A,D,I,T, Bangalore V. National Institute of Rural Banking, Bangalore

ITA 923/BANG/2011

• Counselvise Citation: 92321114 RSA 2011
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 10; 11; 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BANGALORE BANGALORE BANGALORE BENCH BENCH BENCH BENCH C CC C BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N. N. N. N. BARAT BARAT BARAT BARATH HH HVAJA SANKAR, VICE VAJA SANKAR, VICE VAJA SANKAR, VICE VAJA SANKAR, VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT A AA AND NDND ND SHRI SHRI SHRI SHRI N.V.VASUDEVAN N.V.VASUDEVAN N.V.VASUDEVAN N.V.VASUDEVAN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO.923/BANG/2011 (ASSESSMENT YEAR: 2007-08) ASST. DIRECTOR OF INCOME-TAX (EXEMPTION), CIRCLE 17(2), BANGALORE. APPELLANT VS. M/S.NATIONAL INSTITUTE FOR RURAL BANKING, 67, RICM CAMPUS, PADMANABHANAGAR, BANASHANKARI 2 ND STAGE, BANGALORE. RESPONDENT PAN: AAATN 1059 J APPELLANT BY: SHRI SUNDER RAJAN, JCIT. RESPONDENT BY : SHRI C.RAMESH, CA. DATE OF HEARING: 17-07-2012. DATE OF PRONOUNCEMENT: 24-07-2012. O R D E R O R D E R O R D E R O R D E R PER PER PER PER N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP N. BARATHVAJA SANKAR, VP: :: : THIS IS AN APPEAL PREFERRED BY THE REVENUE IN THE CASE OF M/S.NATIONAL INSTITUTE OF RURAL BANKING, BANGALORE, AGAINST THE APPELLATE ORDER DATED 10-8-2011 OF THE CIT(A)-V, BA NGALORE, FOR THE ASSESSMENT YEAR 2007-08. 2. 2.2. 2. THE REVENUE HAS BROUGHT BEFORE US TWO ISSUES FOR ADJUDICATION VIZ., (I) WHETHER THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTING U/S 10(23C)(IIIA D) OF THE ITA NO.923/BANG/2011 PAGE 2 OF 8 INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT'] WITHOUT APPRECIATING THE FACT THAT THE SOCIETY IS N OT AN UNIVERSITY OR EDUCATIONAL INSTITUTION EXISTING SOLE LY FOR EDUCATIONAL PURPOSES AND (II) THE CIT(A) HAS ERRED IN NOT GIVING A FINDING THAT DISALLOWANCE MADE BY THE AO U/S 11(1)( A) ON ACCOUNT OF APPLICATION OF INCOME OUTSIDE INDIA. 3. 3.3. 3. LET US TAKE UP THE FIRST ISSUE RELATING TO ELIGI BILITY FOR EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT. THE RELEVA NT GROUNDS READ AS UNDER: 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) WITHOUT APPRECIATING THE FACT THE SOCIETY IS NOT AN UNIVERSITY OR EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES. 2. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ACTIVITIES CARRIED OUT BY SOCIETY CANNOT BE SAID THAT THE SOCIETY EXISTS SOLELY FOR EDUCATION PURPOSE. THE ACTIVITIES CARRIED OUT BY THE SOCIETY HAVE NO CO-RELATION TO EDUCATION. IN THE ABSENCE OF ACTUAL ACTIVITY OF IMPARTING EDUCATION BY NORMAL SCHOOLING OR NORMAL CONDUCT OF CLASSES THE ACTIVITIES/OBJECTS OF THE SOCIETY DO NOT FALL WITHIN THE AMBIT OF SECTION 10(23C)(IIIAD). THE BRIEF FACTS PERTAINING TO THIS ISSUE ARE THAT T HE ASSESSEE- NATIONAL INSTITUTE FOR RURAL BANKING IS A TRUST WHI CH CAME INTO EXISTENCE IN 1990 WITH THE OBJECTIVES OF TRAINING P ERSONNEL IN THE AREA OF AGRICULTURE AND ON RURAL DEVELOPMENT BA NKING. THE TRUST IS IMPARTING TRAINING IN THE AREA OF RURAL CR EDIT MANAGEMENT TO THE BANKING PERSONNEL SINCE 1990. TH E OFFICERS