Income Tax Appellate Tribunal - Hyderabad
M/S. Bishop Solomon Educational ... vs Department Of Income Tax on 4 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
ITA No. 1302/HYD/2013
Assessment Year: 2007-08
Asst. Director 0f Income-tax(Exemptions), ... Appellant
Hyderabad
Vs.
M/s Bishop Solomon Educational Trust, ...Respondent
Hyderabad.
(PAN - AAATB5720G)
Appellant by : Shri Solgy Jose T Kottaram
Respondent by : None
Date of Hearing : 04/02/2014
Date of Pronouncement : 04/02/2014
ORDER
PER CHANDRA POOJARI, A.M.:
This appeal preferred by the Revenue is directed against the order of CIT(A)-IV Hyderabad dated 09/07/2013 for the assessment year 2007-08 wherein the Revenue has raised the following grounds of appeal:
"1. The order of the ld. CIT(A) is erroneous both on facts and in law.
2. The ld. CIT(A) erred in holding that the assessee is eligible for claim of exemption u/s 11 of the IT Act, 1961 even in absence of approval under sub-clause (vi) to the section 10(23C) of the Act.
3. The ld. CIT(A) ought to have appreciated the fact that approval under sub-clause (vi) to the section 10(23C) of the IT Act, 1961 is distinct from registration u/s 12A of the Act.2 ITA No. 1302/H/13
M/s Bishop Solomon Educational Trust
4. The ld. CIT(A) ought to have appreciated that sub-clause (vi) to section 10(23C), as inserted by the Finance Act, 1998 w.e.f. 01/04/1999, states that the university or other educational institution existing solely for education purpose, and which may be approved by the prescribed authority. The issue is explicitly dealt with by the Act itself and the intention of the legislature is quite clear from it.
5. The ld. CIT(A) ought to have appreciated that obtaining approval from the prescribed authority is mandatory, as per the plain meaning of section 10(23C) of the IT Act, 1961,m whenever the gross receipts of an educational institution exceed Rs. one crore."
2. Briefly the facts of the case are that the assessee society is registered u/s 12A of the IT Act, 1961. It was running educational institutions and during the previous year relevant to AY under consideration it had claimed exemption u/s 11 of the Act. The assessee has not obtained notification u/s 10(23C)(vi) of the IT Act. Since assessee was running educational institution, the AO asked the assessee as to why the provisions of section 10(23C) should not be applied and in the absence of such notification u/s 10(23C)(vi), the exemption should not be denied to the assessee for the AY under consideration. In reply, the assessee stated as follows:
"The provisions of section 10(23C) and 11 to 13 of the Act are beneficial provisions. Hence, the provisions that suit more to the organization can be opted by the organization. The preference of one section over another is a matter of procedural convenience and both the sections are having more or less the same monitoring mechanism.
It has been claimed that the assessee was registered u/s 12 thereby entitled to the application of the provisions of section 11-13. These provisions allow exemption under specified conditions that (a) exemption was allowable only on the application of the receipts to the objects of the trust; (b) accumulations subject to specific conditions; (c) not to be diverted for personal gains as detailed in section 13. Thus, there are strict control mechanisms on the application front and it had satisfied all the requirements of these control mechanisms.3 ITA No. 1302/H/13
M/s Bishop Solomon Educational Trust 2.1 However, the AO had not considered the above submissions of the assessee and disallowed the claim of the assessee relying on the decisions of M/s St. Theresa Education Society for the AY 2003-04 filed u/s 260A before the Hon'ble AP High Court and the decision of the ITAT, Hyderabad in Maheswara Educational Society, Narasampet vide its order dated 16/07/2008 in MA No. 55/Hyd/2008 in ITA No. 270/Hyd/2008 and since the assessee has not obtained approval u/s 10(23C)(vi) of the IT Act, though, its gross receipts have been crossed Rs. 1 crore.
3. On appeal, before the CIT(A), the assessee had argued that obtaining of approval u/s 10(23C)(vi) of the Act is not mandatory and for this proposition the assessee relied on the following judgments:
1. M/s Chaitanya Memorial Education Vs. ITO, ITA No. 440/Hyd/2012, dtd. 22/03/2013.
2. M/s Bapatla Educational Society Vs. ITO, dated 25 th February, 2010 and Jeevan Deep Charitable Trust Vs. CIT, High Court of Allahabad vide judgment dated 29/10/2012.
3.1 After considering the submissions of the assessee and relying on the decisions placed by the assessee, the CIT(A) allowed the claim of the assessee on the ground that there is no strength in the assessment order passed by the AO.
4. Aggrieved by the order of the CIT(A), the revenue is in appeal before us.
5. None appeared on behalf of the respondent-assessee at the time of hearing before us. However, we proceed to decide this appeal after hearing the learned DR and on merits.
6. We have heard the learned DR, perused the material on record and have gone through the orders of the authorities below. The issue in dispute is squarely covered by the decision of the SMC bench of ITAT, Hyderabad in the case of ACIT(Exemptions) vs. Raisatani 4 ITA No. 1302/H/13 M/s Bishop Solomon Educational Trust Siksha Samiti, [2008] 23 SOT 124 (Hyd.) wherein it was held as follows:
"Sec. 11 mandates the exclusion of income derived from property held under trust wholly for charitable or religious purposes from the total income of a person. Sec. 10(23C) mandates the exclusion from the total income of a person any income received by such person on behalf of any university or other educational institution existing solely for educational purposes and not for purposes of profit. Thus, it has to be noted that the exemption under s. 11 and s. 10(23C) is available to a person only. The only difference is that under s. 11, the exemption will be available to the extent such income is applied to charitable or religious purposes. On the other hand, under s. 10(23C), any income derived by the person on behalf of the educational institution will be exempt. Because of this difference, i.e., application of income in s. 11 and receipt of income under s. 10(23C), it is argued by the Departmental Representative that whereas exemption under s. 11 is activity based, exemption under s. 10(23C) is institution based and, therefore, an institution cannot claim exemption under s. 11. However, while making this argument, the Departmental Representative, it seems, has missed out on the provisions of s.
12. Sub-s. (2) of s. 12 provides that the value of any services, being medical or educational, made available by any charitable trust running such institution or made available by an educational institution shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable purposes. But such income shall be chargeable to tax only to the extent the services are made available to any person who has made substantial contribution to the trust or institution, to the member of an HUF which happens to be the author or founder of the trust or institution, to any trustee of the trust or manager of the institution or to any relative of any such author, founder, person, member, trustee or manager as aforesaid. This is provided in s. 12(2) r/w s. 13(3)(b), (c), (cc) or
(d). To simplify what is stated above, income derived by a trust running an educational institution or by an educational institution per se is deemed to be the income derived by such trust or institution from property held under trust and will be exempt from income subject to the exceptions provided in s.
13(3). Therefore, there is no gainsaying that an educational institution cannot avail exemption under s. 11. Merely because s. 10(23C) provides for exemption of the income of an educational institution, it does not follow that such institution cannot avail exemption under s. 11/12 subject to conditions being fulfilled. In fact, it is difficult to conceive the idea of 5 ITA No. 1302/H/13 M/s Bishop Solomon Educational Trust availability of exemption on the ground that one is activity oriented and the other is institution oriented. How can an institution avail exemption under s. 10(23C) without carrying out any activity. If the argument of the Departmental Representative is to be accepted, then s. 12 will be rendered otiose and s. 12AA which speaks of registration of trust as well as institution will also be partly redundant. It is absolutely futile to argue that institutions falling under s. 10(23C) cannot claim exemption under s. 11.--CIT vs. Bar Council of Maharashtra (1981) 22 CTR (SC) 106 : (1981) 130 ITR 28 (SC) relied on."
6.1 In view of the decision of the coordinate bench, we are of the opinion that when the assessee duly granted registration u/s 12A of the IT Act and claimed exemption u/s 11 of the Act, the Assessing Officer cannot deny exemption on the reason that the assessee's case is covered u/s 10(23C) of the IT Act and cannot thrust upon the assessee for particular deduction. It is left open for the assessee to claim deduction u/s 11 or u/s 10(23C) of the Act. In the present case, assessee is having registration u/s 12A of the Act, therefore, claim of exemption u/s 11 is to be granted. Being so, we are in agreement with the order of the CIT(A) and accordingly the same is hereby confirmed. Thus, the grounds raised by the revenue in this regard are dismissed.
7. In the result, appeal of the revenue is dismissed.
Pronounced in the open court on 04/02/2014.
Sd/- Sd/-
(D. MANMOHAN) (CHANDRA POOJARI)
VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad, Dated: 05/02/2014.
kv
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ITA No. 1302/H/13
M/s Bishop Solomon Educational Trust
Copy to:-
1) ADIT(E) - I, 3 rd Floor, Aayakar Bhavan, Basheerbagh,
Hyderabad - 500 004.
2) M/s Bishop Solon Educational Trust, H.No. 1-3-41/C/2,
Santhinagar, Peddapally, Karimnagar
3) CIT(A)-IV, Hyderabad
4) DIT(E), Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.