Income Tax Appellate Tribunal - Chandigarh
Himachal Pradesh Board Of School ... vs Assessee on 18 January, 2016
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER
ITA No. 673/CHD/2014
Assessment Year: 2011-12
&
Stay Application No. 20/CHD/2015
In ITA No. 673/CHD/2014
Assessment Year: 2011-12
Himachal Pradesh Board of Vs The DCIT,
School Education Circle
(through its Secretary), Palampur(HP).
Dharamshala,
District - Kangra (HP)
PAN: AAAJH0373H
(Appellant) (Respondent)
Appellant by : Shri Ajay Vaidya
Respondent by : Shri Sushil Kumar,CIT-DR
Date of Hearing : 04.01.2016
Date of Pronouncement : 18.01.2016
O R D E R
PER BHAVNESH SAINI,JM The appeal of assessee as well as Stay Application have been heard together and are disposed of through this common order.
2. The assessee in its appeal has challenged the order of ld. CIT(Appeals), Shimla dated 26.05.2014 for 2 assessment year 2011-12 on the following amended grounds of appeal :
a) That the impugned orders as passed by the Respondents are bad in law and against the fact and circumstances of the case. The Ld. Assessing officer as well as the Ld Commissioner of Income Tax (Appeal) has erred in law and fact of the case by treating the appellant under the provisions of section 10(23C)(vi)without appreciating the functioning and objective of the appellant Board that its income is covered by the provisions of Section 10(23C)(iiiab). Further the respondent has treated the appellant as AOP (Association of Person) without any basis and against the provisions of the Act.
b) That the learned Commissioner of Income Tax (Appeals) has misinterpreted the pleadings/arguments of the appellant and traveled beyond the principals applicable to the case as also has committed serious illegality while coming to conclusion that the appellant was not wholly and substantially financed by the State Government and is not controlled by the State Government 'and that it is immaterial whether or not the profit motive exists in the appellants objective. The appellant has been financed by the State Government which is evident from the various documents which were brought before the respondent at the time of the framing of the assessment and is not exists for profit motive and is entitled for exemption u/s 10(23) (iiiab) of the Income tax Act. Hence on this ground also the appeal deserve to be allowed".
3. The ld. counsel for the assessee submitted that in all the grounds of appeal, the assessee has made a claim of exemption under section 10(23C)(iiiab) of the Act.
3
4. Brief facts of the case are that the assessee has been incorporated under the Himachal Pradesh Board of School Education Act, 1968 with the purpose of publication of books, prescribing of syllabus and conduct of examination of various levels upto secondary level in the State of Himachal Pradesh. The appellant filed return of income on 30.09.2011 declaring NIL income after claim of exemption u/s 10(23C) of the Act. A revised return was filed on 29/03/2011 at nil income. The return was selected for scrutiny assessment. 4(i) During the assessment proceedings on perusal of return of income and other documents like audit report, Form No. 10BB, the Assessing Officer made twenty points observations as enumerated in para 3 of assessment order. The Assessing Officer noted that the Board has failed to utilize earmarked fund given by the State Government for specific direction to distribute the text books on free basis to the students belonging to other backward classes, schedule caste & schedule tribes of Rs. 11,90,38,662/- and utilized for other objects, and the balance amount of Rs.12,21,76,840/- utilized for printing, publishing and sale of the books but majority of these text books have been sold in the open market through book depots with the motive of earning profit and earned of Rs.9,48,34,214/- and the profit so earned was also not utilized for the benefit of students for which the earmarked fund was allocated by the education department. Thus, the Board has failed to 4 apply the fund allotted by State Government to the specific direction to the extent of Rs.11,90,38,662/- and Rs. 9,48,34,214/- which is the profit earned- by utilizing earmarked fund in carrying out activities in the nature of trade, commerce and business in the form of printing, publishing and sale of the books. Accordingly the assessee was issued a show cause notice and the assesses made para-wise submissions which are again enumerated on page 5 to 7 of the assessment order. 4(ii) The A O also recorded the statement of Secretary of the Board to find out the exact utilization of earmarked funds allocated by Directorate of Education for free distribution of text books to the students belonging to other backward classes, schedule cast and schedule tribes and whether the Board has received any mandate for utilization of earmarked funds for other purposes. After considering the assessee's submission and statement of Secretary of the Board, the AO concluded that the assessee has failed to apply earmarked fund to the objects for which the fund was allocated by the government to the extent of Rs.21,38,72,876/- (Rs. 11,90,38,662/- out of total earmarked fund of Rs.24,66,13,426/- + profit earned by applying the part of the earmarked fund on printing at Rs. 12,21,76,840/-). Thus, the unutilized earmarked fund of Rs.11,90,38,662/- and profit earned at Rs.9,48,34,214/- from the activities in the nature of commerce, trade and business totaling 5 Rs.21,78,72,876/- is treated the income of assessee for the assessment year 2011-12 under the provisions of section 2(24)(iia) of the Income-tax Act, 1961 and added to the income of the assessee.