FROM THE CO-OPERATIVE BANK AND ALSO REGIONAL RURAL BANKS AND COMMERCIAL BANKS FROM ALL OVER THE COUNTRY TAKE PAR T IN THE TRAINING PROGRAMMES CONDUCTED BY THE ASSESSEE. TH E ITA NO.923/BANG/2011 PAGE 3 OF 8 ASSESSEE-TRUST IS REGISTERED U/S 12A OF THE ACT. T HE ASSESSEE- TRUST FILLED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2007-08 DECLARING NIL INCOME BY CLAIMING EXEMPTION U/S 10 (23C)(IIIAD) OF ITS INCOME OF `19,67,298/-. THE AO IS OF THE VI EW THAT WHERE ALL THE OBJECTS OF THE TRUST ARE EDUCATIONAL PURPOS E AND THE SURPLUS, IF ANY, FROM RUNNING EDUCATIONAL INSTITUTI ON IS USED FOR EDUCATIONAL PURPOSE ONLY IT COULD BE HELD THAT THE INSTITUTION IS EXISTING FOR EDUCATIONAL PURPOSES AND NOT FOR THE P URPOSE OF PROFIT. THE AO VERIFIED THE ORIGINAL TRUST DEED DA TED 2-4-1990 IN THE LIGHT OF HIS ABOVE OBSERVATION. ACCORDING TO H IM, A SIMPLE VERIFICATION OF THE TRUST DEED INDICATED THAT THE A SSESSEES OBJECTIVES ARE NOT TOTALLY FOR EDUCATION PURPOSE AN D THE ASSESSEE HAD MULTIPLE OBJECTIVES LIKE PROMOTION OF RURAL DEVELOPMENT, UNDERTAKING SOCIAL SERVICE AND CHARITA BLE ACTIVITIES TO ALLEVIATE POVERTY AND DISTRESS ALL OV ER THE COUNTRY ESPECIALLY IN RURAL AREA ETC. ACCORDING TO THE AO, HE ASSESSEE IS NOT SOLELY EXISTING FOR EDUCATIONAL PURPOSE AND THE REFORE THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(23C)(IIIAD ) WAS DISALLOWED. 4. 4. 4. 4. AGGRIEVED, ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE HIM, I T WAS SUBMITTED THAT THE TRUST CAME INTO EXISTENCE CONSEQUENT TO A TRUST DEED DATED 2-4-1990 AND THE ASSESSEE HAD BEEN FILING RET URNS FOR ASSESSMENT YEAR 1991-92 ONWARDS AND UP TO ASSESSMEN T YEAR 2006-07. UPTO ASSESSMENT YEAR 2006-07 THE CLAIMS MA DE BY THE ASSESSEE FOR EXEMPTION U/S 10(22)/10(23C)(IIIAD ) HAD BEEN ACCEPTED BY THE DEPARTMENT AND FOR THE ASSESSMENT Y EAR 1996- ITA NO.923/BANG/2011 PAGE 4 OF 8 97, ORDER U/S 143(3) HAD BEEN PASSED ACCEPTING THE EXEMPTION CLAIMED BY THE ASSESSEE. FURTHER, IT WAS PLEADED T HAT THE MAIN OBJECTIVE OF THE ASSESSEE IS AS UNDER: TO PROMOTE MANAGEMENT DEVELOPMENT AND EXECUTIVE DEVELOPMENT AND TAKING UP THE ACTIVITIES TO ELIMINA TE POVERTY ETC., ARE INCIDENTAL TO THE MAIN OBJECTIVE A ND SUPPLEMENT THE SAME CAUSE. THOUGH THERE ARE OTHER INCIDENTAL OBJECTIVES MENTIONED IN THE TRUST DEED T HE ONLY ACTIVITY OF THE APPELLANT TRUST IS EDUCATION AN D TRAINING. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS IN L IGHT OF THE FACTS AND MATERIALS ALLOWED THE ASSESSEES APPEAL I N RESPECT OF THIS GROUND RELATING TO EXEMPTION U/S 10(23C)(IIIAD ). WHILE ALLOWING THE EXEMPTION, THE CIT(A) HAS OBSERVED AS UNDER: FROM THE PLAIN READING OF THIS PROVISION IT IS CLEAR THAT THE EDUCATIONAL INSTITUTION SHOULD CARRY ON ONLY EDUCATIONAL ACTIVITY WITHOUT PROFIT MOTIVE. THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF VANITA VISHRAM TRUST VS. CCIT 192 TAXMAN 389, HELD THAT IF THE TRUST CONDUCTED ONLY EDUCATIONAL ACTIVITIES AND NO OTHER ACTIVITIES WERE CARRIED OUT, IT MUST BE REGARDED AS EXISTING SOLELY FOR THE PURPOSE OF EDUCATIONAL IRRESPECTIVE OF THE FACT THAT MEMORANDUM OF ASSOCIATIO N OF THE TRUST CONTAINED VARIED OBJECTS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JAYPEE INSTITUTE O F INFORMATION TECHNOLOGY SOCIETY VS. DGIT (EXEMPTIONS ) REPORTED IN 185 TAXMAN 110 HELD THAT EXEMPTION CAN BE ALLOWED DESPITE THE TRUST HAVING VARIED OBJECTIVES W HICH HOWEVER, WERE HELD INCIDENTAL TO THE MAIN OBJECTIVE OF EDUCATION. AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE CASE I AM CONVINCED THAT THE APPELLANT TRUST IS ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAD) AND ACCORDINGLY THE AO IS DIRECTED TO ALLOW EXEMPTION 10(23C)(IIIAD) OF THE IT ACT 1961 TO THE APPELLANT AND THE APPEAL IS ALLOWED. I N VIEW OF THIS THE ISSUE OF COMPUTATION OF INCOME U/S 11 IS NOT DISCUSSED IN THIS ORDER. THUS, THE ASSESSEE SUCCEEDED BEFORE THE BEFORE THE FIRST APPELLATE AUTHORITY. 5. 5. 5. 5. NOW, THE REVENUE IS AGGRIEVED AND IS ON SECOND A PPEAL BEFORE US WITH THE GROUNDS OF APPEAL EXTRACTED ELSE WHERE OF THIS ITA NO.923/BANG/2011 PAGE 5 OF 8 ORDER. AT THE TIME OF HEARING, LEARNED DEPARTMENTA L REPRESENTATIVE REITERATED THE CONTENTS OF THE ASSES SMENT ORDER AS HIS SUBMISSIONS. HE ALSO RELIED ON THE GROUNDS OF APPEAL RAISED BEFORE US. THAT APART, HE RELIED ON THE DEC ISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION VS. CIT (2005) 273 ITR 139(GUJ) FOR THE PROPOSITION THAT FOR CARRYING ON EDUCATIONAL ACTIVITIES, THE AS SESSEE TRUST SHOULD HAVE BEEN AFFILIATED TO OR REGISTERED BY ANY AUTHORITY AND IF NO SO, THE SAME CANNOT BE TREATED AS EDUCATIONAL INSTITUTION. PER CONTRA, LEARNED AR OF THE ASSESSEE REITERATED THE VERY SAME CONTENTIONS MADE BEFORE THE FIRST APPELLATE AU THORITY AS HIS SUBMISSIONS. THAT APART, IT WAS ALSO SUBMITTED THAT THE AO DID NOT DENY THE FACT ABOUT THE ACTIVITY OF THE ASS ESSEE CONDUCTING TRAINING TO THE EMPLOYEES OF VARIOUS CO- OPERATIVES. IN THE ORDER OF ASSESSMENT THE AO HAS EXTRACTED CER TAIN CLAUSES FROM THE OBJECTIVES WHICH ARE IN THE NATURE OF ALLI ED ACTIVITIES. THE AO APPEARS TO BE OF THE OPINION THAT SINCE VARI OUS ALLIED ACTIVITIES ARE INTENDED TO BE CARRIED ON, IT CANNOT BE HELD THAT THE ASSESSEE TRUST EXISTS SOLELY FOR EDUCATIONAL PU RPOSE. HE FURTHER SUBMITTED THAT FACTUALLY NO ACTIVITY OTHER THAN THAT OF IMPARTING TRAINING HAS BEEN CARRIED OUT. REGARDING THE NORMAL SCHOOLING OR NORMAL CONDUCT OF CLASSES, DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DELHI MUSIC SOCIETY VS. DIRECTOR GENERAL OF INCOME-TAX (2012) 246 CTR 327(DEL) WAS RELIED. IN THAT DECISION, IT HAS BEEN HELD THAT THE FACT OF NO T CONDUCTING ANY EXAMINATION OR AWARDING ANY DEGREES OF ITS OWN IS NOT DECISIVE TO DECIDE WHETHER AN INSTITUTION IS AN EDU CATIONAL ITA NO.923/BANG/2011 PAGE 6 OF 8 INSTITUTION OR NOT. IF THE ASSESSEE MEETS THE REQU IREMENT OF IMPARTING EDUCATION WHICH CAN BE TRAINING OF ANY NA TURE, AND IF ONLY SUCH ACTIVITY IS CARRIED ON, THE INSTITUTION S HOULD BE HELD ELIGIBLE FOR DEDUCTION U/S 10(23C)(IIIAD) OF THE AC T. HENCE, IN VIEW OF THE ABOVE DECISION, SINCE THE ASSESSEE-TRUS T HAS BEEN CARRYING OUT ONLY ACTIVITY OF TRAINING PERSONNEL IN THE CO- OPERATIVE SECTOR, THE ASSESSEE IS ELIGIBLE FOR DEDU CTION U/S 10(23C)(IIIAD) OF THE ACT. 6. 6. 6. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED T HE FACTS AND MATERIAL ON RECORD INCLUDING THE DECISION S CITED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS CARRYING ONLY THE ACTIVITY OF EDUCATION AND TRAINING, EVEN THOUGH OTHER INCIDENTAL OBJECTIVES ARE MENTIONED IN THE TRUST DE ED. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAD BEEN FILING RETU RNS FROM ASSESSMENT YEAR 1991-92 ONWARDS UP TO ASSESSMENT YE AR 2006- 07 AND THE CLAIMS MADE BY THE ASSESSEE U/S 10(23C)( IIIAD) HAD BEEN ACCEPTED BY THE DEPARTMENT FOR ASSESSMENT YEAR 1996-97 U/S 143(3) OF THE ACT. IT COULD BE SEEN FROM THE S ECTION THAT SUB-SECTIONS (22) AND (22A) OF SEC.10(22) ARE JUST RE-ENTERED IN CLAUSES (IIIAD) AND (IIIAE) OF 10(23C). OTHERWISE THERE IS NO DIFFERENCE BETWEEN THESE TWO SECTIONS VIZ., 10(22) AND 10(23C)(IIIAD) EXCEPT SECTION 10(23C)(IIIAD) IS PRE SCRIBING SOME LIMIT FOR ANNUAL RECEIPTS. HENCE, IN OUR OPINION, WHEN THE ASSESSEE HAS BEEN GRANTED EXEMPTION U/S 10(22) WITH THE SAME OBJECTIVES, THE ASSESSEE HAS TO BE GRANTED EXEMPTIO N U/S 10(23C)(IIIAD) IF THE ANNUAL RECEIPT IS WITHIN THE LIMIT PRESCRIBED. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEES AN NUAL RECEIPTS ITA NO.923/BANG/2011 PAGE 7 OF 8 ARE EXCEEDING THE LIMIT PRESCRIBED U/S 10(23C)(IIIA D) OR THE RELEVANT RULES. FURTHER, THERE IS A FORCE IN THE C ONTENTION OF THE LEARNED AR THAT THE ASSESSEE IS CARRYING ON ONLY T HE ACTIVITY OF EDUCATION AND TRAINING, EVEN THOUGH OTHER INCIDENTA L OBJECTIVES ARE MENTIONED IN THE TRUST DEED. THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF VANITA VISHRAM TRUST (SUPRA) AND JAYPEE INSTITUTE OF INFORMATION TECHNOLOGY SOCIETY (SUPRA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DELHI MUSIC SOCIETY (SUPRA) SUPPORT THE CLAIM OF THE ASSESSEE. THE DECISION IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION (SUPRA) RELIED ON BY THE LEARNED DEPARTMENTAL REPRE SENTATIVE CANNOT ADVANCE THE CASE OF THE REVENUE IN VIEW OF T HE SUBSEQUENT DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DELHI MUSIC SOCIETY (SUPRA) WHEREIN IT WAS HELD THAT IF THE ASSESSEE MEETS THE REQUIREMENT OF IMPARTING EDUCATI ON WHICH CAN BE TRAINING OF ANY NATURE AND IF ONLY SUCH ACTI VITY IS CARRIED ON, THE INSTITUTION SHOULD BE HELD ELIGIBLE FOR DED UCTION U/S 10(23C)(IIIAD) OF THE ACT. IN VIEW OF THE ABOVE DE CISION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE FIRST AP PELLATE AUTHORITY IN GRANTING EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT AND AS SUCH WE CONFIRM THE SAME. 7. 7. 7. 7. TURNING TO THE NEXT ISSUE RELATING TO DISALLOWAN CE MADE U/S 11(1)(A) OF APPLICATION OF INCOME OUTSIDE INDIA , IN OUR VIEW, THIS ISSUE IS ONLY ACADEMIC AND WE ARE NOT DEALING WITH THE SAME AS WE HAVE ALREADY GRANTED EXEMPTION U/S 10(23 C)(IIIAD) OF THE ACT. ITA NO.923/BANG/2011 PAGE 8 OF 8 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2012 . SD/- SD/- (N. (N. (N. (N.V. V.V. V.VASU VASU VASU VASUDEVAN DEVAN DEVAN DEVAN) )) ) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) (N.BARATHVAJA SANKAR) VICE VICE VICE VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FIL E BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALOR E