M/S H.P. Nursing registration Council, Shimla V. Asstt.Commissioner Of Income Tax, Shimla

ITA 875/CHANDI/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2565 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12AA; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 875/CHD/2014 ASSESSMENT YEAR 2010-11 M/S H.P. NURSING REGISTRATION VS THE ACIT, COUNCIL, OLD DENTAL BUILDING, CIRCLE, IGMC HOSPITAL, RAILWAY BOARD BUILDING, SHIMLA. THE MALL, SHIMLA. PAN: AAAJH0376C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VISHAL MOHAN RESPONDENT BY : SHRI MANOJ MISHRA DATE OF HEARING : 19.01.2016 DATE OF PRONOUNCEMENT : 20.01.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) SHIMLA DATED JULY,201 4 FOR ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUND : THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD COMMISSIONER OF INCOME TAX(APPEALS) SHIMLA IS NOT JUS TIFIED IN UPHOLDING THE ADDITION OF RS. 1 ,40,17,320/- IN RES PECT UNUTILIZED GRANT IN AID OF RS. 1.00 CRORES WHICH WAS RECEIVED BY THE COUNCIL FROM GOVT. OF INDIA WITH SPECIFIC DIRECTION FOR DEVELOPMENT OF INFRASTRUCTURE I.E FOR THE MAINTENANCE/DEVELOPMENT OF BUILDING AND OTHER FACIL ITIES. MOREOVER GRANT WAS RELEASED BY GOVT ACTIVITYWISE NO T YEARWISE. ACCORDINGLY SAID ADDITION IS NOT SUSTAINABLE IN THE EYES OF LAW. 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE INSTITUTION I. E. H. P. NURSING REGISTRATION COUNCI L IS A REGULATORY BODY ESTABLISHED BY THE STATE GOVERNMENT OF HIMACHAL PRADESH THROUGH ITS ACT I. E. H.P.N.R.C. A CT, 1977. IT HAS ITS ACT OF 1977 WHICH CAME INTO FORCE W.E.F. 1 AUGUST, 1978 VIDE HEALTH & FAMILY WELFARE DEPTT. NOT. NO.2-16/71 H & FP DT. 31/07/1978. THE MAIN FUNCTIONARIES OF THIS COUNCIL IS THE REGISTRAR WHO IS APPOINTED BY THE STATE GOVT. AND THE DIRECTOR MEDIC AL EDUCATION & RESEARCH, H.P. WHO IS A PRESIDENT OF TH E COUNSEL HEADED BY HEALTH DEPARTMENT UNDER THE PRINCIPAL SECRETARY (HEALTH) TO THE GOVT. OF HIMACH AL PRADESH. 2(I) RETURN DECLARING NIL INCOME WAS FILED BY THE ASSESSEE AND THE SAME WAS PROCESSED U/S 143(1) AT N IL INCOME. THE CASE WAS PICKED UP FOR COMPULSORY SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH THE COPY OF REGISTRATION GRANTED TO THE INSTITUTION U/S 12AA BY THE CIT, SHIMLA OR ANY OTHER EXEMPTION GRANTED. ASSESSE E WAS ASKED TO EXPLAIN THAT SINCE THE REGISTRATION WA S GRANTED W.E.F. 01/04/2010 RELEVANT TO A.Y. 2011-12, WHY THE SURPLUS OF THE PREVIOUS YEAR SHOULD NOT BE TREATED THE INCOME OF THE ASSESSEE FO R THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE STATED THAT THIS IS A REGULATORY BODY OF THE STATE