4(iii) Further, that Assessing Officer noted that assessee had failed to deduct tax at source on payments made to the authors on account of royalty and auditor's fee of Rs.1,57,55,253/- and Rs 12,00,000/- respectively. The AO disallowed an amount of Rs.1,96,55,253/- u/s 40(a)(i) of the Act. The Assessing Officer further noted that the assessee had debited capital expenditure of Rs.53,97,924/- on construction of new building. The AO's finding was admitted by the assessee and on this account an amount of Rs.53,97,924/- was disallowed. Thus, a total addition of Rs. 23,89,36,053/- was made and the assessee's claim under section 10(23C) was not granted.
5. The assessee challenged the addition before ld. CIT(Appeals) and during the course of appeal, the assessee has made verbal as well as written submissions. The gist of the submissions is as under:-
(i) The appellant has been incorporated under the Himachal Pradesh Board of school Education Act, 1968 with the purpose of publication of books, prescribing of syllabus and conduct of examination at various levels upto secondary level in the state of Himachal Pradesh. The appellant appl ied on 20.06.2008 bef ore Chief Commissioner of Income-tax, 6 H.P. Region (CCIT ) f or granting the exemption under section 10 (23C) (vi) and (via) of the Act. Since, the appellant is engaged solely f or the purposes of education, hence its income is exempted under section 10 (23) ( iii) ( ab) of the Act. Vide order dated 30.6.2009 approval u/s 10(23C) (vi) of the Act. w.e.f .
assessment year 2009-10 relevant to f inancial year 2008-09 was granted to the Board. Thereaf ter, vide letter dated 23.12.2009 the appellant submitted to the CCIT stating the reasons why the approval which has been granted under section 10(23C) (vi) is required to be modif ied and the appell ant be granted exemption U/R 10(23C) (iii)( ab) of the Act.
(ii) Vide letter dated 11.03.2010 the CCIT passed an order and held that the HP Board of school education is not wholly or substantially f inanced by the Government. Hence, the Board does not appear to satisf y the condition of section 10(23C) (iiiab). The question whether 10(230) (iiiab ) exemption is allowable or not is an assessment issue and will be decided in due course. The CCIT declined to intervene in the matter and treated the application as rejected.
(iii) During the assessment proceedings f or A. Y. 2011-12 the AO came to the conclusion that the Board has not been adhering to the provisions of the section 10(23C)(iv) of the Act. The appell ant submitted that the Board is covered by the section 10(23C) ( iiiab) of the income T ax Act and entire Income of the Board is exempted from Income tax. The appellant board has been f inanced by the Himachal Pradesh Government. The appellant board is f inancially assisted by the State Government and thus the requirement of section 10(23C) (iiiab) of the IT. Act is f ulf illed by the appell ant board. 7
(iv) It was submitted that as per the sub section (iiiab) the requirements to qualif y f or exemption under this section is that the educational institute exists solely f or educational institute was wholly or substantially f inanced the Government. It was submitted that there is categorically f inding by the Assessing Authority who has af ter scrutinizing the documents came to this conclusion that the institution (appellant Board) is not established f or any prof it motive. The appell ant af ter pl acing reliance on judicial pronouncements submitted that the appellant educational institute exists solely f or educational purpose and not f or the purpose of prof it and said educational institute is substantially f inanced by the Himachal Pradesh State Government. Further the appellant submitted that even if some amount remains surplus with the appellant that is util ized only f or the purposes of education.
(v) In vie w of its submissions the appellant prayed for, the orders as passed by the AO, may be quashed and set aside and the income of the appellant may be held to be exempted u/s 10(23C) (iiiab) of the Act.
