Jain Vidya Mandir, Sonepat V. CIT, Rohtak

ITA 900/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7594 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-10-2014
• Assessment Year: misc
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHULEKHA VERMA
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Competent authority
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. T. S. KAPOOR , ACCOUNTANT MEMBER I.T.A .NO. 900 / DEL/201 3 (ASSESSMENT YEAR ) JAIN VIDYA MANDIR, NEAR SUBZI MANDI, SONEPAT P AN - AABTJ1714F (APPELLANT) VS CIT, ROHTAK (RESPONDENT) APPELLANT BY SH. VED JAIN, CA RESPONDENT BY MS. SHULEKHA VERMA, CIT DR ORDER PER DIVA SINGH, JM TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 12AA(1 )(B)(II) OF THE INCOME TAX ACT, 1961 BY CIT(A) , ROHTAK DATED 12.6.2012 ON VARIOUS GROUNDS . THE LD. AR SUBMITTED THAT THE GRIEVANCE CAN BE ADDRESSED BY GROUND NO. 2 AND 3 WHICH READS AS UNDER: - 2. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12A DESPITE THE SAME BEING COMPLETE AND WAS IN COMPLIANCE TO THE PROVISIONS OF THE ACT. 2. IN THE CONTEXT OF THE ABOVE INVITING ATTENTION TO THE IMPUGNED ORDER I T WAS SUBMITTED BY THE LD. AR THAT THE CLAIM OF THE ASSESSEE HAS BEEN INCORRECTLY DENIED BY THE ASSESSING OFFICER ON REASON S WHICH ARE NOT COGENT AND RELEVANT FOR ARRIVING AT A CONCLUSION. THE REASONING IT WAS SUBMITTED IS BASED ON FACTS WHICH ARE INCORRECTLY CONSIDERED BY THE CONCERNED AUTHORITY. THE RELEVANT PORTION OF THE 2 I.T.A .NO. 900 /DEL /201 3 ORDER TO WHICH OUR ATTENTION WAS INVITED IS REPRODUCED HEREUNDER FOR READY - REFERENCE : - 5. THE SOCIETY/EDUCATIONAL INSTITUTION IS MAKING SYSTEMATIC PROFIT YE AR TO YEAR AND DIVERTING ITS PROFIT TOWARDS CORPUS/CAPITAL TO ENHANCE ITS EARNING CAPACITY THROUGH THE ACQUISITION OF BUILDINGS & OTHER FIXED ASSETS WHICH IS EVIDENT FROM THE SURPLUS AND DEPRECIATION CLAIMED ON FIXED ASSETS WHICH IS EVIDENT FROM THE FOLLOW ING TABULAR INFORMATION: - AY RECEIPT SURPLUS AFTER DEPRECIATION SURPLUS BEFORE DEPRECIATION AMOUNT (%) AGE AMOUNT (%) AGE 2009 - 10 5363670 1291352 24 1641504 30 2010 - 11 6551155 1032507 15 1696458 25 2011 - 12 9624316 908494 9 1985521 20 ACCUMULATION OF INCOME IS NOT THE MOTTO OF THE ACT HERE. THE CHARITABLE SOCIETY COULD HAVE AT THE MOST ACCUMULATED 15% OF ITS INCOME HELD UNDER TRUST. THE LEVERAGE OF 15% HAS BEEN GIVEN TO TAKE CARE OF THE PRACTICAL DIFFICULTIES. 