Delhi High Court
Director Of Income Tax (Exemption) vs Moti Bagh Mutual Aid Education on 10 January, 2007
Equivalent citations: [2008]298ITR190(DELHI)
Bench: Madan B. Lokur, V.B. Gupta
ORDER
1. The Revenue is aggrieved by an order dt. 27th Sept., 2004 passed by the Tribunal, Delhi Bench 'D', New Delhi, in IT(SS)A No. 652/Del/2000 relevant for the asst. yr. 1996-97.
2. The assessed is admittedly a society and has been running a school by the name of Vidya Niketan since sometime in 1960. All along, the assessed was granted exemption under Section 10(22) of the IT Act, 1961 on the ground that it is a society which is existing solely for educational purposes and not for any profit motive. Even for the years subsequent to the assessment year in question, we have been told that the assessed has been granted exemption under Section 10(22) of the Act.
3. In the assessment year that we are concerned with, it has been pointed out that there were three discrepancies in the accounts maintained by the assessed which led the AO to come to the conclusion that it was not existing solely for educational purposes but also for a profit motive.
The first discrepancy pertained to a donation that had been made by one Mr. Bhatia of Rs. 50,000. The donation was made in cash and when the assessed was asked to explain as to why penalty under Section 269SS of the Act be not imposed, the assessed turned around and stated that it was actually a "Gupt Daan" that had been deposited by Mr. Bhatia, but by a mistake, the accountant showed it as an unsecured loan.
4. Insofar as the assessed is concerned, it is clear that the amount is a receipt and not an outflow from the corpus of the assessed. Therefore, the only question in this regard is whether the amount was received by way of a loan or by way of "Gupt Daan". In either case, it cannot be said that the amount was received with a profit motive, unless it was not meant for utilization for educational purposes for which there is no evidence on record.
5. The second discrepancy is that donations have been received to the extent of Rs. 5,09,760 and the donors were not produced before the AO. In this regard, the learned Tribunal has noted that confirmations of donations were produced as certificates and it was not necessary for the assessed to produce the donors themselves, more particularly, since the donations were in the nature of "Gupt Daan". The AO took the view that since the assessed is not a religious entity, therefore, there is no question of "Gupt Daan" being made to the assessed.
6. Reference has been made by learned Counsel for the assessed to a decision of a Division Bench of this Court in Director of IT (Exemption) v. Keshav Social & Charitable Foundation (2005) 278 ITR 152 (Del), wherein the allegation made against the assessed was that through some donations, it was introducing unaccounted money into its corpus. It was held, even though it was a case under Section 11 of the Act, that the list of donors had been submitted and even if that list was not submitted or the donors were not produced, it would not necessarily lead to an inference that the assessed was trying to introduce unaccounted money by way of donation receipts.
7. Insofar as the present case is concerned, we find that there is no dispute about the fact that the donations totalling Rs. 5,09,760 were utilized for construction of the building of the school, which is clearly an educational purpose. By no stretch of imagination can it be said that the donations were received with some profit motive.
8. Moreover, as we have already indicated earlier with regard to the amount concerning Mr. Bhatia, the amount in question is not an outflow from the corpus of the assessed but an inflow into its corpus for the purposes of construction of a building. That is relevant in this case also, and it cannot be said that the receipts were with a profit motive, more particularly, when the donations were utilized for educational purposes.
9. We may also note another decision of this Court in Director of IT v. Andhra Educational Society (2005) 198 CTR (Del) 573, wherein it was held that the application of donations received for the purposes of construction of a building of a school, was really a question of fact touching upon the objects of the society and that did not raise any question of law, much less any substantial question of law.
10. The third discrepancy given by the AO is with regard to certain payments made to M/s Pokhriyal Construction to the extent of Rs. 27,22,744. It was the view of the AO that M/s Pokhriyal Construction is a company in which the son of one of the members of the assessed society is a director. Since proper bills and vouchers relating to the transaction were not produced, therefore, the transaction itself became doubtful. It was the view of the AO that the amount was actually diverted to a member of a society since the genuineness of the transaction was not proved and on this basis the assessed was not entitled to exemption under Section 10(22) of the Act.
11. Learned Counsel for the assessed has placed reliance upon the order of the learned Tribunal wherein it has been noted that details of construction of the school building through M/s Pokhriyal Construction have been filed. A copy of the agreement between the assessed and M/s Pokhriyal Construction was also placed in the paper book along with the minutes of the assessed society, the details of payments and balance due. It was nobody's case that the building was not constructed. Therefore, it must follow that the building having been constructed, the funds that were given to M/s Pokhriyal Construction were utilized for services rendered in construction of the school building which again is a utilization of the amount for educational purposes.
12. Moreover, the running bill of the contractor was produced and it appears from the record of the case before us that the materials were purchased and supplied by the assessed itself and only labour charges were paid to M/s Pokhriyal Construction. This can hardly be said to be diversion of funds.
13. We are of the view that even if there are minor contradictions or deviations in the accounts of the assessed, that by itself cannot substantiate the allegation that the assessed does not exist solely for educational purposes or that it exists partly for a profit motive. The fact that the assessed had been granted exemption under Section 10(22) of the Act since 1960 and even subsequent to the assessment year in question is a factor that cannot be easily overlooked. It is not possible to accept the view, in the absence of any cogent reason, that for one particular year merely on the basis of some discrepancy in the accounts of the assessed, its objects changed from educational purposes to making a profit.
14. We may also note a decision of this Court in CIT v. Lagan Kala Upvan , wherein a Division Bench accepted the view of the statutory authorities under the Act to the effect that a claim of depreciation in respect of certain assets of the assessed does not per se show the business/profit motive of the assessed or disentitle it from exemption under Section 10(22) of the Act. Similarly, in this case, even if it is assumed that there are some discrepancies in the accounts of the assessed, that would not per se lead to any conclusion regarding a change in the object of the assessed.
15. Under the circumstances, we are of the opinion that no substantial question of law arises for our consideration. The appeal is dismissed.