6. The ld. CIT(Appeals), considering the submissions of the parties and material on record, dismissed appeal of the assessee following his appellate order for assessment year 2006-07 in which, on identical facts the similar claim of assessee was dismissed. The findings in appellate order in para 6 to 6.1 are reproduced as under :
" I have considered the facts, case history and the rival submissions. It is noted that my predecessor has dealt 8 the assessee's appeal for A. Y. 2006-07. My predecessor on the similar issue in the assessee's own case has given the finding for appeal No. IT/569/09-1 0/Sml vide order dated 28/2/2012 as under:-
"5.2 The rival submissions have been carefully considered. It is noted that the appellant Board had applied for grant of exemption u/s 10(230) (vi) and the said exemption was granted by the CCIT, Shimla w. e. f. Assessment year 2009-10. The appellant's request for the condonation of delay in filing the application for approval u/s 10(23C) (vi) and for grant of exemption w.e.f. A.Y.2005-06 has been rejected by the CCIT, Shimla. Therefore there is no strength in the appellant's argument that it should be granted exemption u/s 10(23C)(vi) of the Act. Simultaneously the appellant is claiming exemption u/s 10(23C)(iiiab). Thus the appellant is trying to take benefit of the provisions of two different sections of the Act at the same time. It is, however, noted that the claim of then appellant under section 10(23C)(iiiab) is otherwise also not legally sustainable. As per the provisions of Section 10(23C)(iiiab), the concerned University or other educational institution must be wholly and substantially financed by the government. As per the assessment record of the appellant, it had never been financed by the Govt. during the period A.Y. 2004-05 to A.Y. 2010-11. It has been generating its own income from sale of books and on account of registration fees. The aid from the State Govt. to the appellant is Nil. It has been wrongly mentioned by the ld. A.O. in the assessment order that "there is no doubt that assessee Board is financed and controlled by the State Govt." In fact, in the year under appeal, the appellant Board has transferred an at of Rs. 5 9 Crores to the H.P. Govt. from its own income. It is further noted that the appellant board is not directly controlled by the State Govt. but is governed under a separate Himachal Pradesh Board of School Education Act, 1968. On the given facts of the case, it is also evident that the appellant Board does not exist solely for educational purposes. It is, in fact, earning huge profits. Once it is established that the appellant Board had generated surplus and profits, it is immaterial whether or not the profit motive existed in the appellant's objectives. The receipt of income in the hands of the appellant is taxable and therefore, the action of the ld. A.O. does not call for any interference. The addition of Rs. 12,24,21,993/- to the taxable income of the appellant is, therefore, upheld as the appellant is not eligible for exemption under any of the provisions of the income-tax Act. In the result, the appeal of the appellant is dismissed."
6. Since the facts of the case and the issue of denial of exemption of income under section 10(23C) to the appellant are same in the assessment year 2011-12 also, therefore, I agree with the decision, as above, of my predecessor given for assessment year 2006-07. Thus, in A.Y. 2011-12, the addition of Rs. 23,89,36,053/- made by the A.O. as taxable income of the appellant is upheld as the appellant is not eligible for exemption under any provisions of the Income tax Act. These grounds of appeal are dismissed."
7. The assessee is in appeal challenging the orders of authorities below in not granting deduction/exemption under section 10(23C)(iiiab) of the Act. 10
8. We have heard ld. Representatives of both the parties and perused the material on record.
9. It is admitted fact that the ld. CIT(Appeals) dismissed the appeal of the assessee following the order of his predecessor for assessment year 2006-07 dated 28.02.2012 which order has been confirmed by ITAT Chandigarh-A Bench in the case of same assessee in ITA 405/2012, assessment year 2006-07 vide order dated 13.09.2013 and appeal of the assessee has been dismissed. The findings of the Tribunal in paras 9 to 12 are reproduced as under :
9. We have heard the rival submissions and perused the material available on record. Section 10 (23C)(iiiab) of the Income Tax Act provides as under:-
10(23C).........
[(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or (iiiac)......
10. The condition of the above provision would show that University and other educational institutions must exist solely for education purposes and not for the purposes of profits and which is wholly and substantially financed by the government. The Assessing Officer has given a specific finding against the assessee that in the assessment year under appeal, the assessee has not fulfilled the conditions of the above provision. It was also found that in the assessment year 11 under appeal, the assessee has advanced its income to the State Government. The Ld. CCIT Shimla has granted approval u/s 10(23C) (vi) of the Income Tax Act to the assessee AOP from the assessment year 2009-10 onwards subject to certain conditions, therefore, the same would not apply to the assessment year under appeal i.e. 2006-07. The Ld. CIT(A) on examination of the assessment record also found that assessee had never been financed by the Government during the assessment year in appeal and other years. It was also found that assessee has been generating its own income from sale of books and on account of registration fees. The Ld. CIT(A) therefore, on examination of the records found that the aid from the State Government to the assessee is nil and it was wrongly mentioned by the Assessing Officer in the assessment order that the assessee Board is financed and controlled by the state government. In fact, in the assessment year under appeal, the assessee Board has transferred and amount of Rs. 5 crores to the Himachal Pradesh Government from its own income. It was also noted from the record that assessee Board is not directly controlled by the State Govt. but is governed under the Separate Himachal Pradesh Board of School Education Act, 1968. The Ld. CIT(A), therefore, found that assessee does not exist solely for educational purposes. It is in fact earning huge profits and has surplus income and profits. The finding of the fact recorded by Ld. CIT(A) clearly suggests that assessee did not have fulfill the terms and conditions of section 10(23C)(iiiab) of the I.T.Act. The appeal was adjourned many times but the assessee did not take any steps to produce any evidence before the Tribunal to contradict the findings of fact recorded by Ld. CIT(A) in the impugned order. Even during the course of arguments, Ld. Counsel for the assessee was specifically required to point out any error in the order of Ld. CIT(A) on the basis of evidence or material on record but it was stated that no evidence or material has been filed on record to contradict the above finding of fact recorded by Ld. CIT(A). The Ld. Counsel for the assessee only relied upon the two unreported judgments 12 as above, however, the said judgments could not be considered favorable in favour of the assessee in the absence of any evidence or material on record in favour of the assessee. Thus, the findings of fact recorded by Ld. CIT(A) above have not been rebutted through any material, therefore, we conclude that assessee miserably failed to satisfy the requirement of section 10(23C)(iiiab) of the Income Tax Act in the assessment year under appeal.