FOR REGULATION AND CONDUCT OF VARIOUS CATEGORIES OF NUR SING 3 PERSONAL WORKING IN GOVT. OR PRIVATE SECTOR AS WELL AS NURSING INSTITUTIONS RUNNING IN THE STATE. COUNCIL IS ESTABLISHED PRIMARILY TO PROVIDE UNIFORM STANDARD O F NURSING EDUCATION AND TRAINING AND VERY MUCH COVERE D UNDER SECTION 10(23C) OF THE ACT, BEING SUBSTANTIAL LY FINANCED BY GOVT. FURTHER/COUNCIL IS CARRYING ON TH E CHARITABLE ACTIVITIES DEFINED U/S 2 (15) OF THE ACT AS IT IS FACILITATING/ENSURING BETTER MEDICAL FACILITIES TO GENERAL PUBLIC AT LARGE BY WAY OF PROPER TRAINING AND EDUCA TION OF NURSE, MIDWIFES, HEALTH VISITORS ETC. 2(II) THE REPLY OF THE ASSESSEE WAS NOT FOUND SATISFACTORY BY AO ON THE GROUND THAT MIXED METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE WAS NOT PERMISSI BLE AS PER THE PROVISIONS OF SECTION 145(1) OF THE ACT. AND SINCE THE ASSESSEE INSTITUTION WAS NOT REGISTERED U /S 12AA OF THE ACT FOR THE YEAR UNDER CONSIDERATION. RELYING ON THE CASE LAW IN THE CASE OF CIT VS. GEM & JEWELLERY EXPORT PROMOTION (BOM. ) THE AO HELD THAT AS PER THE PROVISIONS OF SECTION 11 THE ASSESSEE WAS REQUIRED TO SPEND 85% OF THE TOTAL INCOME OF RS.1,48,49,196/- I.E RS.1,26,21,81 7/- DURING THE YEAR ON CHARITABLE OR RELIGIOUS PURPOSES. HOWEVER THE ASSESSEE HAD ONLY UTILIZED RS.8,31,843/-. THE AO TREATED THE REMAINING SURPLUS OF RS.1,40,17,323/- A S TAXABLE INCOME OF THE ASSESSEE. AGGRIEVED BY THE OR DER OF THE A.O. THE ASSESSEE HAS PREFERRED THE APPEAL. 4 3. DURING THE HEARING OF APPEAL, THE ASSESSEE SUBMITTED THAT THE AO HAS AGREED AT PARA NO 2 OF TH E ASSESSMENT ORDER THAT COUNCIL IS A REGULATORY BODY ESTABLISHED BY STATE GOVT. FOR REGULATION AND CONDU CT OF NURSING PROFESSION AND VARIOUS CATEGORIES OF NURSIN G PERSONAL WORKING IN GOVT. OR PRIVATE SECTOR AS WELL AS OF NURSING INSTITUTIONS RUNNING IN THE STATE. HOWEVER, ASSESSING OFFICER DID NOT ACCEPT CONTENTION OF ASSE SSEE THAT IT FALLS WITHIN AMBIT OF SECTION 10(23C) OF TH E ACT BEING SUBSTANTIALLY FUNDED BY GOVT. SIMPLY ON THE GROUND THAT THEY HAVE SEPARATELY APPLIED FOR REGIST RATION U/S 12AA OF THE INCOME TAX ACT AND GIVEN REGISTRATI ON W.E.F A.Y. 2011-12. THE A.O. AT PARA 5 NOTED THAT ASSESSEE WAS ASKED TO EXPLAIN THE METHOD OF ACCOUNT ING OF THE SOCIETY AND SAME HAS BEEN SUBMITTED BY THE ASSESSEE THAT MIXED METHOD OF ACCOUNTING HAS BEEN FOLLOWED. HERE ALSO NO SUCH SUBMISSION HAS BEEN MAD E AND HOW A.O. HAS ASCERTAINED THE METHOD OF ACCOUNTI NG REMAIN UNEXPLAINED. ASSESSEE IS CONSISTENTLY FOLLOW ING THE MERCANTILE SYSTEM OF ACCOUNTING OVER THE YEARS. THE A.O. AT PARA 8 NOTED THAT GRANTS ARE VOLUNTARY CONTRIBUTION AND