Shri Govindram Seksaria Technological Society, Indore V. The ACIT 1(2), RANGE-1, Indore

ITA 711/IND/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78039 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BE NCH INDORE , . ., BEFORE : SHRI JOGINDER SINGH, JM & SHRI R.C.SHARMA, AM !' ./ ITA NO.711/IND/2013 ( #$% & /ASSESSMENT YEAR : 2006-07) SHRI GOVINDRAM SEKSARIA TECHNOLOGICAL SOCIETY, 23, PARK ROAD, INDORE(M.P.) VS. ACIT 1(2), RANGE-1, INDORE ' ./ ( ./PAN/GIR NO. : AAETS 07467 J ( !' ') /APPELLANT ) .. ( *+') / RESPONDENT ) #$,- /ASSESSEE BY : SHRI S.N.AGRAWAL & SHRI PANKAJ MOGRA /REVENUE BY : SHRI R.A. VERMA . # / -0 / DATE OF HEARING : 29 TH APRIL, 2014 1&% / -0 /DATE OF PRONOUNCEMENT : 21.5. 2014 / O R D E R PER R.C.SHARMA (A.M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, INDORE FOR THE ASSESSMENT YEAR 2006-07, I N THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, WHEREIN FOLLOWING TWO GROUNDS HAVE BEEN TAKEN :- 01 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM AND CONFIRMING THE AOS ACTION IN TAXING INTEREST FROM FDR AND SAVING BANK ACCOUNT OF RS.3,72,643/- IN ITS ONE OF THE EDUCATIONAL SOCIETY RUN BY THE ASSESSEE SOCIETY IN THE NAME OF GSIMR AS ITS TAXABL E INCOME AND NOT CONSIDERING THE SAID INCOME AS ELIGIBLE FOR EXEMPTION U/S 10(23)(IIIAD) EVEN WHEN THE SAID INSTITUTION IS CARRYING OUT EDUCATIONAL ACTIVITIES ONLY AND HAS APPLIED ITS ENT IRE INCOME FOR EDUCATIONAL PURPOSES ONLY. ITA NO.711/IND/2013 2 WITHOUT PREJUDICE TO THE ABOVE 02. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT ALLOWING SET OFF OF LOS S INCURRED BY ONE OF ITS INSTITUTION OF RS.1,51,84,627/- AGAINST NET INCOME OF THE OTHER INSTITUTION OF RS.4,85,280/- AND THE INCO ME OF SOCIETY OF RS.18,311/-. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUS ED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN EDUCATIONAL IN STITUTION. IT WAS REGISTERED ON 17.02.1954 AND IS RUNNING TWO EDUCAT IONAL INSTITUTIONS NAMELY, (I) GOVINDRAM SEKSARIA INSTITUTE OF TECHNOL OGY AND SCIENCE (GSITS) & (II) GOVINDRAM SEKSARIA INSTITUTE OF MAN AGEMENT AND RESEARCH (GSIMR). DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE LD. AO HAS ASSESSED THE INCOME OF THE SOCIETY O F RS.18,311/- AND THAT OF GSIMR OF RS.4,85,280/-. THE LOSS DECLAR ED BY GSITS OF RS.1,51,84,627/- HAS BEEN IGNORED BY THE A.O BECAUS E THE RETURN OF TOTAL INCOME FOR THIS YEAR WAS FILED ON 30.03.2007 I.E. BEYOND THE PRESCRIBED TIME LIMIT. THE LD. AO HAD ALLOWED EXEMP TION TO THE INCOME OF GSITS OF RS.1,14,55,992/- IN THE EARLIER ASSESSMENT YEAR I.E. AY 2005-06 U/S10(23C)(IIIAB). AS REGARDS THE T AXABILITY OF THE INCOME OF GSIMR OF RS.4,85,280/-, THE LD. AO HAS NO T ALLOWED EXEMPTION TO THE SAID INCOME ON THE PLEA THAT SAID INSTITUTIONS WAS NOT SUBSTANTIALLY FINANCED BY THE GOVERNMENT. HE HA S ALSO NOT ALLOWED SET OFF OF SAID INCOME AGAINST THE LOSS OF GSITS FOR THE REASON THAT THE RETURN OF TOTAL INCOME OF THE SOCIE TY WAS FILED LATE. 3 . BEFORE THE CIT(A), ASSESSEE CLAIMED FOR ALLOWING SETTING OFF LOSS OF GSITS AGAINST INCOME OF GSIMR, WHICH WAS DE CLINED BY THE ITA NO.711/IND/2013 3 CIT(A) ON THE PLEA THAT THE INCOME OF GSITS IS FULL Y EXEMPT