11. In view of the above discussion, we do not find any error in the order of Ld. CIT(A) in rejecting the claim of the assessee u/s 10(23C) (iiiab) of the I.T. Act.
12. In the result, the appeal of the assessee is dismissed.
10. In assessment year 2006-07, it was found that the assessee does not exist solely for educational purposes. It is earning huge profits and has surplus income and profits. The finding of fact recorded by the ld. CIT(Appeals) clearly suggest that assessee did not fulfill the terms and conditions of Section 10(23C)(iiiab) of the Income Tax Act. It was also found that assessee Board is no directly controlled by the State Government but is governed under separate Himachal Pradesh Board of School Education Act, 1968. Ld. Representatives of both the parties submitted during the course of arguments that the above order of the Tribunal dated 13,09,2013 has not been challenged by the assessee in further appeal before High Court. It is also stated that assessee has filed Miscellaneous Application before ITAT Chandigarh Bench against the order of the Tribunal 13 dated 13.09.2013 which is also dismissed. The ld. counsel for the assessee stated that the assessee has preferred appeal against the order passed on the Miscellaneous Application. Therefore, it stands clear that the finding of fact recorded in assessment year 2006-07 in appeal of the assessee has reached finality as the order of the Tribunal dated 13.09.2013 has not been challenged in appeal before the High Court.
11. The Assessing Officer on perusal of the Audit Report on record found that assessee has received Rs. 24,66,13,426/- from the Director of Education, Himachal Pradesh for utilization of funds for the financial year 2010-11 under consideration with specific direction for free distribution of textbooks to the students belonging to Other Backward Classes, Scheduled Caste and Scheduled Tribes, following the order of the Government of Himachal Pradesh through Notification dated 21.11.1996, copy of which is attached as annexure to the assessment order. The Assessing Officer, therefore, noted that the funds allotted by the Directorate of Education to the assessee Board at Rs. 24.66 Cr was earmarked for the free distribution of textbooks to the students belonging to the specific class of students, but the Board has failed to utilize funds for the earmarked purposes. The Assessing Officer further noted that the Board has utilized Rs. 11,90,38,662/- out of the earmarked fund of Rs. 24.66 Cr for fulfillment 14 of other objects for meeting of establishment, administration and office expenses for which the fund was not allocated. Thus, the assessee violated the provisions of Section 11(4) of the Income Tax Act. The Assessing Officer further noted that the assessee Board has stated to have utilized only Rs. 12.75 Cr for printing of textbooks which includes establishment and office expenses of Rs. 2.05 Cr, payment of Audit Fees of Rs. 12 lacs, Royalty to authors of Rs. 1.58 Cr, purchase of paper of Rs. 6.11 Cr, printing of textbooks of Rs. 2.07 Cr and payment of rent of Rs. 21,91,055/- etc. Thus, Board has incurred only Rs. 10,00,01,870/- on printing of the books from which the Board has printed 69,50,143 textbooks for free distribution to the specified class of the students as per Himachal Pradesh Government Notification but the Board even has not distributed these total textbooks to these categories of students but sold major portion of these textbooks in the open market through Book Depots with the motive of earning profits and earned profit of Rs. 9,48,34,214/-. The Assessing Officer, therefore, found that assessee was found to be carrying out activities of printing, publishing and sale of textbooks which is in the nature of commerce, trade and business to earn profit. 11(i) The Assessing Officer further found that assessee is engaged in carrying out the activities of conducting of the examination and in-fact, not imparting any education in 15 terms of training and schooling directly to the students. The Secretary of the Board has categorically denied having imparting any education directly or indirectly to the students in terms of training or schooling. The assessee has received income from schools as examination and other fees etc. The Board has not received any financial support wholly or substantially from the Government. Out of the total funds of Rs. 24.66 Cr, the Board has misappropriated and utilized the funds for other purposes other than funds allotted with specific direction to distribute the textbooks on free basis to the backward classes, scheduled castes and scheduled tribes. The assessee has shown income from sale of books of Rs. 34.19 Cr and debited expenditure at Rs. 17.06 Cr. The Assessing Officer, in totality of the facts and circumstances, found that assessee has earned profit on sale of the books. The assessee, however, denied the observations of the Assessing Officer, therefore, the Assessing Officer in order to find out the exact utilization of earmarked funds allocated by the Directorate of Education for free distribution of textbooks to the students belonging to other backward classes and schedule castes and schedule tribes and whether the Board has received any mandate or requested for utilization of earmarked funds for other purposes to the Directorate of Education and to find out exact nature of the activities and status of the Board, issued summons under section 131 to the Secretary of the Board and the 16 Secretary of the assessee Board Smt. Rakhi Kahlon attended the proceedings before Assessing Officer and her statement was recorded. The question Nos. 1 to 8 and their answers are reproduced in the assessment order which read as under :
Q. No.l- Please explain whether the Board has received payment from Directorate of Education, Himachal Pradesh for supply distribution of free text books to the students belonging to other backward classes, schedule caste and schedule tribes during the financial year 2010-11. If yes, please quantify the amount received under this head.
