The Commissioner of Income Tax, V. Mamatha Educational Society,

ITTA/461/2011

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Vijayawada against the Mamatha Educational Society concerning the assessment years 1997-98 and 1998-99. The primary legal issue was whether the society was entitled to claim the benefits of Section 11 of the Income Tax Act, 1961, despite not having fully operationalized its educational institutions during the relevant assessment years. The society, registered under the Public Societies Registration Act, aimed to establish a Medical College and had initiated construction and other preparatory activities. However, due to the lack of necessary approvals and certifications from regulatory authorities during the assessment years in question, the institutions were not fully operational. The Tribunal, referencing several precedents, concluded that the society's efforts towards establishing educational infrastructure constituted sufficient grounds for exemption under Section 11.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 719153 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 28-08-2012
• Assessment Year: misc
• Other Referred Cases: AR Educational Society v. Commissioner of Income-tax, Trustees of Vanita Vishram v. CIT, CIT v. Devi Educational Institution
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: C P RAMASWAMY
• Assessee Lawyers: J V PRASAD
• Keywords: Assessment Year; Educational Society; Exemption; Income Tax; Medical college; Teaching Hospital
• Section: 147; 11; 12A; 260-A; 10(22)

Judgement Text

"THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO ITTA No. 461 of 2011 Dated: 28-08-2012 Between: The Commissioner of Income Tax, Vijayawada …Appellant And Mamatha Educational Society, Khammam. …Respondent. Judgment: (Per Hon’ble Sri Justice Goda Raghuram) This appeal by the Revenue under Section 260-A of the Income tax Act, 1961 is preferred against the order of the Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench dated 29-9-2006 in ITA No. 826/H/2005 pertaining to an order of Assessment of the year 1998-99. By the order impugned, which is a common order, the Tribunal partly allowed appeals preferred by the Revenue against a common order of the Commissioner of Income Tax (Appeals) dated 1-6-2006, in respect of two Assessment Years 1997-98 and 1998-99. The only issue presented for consideration in this appeal is whether the Tribunal erred in holding that the respondent-assessee was entitled to claim the benefit of Section 11 of the Income Tax Act, 1961 (for short ‘the Act’). The assessee is a Society registered under the Public Societies Registration Act and is assessed as an Association of Persons (AOP) with the principal object of establishing, aiding and administering educational and other institutions, to impart education at all stages in all subjects including medicine, engineering etc., for diffusion of knowledge. The assessee proceeded to establish a Medical College at Khammam. For want of approval, though the construction activity and execution of civil works of the Medical College were initiated and progressed during the Assessment year in question, the establishment of the Medical College and the Teaching Hospital could not fructify during the relevant Assessment year, for want of approval and certification by the relevant Regulatory Authorities. The Teaching Hospital became operative and functional from 25-8- 1996; the University of Health Sciences granted affiliation on 4-11- 1996 and the State issued Essentiality certificate on 21-9-1996. The society was registered under Section 12A of the Act earlier and with effect from 28-5-1992. The assessee had earned Rs.10,55,587/- towards interest on fixed deposits during the Assessment Year in question and received tuition fees, application money and other collections but failed to file its returns. Eventually a notice under Section 147 was issued. In response, the assessee filed its returns of income and claimed 100 per cent exemption under Section 10 (22) of the Act (as it then stood) and claimed exemption under Section 11 of the Act. This was rejected by the Assessing Authority. On an appeal preferred by the assessee, the CIT (Appeals) reversed the findings of the Assessing Authority and held that since infrastructure for operating the educational institutions is essential to the establishment of the educational institutions; the assessee had disclosed all the material facts fully and truly; and eventually the Teaching Hospital and the Medical College have come into being and became functional from 25-8-1996, the assessee was entitled to the benefits of Section 10 (22) and 11 of the Act and thus to exemption. The Revenue preferred an appeal thereagainst to the Tribunal which concurred with the reasoning and conclusions recorded by the CIT (Appeals) and reiterated that since it is not disputed that the assessee was engaged in creating the infrastructure for setting up a Medical College and that was towards the fulfillment of the main object for which the society was established, the assessee should not be denied the benefit of Section 11 of the Act. Reliance was is placed by the Tribunal on the judgment of the Madras High Court in AR Educational Society v. Commissioner of Income-tax[1]; of the Bombay High Court in Trustees of Vanita Vishram v. CIT[2] and on another decision of the Madras High Court in CIT v. Devi Educational Institution[3] for the conclusion that the expression “existing” in Section 10 (22) of the Act does not only mean being functional and the process towards effectuation of educational activity carried on during the period in question would also entitle an assessee to the benefits under the provision. The Tribunal held that since the assessee- society was taking steps towards creating infrastructure for the eventual operationality of the Medical College and Teaching Hospital, it was entitled to the benefit of exemption under Section 11 of the Act. No question of law, let alone any substantial question of law arises for consideration in this appeal and the findings of fact recorded by the CIT (Appeals) and concurred with by the Tribunal as to the educational purposes pursued by the assessee-society warrant no interference in this appeal under Section 260-A of the Act. This appeal is accordingly dismissed at the stage of admission after hearing Sri J.V.Prasad, learned counsel for the appellant and Dr. C.P.Ramaswamy, learned counsel for the respondent. No costs. _________________________ GODA RAGHURAM, J 28th August, 2012 _______________________________ M.S.RAMACHANDRA RAO, J GRR [1] 253 ITR 589. [2] 280 ITR 345 [3] 153 ITR 571 "