U/S.10(23C)(IIIAB), THEREFORE, LOSS INCURRED BY INS TITUTION WHOSE INCOME IS FULLY EXEMPT CANNOT BE ALLOWED AGAINST IN COME OF TAXABLE INSTITUTION. CIT(A) ALSO DECLINED EXEMPTION IN RESP ECT OF INTEREST INCOME OF GSIMR ON THE PLEA THAT INTEREST INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 4 . WITH REGARD TO THE ASSESSEES CONTENTION REGARDIN G EXEMPTION OF INTEREST INCOME, LEARNED AR RELIED ON THE DECISI ON OF HONBLE BOMBAY HIGH COURT IN CASE OF TRUSTEES OF VANITA VISHRAM VS. CIT, (2005) 148 TAXMAN 546 (BOM) IN SUPPORT OF THE PROPOSITION THAT WHERE THE ASSESSEE TRUST EXISTED ONLY FOR EDUC ATIONAL PURPOSES, I.E. FOR RUNNING SCHOOLS AND NOT FOR THE PURPOSES O F MAKING PROFIT, IT WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 10(22) ON INTEREST INCOME DERIVED FROM INVESTMENT OF SURPLUS FUNDS OF SCHOOL. LEARNED AR ALSO ARGUED THAT THE AO WAS NOT JUSTIFIED IN ALL OWING THE SETTING OFF OF INCOME OF ONE INSTITUTION AGAINST THE LOSS O F ANOTHER INSTITUTION RUN BY THE SAME SOCIETY. 5 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER S OF LOWER AUTHORITIES. 6 . WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND CONSIDERED THE RIVAL CONTENTIONS. FROM THE RECORD, WE FOUND THAT WITH RESPECT TO THE INTEREST INCOME EARNED BY GSIMR , THE CIT(A) HAS RECORDED A FINDING TO THE EFFECT THAT THE TURNO VER DURING THE YEAR ITA NO.711/IND/2013 4 WAS RS.58.31 LAKHS I.E. LESS THAN RS.1 CRORE, THERE FORE, IT IS ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 10(23C)(IIIAD), HO WEVER, EXEMPTION WAS DECLINED IN RESPECT OF INTEREST INCOM E ON THE PLEA THAT IT WAS TAXABLE UNDER THE HEAD INCOME FROM OTHE R SOURCES. IN VIEW OF SUCH FINDING, THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TRUSTEES OF VANITA VISHRAM (SUPRA) , WHEREIN THE OBSERVATION OF THE HONBLE BOMBAY HIGH COURT WAS AS UNDER :- HELD: THE INTENTION OF THE LEGISLATURE APPEARS TO B E TO GRANT EXEMPTION TO THE INSTITUTION, UNDER SECTION 10(22) IF IT SOLELY EXISTS FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSES OF PROFIT. THE LEGAL POSITION IS WELL ESTABLISHED ON THE STREN GTH OF THE VARIOUS DECISIONS THAT IF A TRUST OR SOCIETY EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND IT RUNS AN EDUCATIONAL IN STITUTION, ITS INCOME WILL BE THE INCOME OF THE EDUCATIONAL IN STITUTION AND, THEREFORE, EXEMPTED UNDER SECTION 10(22). THE FACT THAT THE ASSESSEE HAD OTHER OBJECTS WILL NOT DISENTITLE IT TO THE EXEMPTION SO LONG AS THE ACTIVITY CARRIED ON BY IT IN THAT ASSESSMENT YEAR WAS THAT OF RUNNING AN EDUCATIONAL INSTITUTION AND NOT FOR PROFIT. IN THE INSTANT CASE, THERE WAS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE-TRUST EXISTED ONLY FOR EDUCATIONAL PUR POSES, I.E., FOR RUNNING SCHOOLS AND NOT FOR THE PURPOSES OF MAKING PROFIT. THERE WAS AN INTEGRAL UNITY BETWEEN THE TRU ST AND THE SCHOOL FOR THE PURPOSES OF SECTION 10(22). THE AMOU NT INVESTED BELONGED TO THE SCHOOL. THE SCHOOL WAS NOT MERELY A BUILDING IN WHICH IT WAS HOUSED, OR THE EQUIPMENT THAT WAS CONTAINED IN IT, BUT SOMETHING MORE. IT WAS AN INST ITUTION, AND THAT INSTITUTION BELONGED TO THE TRUST. IN DEAL ING WITH THE QUESTION, WHETHER THE INCOME WAS THAT OF THE SCHOOL , THE SIGNIFICANCE OF THE EXPRESSION ANY INCOME OF A UNIV ERSITY OR OTHER EDUCATIONAL INSTITUTION IN SECTION 10(22) HAD TO BE NOTICED. BOTH WORDS ANY AND OF CARRY A DEFINITE MEANING. IT IS NOT INCOME FROM THE EDUCATIONAL INSTITUTION THAT IS EXEMPTED BUT ANY INCOME OF THE EDUCATIONAL INSTITUT ION. WHAT APPEARS TO BE RELEVANT IS THAT THE INCOME SHOU LD REACH THE SCHOOL TO BE UTILIZED BY IT FOR EDUCATIONAL PUR POSES AND NOT FOR THE PURPOSES OF PROFIT. IT IS CLEAR FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT THAT ITA NO.711/IND/2013 5 SIGNIFICANCE OF THE EXPRESSION OF ANY INCOME OF U NIVERSITY OR EDUCATIONAL INSTITUTION UNDER SECTION 10(22) HAD TO BE NOTICED. IT IS NOT INCOME FROM EDUCATIONAL INSTITUTION THAT IS E XEMPTED BUT ANY INCOME OF EDUCATIONAL INSTITUTION. WHAT IS RELEVAN T IS THAT INCOME SHOULD REACH THE SCHOOL TO BE UTILIZED BY IT FOR ED UCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT. THUS, THE OBJEC T IN GRANTING THE EXEMPTION TO THE INCOME OF EDUCATIONAL INSTITUTION IS TO ENABLE SUCH INSTITUTION TO UTILIZE THE MONEY AVAILABLE WITH IT FOR THE PURPOSE OF RUNNING EDUCATIONAL INSTITUTION. SOURCES OF THE MON EY RECEIVED IS OF NO CONSEQUENCE. WHAT IS RELEVANT IS THE APPLICATION OF INCOME. APPLYING THE PROPOSITION OF LAW AS LAID DOWN BY THE HONBLE HIGH COURT TO THE FACTS OF THE INSTANT CASE BEFORE US, W HEN THERE IS NO ALLEGATION BY ANY OF THE LOWER AUTHORITIES THAT ASS ESSEE TRUST DID NOT EXIST SOLELY FOR EDUCATIONAL PURPOSES BUT FOR EARNI NG PROFIT AND ITS INCOME WAS NOT FULLY UTILIZED FOR THE PURPOSE OF ED UCATIONAL PURPOSES, THERE IS NO REASON TO DISALLOW EXEMPTION IN RESPECT OF INTEREST INCOME EARNED BY IT AND UTILIZED FOR ITS E DUCATIONAL PURPOSES. RESPECTFULLY FOLLOWING THE VERDICT OF HON BLE BOMBAY HIGH COURT, WE DIRECT THE AO TO ALLOW THE CLAIM OF EXEMP TION IN RESPECT OF INTEREST INCOME OF RS.3,72,643/- AS THE INCOME OF A SSESSEE TRUST IS ELIGIBLE FOR EXEMPTION U/S.10(23C)(IIIAD) OF I.T. A CT. 7 . WITH REGARD TO THE ASSESSEES CLAIM FOR ALLOWING SETTING OFF OF LOSS INCURRED BY ONE OF ITS INSTITUTION AMOUNTING T O RS.1,51,84,627/- AGAINST NET INCOME OF OTHER INSTITUTION OF RS.4,85, 280/-, WE DO NOT ITA NO.711/IND/2013 6 FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHOR ITIES INSOFAR AS PROVISIONS OF SECTION 70 IS AVAILABLE ONLY TO THE L OSSES ARISING OUT OF BUSINESS INCOME AND NOT TO THE INSTITUTION WHOSE IN COME IS EXEMPT FROM TAXATION. ACCORDINGLY, WE CONFIRM THE ACTION O F THE LOWER AUTHORITIES FOR DISALLOWANCE OF ASSESSEES CLAIM OF SETTING OFF LOSS. 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED IN PART. ',%-2 #$,- / !' 3 - / - 4 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/5/201 4. / 1&% . 6 7#2 21/5/2014 / 5 SD/- SD/- ( ) ( JOGINDER SINGH) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER INDORE; 7# DATED 21/5/2014 *. . ./PKM , # . / PS !' #'$ / COPY OF THE ORDER FORWARDED TO : % & / BY ORDER, ' / ( ) ( ASSTT. REGISTRAR) , / ITAT INDORE 1. !' ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. . <- ( !' ) / THE CIT(A), INDORE 4. . <- / CIT, INDORE 5. => *-#?$ , !' 0 !?$% , / DR, ITAT, INDORE 6. @ A / GUARD FILE. +='- *- //TRUE COPY//