RECORDED THAT GOVT. AGENCY DOES NO T EXPECT ANY RETURN FOR THE GRANTS AND THERE IS NO EL EMENT WHICH IS REQUIRED TO BE DONE BY COUNCIL. THIS CONTENTION OF AO IS NOT TENABLE AS GRANTS OF RS.1.0 0 CRORE WAS RECEIVED BY COUNCIL WITH SPECIFIC DIRECTI ONS AND COUNCIL IS FULLY ACCOUNTABLE TO THE MONEY SPENT OUT OF GRANTS AND IF AMOUNT REMAIN UNSPENT SAME NEED TO BE 5 REFUNDED TO GOVT. MOREOVER OUR CONTENTION THAT GOVT . GRANTS ARE GIVEN ACTIVITY WISE AND NOT YEAR-WISE AL SO NOT ACCEPTED BY THE LD. A.O. WE HAVE SPECIFICALLY PLEAD ED THAT GOVT. GRANTS ARE GIVEN ACTIVITY WISE AND NOT Y EAR- WISE. THE ACTIVITY MAY CONTINUE FOR YEARS TOGETHER OR MAY END IN ANY YEAR ITSELF AT THE END OF THE ACTIVI TY. THE REMAINING UNUTILIZED AMOUNTS HAVE TO BE REFUNDED TO GOVT. OF INDIA SINCE GRANTS ARE NOT YEAR-WISE AND T HESE CANNOT BE CONSIDERED AS INCOME OF THE YEAR. REFEREN CE WAS MADE TO THE CITATION (2014) 44 TAXMANN.COM 233(CHANDIGARH-TRIBUNAL) HARYANA RURAL DEVELOPMENT AUTHORITY VS. DCIT PANCHKULA CIRCLE. FURTHER BEING ASSOCIATION OR INSTITUTION ESTABLISHED IN INDIA HAV ING ITS OBJECT THE CONTROL, SUPERVISION, REGULATION OR ENCOURAGEMENT OF THE PROFESSION OF MEDICINE, AS AGR EED BY ASSESSING OFFICER AT PARA 2 OF THE ASSESSMENT OR DERS, COUNCIL IS COVERED U/S 10(23A) OF THE INCOME TAX AC T. IN VIEW OF ABOVE IT WAS PRAYED TO CONSIDER THE SUBMISS IONS FAVORABLY AND ALLOW THE RELIEF AGAINST THE ORDERS O F ASSESSING AUTHORITY. 4. THE LD. CIT(APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD, DISMISSED T HE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 3 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBMISSION OF ASSESSEE VARIOUS PROVISIONS OF THE AC T AND VARIOUS CASE LAWS CITED BY ASSESSEE. THE MAIN 6 ARGUMENT OF THE ASSESSEE IS THAT IT IS AN ORGANIZAT ION COVERED BY SECTION 10 (23C) AND HAS BEEN SUBSEQUENTLY GRANTED REGISTRATION U/S 12AA W.E.F. 01.04.2010 RELEVANT FOR A.Y. 2011-12, CONSIDERING THAT ASSESSEE WAS NOT REGISTERED U/S 12AA AND IS FOLLOWING MIXED ACCOUNT SYSTEM AND HAS RECEIVED VOLUNTARY CONTRIBUTION, PROVISIONS OF SECTIONS 2(24 ) ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF ASSESSEE. THE PROVISION OF SECTION 10(23G) (IIIAB) OF IT ACT ARE NOT FACTUALLY .APPLICABLE AS IT IS NEITH ER A UNIVERSITY NOR AN EDUCATIONAL INSTITUTION SOLELY FO R THE EDUCATIONAL PURPOSES. IN ABSENCE OF ASSESSEE HAVING REGISTRATION U/S 12AA AND ASSESSEE HAVING FAILED TO SPEND 85% OF TOTAL' RECEIPTS THE ACTION O F AO IS UPHELD AND APPEAL OF ASSESSEE IS DISMISSED. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND REFER RED TO PB-11 WHICH IS INCOME & EXPENDITURE ACCOUNT ENDI NG 31.03.2010 AND PB-46 WHICH IS A LETTER OF THE GOVERNMENT OF INDIA, MINISTRY OF HEALTH & FAMILY WELFARE ( NURSING SECTION) DATED 18.03.2009 THROUGH WHICH THE AMOUNT OF RS. 1 CRORE WAS RECEIVED BY ASSESSEE FOR UP-GRADATION/STRENGTHENING OF NURSING SERVICES UNDER HUMAN RESOURCES FOR HEALTH. HE HAS, THEREFORE, SUBMITTED THAT SAME COULD NOT BE TREATED AS INCOME OF THE ASSESSEE. HE HAS ALSO RELIED UPON OR DER OF ITAT CHANDIGARH BENCH IN THE CASE OF H.P. GOVERNMENT ENERGY DEVELOPMENT AGENCY VS ACIT DATED 15.10.2010. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 7 6. WE HAVE HEARD RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF T HE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT ASSES SEE IS A REGULATORY BODY ESTABLISHED BY THE STATE GOVERNMENT UNDER THE STATE ACT. THE ASSESSEE FILED RETURN OF INCOME AT NIL. COPY OF THE COMPUTATION OF INCOME IS FILED IN THE PAPER BOOK IN WHICH THE ASSESSEE CLAIM ED EXEMPTION UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT. IT IS, HOWEVER, ADMITTED FACT THAT NO REGISTRATION UNDER SECTION 12AA HAVE BEEN GRANTED TO THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IN APPEAL. THE REGISTRATIO N GRANTED SUBSEQUENTLY UNDER SECTION 12AA WAS GRANTED RELEVANT TO THE ASSESSMENT YEAR 2011-12. THE ASSES SING OFFICER NOTED THAT ASSESSEE COULD NOT ADOPT MIXED METHOD OF ACCOUNTING WHICH IS NOT PERMISSIBLE AS PE R PROVISIONS OF SECTION 145(1) OF THE INCOME TAX ACT. HON'BLE SUPREME COURT IN THE CASE OF U.P. FOREST CORPORATION & ANOTHER 297 ITR 1 HELD THAT REGISTRATION OF TRUST OR INSTITUTION IS A CONDITIO N PRECEDENT FOR GRANTING RELIEF UNDER SECTION 11 OF T HE INCOME TAX ACT. SINCE, IN THIS CASE, THERE IS NO REGISTRATION EFFECTED IN FAVOUR OF THE ASSESSEE UND ER SECTION 12AA OF THE INCOME TAX ACT, THEREFORE, ASSE SSEE WOULD NOT BE ENTITLED FOR EXEMPTION OF INCOME UNDER SECTION 11 OF THE INCOME TAX ACT AS IS CLAIMED IN T HE COMPUTATION OF INCOME. THE ASSESSEE HAS NOT CLAIME D INCOME OF THE ASSESSEE TO BE EXEMPT IN ANY OTHER PROVISIONS OF LAW. HOWEVER, ASSESSEE MADE A CLAIM OF 8 INCOME TO BE EXEMPT UNDER SECTION 10(23C)(IIIAB) OF THE INCOME TAX ACT BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT BEFORE THE AUTHORITIES BELOW. THE LD. CIT(APPEALS) SPECIFICALLY FOUND THAT THIS PROVISION IS NOT APPLICABLE TO ASSESSEE BECAUSE ASSESSEE IS NEITHER A UNIVERSITY NOR EDUCATIONAL INSTITUTION SOLELY FOR EDUCATIONAL PURPOSES WHICH IS ALSO A CONDITION PRECEDENT FOR CLAIMING EXEMPTION OF INCOME UNDER SECTION 10(23C)(IIIAB) OF THE INCOME TAX ACT, THERE FORE, SUCH A CLAIM OF ASSESSEE WAS NOT TENABLE. NO