85% OF ITS INCOME HAS TO BE APPLIED YEA R TO YEAR AND THUS AN EMPIRE CANNOT BE BUILT BY RUNNING A CHARITABLE INSTITUTION. THE AMOUNT OF HUGE DEPRECIATION AS ABOVE CLEARLY SHOWS THAT THE SOCIETY IS ACCUMULATING ASSETS AND GENERATING WEALTH. THE LEGISLATURE DOES NOT WANT THAT CHARITABLE INSTITUTIO NS SHOULD GET FULLY PAID FOR THE BENEFITS PROVIDED BY THEM, AS THIS WOULD BE MERE OSTENSIBLE CHARITY. IF THE CHARITABLE INSTITUTIONS ARE EARNING PROFITS, THEY ARE MISUSING THE BENEFITS GIVEN BY THESE PROVISIONS. IF AN INSTITUTION FULFILLING CHARITABLE PURP OSE UNDERTAKES ACTIVITIES FOR PROFIT, IT HOODWINKS THE STATUE. THUS, THE SOCIETY IS RUNNING ITS INSTITUTIONS ON PURELY COMMERCIAL LINES AND EARNING PROFITS/SURPLUSES SYSTEMATICALLY YEAR AFTER YEAR BY CHARGING SUBSTANTIAL FEES FROM THE STUDENTS AND MAKING H UGE PROFITS. THE HON BLE UTTRAKHAND HIGH COURT IN THE CASE OF CIT VS NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING & EDUCATIONAL SOCIETY REPORTED IN (2009) 226 CTR 82 HAS HELD THAT MERE IMPARTING EDUCATION FOR PRIMARY PURPOSE OF EARNING PROFITS CANNOT BE SAID TO BE A CHARITABLE ACTIVITY. CHARITY IS THE SOUL OF EXPRESSION CHARITABLE PURPOSE . MERE TRADE OR COMMERCE IN THE NAME OF EDUCATION CANNOT BE SAID TO BE A CHARITABLE PURPOSE. 6. PERUSAL OF INCOME AND EXPENDITURE ACCOUNT FOR THE FINANCIAL YEARS 2008 - 0 9, 2009 - 10 & 2010 - 11 SHOWS THAT RECEIPTS AND EXPENDITURE IN RESPECT OF SKILL DEVELOPMENT, ANNUAL CHARGES AND COMPUTER ARE AS UNDER: - FY COMPUTER FEE/EXP. FEE EXP. RECEIVED INCURRED SKILL DEVELOPMENT FEE/EXP. ANNUAL CHARGES/EXP FEE RECEIVED EXP. INCURRED FEE RECEIVED EXP. INCURRED 2008 - 09 263390 101865 219200 NIL NIL NIL 2009 - 10 382030 5490 138900 NIL 5750 NIL 2010 - 11 611210 106905 144300 NIL 2481010 NIL 3 I.T.A .NO. 900 /DEL /201 3 VIDE ORDER SHEET ENTRY DATED 10.10.2012, THE APPLICANT WAS SPECIFICALLY ASKED TO EXPLAIN THE DISCREPANCY IN COMPUTER EXPENSES, EXAM EXPENSES AND SKILL DEVELOPMENT EXPENSE AS AGAINST CORRESPONDING RECEIPTS UNER THESE HEADS. THE APPLICANT DID NOT FURNISH ANY EXPLANATION IN THIS REGARD. SILENCE OF THE APPLICANT IN ITSELF SPEAKS A LOT. IT SHOWS T HAT IT HAS NO VALID EXPLANATION ON THESE DISCREPANCIES. CHARGING FEE UNDER VARIOUS HEADS WITHOUT INCURRING EXPENDITURE ON THEM CLEARLY SHOWS THE INTENTION OF THE APPLICANT SOCIETY THAT ITS MOTIVE CANNOT BE CHARITABLE, BUT TO EARN PROFIT BY THIS WAY OR THAT WAY. KEEPING IN VIEW OF THE ABOVE, THE APPLICATION OF THE ASSESSEE SOCIETY DOES NOT DESERVE FOR REGISTRATION. 7. ON PERUSAL OF THE INCOME AND EXPENDITURE ACCOUNT SUPPLIED BY THE ASSESSEE FOR THE FINANCIAL YEAR 2008 - 09, 2009 - 10 & 2010 - 11, IT IS NOTICED THA T THE ASSESSEE SOCIETY HAS MADE EXPENDITURE ON ADVERTISEMENT AMOUNTING TO RS. 24,010/ - , RS. 22,392/ - & RS. 54,689/ - RESPECTIVELY IN ALL THE THREE YEARS. IT SHOWS THAT ASSESSEE IS KEENLY INTERESTED TO ATTRACT MORE AND MORE STUDENTS TO MAXIMIZE ITS PROFIT. T HUS, THE ASSESSEE SOCIETY IS PROFIT ORIENTED BUSINESS ENTITY AND NOT A CHARITY INSTITUTE. KEEPING IN VIEW OF THE ABOVE, THE APPLICATION OF THE ASSESSEE SOCIETY DOES NOT DESERVE FOR REGISTRATION. 2. 1 IT WAS HIS SUBMISSION THAT THERE IS NO DISCUSSION IN TH E IMPUGNED ORDER ON THE RELEVANT FACTS AS PER JUDICIAL PRECEDENT NAMELY WHAT ARE THE O BJECTS OF THE TRUST . A TTENTION WAS INVITED TO PAGE 7 OF THE PAPER BOOK WHICH CONTAINS THE COPY OF THE MEMORANDUM OF ASSOCIATION AND REFERRING TO THE A IMS AND O BJECTS OF THE TRUST , S PECIFIC ATTENTION WAS INVITED TO CLAUSE 3(D) OF THE SAME WHICH WAS RELIED UPON SO AS TO CLAIM THAT THE OBJECTS WERE CHARITABLE: TO RUN EDUCATIONAL INSTITUTION ON MODERN LINES WITH A VIEW TO PROVIDING EDUCATION TO BOYS AND GIRLS IN HEALTHY A ND CONGENIAL SURROUNDINGS INCLUDING IN THEM SENSE OF DISCIPLINE SPIRIT OF BROTHERHOOD, AND CONTRACT APPRAISAL OF MORAL VALUES. 2 . 2 IT WAS HIS SUBMISSION THAT THE LEGAL POSITION IS WELL SETTLED WHICH HOLDS THAT AT THE TIME O F GRANTING R EGISTRATION WHAT IS NECESSARY TO BE SEEN IS THE OBJECT OF THE ASSESSEE AND NOT F UNCTIONING OF THE ASSESSEE WHETHER IT IS IN TERMS OF THE OBJECTS BECAUSE THAT ENQUIRY IS TO BE MADE AT THE ASSESSMENT STAGE AND THE ASSESSEE HAS NOT PERFORMED FUNCTIONS AS P ER THE OBJECTS ENSHRINED THEN THE SAID RECEIPTS CAN BE SUBJECTED TO ADDITIONS AS PER NORMAL PROVISIONS. FOR THE SAID PURPOSE, ATTENTION WAS INVITED TO VARIOUS DECISIONS INCLUDING AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTION VS CBDT AND OT HERS 301 ITR 86, SURYA EDUCATIONAL & 4 I.T.A .NO. 900 /DEL /201 3 CHARITABLE TRUST (2013) 355 ITR 280 (P& H), RELIABLE EDUCATIONAL ALLIANCE SOCIETY VS CIT (2009) 126 TTJ 407 (DEL), DREAM LAND EDUCATIONAL TRUST (2007) 109 TTJ (ASR.) 850 AND ORDER DATED 21.3.2014 IN LAL BAHADUR SHASTRI BAHKUUDDESHIYA INTERNATIONAL SOCIETY VS CIT, ITA 4030/DEL/2013, BHAGWAN MAHAVIR VIDYAPEETH, REWARI (HARYANA) VS CIT, ITA NO. 2285/DEL/2012 DATED 25.4.2014. 2.3 IT WAS RE - ITERATED THAT IF AT ALL ON FACTS THE BENEFIT OF THE REGISTRATION WAS NOT TO BE PROVIDED ON FACTS THEN ADDITIONS CAN BE MADE EVEN AT THE STATEMENT STAGE . RELIANCE WAS PLACED ON THE FOLLOWING CHART: F Y RECEIPT S SURPLUS BEFORE APPLICATION TOWARDS CAPITAL ASSETS APPLICATIO N TOWARDS CAPITAL ASSETS NET SURPLUS PERCENTAGE 2009 - 10 53 , 63 , 670 12 , 91 , 352 (PB PG. 15) 14,16,391 (PB PG. 17) ( - ) 1,25,039 NIL 2010 - 11 69,51,199 10 , 32 , 507 (PB PG. 18) 38,99,045 (PB PG. 20) ( - ) 26,66,538 NIL 2011 - 12 96,24,316 9 , 08 , 494 (PB PG. 21) 6,42,287 (PB PG. 23) 2,66,207 2.7% 2 . 4 I N THE AFORE - MENTIONED PECULIAR FACTS IT WAS HIS SUBMISSION THAT THE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. 3. AS OPPOSED TO THIS THE LD. CIT DR TO OK STRONG OBJECTION TO THE RELIANCE PLACED UPON BY THE ASSESSEE ON THE CHART PLACED BEFORE THE BENCH REFERRED TO IN THE SYNOPSIS . I T WAS H E R SUBMISSION THAT THIS CALCULATION HAS NOT BEEN SUBJECTED TO SCRUTINY OF THE CONCERNED OFFICER AND AT BEST CAN COME IN TO PLAY ONLY AT THE ASSESSMENT STAGE AND NOT AT THE STA G E OF GRANT OF R EGISTRATION. AT THE PRESENT STAGE, IT WAS HER SUBMISSION IT IS ONLY THE I NCOME AND E XPENDITURE ACCOUNT WHICH IS RELEVANT . I T WAS ALSO THE SUBMISSION THAT IN THE FACTS OF THE PRESENT CAS E THE ASSESSEE HAS NEVER PRODUCED THE ORIGINAL DOCUMENTS BEFORE THE CONCERNED AUTHORITY WHICH IS A NECESSARY REQUIREMENT. REFERRING TO THE PHOTOCOPY OF THE R EGISTRATION APPENDED WITH THE APPLICATION IT WAS POINTED OUT THAT IT STATES THAT THE INSTITUTION H AD BEEN 5 I.T.A .NO. 900 /DEL /201 3 ESTABLISHED ON 6.7.1971 HOWEVER THE A IMS AND O BJECTS AS PER PAGE 9 OF THE PAPER BOOK ARE DATED 27 TH SEPTEMBER 2002 . I T WAS ALSO HER ARGUMENT THAT THE CASE RELIED UPON BY THE ASSESSEE IS PRIOR TO THE CHANGE IN THE STATUE IN SECTION 2(15) OF THE AC T WHICH NECESSITATES THAT THE COMPETENT AUTHORITY IS ALSO REQUIRED TO CONSIDER THE GENUINENESS AS SUCH CLAIM OF THE ASSESSEE CAN N OT BE ALLOWED. 4. THE LD. AR SUBMITTED IN RE PLY THAT THE ORIGINAL DOCUMENTS WERE NEVER CALLED FOR EXAMINATION BY THE COMPETENT AUTHORITY AND ALTHOUGH THE RULES REQUIRED THE FILING OF THE ORIGINAL DOCUMENTS BUT NORMALLY ONLY A PHOTOCOPY IS GENERALLY FILED BY THE ASSESSEE S SO THAT IT IS NOT LOST. I N THE FACTS OF THE PRESENT CASE , IT WAS HIS SUBMISSION THAT THE ORIGINAL REGISTRATIO N DOCUMENT COULD NOT BE TRACED AS A RESULT OF WHICH THE ASSESSEE HAD TO MAKE EFFORTS AND CONSEQUENTLY THE VERY SAME MEMORANDUM WAS SIGNED ON SUBSEQUENT DATE SO AS TO FULFILL THE LEGAL REQUIREMENT. IT WAS HIS SUBMISSION THAT THE ASSESSEE IS READY TO PRODUCE THE SAME FOR VERIFICATION. 3 . WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE SAME WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IT IS APPROPRIATE TO RESTORE THE ISSU E BACK TO THE FILE OF CIT, ROHTAK , WHO SHALL CONSIDER THE SAME AFRESH. THE ASSESSEE IS DIRECTED TO PRODUCE THE ORIGINAL DOCUMEN TS OF REGISTRATION BEFORE THE CIT, ROHTAK WHO SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW TAKING INTO CONSIDERATION THE JUDGMENT ON THE ISSUE OF THE JURISDICTIONAL HIGH COURT . NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. 6 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . THE ORDER IS PRONOUNC ED IN THE OPEN COURT ON 1 1 T H OF NOVEMBER 2014 . S D / - S D / - ( T. S. KAPOOR ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 1 / 1 1 /2014 SUBODH KUMAR /AMIT KUMAR 6 I.T.A .NO. 900 /DEL /201 3 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI