NABABHARAT SIKSHA V. CHIEF COMMNR.OF INC

WP(C)/3670/2013

AI Insights

The case revolves around the denial of tax exemption to Nababharat Siksha Parishad by the Chief Commissioner of Income Tax, Orissa, under Section 10(23C)(vi) of the Income Tax Act, 1961 for the financial year 2008-09. The society, which was involved in educational activities, also had non-educational objectives and incurred expenditures on these non-educational activities. The Chief Commissioner found that the society was not solely educational as it made systematic profits and did not invest these in accordance with section 11(5) of the Act. The High Court, after reviewing the submissions and the financial statements of the society, concurred with the Chief Commissioner's decision and dismissed the writ petition.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 725828 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 05-04-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: A K ROY
• Keywords: Audit report; Exemption; Financial Statements; Income Tax; Non-educational objects; Educational objects
• Section: 10(23C)(vi)

Judgement Text

" Page 1 of 4 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No. 3670 of 2013 Nababharat Siksha Parishad ….. Petitioner Mr. A.K. Roy, Advocate Vs. Chief Commissioner of Income Tax, Orissa and others ….. Opposite Parties CORAM: DR. JUSTICE B.R. SARANGI MR. JUSTICE G. SATAPATHY ORDER 05.04.2024 Order No. 09. This matter is taken up through hybrid mode. 2. Heard Mr. A.K. Roy, learned counsel for the petitioner. 3. The petitioner has filed this writ petition seeking to quash the order dated 14.01.2013 under Annexure-13, wherein the Chief Commissioner of Income Tax, Odisha did not grant exemption to the assessee under section 10 (23C) (vi) of the Income Tax Act, 1961 for the financial year 2008-09. 4. The factual matrix of the case in hand is that vide office order dated 31.03.2010, the application filed by the assessee seeking approval for exemption under Section 10 (23C) (vi) of the Income- tax Act,1961 for the financial year 2008-09 was rejected on the grounds that the applicant Society has non-educational objects also besides the object of providing education and the applicant Society had neither furnished audit report in Form No. 10BB nor furnished return of income for the financial year ending 31.03.2009 relevant to assessment year 2009-10. In the absence of audited accounts, it was not possible to ascertain the aggregate annual receipts of the Society, Page 2 of 4 which is a condition for consideration of grant of exemption u/s. 10(23C)(vi). Needless to say that the approval u/s.10(23C) (vi) of the I.T. Act,1961 was granted to the assessee for the subsequent year i.e. financial year 2009-10 vide order of the CCIT dated 19.05.2011. Aggrieved by the order dated 31.03.2010 denying approval u/s. 10(23C)(vi) for the financial year 2008-09, the assessee approached this Court by filing W.P.(C) No.11339 of 2011, which was disposed of on 06.11.2012, whereby the issue of grant of exemption u/s. 10(23C)(vi) was considered and the matter was remitted back to the Chief Commissioner to examine the matter and pass order in accordance with law within a period of three months from the date of communication of the order taking into account the order dated 19.05.2011 for the assessment year 2009 -10. In compliance thereto, the Chief Commissioner of Income Tax, Bhubaneswar gave opportunity to the petitioner by issuing a letter on 21.11.2012 to represent its case with regard to submissions/ clarifications made before this Court. In response to the same, the petitioner represented through its lawyer along with Sri M.R. Das, Administrative Officer of the society appeared for hearing and furnished the relevant financial statements, written submission and related documents. Books of account produced were examined. The case was discussed. Therefore, taking into consideration the memorandum of association, wherein it was found, the society has been constituted taking as many as 24 objects. Out of that Clauses-xx, xxi, xxii and xxiii cannot be said to be related to education. Therefore, the object of the society is very clear that besides, the education, they are doing some other work. Therefore, on examination of financial statement, it was found that the society was incurring expenditure for its non-educational Page 3 of 4 objects. Therefore, the commissioner came to a conclusion that the society not only has objects other than educational, but also has been incurring expenditure for its non-educational objects. Therefore, it cannot be said that the Society exists solely for education. Thereafter the Commissioner examined the financial affairs of the Society, the statement of accounts for the six financial years, i.e. from 2006-07 to 2011-12. On analysis of disclosed financial transactions of the Society it is found that the society is claiming to be engaged in the activities of running various educational institutions has actually managed to earn systematic profit from its gross receipts continuously for all the years ranging from 12% to 72% of its gross receipts. Specifically for the F.Y. 2008-09 the percentage of surplus is as high as 72% of gross receipts. 5. In view of the factual position, the Chief Commissioner has came to a conclusion that earning systematic profit year after year the admissibility of application seeking approval U/s 10(23C)(vi) for claiming exemption from the charge of Income Tax in accordance with the provision of Section 10(23C)(vi) has to be examined in terms of the stipulation indicated in this section. 6. After examining the same, in paragraph-5, it came to the following finding:- “5. So far as granting exemption/deduction under the I.T. Act, 1961 is concerned, the provisions of the Act are to be interpreted strictly. As discussed above detail, the society does not exist solely for education. Further, it has made systematic profits over the years by running educational institutions purely on commercial lines. Its surplus funds are also found not invested in the modes specified u/s. 11(5) of the I.T. Act and a substantial part of the same has been diverted for the benefit of the business of a company, where one of its Governing Council Members is a Director. In view of all this there can be no justification whatsoever, both on facts and in law, to accord approval for exemption u/s.10(23C)(vi) for the Page 4 of 4 F.Y. 2008-09 to the Society. I am, therefore, not inclined to grant exemption to the assessee u/s.10(23C)(vi) of the Income Tax Act,1961 for the financial year 2008-09.” 7. After coming to such finding and coming to the conclusion that So far as granting exemption/deduction under the I.T. Act, 1961 is concerned, the provisions of the Act are to be interpreted strictly. The society having not been existed solely for education and, it has made systematic profits over the years by running educational institutions purely on commercial lines, therefore, the Chief Commissioner of Income Tax did not incline to grant exemption to the assessee under Section u/s.10(23C)(vi) of the Act for the financial year 2008-09. 8. In view of such position, this Court does not find any error apparent on the face of record or irregularity committed by the Chief Commissioner while passing the impugned order. Consequently, this Court is not inclined to interfere with the same. Thereby, the writ petition merits no consideration and the same stands dismissed. Arun (DR. B.R. SARANGI) JUDGE (G. SATAPATHY) JUDGE Digitally Signed Signed by: ARUN KUMAR MISHRA Designation: ADR-cum-Addl. Principal Secretary Reason: Authentication Location: High Court of Orissa, Cuttack Date: 06-Apr-2024 16:00:35 Signature Not Verified "