Ans:- Yes, the Board has received Rs. 24,66,13,426/- for distribution of free text books to the students from class 1 to 10th to the students belonging to other backward classes, schedule caste & schedule tribes.
Q.No.2- Please explain whether there was a mandate from the Directorate of Education that payment allocated for free distribution of text books to the students belonging to other backward classes, schedule caste and schedule tribes for utilizing this allocated fund for other purposes such as sale of the books to the other category-.of students through book depots and utilizing the fund for examination or other purposes.
Ans:- No, we have not received any mandate from the Directorate of Education for utilized of above mentioned allocate funds for other purpose such as sale of books and utilization of fund for exam.
Q.No.3. Please explain whether the fund allocate of Rs. 24,66,13,426/-.for the purpose of distribution of free text books to the students belonging to other backward classes and schedule caste & schedule tribe had been utilized for other purposes, other than purpose for specific direction for utilization. If yes, please quantify the same.
Ans:- Yes, we have utilized Rs. 11,90,38,662/- for the examination purposes of all students. The balance amount of Rs. 12,75,74,764/- had been utilized for printing of text books out of which we sold the text books through depots amounting to Rs. 9,48,34,214/- and balance books has been distributed on free basis to the students belonging to other backward classes, schedule cast & schedule tribe. The books distributed to these categories of students have already been submitted.
Q. No. 4:- Please explain whether the Board has carried out the activities in the nature of printing of text books and sale of the books which is in the nature of commerce, trade and business Ans:- Yes, the Board has carried out the activities of printing and publishing of text books and sold the text books through depots out of total stock printed as per object No. 12 of the bye laws of the Board, but the activities of printing and sale of text books are not in the nature of commerce and trade.17
Q. No. 5:- Please explain whether the Board is carrying out any activities of schooling, training or imparting any type of education directly or indirectly to the students other than holding of exams for classes 8th, 10th & 12th.
Ans:- We are connecting examination for testing the knowledge of classes 8th, 10th, 11th & 12th but not imparting any type of education directly or indirectly to the students other than holding of exam for classes 8th, 10th & 12th.
Ans:- We are connecting examination for testing the knowledge of classes 8th, 10th 11th & 12th, but not imparting education to the students directly or indirectly. Apart from that we also distribute scholarship to the meritorious students.
Q. No.6:- Please explain whether you have maintained separate books of accounts for printing and sale of books?
Ans:- No, we are not maintaining separate books of accounts for printing and sale of books.
Q. No,7:- Please explain whether Board has earned profit from printing and sale of books made through Book Depots? Ans:- The Board has not earned any profit from these activities. But yes the Board has earned surplus or expenditure from the activities of printing, publishing and sale of books. It is also brought to your notice that the surplus so generated from these activities has been utilized for examination activities.
Q. No:8:- Please explain whether the Board has received any type of wholly or substantially financial support from Govt. for running of day to day activities and for fulfilment of objects of Board other than allocation of fund made by Director of Education, H.P. of Rs.24,66,13,426/- for distribution of free text books for the students belonging to Backward classes, Schedule cast & Schedule caste ?
Ans:- No, we have not received any financial support from the Govt. of H.P. for functioning/fulfilment of objects of the Board other than funds mentioned above for distribution of free text books for specific objective to the students belong to other backward classes, Schedule Cast & Schedule Tribe.
12. The Assessing Officer in view of the statement of the Secretary of the assessee Board and material on record found that the assessee Board has received Rs.
24.66 Cr for free distribution of textbooks to the backward classes, SC & ST students but the same have been utilized in contravention of the objects for which the funds were allocated. The assessee has not received any mandate from the Directorate of Education for 18 utilizing the abovesaid earmarked funds for the purposes other than the purpose/object for which the fund was allocated. The funds were utilized for the purpose other than the objects of the assessee. The textbooks were sold and profit was earned. The Secretary denied to have imparted any education directly or indirectly to the students in the nature of schooling or training. The assessee has also stated that assessee Board has not received any type of financial support from the Government wholly or substantially for functioning and fulfillment of the objects of the Board other than the earmarked fund of Rs. 24.66 Cr received from free distribution of textbooks to the specified class of students. The Assessing Officer, therefore, added the amount as income of the assessee and after completing the assessee's assessment on other issues, computed the total income at Rs. 23,89,36,053/-. Section 10(23C)(iiiab) of the Income Tax Act provides as under :
10(23C).........
[(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or
13. The condition of the above provision would show that University or other educational institution must exist solely for education purpose and not for the 19 purpose of profit which is wholly and substantially financed by the Government. All the conditions shall have to be cumulatively satisfied before seeking exemption under the above provisions. The Assessing Officer has given a specific finding against the assessee that assessee has received Rs. 24.66 Cr from Directorate of Education, Himachal Pradesh for utilization of these funds with specific directions for free distribution of textbooks to the students belonging to other backward classes, SC and ST. The Assessing Officer referred to the Notification of Government of Himachal Pradesh dated 21.11.1996 in this regard through which funds have been allocated to the assessee for free distribution of the textbooks to the specified class of the students.
It is also brought on record that except this amount, which was given for specific purpose of free distribution of the textbooks to backward class students etc., assessee Board has not received any financial support wholly or substantially from the Government. It is also brought on record that whatever funds were given for specific purpose of free distribution of the textbooks to specified class of students, have been misused in violation of the Notification. The Board has failed to utilize earmarked funds given by the State Government for the specific purpose. It is also not in dispute that textbooks which have been printed by the assessee Board have been sold in open market through book depots with the motive of earning profits and assessee 20 earned Rs. 9.48 Cr. The copy of the revised Income & Expenditure Account for the year ending 31.03.2011 is filed at page 163 of the Paper Book which shows that assessee has received income from students' fees in a sum of Rs. 17.89 Cr and also received book income of Rs.34.19 Cr. The ld. counsel for the assessee has filed details of income from books (private) in assessment year under appeal which shows that assessee has received income on sale of books through private depots in a sum of Rs. 9,53,65,751/- and the amount reimbursed by the Himachal Pradesh Government was of Rs. 24.60 Cr and thus, the total book income received by the assessee was of Rs. 34.19 Cr. including the interest income. The Income & Expenditure Account also shows assessee has income from other heads as well. In this Income & Expenditure Account, assessee has not shown any amount received or financed by the Government. The funds of Rs. 24.66 Cr have been received by assessee from Directorate of Education for the purpose of free distribution of textbooks to the backward class students, therefore, the same could not be construed to be wholly and substantially financed by the Government. When the Assessing Officer examined the Secretary of the assessee Board Smt. Rakhi Kahlon under section 131 of the Income Tax Act, she has admitted in answer to question No. 8, as reproduced above, that assessee Board has not received any financial support from Government of Himachal Pradesh 21 for functioning/fulfillment of the objects of the Board other than funds mentioned above for distribution of free textbooks for specific objective to the students belonging to backward class etc. She has also admitted in answer to question No. 2 above that assessee Board has not received any mandate from the Directorate of Education for utilization of the fund of Rs. 24.66 Cr for other purposes such as sale of books and utilization of funds for exams. She has also admitted to have sold the textbooks through private depots amounting to Rs. 9.48 Cr. She has also admitted that assessee Board is not imparting education to the students directly or indirectly. It is also admitted that Board has earned surplus over the expenditure from the activities of printing, publishing and sale of books. Therefore, there is a clear admission on the part of the Secretary of the assessee Board that assessee Board has not received any financial support from the Government of Himachal Pradesh for functioning/fulfillment of the objects of the assessee Board. The assessee Board is not imparting any education and was selling textbooks on which profit have been earned. Therefore, admission of the Secretary of the Board clearly disentitle the assessee for claiming any relief under section 10(23C)(iiiab) of the Income Tax Act.
14. The ld. counsel for the assessee during the course of arguments submitted that Secretary of the Board has 22 made a wrong statement before the Assessing Officer. However, he has admitted that Secretary of the Board has never retracted from her statement at any stage later on. It, therefore, stands clear that the statement of the Secretary of the Board was clear admission on the part of the assessee Board to prove that assessee is not entitled for any exemption/deduction under section 10(23C)(iiiab) of the Act.
15. Hon'ble Punjab & Haryana High Court in the case of Hotel Kumar Palace V CIT 283 ITR 110 held as under:
" Held, that as noticed by the Commissioner, income from catering business was estimated by the Assessing Officer, on the basis of the statement of the partner, recorded during the course of search, and diaries seized in these proceedings. The Tribunal had also observed that in his statement, the partner had admitted that income from catering business was not fully recorded in the books of account. This f inding was never under challenge. The block assessment was valid."
16. Hon'ble Supreme Court in the case of ITO Vs M a n g a t R a m N o r a t a R a m N a r w a n a & a n o t h e r 3 3 6 I TR 624 held as under :
" Admission is the best evidence against the maker and it can be inferred from the conduct of the party. Admission implied by conduct is strong evidence against the maker but he is at liberty to prove that such admission was mistaken or untrue."23
17. Hon'ble Rajasthan High Court in the case of Hukum Chand Jain V ITO 334 ITR 197 held as under ;
" Held, dismissing the appeal, that admission despite being an import-piece of evidence was not conclusive and it was open to the assessee to show that it was not correct. But in this case, no such effort was made by the assessee and no such material was produced by him. The assessee could not produce any other evidence to the contrary to show that investments were actually made in different years than this. The assessment was valid."
18. The finding of fact recorded in earlier assessment year 2006-07 have not been rebutted through any material on record in which the ld. CIT(Appeals) found that assessee does not exist solely for educational purposes and it is a fact that assessee earning huge profits and has surplus income and profits. These findings of fact have been confirmed by the Tribunal vide order dated 13.09.2013. The ld. counsel for the assessee sought several adjournments to produce sufficient material and evidence on record to distinguish the case of the assessee from the assessment year 2006- 07 but ld. counsel for the assessee did not produce any material or evidence to prove that facts are all together different from the finding of fact recorded in assessment year 2006-07. As noted above, no amount is given by the State Government to the assessee Board for any educational purpose. Therefore, there is no question of 24 government wholly or substantially financing the assessee Board. The assessee Board has independent source of income i.e. income from students' fees, books income, interest income and other income etc. Income & Expenditure Account is supported by the statement of the Secretary of the Board recorded during the course of assessment proceedings, in which the Secretary of the assessee Board has admitted that Board has not received any financial support from the Government of Himachal Pradesh for functioning/fulfillment of the objects of the Board. The Board has received Rs. 24.66 Cr for distribution of free textbooks to the students belonging to OBC/SC/ST and according to the Income & Expenditure Account, the cost of the books has been shown in a sum of Rs. 17.06 Cr and ultimately the total book income of the assessee including interest has been shown at Rs. 34.19 Cr and as such, the assessee Board has misused the funds provided by the State Government for limited purposes. Thus, the assessee is not wholly or substantially financed by the Government. The assessee earned Rs. 9.48 Cr on sale of textbooks which were sold through private booksellers for other students, so the funds given by the State Government for the benefit of OBC/SC/ST students have not been utilized by the assessee Board. The Notification of the Govt. of Himachal Pradesh dated 21.11.1996, thus, has been violated by the assessee Board.
25
18. Similarly, when the assessee raised the issue before CCIT, Shimla in connection with approval under section 10(23C)(vi) of the Income Tax Act, the assessee was informed of the order of ld. CCIT, Shimla vide letter dated 11.03.2010 (supra). The assessee was intimated that from the record maintained alongwith application under section 10(23C)(vi), it was seen that the assessee is not wholly or substantially financed by the Government hence, the Board does not appear to satisfy the conditions of Section 10(23C)(iiiab) of the Income Tax Act. It is not clarified by the ld. counsel for the assessee whether assessee challenged the aforesaid order of the CCIT, Shimla intimated through letter dated 11.03.2010 before any appropriate forum. This is also incriminating finding against the assessee. 18(i). The ld. counsel for the assessee contended that since assessee received Rs. 24.66 Cr from the State Government, therefore, conditions of Section 10(23C)(iiiab) have been satisfied. The contention of ld. counsel for the assessee is not tenable. The Secretary of the Board in her statement recorded under section 131 of the Income Tax Act in answer to question No. 1 has categorically admitted that Board has received Rs. 24.66 Cr for distribution of free textbooks to the students belonging to reserved categories. The total book income on this issue was of Rs. 34.19 Cr which would clearly prove that assessee Board exists for the 26 purpose of profit. The ld. counsel for the assessee further contended that no fact is mentioned in the Notification dated 21.11.1996 that private sale cannot be done by the assessee which is the object of the assessee Board. The copy of the Himachal Pradesh Board of School Education Act, 1968 is placed on record in which in Section 10(12), it is specified that Board shall arrange for the preparation, writing, compilation, printing, publishing and sale of textbooks, other educational material and undertake the publication of any other educational work, books or periodicals, but this Section does not authorize the assessee Board to earn any profit in violation of the Notification of the Government issued for specific purpose to provide free textbooks to the reserved category students. The contention of ld. counsel for the assessee is also not tenable as per answer to question No. 1 above of the Secretary of the assessee Board that assessee Board received Rs.24.66 Cr for distribution of free textbooks to reserved category students is corroborated by the receipts issued by the assessee Board on receipt of the aforesaid amount in which it is specifically mentioned that amounts in question have been received for supply of free textbooks. Therefore, assessee cannot earn profit out of the same transaction which is specifically directed by the State Government. The contention of ld. counsel for the assessee is, therefore, rejected that assessee can print and publish the textbooks for other 27 students out of the same amount which was received for a specific purpose.
18(ii) The ld. counsel for the assessee lastly contended that principle of res-judicata does not apply to the income tax proceedings, however, ld. DR submitted that rule of consistency does apply to the income tax proceedings and issue is covered in favour of the revenue by order of ITAT Chandigarh Bench in the case of same assessee for assessment year 2006-07 dated 13.09.2013 (supra).
19. In view of the above discussion and finding of fact recorded by the authorities below, it is clear that assessee has failed to rebut the finding of fact recorded by the authorities below in assessment year under appeal as well in preceding assessment year 2006-07 decided earlier. Though the principle of res-judicata does not apply to the income tax proceedings but the rule of consistence does apply to the income tax proceedings. Hon'ble Delhi High Court in the case of ARJ Securities Printer 264 ITR 276 held that "For the sake of consistency and f inality of litigation, earlier decision on same question should not be reopened unless n e w f a c t s c a m e t o t h e k n o wl e d g e " . Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT 193 ITR 321 and Hon'ble Madhya Pradesh High Court in the case of Godavari Corporation Ltd. 156 ITR 835 held that, "Rule of consistency shall have to be maintained in 28 i n c o me t a x p r o c e e d i n g s " . In the present case, despite giving several opportunities to the ld. counsel for the assessee, no evidence or material is produced before us to distinguish the case of the assessee from that of assessment year 2006-07 in which the identical issues have been decided against the assessee Board. Therefore, ld. DR is justified in contending that the issue is covered against the assessee by earlier order of the Tribunal in the case of the same assessee dated 13.09.2013.
20. The ld. counsel for the assessee relied upon following decisions :
i) Decision of Rajasthan High Court in the case of CIT Vs Rajasthan State Textbook Board 244 ITR 667 in which the issue was exemption under section 10(22) of the Income Tax Act in which the circular of the Board dated 19.08.1975 under section 10(22) was followed.
In this case the ld. CIT(Appeals) as well as Tribunal have noticed that even if some amount remains surplus, that is utilized only for the purpose of education, therefore, order of the Tribunal was held not to be erroneous and no question of law arises.
ii) Decision of Orissa High Court in the case of Secondary, Board of Education Vs ITO 86 ITR 408 in which it was observed that under the Orissa Secondary Education Act, 1953, Secretary Board of Education, Orissa has a fund. One of the source of income of the Board 29 is profit from compilation, publication, printing and sale of textbooks. The profit so earned entered into Board fund. The Income & Expenditure of the Board is controlled and the entire expenditure is to be directed towards development and expansion of education purpose. The issue was under section 10(22) of the Income Tax Act.
iii) Decision of Madhya Pradesh High Court in
the case of CIT Bhopal Vs Madhya Pradesh
Pathya Pustak Nigam 226 CTR 497 in which the issue was under section 10(22) of the Income Tax Act and the matter has been remanded to the Assessing Officer for re-consideration. 20(i) Decision of the Hon'ble Supreme Court in the case of Assam State Textbook Printing & Publication Corporation Ltd. Vs CIT 319 ITR 317 in which also the issue was under section 10(22) of the Income Tax Act and matter was restored to the Assessing Officer for considering the issue denovo in the light of the judgement of the Rajasthan High Court and Orissa High Court with reference to the CBDT Circular dated 19.08.1975 (supra). All the above decisions are distinguishable on facts of the present case because in the present case, it is specifically found that assessee does not exist solely for education purpose and earned profits and further assessee is not wholly or substantially financed by the Government. Therefore, the conditions of Section 10(23C)(iiiab) of the Income Tax Act have not been satisfied in the present case. 30 Therefore, these decisions would not support the case of the assessee.
21. Considering the above discussion, in the light of the finding of fact recorded by the authorities below and earlier decision in the case of the assessee, we are of the view assessee has failed to satisfy requirements of Section 10(23C)(iiiab) of the Income Tax Act, therefore, assessee would not be entitled for exemption under the above provisions. The appeal of the assessee, thus, has no merit and same is accordingly dismissed.
22. Since we have dismissed appeal of the assessee, therefore, no appeal is pending so as to consider the Stay Application. The same has thus, become infructuous and is accordingly dismissed.
23. In the result, the appeal of the assessee and Stay Application are dismissed.
Order pronounced in the Open Court.
Sd/- Sd/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 18th January, 2016. 'Poonam' Copy to:
The Appellant, The Respondent, The CIT(A), The CIT,DR Assistant Registrar, ITAT/CHD