MATER IAL IS PRODUCED BEFORE US TO SHOW THAT ASSESSEE SATISFI ED THE REQUIREMENTS OF SECTION 10(23C)(IIIAB) OF THE I NCOME TAX ACT. THEREFORE, THIS CLAIM OF ASSESSEE WAS COR RECTLY REJECTED BY THE AUTHORITIES BELOW. SINCE THE ASSES SEE HAS RECEIVED VOLUNTARY CONTRIBUTION, THEREFORE, PROVISIONS OF SECTION 2(24)(IIA) OF THE INCOME TAX ACT WOULD SQUARELY APPLY AND THE AMOUNT RECEIVED BY THE ASSESSEE FROM GOVERNMENT OF INDIA WOULD BE THE INCO ME OF THE ASSESSEE WHICH ASSESSEE HAS FAILED TO SHOW I N THE COMPUTATION OF INCOME. 6(I) DURING THE COURSE OF ARGUMENTS, LD. COUNSEL FO R THE ASSESSEE WAS NOT ABLE TO SHOW AS TO UNDER WHICH PROVISIONS OF LAW, THE INCOME OF THE ASSESSEE WOULD BE EXEMPT. THEREFORE, ASSESSEE MISERABLY FAILED TO REB UT THE FINDINGS OF AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE, LASTLY RELIED UPON ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF H.P. GOVERNMENT 9 ENERGY DEVELOPMENT AGENCY (SUPRA) IN WHICH THE ISSU E WAS, WHETHER THE INTEREST EARNED ON THE AMOUNT OF GRANT-IN-AID RECEIVED FROM THE GOVERNMENT OF INDIA WOULD BE INCOME IN THE HANDS OF THE ASSESSEE ? TH IS ISSUE IS NOT INVOLVED IN THE PRESENT APPEAL OF THE ASSESSEE. FURTHER THE AUTHORITIES BELOW HAVE GIVEN A CATEGORICAL FINDING THAT TOTAL RECEIPTS OF THE ASSE SSEE WERE OF RS. 1.48 CR AS GIVEN IN THE INCOME & EXPENDITURE ACCOUNT AND ASSESSEE HAS EXPENDED/UTILIZED ONLY RS. 8,31,843/-. THEREFORE, THE REST OF THE AMOUNT WOULD BE INCOME OF THE ASSESSEE. THIS FINDING OF FACT RECORDED BY THE AUTHORITIES BE LOW HAS ALSO NOT BEEN REBUTTED BY THE ASSESSEE IN ANY MANNER. IT IS, THEREFORE, CLEAR THAT ASSESSEE EARN ED INCOME DURING THE YEAR UNDER CONSIDERATION DESPITE IT HAS RECEIVED GRANT FROM THE GOVERNMENT OF INDIA FOR UPGRADATION/STRENGTHENING OF NURSING SERVICES. IN THE ABSENCE OF ANY PLAUSIBLE EXPLANATION AND IN THE ABS ENCE OF ANY EXPLANATION AS TO UNDER WHICH PROVISION OF L AW, INCOME OF THE ASSESSEE WOULD BE EXEMPT, WE DO NOT F IND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS MADE A CLAIM O F EXEMPTION BEFORE AUTHORITIES BELOW UNDER SECTION 11/12AA OF THE INCOME TAX ACT AND SECTION 10(23C) O F THE ACT WHICH ARE CLEARLY NOT APPLICABLE TO THE FAC TS AND CIRCUMSTANCES OF THE CASE. THUS, ASSESSEE FAILED T O PROVE ANY CASE OF EXEMPTION OF INCOME UNDER ANY PROVISIONS OF INCOME TAX ACT. WE DO NOT FIND ANY E RROR 10 IN THE ORDER OF LD. CIT(APPEALS). WE CONFIRM HIS FI NDINGS AND DISMISS THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVN ESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20 TH JANUARY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD