Income Tax Appellate Tribunal - Chandigarh
Smb Geeta Hing School, Kurukshetra vs Assessee on 12 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B' CHANDIGARH
BEFORE Ms.SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 1114/CHD/2011
Assessment Year: 2007-08
M/s SMB Geeta High School, V ACIT, Circle,
Railway Road, Kurukshetra.
Kurukshetra.
PAN: AAETS-4366H
(Appellant) (Respondent)
Appellant by : Shri K.R.Chhabra
Respondent by : Shri Akhilesh Gupta
Date of Hearing : 12.01.2012
Date of Pronouncement : 23.01.2012
ORDER
PER MEHAR SINGH, AM
The present appeal filed by the assessee is directed against the order dated 29.09.2011 passed by the ld. CIT(A) u/s 250(6) of the Income-tax Act,1961 (in short 'the Act').
2. In this appeal, the assessee has raised the following Grounds of Appeal:
"1. Orders passed by ld. ACIT and CIT(A) are illegal, arbitrary and bad in law.
2. On f acts and in circumstances of the case ld. ACIT and CIT(A) were not justif ied in holding that the assessee society does not exist f or educational purposes and but f or the prof it.
3. On f acts and in circumstances of the case, ld. ACIT and CIT(A) was not justif ied in re jecting the cl aim of the society f or its income exempt u/s 10(23C)( iiiab) of the IT Act when the society was substantially f inanced by the Government.
4. On f acts and in circumstances of the case, ld. ACIT and CIT(A) was not justif ied in not allo wing the amount spent on acquisition of fixed assets which were acquired f or the purpose of education."2
3. We have carefully perused the facts of the case, rival submissions and the case laws relied upon by the contending parties and the relevant material on record. The facts of the case, are that the assessee society is running a Senior Secondary School, since 1947. It has been granted permanent recognition by the Director, School Education, Haryana. The assessee appellant is charging nominal fees. The assessee is aided school by the Haryana Government. During the year under reference, the assessee has received grant of Rs.45,44,848/-, from the State of Haryana. The assessee society had been receiving such grant from the State of Haryana. The assessee had been granted exemption u/s 10(23C)(iiiab) of the Act, by the Department, in the past vide assessments completed u/s 143(1) and also 143(3) of the Act. The school is receiving grant of 75%, from the Government of Haryana, in respect of sanctioned staff and other expenses are met by school from its own sources. The AO, by placing reliance, on the decision of the Hon'ble Uttarakhand High Court in the case of CI T V Queens' Educational Society (2009) 319 ITR 160 (Utttarakhand), denied the exemption to the society. The relevant head note of the said decision is reproduced hereunder :
"Exemption-Educational Institution -Registered Eucational Society imparting education to children-Society applying income earned f rom running of school on f ixed assets to expand institution-Not entitled to exemption-Income-tax Act,1961, s. 10(23C)( iiiad)."
4. The AO indicated that the assessee society applied for exemption u/s 10(23C) of the Act, for the assessment year 3 2004-05 to 2007-08, which was rejected by the CCI T, Panchkula vide F.No. CCIT/PKL/10(23C)/2008-09/1015 dated 23.05.2008. The AO also observed that the aid received by the assessee is 30% of the gross receipts. This is undisputed fact that the society has been granted registration u/s 12AA of the Act since 01.04.2007. The present appeal pertains to the assessment year 2007-08.
5. The ld. CI T(A) upheld the finding of the ld. AO.
6. Before CI T(A), the assessee placed reliance on the decision of the Hon'ble jurisdictional High Court, in the case of Pine Grove International Charitable Trust V UOI & others (2010) 327 ITR 73 (P&H). The assessee also placed reliance on the CBDT Circular issued vide F.No. 194/16-17/IT/A-1. The ld. CIT(A) also considered the comments of the AO, on the submissions filed by the assessee, in the matter. Ultimately, CIT(A) upheld the findings of the AO.
7. In the present case, we have to analyze the provisions of Section 10(23C) of the Act and its sub-clauses. The exemption under the said Section is granted to any University or other educational institution existing solely for educational purpose and not for the purpose of profit and which is wholly or substantially financed by the Government. The Revenue has not disputed that the assessee society is existing solely for educational purposes. There is no finding by the lower authorities, indicating that the society appellant does not exist solely for educational purposes. Similarly, there is no finding that the assessee appellant exists for the purpose of profit. The 4 assessee society had been in existence since 1947, solely for educational purposes and not for the purpose of profit. Further, the society is running a school aided by the Government of Haryana. The AO, following the decision of the Queens' Educational Society (supra) disallowed the capital expenditure incurred for educational purpose. It is further mentioned that society had been granted exemption by the revenue while processing the return u/s 143(1) or making the scrutiny assessment u/s 143(3) of the Act. The revenue has failed to bring on record any material, evidencing departure of the appellant from its activities in pursuance of its object, in the assessment year under reference, which inspired the revenue authority to decline exemption. This approach of the revenue runs contrary to the concept of natural justice and the principle of consistency, particularly as enunciated by the Hon'ble Supreme Court, in the case of Radhasoami Satsang V CIT 193 ITR 321, reproduced hereunder "Rel igious Trust-Exemption-Trust revocable at discretion of central council-Religious sect bif urcating into two-One group held to be entitled to exemption-Exemption claimed by other group on same f undamental f acts-Other group also entitled to exemption - Res judicata- Appl icable where f undamental aspects f ound as a f act earlier-Income-tax Act, 1961, s.11.. Trust - No f ormal document necessary to create Trust."
8. It is pertinent to mention here that the society had been granted registration u/s 12AA of the Act w.e.f. 1.4.2007, by the CIT after satisfying the activities of the society in pursuance of the object clause. In view of this, no departure from such activities can be presumed in the assessment year under 5 reference. Both the objects and the activities of the society, since 1947, had been solely for educational purposes. In view of this factual background, there is hardly any case for revenue, on the basis of the decision of Uttarakhand High Court in Queens' Educational Society (supra) which has been discussed and dissented by the jurisdictional High Court, in the case of Pine Grove International Charitable Trust (supra). Further, the Hon'ble jurisdictional High Court, in the case of Pine Grove International Charitable Trust (supra), has reversed the findings of the Chief Commissioner, in respect of a number of such cases, as is clearly evident from the perusal of the said decision, rendered by the Hon'ble jurisdictional High Court. The contention of the assessee before the AO as well as CIT(A) that its approval for exemption u/s 10(23C) of the Act was declined by the CCIT, Panchkula, on technical ground i.e. non- attendance by the assessee company, is pertinent to be considered, in the light of the said decision of the jurisdictional High Court, in similar case. In this context, it is mentioned, as indicated earlier, that number of similar cases where such exemption was declined by the CCIT, Chandigarh/CCI T, Panchkula, were reversed by the Hon'ble jurisdictional High Court, in the case of Pine Grove International Charitable Trust (supra). Therefore, CI T(A) was not justified in not properly appreciating the contention raised by the assessee, particularly in the context of the decision of the jurisdictional High Court in similar cases, as adjudicated in the case of Pine Grove International Charitable Trust (supra). The relevant and operative part of the said decision is reproduced hereunder : 6
" U n d e r s e c tio n 1 0 ( 2 2 ) of th e In c o me - t ax A c t, 1 9 6 1 , wh ic h was th e p r e c u rs o r to s e c ti o n 1 0 ( 23 C ) ( v i) , th e ac tu a l e x is te n c e of th e e d u c a tio n a l in s ti tu t io n was a p r e - c o nd i t i o n f o r th e ap p l i c a t io n f o r in i t i a l ap p r o v al u n d e r s e c tio n 1 0 ( 2 2 ) . O n g r an t of ap p r o v al th e c h ar g in g s e c tio n s 1 1 an d 1 3 we r e n o t to ap p l y . Af te r th e g r an t of e x e mp ti o n u n d e r s e c tio n 1 0 ( 2 2 ) , th e r e wa s n o r o o m f o r as s e s s me n t n o r an y s c o pe f o r r ais in g an y d e man d : th e g r an t of ap p r o v al I u n d e r s e c tio n 1 0 ( 2 2 ) h ad an au to ma t i c ef f e ct. E v e n af te r th e n e w d is p e n s a ti o n f ro m A p r i l 1 , 1 9 9 9 th e te s t o f p r e - d o min an t o b je c t of th e ac t iv i ty c o n tin u e s to ap p l y as u n d e r s e c tio n 1 0 ( 2 2 ) of th e A c t. A s l o n g as an in s ti tu t io n e x i s ts s o l e l y f o r e du c a ti o n a l p u r p o s e s i t wo u l d \ q u al if y f o r g r an t o f e x e mp ti o n u n d e r s e c tio n 1 0 ( 2 3 C ) ( v i) of th e A c t. M e r e l y b e c au se p rof its h av e r e s u l te d f r o m th e ac t iv i ty of i mp ar t i n g e d u c a tio n th a t wo u l d n o t c h an g e th e c h ar ac te r of th e in s ti tu ti o n e x is ti n g s o l e l y f o r e du c a- t io n a l p u r p o s e .
F r o m A p r il 1 , 1 9 9 9, mo n i to r i n g p r o v is io n s h av e b e e n in c o r p o r a te d b y in s e r tin g n u me r o u s p ro v is o s to s e c tio n 1 0 ( 2 3 C ) of th e A c t. T h e p r o c e d u re f o r o bta i n in g e x e mp t io n h as b e e n p re s c r ib e d b y v ar io u s p r o v is o s wh i c h p o s tu l a te th e f il in g of an ap p l ic a t io n b y a u n iv e r s i ty o r o th e r e d u c a ti o n a l i n s ti t u tio n i n th e p r e s c ri b e d f o r m an d man n e r ^ T he p r e s c r ib e d au th o r i ty is t h e n to a p p r o v e s u c h u n i v e r s i t y o r o th e r e d u c a t i o n a l i n s t i t u t i o n a n d i n t h a t r e g a r d m a y c a l l f o r s u c h d o c u me n ts i n c l u d i n g a u d i te d a n n u a l a c c o u n ts to s a t i s f y h i ms e lf a b o u t th e g e n u i n e n e s s o f th e ac t i v i t i e s of s u c h u n i v e r s i ty o r o th e r e d u c a t i o n a l i n s t i t u t i o n . T h e e x e mp t i o n c o u l d b e g r a n te d f o r a p e r i o d n o t e x c e e d i n g th r e e a s s e s s me n t years.
A t t h e i n i t i a l s t a g e wh e n th e a p p l i c a t i o n f o r e x e mp t i o n i s f i l e d b y a n e d u c a t i o n a l i n s t i tu t i o n th e s c o p e o f i n q u i r y i s r e s tr i c te d o n l y to a s c e r t a i n i n g th e g e n u i n e n e s s o f th e a c t i v i t i e s o f s u c h an i n s t i t u t i o n S u c h a n i n q u i r y m a y e v e n e x te n d to e x a m i n a t i o n o f t h e a c c o u n ts o f th e i n s t i t u t i o n , a p p l i c a t i o n o f i ts i n c o me to t h e o b je c t a n d p u r p o s e s o f e d u c a t i o n a n d o th e r c o g n a t e a s p e c ts . O n c e o n th e b a s i s o f th e g e n u i n e n e s s o f th e a c t i v i t i e s o f a n e d u c a t i o n a l i n s t i t u t i o n a p p r o v a l i s g r a n te d f o r e x e mp t i o n t h e mo n i to r i n g p r o v i s i o n s wo u l d c o me i n to p l a y a n d t h e A s s e s s i n g Of f i c e r h a s to e x a m i n e wh e th e r th e c o n d i t i o n s o n wh i c h t h e e x e mp t i o n wa s g i v e n , h a v e b e e n f u lf i l l e d o r n o t. . O n l y if th e e d u c a t i o n a l i n s t i t u t i o n a c tu a l l y e x i s ts f o r e d u c a t io n a l p u r p o s e s i s t h e e d u c a t i o n al i n s t i t u t i o n p e r m i t t e d t o o p e r a t e s u b j e c t t o t h e monitoring conditions.
A n e d u c a t i o n a l i n s t i tu t i o n wo u l d n o t c e a s e to e x i s t " s o l e l y " f o r educatio nal purposes and not f or purposes o f ' p r o f i t me r e l y b e c a u s e i t h a s g e n e r a te d s u r p l u s i n c o me o v e r a p e r io d o f f o u r o r f iv e y e a r s af te r me e t i n g i t s e x p e n d i tu r e . . R u l e 2 B C o f th e I n c o me - t a x R u l e s . 1 9 £ 2 _ h a s p r e s c r i b e d th e l i m i t o f R s . 1 c r o r e wh e r e th e r e q u i r e me n t o f s e e k i n g a p p r o v a l f o r e x e mp t i o n wo u l d n o t b e a p p l i c a b l e . If th e tu r n o v e r i s mo r e th a n R s . 1 c r o r e e x e mp t i o n i n te r m s o f s e c t i o n 1 0 ( 2 3 C ) ( v i ) i s r e q u i r e d . T h e th i r d proviso p o s tu l a t e s th e investment and d e p o s i ts of s u r p l u s _f u n d s . A n e d u c a t i o n a l i n s t i t u t i o n c o u l d m a k e d e p o s i ts a n d c a n a l s o e a r n i n te r e s t, wh i c h i s p e r m i s s i b l e . T h e r e a r e 7 c e r ta i n l i m i ts i m p o s e d o n th e a c c u mu l a t i o n s wh i c h of c o u r s e h a v e to b e me t.
T h e wo r d s " n o t f o r th e p u r p o s e o f p r o f i t" a c c o mp a n y i n g th e wo r d s " e x i s t i n g s o l e l y f o r e d u c a t i o n a l p u r p o s e s ' ' h a v e t o b e r e a d a n d i n te r p r e te d i n v i e w o f th e th i r d p r o v i s o t o S e c t i o n 1 0 ( 2 3 C ) ( v i ) , wh i c h p r e s c r i b e s th e me t h o d o l o g y f o r th e u t i l i z a t i o n a n d a c c u mu l a t i o n o f i n c o me a t t h e h a n d s o f th e e d u c a t i o n a l i n s t i t u t i o n s b y i m p o s i n g t wo r e s tr i c t i o n s , n a me l y , ( i ) t h a t a c c u - mu l a t i o n o f s u r p l u s u p to 1 5 p e r c e n t, c a n b e f o r a n y n u mb e r of y e a r s b y th e e d u c a t i o n a l i n s t i t u t i o n f o r th e p u r p o s e s f o r wh i c h i t i s e s t a b l i s h e d ; a n d ( i i ) if th e a c c u mu l a t i o n i s mo r e t h a n 1 5 p e r c e n t, o f th e i n c o m e i t c a n b e a c c u m u l a te d f o r a m a x i mu m p e r i o d o f f i v e y e a r s to b e u t i l i z e d f o r a c h i e v i n g th e o b je c ts o f th e i n s t i t u t i o n . T h e i n e v i t a b l e c o n s e q u e n c e i s th a t 8 5 p e r c e n t, of t h e i n c o me h a s to b e a p p l i e d f o r i ts o b je c ts b y th e i n s t i t u t i o n .
O n a tr u e a n d p r o p e r i n te r p r e ta t i o n o f th e p r o v i s i o n s o f s e c t i o n 1 0 ( 2 3 C ) ( v i ) r e a d wi t h th e t h i r d p r o v i s o th e r e t o , c a p i t a l e x p e n d i tu r e i n c u r r e d b y th e i n s t i t u t i o n f o r th e a t t a i n m e n t o f th e o b je c ts o f th e i n s t i tu t i o n h a s to b e d e d u c te d f r o m i ts g r o s s r e c e i p ts / i n c o me T h i s i s b e c a u s e th e th i r d p r o v i s o c o n ta i n s th e e x p r e s s i o n " a p p l i e s i ts i n c o me , o r a c c u mu l a te s i t f o r a p p l i c a t i o n o r , wh o l l y a n d e x c l u s i v e l y to th e o b je c ts f o r wh i c h i t i s e s ta b l i s h e d " . T h e wo r d " wh o l l y " r e f e r s to th e q u a n tu m o f e x p e n d i tu r e , a n d t h e wo r d " e x c l u s i v e l y " r e f e r s to th e mo t i v e , o b je c t o r th e p u r p o s e o f e x p e n d i tu r e .
E v e n o th e r wi s e , u n l i k e th e p r o v i s i o n s o f s e c t i o n s 3 7 a n d 3 6 ( i ) ( x i i ) o f th e A c t, i n th e c a s e o f a n e d u c a t i o n a l i n s t i t u t i o n , c a p i t a l e x p e n d i tu r e i s to b e d e d u c t e d wh e n e v e r th e i n s t i t u t i o n a p p l i e s i ts i n c o me f o r th e a c h i e v e me n t o f i ts o b je c t. T h e ' wo r d s " a p p l i e s i t s i n c o m e " me a n " to p u t to u s e " o r " to tu r n t o u s e " _ o r " to ma k e u s e " o r " to p u t to p r a c t i c a l u s e " . In c l a u s e 1 1 o f F o r m 5 6 D o f th e R u l e s i t i s me n t i o n e d th a t th e a mo u n t o f i n c o me o f a n u n i v e r s i t y o r o th e r e d u c a t i o n a l i n s t i tu t i o n t h a t h a s b e e n o r d e e me d to h a v e b e e n u t i l i z e d wh o l l y a n d e x c l u s i v e l y f o r i ts o b je c ts s h a l l h a v e th e me a n i n g a s s i g n e d to i t i n s u b - s e c t i o n s ( l ) and (1A) of sectio n 11. Both on principle and precedents the capital expenditure is to be deducted from the gross income of the educational institutions. Had it been the intention of the Legislature to exclude capital expenditure while applying the income of the institution under the third proviso to section lO(23C)(vi) the proviso would have contained an express embargo against such exclusion.
The determination of the existence of educational institution solely for educational purposes is required to be done on the basis of its objects including the utilization of its income in accordance with the conditions laid down in the third proviso to Section 10(23C)(vi) of the Act.. Merely because there are surpluses in the hands of the educational institution that would not ipso facto lead to an inevitable conclusion that such an educational institution exists for making profit and not solely for educational purposes.
T h e a s s e s s e e s o c i e ty r a n a s c h o o l s o l e l y f o r e d u c a t i o n a l p u r p o s e s . I t wa s r e g u l a r l y a s s e s s e d b y th e A s s e s s i n g Of f i c e r a t 8 n i l i n c o me o n a c c o u n t o f g r a n t o f e x e mp t i o n f r o m p a y me n t of i n c o me - t a x . T h e I n c o me - t a x Of f i c e r i n f o r me d th e a s s e s s e e th a t a p p r o v a l i n te r ms o f s e c t i o n 1 0 ( 2 3 C ) o f th e A c t c o u l d o n l y b e g r a n te d to a u n i v e r s i ty o r e d u c a t i o n a l i n s t i t u t i o n a n d n o t to a s o c i e ty / t r u s t, a n d c a l l e d f o r a l i s t o f i n s t i t u t i o n s r u n b y th e assessee. The assessee in response to the letter of the Income-tax Officer filed a reply giving details of excess of income over expenditure before depreciation and capita! expenditure incurred by the school run by it from the assessment year 2006-07 and submitted that the p h r a s e o l o g y o f t h e p r o v i s i o n s o f s e c t i o n 1 0 ( 2 3 C ) ( v i ) o f t he Act would encompass educational institutions run by a society registered under the Societies Registration Act 1 8 6 0 . P u r s u a n t t o a s h o w c a u s e n o t i c e to wh i c h th e a s s e s s e e r e p l i e d , th e C h i e f C o m m i s s i o n e r wi t h d r e w th e e x e mp t i o n o n th e g r o u n d th a t th e p r o f i ts we r e s u b s t a n t i a l a n d a r o s e y e a r af te r y e a r a n d s t a t i n g t h a t if s u b s ta n t i a l p r o f i ts we r e e a r n e d i n o n e y e a r i t s h o u l d b e t h e d u ty o f th e i n s t i t u t i o n to l o we r i ts f e e s f o r t h e s u b s e q u e n t y e a r s o th a t s u c h p r o f i ts we r e n o t i n te n t i o n a l l y g e n e r a te d . O n a wr i t p e t i t i o n :
Held, allowing the petition, (i) that the interpretation of the Chief Commissioner that there had to be a reasonable profit only and only then can an institution be said not to exist solely for the purposes of profit, was totally a misconception of law. The methodology adopted by the Chief Commissioner while computing surplus in not deducting the capital expenditure incurred by the assessee from the gross income was contrary to the third proviso to section 10(23C)(vi) of the Act. Admittedly, in the case of the assessee the application of income for the attainment and achievement of its objects in the last three years, was more than 100 per cent. The assessee could not be held to be an institution existing for the purpose of making profit so as n o t t o b e e n t i t l e d t o e x e m p t i o n i n v i e w o f t h e p r o v i s i o n s of section W(23CXniLof the Act. The Chief Commissioner failed to keep in view the third proviso while wrongly holding that since substantial profits were being earned_ year after year it could not be said that the surplus was arising incidentally and, therefore, the assessee was not entitled to exemption.
( i i ) T h a t th e c o n te n t i o n o f th e D e p a r t me n t th a t s o c i e t i e s r e g i s te r e d u n d e r t h e 1 8 6 0 A c t d i d n o t f a l l w i t h i n t h e a mb i t o f th e e x p r e s s i o n " o th e r e d u c a t i o n a l i n s t i tu t i o n s " a n d , th e r e f o r e , e x e mp t i o n h a d b e e n r i g h tl y w i th d r a wn u n d e r s e c t i o n 1 0 ( 2 3 C ) ( i v ) o f th e A c t, wa s n o t te n a b l e b e c a u s e af te r th e n o t i c e w a s i s s u e d f o r wi t h d r a wi n g t h e e x e mp t i o n o n t h a t g r o u n d , a r e p l y wa s f i l e d b y th e a s s e s s e e a s s e r t i n g th a t i n v i e w o f th e l a w l a i d d o wn b y t h e c o u r ts s u c h a g r o u n d wa s n o t te n a b l e . T h e C h i e f C o m m i s s i o n e r th e r e af te r d i d n o t i s s u e a n y n o t i c e to t h e a s s e s s e e t a k i n g th i s g r o u n d a s th e b a s i s f o r w i t h d r a wa l o f e x e mp t i o n n o r wa s th e r e a n y f i n d i n g r e c o r d e d i n th e o r d e r s . E d u c a t i o n a l i n s t i t u t i o n s r e g i s t e r e d a s s o c i e t i e s wo u l d c o n t i n u e to r e t a i n t h e i r c h a r a c te r a s s u c h a n d wo u l d b e e l i g i b l e to a p p l y f o r e x e mp t i o n u n d e r S e c t i o n 1 0 ( 2 3 C ) ( v i ) o f th e A c t.
(iii) T h a t i t wa s o b l i g a t o r y o n th e p a r t o f th e C h i ef C o m m i s s i o n e r o r th e D i r e c to r , wh i c h a r e th e p r e s c r ib e d 9 a u th o r i t i e s , to c o mp l y w i th p r o v i s o t h i r te e n . A c c o r d i n g l y , i t h a d to b e a s c e r ta i n e d wh e th e r th e e d u c a t i o n a l i n s t i t u t io n h a d b e e n a p p l y i n g i t s p r o f i t wh o l l y a n d e x c l u s i v e l y to th e o b je c t f o r wh i c h t h e i n s t i tu t i o n wa s e s ta b l i s h e d . M e r e l y b e c a u s e a n i n s t i t u t i o n h a d e a r n e d p r o f it th a t wo u l d n o t b e th e d e c i d i n g f a c to r to c o n c l u d e th a t t h e e d u c a t i o n a l i n s t i tu t i o n e x i s te d f o r p r o f i t.
Capital a s s e ts a c q u i r e d / c o n s tr u c te d by th e educational i n s t i t u t i o n s h a d b e e n tr e a te d a s i n c o me i n t h e b l a n k e t m a n n e r w i t h o u t r e c o r d i n g a n y f i n d i n g wh e t h e r th e c a p i t a l a s s e ts h a d b e e n a p p l i e d a n d u t i l i z e d to a d v a n c e th e p u r p o s e o f e d u c a t i o n . I t wa s o b l i g a t i o n o n th e p a r t o f th e p r e s c r i b e d a u th o r i t y wh i l e e x e r c i s i n g p o we r u n d e r th e th i r te e n th p r o v i s o t o c o n s i d e r wh e th e r e x p e n d i tu r e i n c u r r e d a s c a p i t a l i n v e s t me n t wa s o n th e o b je c t o f e d u c a t i o n o r n o t. T h e r e f o r e , th e o r d e r s in q u e s t i o n we r e l i a b l e to b e q u a s h e d .
( i v ) T h a t wh e r e mo r e th a n 1 5 p e r c e n t, o f th e i n c o me o f a n e d u c a t i o n a l i n s t i t u t i o n i s a c c u mu l a t e d o n o r af te r A p r i l 1 , 2 0 0 2 , t h e p e r i o d o f ac c u mu l a t i o n o f th e a mo u n t e x c e e d i n g 1 5 p e r c e n t, wa s n o t p e r m i s s i b l e b e y o n d f iv e y e a r s , p r o v i d e d t h e e x c e s s i n c o me h a d b e e n a p p l i e d o r a c c u mu l a te d f o r a p p l i c a t i o n wh o l l y a n d e x c l u s i v e l y f o r th e p u r p o s e o f e d u c a t i o n . ( v ) T h a t o n a n a p p l i c a t i o n m a d e b y a n i n s t i t u t i o n , th e p r e s c r i b e d a u th o r i t y c o u l d g r a n t a p p r o v a l s u b j e c t to s u c h c o n d i t i o n s a s i t m a y d e e ms f i t p r o v i d e d th a t t h e y we r e n o t i n c o nf l ic t wi th t h e p r o v i s i o n s o f th e A c t. T h e p a r a me te r s o f e a r n i n g p r o f i t b e y o n d 1 5 p e r c e n t a n d i t s i n v e s t me n t wh o l l y f o r e d u c a t i o n a l p u r p o s e s m a y b e e x p r e s s l y s t i p u l a t e d a s p e r th e s ta t u to r y r e q u i r e me n t. T h e r e af te r th e a s s e s s i n g a u th o r i ty m a y e n s u r e c o mp l i a n c e wi t h t h o s e c o n d i t i o n s . T h e c a s e s wh e r e e x e mp t i o n h a d b e e n g r a n te d e a r l i e r a n d th e a s s e s s me n ts we r e c o mp l e te wi t h th e f i n d i n g th a t t h e r e wa s n o c o n t r a v e n t i o n o f th e s t a tu t o r y p r o v i s io n s , n e e d n o t b e r e o p e n e d . H o we v e r , af te r g r a n t o f a p p r o v a l if i t c a me to th e n o t i c e o f th e p r e s c r i b e d a u th o r i t y t h a t t h e c o n d i t io n s o n wh i c h a p p r o v a l wa s g i v e n , h a d b e e n v i o l a te d o r th e c i r c u ms t a n c e s me n t i o n e d i n t h e t h i r te e n th p r o v i s o e x i s te d , th e n b y f o l l o wi n g t h e p r o c e d u r e e n v i s a g e d i n th e th i r te e n th p r o v i s o , th e p r e s c r i b e d a u th o r i t y c o u l d wi t h d r a w th e a p p r o v a l . ADITANAR EDUCATIONAL INSTITUTION v. ADDL. CIT [1997] 224 ITRJ 310 (SC) and AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE v. CBDT [2008] 301 ITR 86 (SC) applied.
CIT ( ADDL .) V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION [1980] 121 ITR 1 (SC), DIRECTOR OF INCOME-TAX (EXEMPTION) v. STERNAL SCIENCE OF MAN 'S SOCIETY [2007] 290 ITR 535 (Delhi) and CITY MONTESSORI SCHOOL (Regd.) V. Union of India [2009] 315 ITR 48 (All) relied on.
Municipal Corporation of Delhi V Children Book Trust [1992] AIR 1992 SC 1456 explained and distinguished.
CIT V Queens Educational Society [2009] 319 ITR 160 (Uttarakhand) dissented from." 10
9. Having regard to the above legal and factual discussions, the ground of appeal bearing No. 2 & 3 are squarely covered by the decision of the Hon'ble jurisdictional High Court, reproduced above. Further, the Hon'ble jurisdictional High Court has categorically held that expenditure incurred on fixed assets for the purpose of undertaking activities in pursuance of the object clause, would not constitute income of the society. Further, the ld. 'AR', in the course of present appellate proceedings contended that capital expenditure, wholly and exclusively, in pursuance of the object of education is entitled for exemption and would not constitute part of the total income of the assessee in view of the law laid down by the Hon'ble jurisdictional High Court in the case of Pine Grove International Charitable Trust (supra). Therefore, respectfully following the decision of the Hon'ble jurisdictional High Court, Ground No.4 of the assessee is also allowed. Therefore, respectfully, following the said decision of the Hon'ble jurisdictional High Court, the appeal of the assessee is allowed.
Order pronounced in the Open Court on
23rdJan.,2012.
Sd/- Sd/-
(SUSHMA CHOWLA) (MEHAR SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 23 r d Jan.,2012.
'Poonam'
Copy to:
The Appellant, The Respondent, The CI T(A), The CI T,DR Assistant Registrar, ITAT Chandigarh