TO VOLUNTARY CONTRIBUTION, OTHER THAN VOLU NTARY CONTRIBUTION IN CASH OR VOLUNTARY CONTRIBUTION OF THE NATURE REFERR ED TO IN CLAUSE ( B ) OF THE THIRD PROVISO TO THIS SUB-CLAUSE, SUBJECT TO TH E CONDITION THAT SUCH VOLUNTARY CONTRIBUTION IS NOT HELD BY THE TRUST OR INSTITUTION 70 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION], OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OF SECTION 11 , AFTER THE EXPIRY OF ONE YEAR FROM THE END OF THE PREVIOUS YEAR IN WHICH SUC H ASSET IS ACQUIRED OR THE 31ST DAY OF MARCH, 1992, WHICHEVER IS LATER: ] PROVIDED ALSO THAT NOTHING CONTAINED IN SUB-CLAUSE ( IV ) OR SUB- CLAUSE ( V ) 71 [OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA )] SHALL APPLY IN RELATION TO ANY INCOME OF THE FUND OR TRUST OR INSTITUTION 71 [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OT HER MEDICAL INSTITUTION], BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUS INESS IS INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVES AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY IT IN RESPECT OF SUCH BUSINESS: PROVIDED ALSO THAT ANY 72 [NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ), BEFORE THE DATE ON WHICH THE TAXATION LAWS (AMENDMENT) BILL, 2006 RECE IVES THE ASSENT OF THE PRESIDENT * , SHALL, AT ANY ONE TIME, HAVE EFFECT FOR SUCH ASSE SSMENT YEAR OR YEARS, NOT EXCEEDING THREE ASSESSMENT YEARS ] (INCLUDING AN ASSESSMENT YEAR OR YEARS COMMENCING BEFORE THE DATE ON WHICH SUCH NOTIFICATION IS ISSUED) AS MAY BE SPECIFIED IN THE NOTIFICATION:] 73 [ PROVIDED ALSO THAT WHERE AN APPLICATION UNDER THE FIRST PROVISO IS MADE ON OR AFTER THE DATE ON WHICH THE TAXATION LAWS (AMENDMENT) BILL, 2006 RECEIVES THE ASSENT OF THE PRESIDENT, * EVERY NOTIFICATION UNDER SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) SHALL BE ISSUED OR APPROVAL UNDER 74 [SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR] SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ) SHALL BE GRANTED OR AN ORDER REJECTING THE APPLIC ATION SHALL BE PASSED WITHIN THE PERIOD OF TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH SUCH APPLICATION WAS RECEIVED: PROVIDED ALSO THAT WHERE THE TOTAL INCOME, OF THE FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO I N SUB-CLAUSE ( IV ) OR SUB- CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ), WITHOUT GIVING EFFECT TO THE PROVISIONS OF THE SAID SUB-CLAUSES, EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX IN ANY PREVIOUS YEAR , SUCH TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION SHALL GET ITS ACCOUNTS AUDITED IN RESPECT OF THAT YEAR BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 AND FURNISH ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR, THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM 75 DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED :] PAGE 8 OF 14 76 [ PROVIDED ALSO THAT ANY AMOUNT OF DONATION RECEIVED BY THE FUND OR INSTITUTION IN TERMS OF CLAUSE ( D ) OF SUB-SECTION (2) OF SECTION 80G 77 [IN RESPECT OF WHICH ACCOUNTS OF INCOME AND EXPENDI TURE HAVE NOT BEEN RENDERED TO THE AUTHORITY PRESCRIBED UNDER CLAUSE ( V ) OF SUB-SECTION (5C) OF THAT SECTION, IN THE MANNER SPECIFIED IN THAT CL AUSE, OR] WHICH HAS BEEN UTILISED FOR PURPOSES OTHER THAN PROVIDING REL IEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT OR WHICH REMAINS UNUTILISED I N TERMS OF SUB- SECTION (5C) OF SECTION 80G AND NOT TRANSFERRED TO THE PRIME MINISTERS NATIONAL RELIEF FUND ON OR BEFORE THE 31ST DAY OF M ARCH, 78 [2004] SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR AND SHALL ACCORDINGLY BE CHARGED TO TAX:] 79 [***] 80 [ PROVIDED ALSO THAT WHERE THE FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB- CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ) DOES NOT APPLY ITS INCOME DURING THE YEAR OF RECEIPT AND ACCUMULATES IT, ANY PAYMENT OR CREDI T OUT OF SUCH ACCUMULATION TO ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR TRUST OR INSTITUTION OR ANY UNIVERSI TY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION REFERRED TO IN SUB- CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ) SHALL NOT BE TREATED AS APPLICATION OF INCOME TO THE OBJE CTS FOR WHICH SUCH FUND OR TRUST OR INSTITUTION OR UNIVERSITY OR EDUCA TIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTION, AS THE CASE MAY BE, IS ESTABLISHED : PROVIDED ALSO THAT WHERE THE FUND OR INSTITUTION REFERRED TO IN S UB- CLAUSE ( IV ) OR TRUST OR INSTITUTION REFERRED TO IN SUB-CLAUSE ( V ) IS NOTIFIED BY THE CENTRAL GOVERNMENT 81 [OR IS APPROVED BY THE PRESCRIBED AUTHORITY, AS THE CASE MAY BE,] OR ANY UNIVERSITY O R OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( VI ) OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( VIA ), IS APPROVED BY THE PRESCRIBED AUTHORITY AND SUBSEQUENTLY THAT GOVERNMENT OR THE P RESCRIBED AUTHORITY IS SATISFIED THAT ( I ) SUCH FUND OR INSTITUTION OR TRUST OR ANY UNIVERS ITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER ME DICAL INSTITUTION HAS NOT ( A ) APPLIED ITS INCOME IN ACCORDANCE WITH THE PROVIS IONS CONTAINED IN CLAUSE ( A ) OF THE THIRD PROVISO; OR ( B ) INVESTED OR DEPOSITED ITS FUNDS IN ACCORDANCE WI TH THE PROVISIONS CONTAINED IN CLAUSE ( B ) OF THE THIRD PROVISO; OR ( II ) THE ACTIVITIES OF SUCH FUND OR INSTITUTION OR TR UST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION ( A ) ARE NOT GENUINE; OR ( B ) ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ALL OR ANY OF THE CONDITIONS SUBJECT TO WHICH IT WAS NOTIFIED OR APPR OVED, PAGE 9 OF 14 IT MAY, AT ANY TIME AFTER GIVING A REASONABLE OPP ORTUNITY OF SHOWING CAUSE AGAINST THE PROPOSED ACTION TO THE CONCERNED FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INS TITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, RESCIND THE NOTIFICAT ION OR, BY ORDER, WITHDRAW THE APPROVAL, AS THE CASE MAY BE, AND FORW ARD A COPY OF THE ORDER RESCINDING THE NOTIFICATION OR WITHDRAWING TH E APPROVAL TO SUCH FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR O THER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION AND TO THE ASSESSING OFFICER:] 82 [ PROVIDED ALSO THAT IN CASE THE FUND OR TRUST OR INSTITUTION OR A NY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN THE FIRST PROVIS O MAKES AN APPLICATION ON OR AFTER THE 1ST DAY OF JUNE, 2006 FOR THE PURPO SES OF GRANT OF EXEMPTION OR CONTINUANCE THEREOF, SUCH APPLICATION SHALL BE 82A [ MADE ON OR BEFORE THE 30TH DAY OF SEPTEMBER OF THE RELEVANT ASSESSMENT YEAR ] FROM WHICH THE EXEMPTION IS SOUGHT :] 83 [ PROVIDED ALSO THAT ANY ANONYMOUS DONATION REFERRED TO IN SECTION 115BBC ON WHICH TAX IS PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF THE SAID SECTION SHALL BE INCLUDED IN THE TOTAL INCOME :] 84 [ PROVIDED ALSO THAT ALL PENDING APPLICATIONS, ON WHICH NO NOTIFICATION HAS BEEN ISSUED UNDER SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) BEFORE THE 1ST DAY OF JUNE, 2007, SHALL STAND TRANS FERRED ON THAT DAY TO THE PRESCRIBED AUTHORITY AND THE PRESCRIBED AUTHORI TY MAY PROCEED WITH SUCH APPLICATIONS UNDER THOSE SUB-CLAUSES FROM THE STAGE AT WHICH THEY WERE ON THAT DAY;] IF THE LANGUAGE MENTIONED IN SUB-CLAUSE (IIIAD) TO CLAUSE (23C) OF SEC. 10 IS ANALYSED IT CLEARLY SPEAKS ABOUT THE UNI VERSITY OR EDUCATIONAL INSTITUTION SHOULD EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPT OF SUCH INSTITUTION DO NOT EXCEED TH E AMOUNT OF ANNUAL RECEIPT AS MAY BE PRESCRIBED. PURSUANT TO TH IS SUB-CLAUSE, WE ARE REPRODUCING HEREUNDER THE DETAILS OF GROSS I NCOME/SURPLUS OF INCOME OVER EXPENDITURE AND PERCENTAGE OF SURPLU S OVER THE GROSS INCOME: PAGE 10 OF 14 AMOUNT IN RUPEES AND LACS ASSESSMENT YEAR GROSS INCOME SURPLUS PERCENTAGE OF SURPLUS OVER THE GROSS INCOME 1999-00 72.66 33.86 46.6 2000-01 84 37.56 44.71 2001-02 113.9 64.13 56.3 2002-03 107.74 48.92 45.41 2003-04 127.96 67.33 52.61 IF THE AFORESAID FIGURES ARE ANALYSED, THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE SOCIETY IS SYSTEMATICALL Y COLLECTING TUITION FEE/FEE RESULTING INTO GENERATION OF HUGE SURPLUS F UNDS/PROFIT. AS PER THE REVENUE, THE LARGER OBJECT OF PROVIDING CHE APER EDUCATION TO THE POORER SECTION OF THE SOCIETY HAS BEEN DEFEA TED, CONSEQUENTLY, CHARGING OF HIGHER FEES DEFEATS THE V ERY SPIRIT OF EXEMPTION. IF THE ASSERTION OF THE REVENUE AND OBJE CTS OF THE ASSESSEE ARE KEPT IN JUXTAPOSITION, WE HAVE FOUND T HAT THERE IS ABNORMALLY HIGH PROFIT WHICH IS IDENTICAL TO THE LA TEST DECISION, CITED BY THE REVENUE ON IDENTICAL FACT, IN CIT VS. QUEENS EDUCATION SOCIETY (2009) (223 CTR (UK) 395) WHEREIN EVEN THE DECISION FROM HONBLE APEX COURT IN ADITNAR EDUCATIONAL INSTITUTI ON VS. ADDL. CIT (139 CTR (SC) 7); 224 ITR 310 (SC), RELIED UPON BY THE ASSESSEE, PAGE 11 OF 14 HAS BEEN DULY CONSIDERED ALONG WITH THE DECISION IN MCD VS. CHILDREN BOOK TRUST (3SCC 390). THE HONBLE UTTRAKH AND HIGH COURT HAS DELIBERATED UPON THE ISSUE OF EXEMPTION U /S 10(23C)(IIIAD) OF THE ACT BY KEEPING IN JUXTAPOSITI ON WITH THE PROFIT MOTIVE OF THE EDUCATION SOCIETY AND CONCLUDED THAT WHERE PROFIT TO THE EXTENT OF 27 TO 30% WAS EARNED, EXEMPTION U/S 1 0(23C)(IIIAD) IS NOT ALLOWABLE. IN OUR HUMBLE OPINION, THE FACTS ARE IDENTICAL, CONSEQUENTLY, THIS JUDICIAL PRONOUNCEMENT CLEARLY F AVOURS THE REVENUE. IT IS PERTINENT TO MENTION HERE THAT THE S TRONGLY RELIED CASE IN 221 ITR 310 (SC) HAS BEEN DULY CONSIDERED B Y THE HONBLE HIGH COURT. THE HONBLE HIGH COURT CONCLUDED THAT E DUCATIONAL SOCIETIES EARNING NET SURPLUS TO THE EXTENT OF 27 P ER CENT TO 30 PER CENT ARE NOT ENTITLED TO EXEMPTION UNDER SECTION 10 (23C)(IIIAD) IRRESPECTIVE OF THE INVESTMENTS MADE BY THEM IN FIX ED ASSETS OUT OF THE INCOME OF RELEVANT YEAR. THE LD. COUNSEL FOR TH E ASSESSEE PLACED RELIANCE UPON THE DECISION IN THIAGARAJAR CH ARITIES VS. ADDL. CIT (SC), WHEREIN, THE ISSUE BEFORE THE HONBLE COU RT WAS DIFFERENCE BETWEEN OBJECTS OF THE TRUST AND POWERS GIVEN TO TRUSTEES TO CARRY ON THE BUSINESS. IT WAS HELD THAT BUSINESS ONLY A MEANS TO ACHIEVE THE OBJECTS OF THE TRUST. THE TRUS T WAS HELD TO BE ENTITLED TO EXEMPTION U/S 2(15) R.W. SEC. 11 OF THE ACT. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE HAS NOT CITED ANY PAGE 12 OF 14 DECISION CONTRARY TO THE LATEST DECISION OF HONBLE UTTRAKHAND HIGH COURT ON IDENTICAL FACTS. THE LD. COUNSEL FOR ASSES SEE ALSO PLACED RELIANCE UPON THE DECISION IN DI(INV.) VS. MANAV BH ARTI INSTITUTE OF CHILD EDUCATION (2007) 163 TAXATION 50 (DEL), WHERE IN, THREE WAS A FINDING OF THE TRIBUNAL THAT THE SOCIETY WAS ESTA BLISHED WITHOUT ANY PROFIT MOTIVE AND THE OBJECTS WERE PURELY EDUCA TIONAL, CONSEQUENTLY, IT WAS DECIDED IN FAVOUR OF THE ASSES SEE. HOWEVER, IN VIEW OF THE AFORESTATED FACTS AND THE LATEST DEC ISION FROM THE HONBLE UTTRAKHAND HIGH COURT, WHEREIN, THE DECISIO N CITED BY THE ASSESSEE, HAS ALSO BEEN CONSIDERED, CONSEQUENTLY, T HE CASES RELIED UPON BY THE ASSESSEE ARE NOT OF MUCH HELP. SIMILAR IS THE SITUATION IN THE CASE OF ACIT VS. SOUTH POINT MONTESSORI SCHO OL (2007) 109 TTJ (GAU) (TM) 488 (ITAT), WHEREIN, THERE WAS NO MA TERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS NOT EXISTING F OR PROFIT. THE HONBLE SUPREME COURT IN 224 ITR 310 OBSERVED AS UN DER: AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER, THE OBJECT IS TO MAKE PROFIT. IN EVALUATING OR APPRAISING THE ABOVE, ONE PAGE 13 OF 14 SHOULD ALSO BEAR IN MIND THE DISTINCTION DIFFERENCE BETWEEN THE CORPUS, THE OBJECTS AND POWERS OF THE CONCERNED ENTITY. IF ONE LOOKS AT THE OBJECTS CLAUSE, THERE ARE OTHER NOBLE AND PIOUS OBJECTS BUT ASSESSEE SOCIETY HAS DONE NOTHING TO ACHIEVE THE OTHER OBJECTS EXCEPT PERUSING MAIN OBJECT OF PROVIDING EDUCATION AND EARNING PROFIT. FURTHER, WITH PROFIT EARNED THE SOCIETY HAS STRENGTHENED OR ENHANCED ITS CAPACITY TO EARN MORE RATHER THAN TO UNDERTAKE ANY OTHER ACTIVITIES TO FULFIL OTHER NOBLE OBJECTS FOR THE CAUSE OF POOR AND NEEDY PEOPLE OR ADVANCEMENT OF RELIGIOUS PURPOSES. IF THE INTENT OF THE LEGISLATURE IS KEPT IN JUXTA POSITION WITH THE OBJECTS OF THE ASSESSEE AND REAL INTENTION BEHI ND IT, IF ANALYSED, IN OUR HUMBLE OPINION, THE VERY PURPOSE O F GRANTING EXEMPTION, HAS BEEN DEFEATED, CONSEQUENTLY, OUR VIE W IS FULLY SUPPORTED BY THE AFORESAID DECISION FROM HONBLE UT TRAKHAND HIGH COURT. WE MAY FURTHER ADD THAT THE INVESTMENT IN FI XED ASSET LIKE BUILDING, FURNITURE ETC. ARE PROPERTY OF THE SOCIET Y AND ARE NECESSITY IN IMPARTING EDUCATION BUT THE SAME HAS B EEN CONSTRUCTED/PURCHASED OUT OF INCOME FROM FEES ETC. WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME. HOW EVER, THE PAGE 14 OF 14 BASIC PURPOSE OF EXEMPTION INSCRIBED IN THE ACT, UN DER THE GUISE OF IMPARTING EDUCATION IS DEFEATED. IN THE RESULT, THIS APPEAL OF THE REVENUE IS ALLO WED AND THE STAND OF THE LD. ASSESSING OFFICER IS AFFIRMED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.11.2009. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.11.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR