Dharmaprakasha Rajanahalli Ramasetty Educational Trust, Davanagere V. The Income Tax Officer, ward -2, Davanagere

ITA 898/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4587 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-02-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 26-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH, BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.898/BANG/2019 : ASST.YEAR 2010-2011 DHARMAPRAKASHA RAJANAHALLI RAMASETTY EDUCATIONAL TRUST #56/1,2 HANUMANTHAPPA BUILDING, POONA-BANGALORE ROAD, DEVANGERE-577 002. PAN : AATD0801A. VS. THE INCOME TAX OFFICER WARD 2 DAVANGERE. (APPELLANT) (RESPONDENT) APPELLANT BY : --- NONE --- RESPONDENT BY : DR.GANESH R.GHALE, STANDING COUNCIL FOR DR DATE OF HEARING : 19.02.2020 DATE OF PRONOUNCEMENT : 25.02.2020 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), DATED 15.02.2019. THE RELEVANT ASSESSMENT YEAR IS 2010-2011. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY OF LAW, FACT AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED WHILE CONCLUDING THAT THE TRUST IS NOT CREATED SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE REJECTION OF EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T.ACT IN RESPECT OF INCOME OF THE TRUST. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT CONSIDERED THE FACT THAT THE RENTAL INCOME EARNED ITA NO.898/BANG/2019 DHARMAPRAKASHA RAJANAHALLI RAMA SHETTY EDU TRUST. 2 FROM LETTING OUT OF THE THEATRE HAS BEEN USED FOR THE PURPOSE OF RUNNING THE EDUCATIONAL INSTITUTION ONLY AND EXEMPTION HAS BEEN GRANTED TO THE TRUST U/S 10(23C)(IIIAD) ALL THROUGH THE YEARS OF ITS EXISTENCE ON THE SAME GROUNDS. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT CONSIDERED THE FACT THAT THE TRUST IS RUNNING AN EDUCATIONAL INSTITUTION IN ACCORDANCE WITH THE PREDOMINANT OBJECTS OF THE TRUST DEED, I.E., ADVANCEMENT OF EDUCATIONAL CAUSES OF THE SOCIETY, WITHOUT ANY PROFIT MOTIVE. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE RENTAL INCOME DERIVED FROM LETTING OUT OF THE THEATRE IS APPLIED TOWARDS RUNNING OF THE SCHOOL AND RUNNING OF A THEATRE IS NOT AN OBJECT OF THE TRUST. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT ALLOWING EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T.ACT, EVEN THOUGH THE ASSESSEE TRUST HAS FULFILLED ALL THE THREE CONDITIONS STIPULATED U/S 10(23C)(IIIAD) OF THE ACT. 8. THE APPELLANT CRAVE LEAVE TO ADDUCE ADDITIONAL GROUND. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE, HENCE, WE PROCEED TO DISPOSE OF THIS APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 4. THE CRUX OF THE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE DENIAL OF EXEMPTION U/S 10(23C) OF THE I.T.ACT. 5. THE FACTS OF THE CASE ARE THAT THE ASSESSEE-TRUST WAS CREATED MAINLY FOR THE PURPOSE OF RUNNING AN EDUCATIONAL ITA NO.898/BANG/2019 DHARMAPRAKASHA RAJANAHALLI RAMA SHETTY EDU TRUST. 3 INSTITUTION AND IT WAS RUNNING AN EDUCATIONAL INSTITUTION SINCE JUNE 1977. THE ASSESSEE-TRUST WITH A VIEW TO AUGMENT ITS INCOME TO SUPPORT THE RUNNING OF THE SCHOOL ACQUIRED IMMOVABLE PROPERTY IN THE FORM OF A THEATRE BY NAME GEETHANJALI THEATRE. THE ASSESSEE SUBMITTED THAT THE ASSESSEE-TRUST NEVER EXPLOITED THE PROPERTY AS A BUSINESS. THE PROPERTY HAS BEEN LET OUT ON A LONG LEASE AND THE ASSESSEE HAS NO CONTROL OVER THE ACTUAL EXPLOITATION OF THE IMMOVABLE PROPERTY. THE INCOME FROM LETTING OUT OF THE THEATRE HAS ALL ALONG BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE SUBMITTED THAT THIS ITSELF WOULD SHOW THAT THE PROPERTY HAS BEEN EXPLOITED BY THE ASSESSEE AS ITS OWNER AND NOT IN THE COMMERCIAL OR BUSINESS PURPOSES. LETTING OUT OF THE PROPERTY WAS INCIDENTAL AND ANCILLARY TO THE RUNNING OF EDUCATIONAL INSTITUTION BY EARNING INCOME FOR THE PURPOSE OF RUNNING THE EDUCATIONAL INSTITUTION. IN SUPPORT OF ITS CLAIM, THE ASSESSEE RELIED ON THE FOLLOWING JUDGMENTS :- (I) ADITANAR EDUCATIONAL INSTITUTION 244 ITR 310 SC (II) VANITA VISHRAM TRUST V. CCIT 327 ITR 121 BOM (III) DDIT V. SHANTI DEVI PROGRESSIVE EDUCATION SOCIETY 340 ITR 320 DEL. (IV) CIT V. SREE NARAYANA CHANDRIKA TRUST [(1995) 212 ITR 456 (KER.)] (V) BRAHMIN EDUCATIONAL SOCIETY V. ACIT [(1997) 227 ITR 317 (KER.)] 6. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HAS NOT GRANTED EXEMPTION U/S 10(23C)(IIIAD) BY STATING THAT THE TRUST IS NOT EXISTING SOLELY FOR EDUCATION PURPOSES AS THE TRUST IS RUNNING GEETHANGALI THEATRE DERIVING ITA NO.898/BANG/2019 DHARMAPRAKASHA RAJANAHALLI RAMA SHETTY EDU TRUST. 4 INCOME FROM BUSINESS. FURTHER, THE A.O. NOTED THAT THE INCOME DERIVED FROM GEETHANJALI THEATRE HAS BEEN SHOWN IN THE INCOME & EXPENDITURE ACCOUNT FILED BY THE ASSESSEE AND THE TRUST IS GENERATING BUSINESS INCOME BY WAY OF RUNNING A THEATRE WITH AN INTENTION TO EARN THE PROFIT. IN FIRST APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE A.O. WITH THE FOLLOWING OBSERVATIONS:- 6A. I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND ALSO THE PROVISIONS OF SEC.10(23C)(IIIAD). THE OBJECTS AS PER CLAUSE XII, XIII AND XIV OF THE TRUST DEED ARE AS UNDER: XII) TO INITIATE AND DEVISE SUITABLE MEASURES FOR PROVIDING THE NECESSARY FUNDS FOR ACHIEVING ALL OR ANY OF THE ABOVE OBJECTS. XIII) TO ACQUIRE, HOLD, OR CONSTRUCT AND BUILD LANDS AND SITES OR STRUCTURES AND BUILDINGS FOR THE PURPOSES OF THE TRUST. XIV) TO SELL OR PURCHASE OR ACQUIRE ON LEASE, MORTGAGE OR RENT, TO MORTGAGE; LEASE OUT OR EXCHANGE, IMMOVABLE PROPERTIES OF THE TRUST CALCULATED TO SECURE OR CONDUCE TO THE BETTER MANAGEMENT OR THE AFFAIRES OF THE TRUST. FROM A PERUSAL OF CLAUSE XII, XIII AND XIV OF THE OBJECTS OF THE TRUST, IT IS CLEAR THAT THE TRUST IS NOT CREATED SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION. THE CONTENTION OF THE AR THAT THE OBJECT OF THE TRUST BEING ADVANCEMENT OF EDUCATIONAL CAUSES OF THE SOCIETY AND THEREFORE RENTAL INCOME DERIVED FROM OWNING A THEATRE IS EXEMPT U/S 10(23C)(IIIAD) CANNOT BE ACCEPTED. IT IS CLEAR THAT THE APPELLANT HAS NOT SATISFIED ALL THE THREE CONDITIONS STIPULATED AS PER THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT. THEREFORE, I FIND NO INFIRMITY IN THE ORDER OF THE AO AND THUS THE GROUNDS FAIL. 7. I HAVE HEARD THE LEARNED DR AND ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. I FIND NEITHER THE A.O. NOR THE CIT(A) HAVE EXAMINED THE ACTUAL ACTIVITIES CARRIED ON BY THE ASSESSEE BEFORE REJECTING THE CLAIM OF THE ASSESSEE U/S 10(23C) OF THE ACT. IN MY OPINION, IT IS APPROPRIATE TO REMIT ITA NO.898/BANG/2019 DHARMAPRAKASHA RAJANAHALLI RAMA SHETTY EDU TRUST. 5 THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ACTUAL ACTIVITIES CARRIED ON BY THE ASSESSEE, IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IF THE ASSESSEE CARRIED ON ONLY THE ACTIVITIES OF EDUCATION AND NOT OTHER OBJECTS MENTIONED IN THE TRUST DEED, THEN THE ASSESSEE SHALL BE CONSIDERED AS SOLELY EXISTING FOR THE PURPOSE OF IMPORTING EDUCATION AND EXEMPTION U/S 10(23C) OF THE ACT SHOULD BE GRANTED. WITH THESE OBSERVATIONS, THE ISSUE IS REMITTED TO THE FILE OF THE A.O. TO EXAMINE THE ACTUAL ACTIVITIES CARRIED ON BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF FEBRUARY, 2020 . SD/- ( CHANDRA POOJARI ) ACCOUNTANT MEMBER BANGALORE ; DATED : 25 TH FEBRUARY, 2020. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-DEVANGERE. 4. THE PR.CIT-(EXEMPTIONS) BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE