Income Tax Appellate Tribunal - Chennai
Vellore Institute Of Technology, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH 'D' : CHENNAI
[BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER
AND SHRI N.S. SAINI, ACCOUNTANT MEMBER]
I.T.A.No.1332/Mds/2010
Assessment year : 2001-02
The Dy. CIT vs M/s Vellore Institute of Technology
Central Circle IV(1) No.54, Thennamaram Street
Chennai Vellore - 632014
[PAN - AAATN0569M]
(Appellant) (Respondent)
C.O.No.94/Mds/2010
Assessment year : 2001-02
M/s Vellore Institute of vs The Dy. CIT
Technology Central Circle IV(1)
No.54, Thennamaram Chennai
Street
Vellore - 632014
(Cross objector) (Respondent)
Department by : Shri K.E.B Rengarajan, Jr. Standing
Counsel
Assessee by : Shri A. Mahesh
ORDER
PER HARI OM MARATHA, JUDICIAL MEMBER:
The appeal by the Revenue and the cross objection by the assessee are directed against the order of the ld. CIT(A)-I, Chennai, :- 2 -: ITA 1332/10 & CO 94/10 dated 28.5.2010, pertaining to assessment year 2001-02. The sections mentioned in this order are that of Income Tax Act, 1961.
2. Briefly stated, the facts of the case are that the assessee is a public charitable Trust, originally named North Arcot Educational and Charitable Trust; created by a Trust Deed dated 7.5.1984 registered with the number 94/84. The Trust was registered u/s 12A(a) on 9.7.1984 by the Commissioner of Income Tax Tamil Nadu-V. The name of the Trust has been changed to 'Vellore Institute of Technology', subsequently. The sole activity of the Trust during the relevant year is stated to be the running of 'Vellore Engineering College'. The institution became a `Deemed University' in the year 2001. Although, the income of the Trust was exempt u/s 10(22), the Trust submitted in its "statement of facts" that it had been filing income tax returns, along with audited accounts from assessment year 1990-91, inspite of no legal obligation to file returns u/s 139 as it existed at that time.
3. It is stated that the Trust was also approved u/s 80G from its inception. It is further stated that, questions were raised about the eligibility of the Trust for exemption u/s 10(22) on the ground that it was "running for profit" and its eligibility for renewal of approval u/s 80G by the following authorities:
:- 3 -: ITA 1332/10 & CO 94/10 19.2.1994 - 2nd Income Tax Officer, Vellore 12.1.1998 - Director of Income Tax (Exemptions) 18.9.1998 - Commissioner of Income Tax During the assessments u/s 143(3) for Assessment year 2003-04 - ADIT (Exemptions) - 24.3.2006 2004-05 - ADIT (Exemptions) - 1.12.2006 2005-06 - ADIT (Exemptions) - 31.5.2007
4. It is finally stated that after the enquiries and investigations by the aforesaid various authorities stretching over a period from 1994 to 2007, all the authorities had granted exemption to the Trust u/s 10(22)/ sec. 11 and also renewed the approval u/s 80G to the Trust.
5. However, subsequent to a search u/s 132 on 6.6.2007, the Revenue, apparently has altered its earlier conclusion about the assessee's eligibility for exemption u/s 11 and invoked section 147 to deny the exemption originally granted to the assessee resulting in the present appeal and cross objections.
6. For assessment year 2001-02, the Trust earned a surplus of `6,80,23,196/- and had received corpus donations of `1,26,50,000/-, both of which, it claimed, were exempt u/s 11. Apparently, no assessment was made either u/s 143(1) or (3) and it is the grievance of the Trust that even the refund of TDS of ` 10150/- claimed by its return was not issued. Vide order u/s 143(3) r.w.s. 147 dated :- 4 -: ITA 1332/10 & CO 94/10 30.12.2008, the Assessing Officer has brought the aforesaid surplus of ` 6,80,23,196/- and corpus donations of `1,26,50,000/- to tax by denying the exemption u/s 11 for the following reasons:
"1. Subsequent to the Search, Commissioner of Income Tax (Central) - I issued a notice on 8.1.2008 proposing to cancel the registration u/s 12AA(3) of the I.T. Act for the Asst. Year 2004-05 onwards stating in detail various reasons and facts and circumstances brought to light by the search operations. The appellant has not produced any satisfactory explanation to any of the defaults, omissions and commissions pointed out in the notice of the Commissioner of Income Tax which shows that the appellant has no proper or satisfactory explanation on facts to sustain its claim for exemption us 11/12.
2. The appellant trust has been showing huge surplus year after year as seen from the following statistics for the past 3 years.
Surplus Corpus fund
Total surplus
Asst. Year donation
`
` `
2000-01 51932115 59765000 57908615
1999-00 27155378 55006760 82162138
1998-99 19985049 35408920 55393969
3. Investigation during and subsequent to the search disprove the claim of the appellant that the donations were voluntary contribution towards corpus fund and prove that donations were, in fact and substance, only capitation fees collected in violation of the laws of the state.
4. The appellant has been charging very high fees from students and making various recoveries much above its costs of operation as is evident from huge surpluses in the income and expenditure account year after year.
5. Donation is a voluntary payment without quid pro quo. Statements recorded during the search clearly establish that the appellant was collecting capitation fees for offering admissions and is also refunding it in certain cases clearly :- 5 -: ITA 1332/10 & CO 94/10 showing that the amount collected was not a voluntary donation.
6. The corpus donations were admittedly received from 123 parties out of which ` 68,36,000 was received in cash and ` 58,14,000 by cheque / draft.
7. In the light of the findings as a result of search, onus rests on the appellant to prove that the persons mentioned as donors remitted to the institution on their own volition and without expectation of anything in return.
8. Corpus donations of ` 1,26,50,000 were in reality neither donations nor voluntary contributions as these payments were forcibly extracted from the parents / guardians at the time of admission of their children into the appellant's institution.
9. In its decisions the Hon'ble Supreme Court of India has made it clear that education cannot be run as a business and that the concept of teaching shops is contrary to the constitutional scheme and is wholly abhorrent to the Indian culture and heritage. When the appellant runs an educational institution by collecting capitation fees the same cannot therefore be held to be a charitable institution u/s 2(15) of the I.T. Act and the appellant is not eligible for exemption u/s 11.
10. The appellant has to prove that corpus donations were not received from any relatives of the students admitted in the college and donors are totally strangers to the parties to the transactions motivated purely by philanthropic instinct. The list of donors was submitted by the appellant at the fag end of the proceedings and enquiries made with respect to local parties reveal that there were no such persons at the given addresses. The response of persons who were issued questionnaires did not reach the Assessing Officer before closure of proceedings."
:- 6 -: ITA 1332/10 & CO 94/10
7. The ld. CIT(A), however, reversed the Assessing Officer's order on merits and held that the assessee is entitled to exemption u/s 11 by observing as under:
"16. I have considered the submissions of the learned AR Section 2(15) defines 'Charitable Purpose' to include education. The word 'education' is not defined in the I.T. Act but it is fairly well settled that running an educational institution would amount to engaging in the activity of education. The appellant trust which is running an engineering college is therefore prima facie engaged in education and so is eligible to be treated as a 'charitable trust'.
17. Though the Assessing Officer has concluded that the appellant is engaged in the activity of education as business, no evidence has been shown to support such a conclusion. While an adverse inference on the genuineness of donations ........ may be made, no positive inference can be made that the corpus donations were nothing but payments received for admissions given in return by a quid pro quo. Details of admission procedures given by the appellant clearly show that the appellant did not have much discretion in making the admissions so that it could collect capitation fees for the admissions.
18. The burden is on the appellant to show that he is eligible for exemption u/s 11. The appellant has discharged its burden by establishing that it is engaged in running an engineering college, which has not been disputed in the assessment order. It is the contention of the Assessing Officer that the education imparted by the appellant through the engineering college is done as business and should not be considered as education as defined in sec. 2(15). However, this contention of the Assessing Officer is not supported by any evidence. I, therefore, hold that the appellant is eligible for exemption u/s 11.
19. ....... Even if the corpus fund donations are not treated as genuine, they would still be income derived from property held in Trust and hence, eligible for exemption u/s 11 subject to .....".
:- 7 -: ITA 1332/10 & CO 94/10
8. Aggrieved, the Revenue is in appeal before us by raising following grounds:
"1.a On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that the assessee is eligible for exemption u/s 11.
1.b. The learned Commissioner of Income Tax (Appeals) has erred in holding that no evidence has been shown to support that the assessee is engaged in the activity of education as a business without considering the actual evidence available on record viz. Show cause notice issued by the Commissioner of Income Tax Central Range
- I proposing to cancel the registration u/s 12AA(3), statements recorded during the course of search from Sri V. Sankar son of the managing trustee and Sri R. Vijayakumar, Secretary to the other Pro-Chancellor, letters from parents and refund files of donations, the details of all of which have been clearly mentioned in the assessment order.
1.c. The learned Commissioner of Income Tax (Appeals) has erred in holding that the assessee has discharged its burden regarding proving the claim u/s 11 without considering that the assessee has delayed furnishing the list of donors for the relevant year especially when the A.O. has proved the facts for the later assessment years.
1.d. The learned Commissioner of Income Tax (Appeals) has erred in holding that "the details of admission procedures given by the appellant clearly show that the appellant did not have much discretion in making the admission so that it could collect the capitation fee for the admission" which is contrary to the established fact and evidence available on record especially when the management had sufficient flexibility in admitting the students under the management quota, the seats were literally sold and the alleged donations were also refunded without proper and valid reason.
1.e. The learned Commissioner of Income Tax (Appeals) has failed to note that the alleged donations were not voluntary but were only in the nature of one time capitation :- 8 -: ITA 1332/10 & CO 94/10 fee since voluntary donations will not be requested for refunding and the assessee could not explain the special reasons for the alleged donations from across the country to the exclusion of various other similarly placed educational institutions in the same region."
9. The ld.DR vehemently, supported the order of the Assessing Officer by reiterating the statements and findings in the assessment order.
10. Per contra, the ld.AR, Sri A. Mahesh, CA, advanced arguments both on facts and law justifying the allowance of exemption u/s 11 and has also filed 4 volumes of a paper book running to 766 pages, mainly containing copies of various decisions relied on by him, apart from written submissions. A separate paper book of 71 pages styled "statement of facts", enclosing copies of Trust Deed, history of past assessments, enquiries etc., has also been filed. On the issue of the institution being run as a business, charging high fees, collecting Donations (capitation fees) and earning large surpluses, the ld.AR amplified the reasons as to why, during the year relevant to assessment year 2001-02, the assessee had very little discretion in the matter of admissions and therefore, could not have collected donations as quid pro quo for admissions. He submitted that the assessee's engineering college was regulated and controlled by AICTE and DOTE during the year in all the following matters:
:- 9 -: ITA 1332/10 &
CO 94/10
i. The engineering courses that may be conducted;
ii. Number of students that can be admitted for each
course;
iii. Prescribing eligibility criteria and enforcing that the criteria are adhered to in the matter of admissions like, through a common entrance test and single window admission procedure by the Madras University under whose affiliation and control, Vellore Engineering College functioned;
iv. Actual selection and allotment of the candidates for admission in to engineering by the Madras University through the single window system; and v. The fees to be charged.
11. In support of the above submissions, copies of approvals from the University of Madras prescribing the courses and the number of students that can be admitted for each course during the year have been filed in pages 39 to 41 of "statement of facts". Copies of the Admissions Regulations of AICTE and DOTE are placed at pages 22 to 33 of "statement of facts" which substantiate the assessee's submission that it had very little discretion in the matter of admissions which are: (1) 5% of sanctioned seats as NRI quota and (2) "lapsed seat" - seats that remain unfilled after the last date fixed for allotment by the competent authority (regulation No.10 in page No.25 of AICTE admission regulations) placed at page 36 of "statement of facts". He :- 10 -: ITA 1332/10 & CO 94/10 referred to the Notification by the Tamil Nadu Government fixing the fees to substantiate that the trust's revenue was also regulated by the Government. Finally, he referred to pages No.69 to 71 of "statement of facts" to substantiate that the fees actually charged by the assessee during the year was in accordance with the fees fixed as above, thus disproving the allegations of profiteering by the department. Further he referred to Copy of assessee's letter to the University of Madras enclosing the list of candidates admitted during the year under the single window system giving the dates of admission of each student to prove that the last date of admission was 25.10.2000, which is the last date prescribed by DOTE letter dated 7.10.2000 - page 43 of "statement of facts". He, therefore, submitted that there were no "lapsed seats" which is the only discretion that the assessee had in the matter of admissions during the year.
12. The ld.AR further submitted that, although 535 seats were sanctioned by the University of Madras for the year, only 500 students were admitted. Out of the 500 students, 467 students (94%) were allotted by DOTE under the single window system, 18 (4%) foreign students were admitted on being sponsored by Educational Consultants India Limited, Noida (Govt. of India Enterprise) and only 15 (3%) NRI students were admitted as against the 5% discretionary :- 11 -: ITA 1332/10 & CO 94/10 NRI admission available to the assessee. The ld.AR therefore submitted that as the assessee had very little discretion in the matter of admissions, the allegations of the department of profiteering and collection of capitation fees for admissions stand negated and therefore, the grant of exemption u/s 11 by the ld. CIT(A) has to be sustained. Finally, he referred to a chart placed at pages No.67 and 68 of the "statement of facts" to establish that there is absolutely no correlation whatsoever between the percentage of growth in corpus fund donations received and percentage of growth in admissions from its inception in assessment year 1985-86 to assessment year 2001-02.
13. We have considered the rival submissions and have carefully considered the material available on record, including the paper books filed by the assessee-trust. On perusing the aforesaid documents at length, we find substantial force in the submissions by the assessee. Apparently, the main source of income for the institution is fees received from students and donations collected. The fee receipts would depend upon the number of students admitted and the fees charged. The documents referred to above clearly establish that both the number of students and the fees chargeable from them are regulated and controlled by AICTE / DOTE through the University of Madras. Hence, the assessee could not have engaged in 'profiteering' as :- 12 -: ITA 1332/10 & CO 94/10 alleged by the Revenue by increasing the students strength nor could it have charged a higher fee. We find from page 36 of statement of facts that the Government Notification prescribing fees for unaided self financing engineering colleges prescribes 3 different scales of fees with the nomenclatures of
(a) Free seat category
(b) Payment seat category
(c) Non resident Indian students We find that there is a significant difference in the scale of fees for each category of students. Obviously, this is because the Government, in its wisdom, recognizes that unaided self financing educational institutions cannot be run by charging the lower fees charged by aided financial institutions. Therefore, the Government has permitted them to charge higher fees for the different categories. We find from the admission regulations and other documents submitted that 5% of the seats sanctioned by the University of Madras can be given to NRI students who are required to pay the highest scale of fees of ` 39200/- + 1000 Dollars. Out of the remaining seats 50% is under the "Free seats category" for which the fee prescribed is only `12800/-, the remaining 50% falls under "Payment seat category" which attracted a much higher fee of ` 47200/-. The reason for narrating the above facts is to appreciate the bigger picture in the field of :- 13 -: ITA 1332/10 & CO 94/10 education in our country. Traditionally education and health were considered the exclusive obligations of the State and was expected to be provided free of cost; subsidized rates or, at cost, to the different segments of the society, depending on their need for support from the State. However, over a period of difficult financial times, and population explosion, when the State was unable to find the necessary resources to discharge its traditional or constitutional obligations, the State found new ways of catering to its citizens in the fields of education and health. One of the ways is what is popularly called as "Public private partnership" in which the State's function is outsourced to the private sector. While doing this, the Government had to take into account the fact that, while its ability to raise resources by tax and borrowings was unlimited, at least in theory, the resources of the private sector were limited. The State had faced one more difference between the motivation for investments by the State and the Private Sector; ie. - while the State can look at the aforesaid services as a mere "Cost Centre" the "Private Sector" neither can, nor be expected, to look at these functions as a cost centre. Hence, the Government devised ways by which the revenues of such private sector unaided educational institutions could be augmented so as to provide adequate revenues to recoup the investment, provide reasonable return on :- 14 -: ITA 1332/10 & CO 94/10 investment and to provide adequate surpluses to facilitate expansion and modernization. The three tier fee structure prescribed by the Government for different categories of students is a means to achieve the above objective.
14. The reason for presenting and analyzing the macro view on the subject is to appreciate the point that the Government, in its wisdom, has consciously permitted charging higher fees from some students in the case of unaided colleges to achieve its aforesaid objectives. This policy is nothing but a "Cross subsidy" by the affluent students to the needy students, as the State, which was traditionally/constitutionally bound to provide these services, could not do so. Hence, the charging of higher fees from a certain percentage of students will not be detrimental to the "Charitable" nature of the institutions as this charging of higher fees from the affluent students is done only to subsidise the cost of education of the needy students especially when this scheme of "Public private partnership" is an instrument of State policy. We find support for our above view from CIT vs Pulikkal Medical Foundation Private Limited, 210 ITR 299 (Ker) and Breach Candy Hospital Trust vs Chief CIT 322 ITR 246 (Bom). A careful appreciation of the aforesaid macro view can only lead to the irresistible conclusion that charging of higher fees from affluent :- 15 -: ITA 1332/10 & CO 94/10 students or raising funds for the laudable object of education, which is traditionally a State function, through donations, by an unaided self financing educational institutions cannot deter the "charitable" nature of the activity and in any view make such activity "Commercial" in nature.
15. There is one more angle from which the present case can be approached. Although, charitable institutions earn surplus, if the promoters or the trustees or members of such a charitable institutions are precluded from and did not in fact participate or gain distribution of the surplus and the entire surplus is only applied or accumulated for charitable purposes, then occurrence of the surplus will not in any way militate against the claim of "Charitable" nature of the institutions or make it a commercial venture - CIT vs Pulikkal Medical Foundation Private Limited 210 ITR 301 (Ker).
16. We find from clauses 19 and 20 of the trust deed placed at pages No.6 to 17 of the statement of facts that, there is an absolute embargo on any benefits or remuneration to the trustees or their relatives. It is not also the case of the Revenue that any such benefits have been conferred by the assessee during the year. Hence, for this reason too, the occurrence or recurrence of surplus of the assessee through its educational activity will not affect its eligibility for being :- 16 -: ITA 1332/10 & CO 94/10 considered as a charitable trust entitled to exemption u/s 11. Similarly, the assessee's submission that it could not have obtained donations through coercion as alleged by the Revenue also deserves to be accepted, as we find from the admission regulations of AICTE that there were only two defined areas of discretion in the matter of admission viz. 5% of the sanctioned seats for NRIs and filling up of 'lapsed seats'. We find from the break up of admissions given that, out of the 5%, only 3% of seats were allotted to NRIs and further that out of the total corpus fund donation of `1,26,50,000/- there was no donation received from outside India. Hence, the discretion available in this regard could not have led to collection of the aforesaid donations. The letter along with list of students admitted with the date of admission of students reveal that the last student admitted was on 25.10.2000 as per the direction of the University of Madras, copy of which has also been filed. As there was no 'lapsed seat' which could be filled at the discretion of the assessee no donations could have been collected in this area also. Finally, we find from the aforesaid documents that while the seats sanctioned by the University of Madras was 535, only 500 students were actually admitted leaving 35 of the sanctioned seats vacant. When the assessee is unable to get students to fill up even the sanctioned strength, we fail to understand as to how :- 17 -: ITA 1332/10 & CO 94/10 it would be in a position to demand and get donations at the time of admission.
17. For the reasons aforesaid, we have no reservations in holding that the assessee had very little discretion in the matter of admission or charging of fees during the year and therefore, have no hesitation in holding that the corpus donations received cannot be treated as capitation fees and that the surplus earned by the assessee cannot be on account of "profiteering" warranting the assessment of assessee's surplus as 'income from business' and therefore, we dismiss Ground Nos. 1.d and 1.e raised by the Revenue.
18. As regards Ground No.1.c that, the assessee had delayed furnishing the list of donors and therefore the ld. CIT(A) erred in holding that the assessee had discharged his burden, we find, as pointed out by the ld.AR that this ground clearly contradicts para 14, page 8, of the assessment order, which affirms that the list of dates, names, full addresses and donations received were obtained and verified with the account books and records. Further, there is much force in the assessee's submission that all the books and records had already been seized on 6.6.2007 or called for and retained by the Deputy Director of Income-tax, as early as on 24.9.2007and :- 18 -: ITA 1332/10 & CO 94/10 impounded. Hence, we find that Ground No.1.c has no legs to stand on and the same is dismissed.
19. The ld.DR vehemently argued on Ground No.1.b to claim that the contents of the show cause notice by the CIT, Central Circle-I, proposing to cancel the registration u/s 12AA(3); statements recorded during the search from Sri V. Sankar son of Managing Trustee and Sri R. Vijayakumar, Secretary to the Pro-Chancellor and the letters from parents requesting for refund of donations, are good evidences to support the finding of the Assessing Officer that the assessee is engaged in the activity of education as a business.
20. Per contra, the learned AR submitted that even the show cause notice of the ld. CIT, Central Circle - I, had proposed to cancel the registration u/s 12AA(3) only w.e.f. assessment year 2004-05, as, even according to the DDI and the CIT, the alleged letters from parents relate only to 2004 and subsequent years. As regards the statements by Sri V. Sankar son of Managing Trustee and Sri R. Vijayakumar, Secretary to the Pro-Chancellor, it is submitted that these statements were obtained under duress and by coercion at the time of search and were retracted. It was submitted that Sri V. Sankar was neither a Trustee nor a Pro-Chancellor or holding any other position in the Trust during the year relevant to assessment year 2001-02 and :- 19 -: ITA 1332/10 & CO 94/10 that Sri R. Vijayakumar became an employee of Vellore Institute of Technology only on 2.8.2004. The ld.AR would therefore contend that the above retracted statements relied on by the department, which were obtained from persons who had absolutely no position in the organization of the assessee during the relevant year and who therefore could not have been privy to any information or knowledge of the assessee's affairs during the relevant year, cannot be relied upon to deny the exemption u/s 11. As it has been held in CIT vs Anoop Kumar, 94 TTJ 288(ASR.), ACIT vs J.S.M Rathod, 94 TTJ 867 (Ahd) and ACIT vs Balaji Educational & Charitable Trust, in I.T.A.No. 1476 to 1482/Mad/2010, dated 5.4.2011 that retracted statements alone cannot be acted upon without supporting evidence.
21. After considering the rival submissions, we are inclined to accept the aforesaid submissions of the assessee. It is a well established principle that, income tax, being an annual tax, the proceedings and assessment of each year is self contained and will be based only on the facts, circumstances and the law prevailing during that year and cannot be influenced by facts and circumstances of even the same assessee in another year. Although this principle is so well established that it needs no precedence to be relied on, we may quote the decision of the Hon'ble Supreme Court rendered in the case of :- 20 -: ITA 1332/10 & CO 94/10 Adithanar Educational Institution vs. Additional CIT 224 ITR 310 (SC) - where, in page 318, it was held as under:
"Income tax is an annual tax and therefore, the liability for taxation must be determined with reference to each year"
"... the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit."
22. We, therefore, hold that the contents of the show cause notice u/s 12AA(3) proposing to cancel registration from assessment year 2004-05; the retracted statements of V. Sankar and R. Vijayakumar who were neither employed nor had any position in the assessee trust during the relevant year and therefore, could not have had knowledge of the assessee's affairs during the year relevant to assessment year 2001-02; or the letters from parents in 2004 and later, requesting for refund of money, can be relied upon by the Revenue to deny the exemption u/s 11 for assessment year 2001-02.
23. Not being content with defending the order of the ld. CIT(A) restoring the exemption u/s 11 and assailing the Revenue's grounds of appeal, the ld.AR advanced erudite arguments on law to justify the grant of exemption u/s 11 which are dealt with hereunder:
:- 21 -: ITA 1332/10 & CO 94/10 I. Exemption not anathema to "Surplus" arising out of charitable activity - if "surplus" is applied for "charitable" purposes.
a. That the Revenue is importing the language of sec. 10(22) (deleted on 1.4.1999) that the educational institution should "exist solely for education purposes and not for purposes of profit" into sec.11 which has no such conditions and therefore, the generation of 'surplus' within the frame work of regulations of the competent authorities cannot be construed as a 'business' activity or 'profiteering' so as to deny exemption u/s 11.
b. When the CIT, highest functionary of the Revenue had himself examined the very same aspect on 18.9.1998 (copy of this letter is filed in page 35 of Volume I of Paper book) and concluded in favour of the assessee, no new facts or circumstances have been brought on record for the year relating to 2001-02 a/y to change the Commissioner of Income Tax's view in 1998.
c. Eleemosynary and altruism are irrelevant for claiming exemption u/s 11 - relying on the commentary in the law and practice of income tax in Kanga and Palkhiwala and the cases cited therein (page 392).
d. CBDT Circular F.No.194/16-17-IT(AI) reproduced in 212 ITR 462 (KER) -
"The question for consideration is whether an educational institution existing solely for educational purpose but which shows some surplus at the end of the year is eligible for this exemption. If the profit of the educational institution can be diverted for the personal use of the proprietor thereof, then the income of the :- 22 -: ITA 1332/10 & CO 94/10 educational institution will be subject to tax. However, there may be cases where the educational institutions may be owned by the trusts of societies to whom the provisions of section 11 may be applicable. Where all the objects of these trusts are educational, and the surplus, if any, from running the educational institution is used for educational purposes only, it can be held that the institution is existing for educational purposes and not for purposes of profit."
24. The aforesaid propositions were again buttressed by the ld.AR by a line of cases as under:
Aditanar Educational Institution vs. ACIT - 224 ITR 310 (SC) "...running, managing or assisting schools and colleges
- is an educational institution entitled to exemption available each year on surplus over expenditure, if the institution existed solely for educational purposes -
overall view to be taken - Income Tax Act..."
"...availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit. After meeting the expenditure, if any surplus results incidentally..."
"...it will not cease to be one existing solely for educational purposes, since the object is not one to make profit. The decisive or acid test is whether, on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction / difference between the corpus, the objects and the powers of the concerned..."
:- 23 -: ITA 1332/10 & CO 94/10 "...10(22) should be evaluated or investigated every year and only if it was found that the 'institution' existed for educational purposes in the relevant year and even if any profit resulted which was only incidental to the purpose of education, the income would be...".
American Hotel & Lodging Association Educational Institutes vs. CBDT - 301 ITR 86 (SC) "...The mere existence of profit / surplus did not disqualify the institution ...".
ACIT vs. Surat Art Silk Cloth Manufacturers Association - 121 ITR 1 (SC) - 5 member bench "... Not involving any activity for profit - meaning and scope ..."
"... So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be - it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not ..."
CIT vs. Indian Institute of Computer Technology - 244 ITR 371 (KER) Birla Vidya Vihar Trust vs. CIT - 136 ITR 445 (CAL) "... Educational Institution condition precedent - must exist solely for educational purposes and not for purposes of profit - position to be determined with reference to cumulative effect of all relevant facts ..."
"... Neither the fortuitous factor of having a large surplus in any particular year nor the solitary fact of diverting some of the income to objects charitable but not educational would be decisive of the matter ..."
:- 24 -: ITA 1332/10 & CO 94/10 "... a solitary instance of application of income from the schools for non-educational purposes in a prior year was not very material. The fact that the assessee trust had objects other than educational objects was also not material..."
Pinegrove International Charitable Trust vs. Union of India and Others - 327 ITR 73 (P&H) "...Merely because profits have resulted from the activity of imparting education that would not change the character of the institution existing solely for educational purpose ..."
"...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 profits and not solely for educational purposes ..."
"...Accordingly, it had to be ascertained whether the educational institution had been applying its profit wholly and exclusively to the object for which the institution was established. Merely because an institution had earned profit that would not be the deciding factor to conclude that the educational institution existed for profit ..."
Vanita Vishram Trust vs. Chief Commissioner of Income - Tax and Another - 327 ITR 121 (BOM) "... the fact that a surplus may incidentally arise from the activities of the trust, after meeting the expenditure incurred for conducting educational activities would not disentitle the trust of the benefit of the provisions of section 10(23C)..."
Maa Saraswari Educational Trust vs. UOI (HP) -
194 Taxman 84 (HP)
:- 25 -: ITA 1332/10 &
CO 94/10
"...Therefore, it is not as if the educational institution cannot generate any surplus. Generating surplus and accumulation of income will not disqualify an institution for the benefits of section 10(23). Surplus is to be understood in contradistinction to generation of income with the sole motive of profit if one has to properly understand the legislative intent of section 10(23C)(vi)..."
"... Though charity is a laudable object, that consideration is irrelevant under the said provision. What is relevant is purpose and administration of the institution only for education and nothing more or nothing less or anything else ..."
Breach Candy Hospital Trust vs. Chief Commissioner (BOM) - 322 ITR 246 (BOM)
25. On a thorough reading of the judgments relied on, extracts from which are given above, we find that they apply in greater force to the assessee, whose claim for exemption is u/s 11, although most of the judgments have been rendered under sec.10(22). We notice that, while sec 10(22) had an express condition that the institution should exist "not for purposes of profit" sec.11 does not impose any such condition. If the incidence of profit is not an impediment for allowing exemption u/s 10(22), as decided by the above line of cases and CBDT Circular, we fail to see the Revenue's claim that the surplus would militate the assessee's claim for exemption u/s 11. We therefore, hold that the incidence of surplus during the course of activity of running :- 26 -: ITA 1332/10 & CO 94/10 the educational institution would not be a ground to state that the assessee is carrying on a business activity so as to forfeit exemption u/s 11.
II. Application of Doctrine of Legitimate expectation That, the assessee is entitled to consistency in assessment of income from the same activity over different years, especially when the department has failed to bring on record any facts or circumstances relating to 2001-02 a/y, when the Revenue had been holding the assessee, as a charitable institution from its inception in 1984 up to 2000, as decided, in the following cases:
Radhasaomi Satsang vs. CIT - 193 ITR 321 (SC) Berger Paints India Ltd. vs. CIT - 266 ITR 99 (SC) Union of India vs. Sathish Paunalal Shah - 249 ITR 221 (SC) CIT vs. S. Kamalahassan - 141 Taxman 24 (MAD) CIT vs. S. Kamalahassan - 141 Taxman 257 (MAD) DIT vs. Lovely Ran Shiksha Parishad - 266 ITR 349 (DEL) CIT vs. N.P. Mathaw - 280 ITR 44 (KEL) CIT vs. Neo Polypack Ltd. - 245 ITR 492 (DEL) III. 'Education' per se is 'charity' It was submitted that, Sec. 2(15) providing an inclusive definition of charitable purpose, enumerates the following:
• Relief of the poor;
• Education;
• Medical relief and • Advancement of any other object of general public utility, not involving the carrying on of any activity for profit.
:- 27 -: ITA 1332/10 & CO 94/10
26. It was also submitted that there are no conditions for treating 'education' as charitable purpose u/s 2(15) - unlike u/s 10(22) and that the Hon'ble Supreme Court in the case of Additional CIT vs. Surat Art Silk Manufacturers Association, 121 ITR 1 (SC), has held that the phrase "not involving the carrying on any activity for profit" would govern only the last limb of sec. 2(15) and not the earlier 3 limbs, which includes 'education'. Further, CBDT Circular No. 11 of 2008 dated 19.12.2008 also clearly endorses this view and puts the matter to rest. Para 2.1 and 2.2 of the said circular reads as under:
2.1 "newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15) i.e. education. Consequently, where the purpose of a trust or institution is relief of the poor, education, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities.
2.2 entities whose object is 'education' would also continue to be eligible or exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above."
27. The ld.AR has relied on a line of decisions below, which have held unequivocally that 'education' per se is 'charity' and that there are no strings attached.
:- 28 -: ITA 1332/10 & CO 94/10 P.C. Raja Ratnam Institution vs. Municipal Corporation of Delhi & Others - 181 ITR 354 (SC) "...Test of charitable purpose satisfied by proof of any of the three conditions of relief of poor, education or medical relief...."
DIT vs. Garden City Educational Trust - 330 ITR 480 (KAR) "... so long as a trust has education as one of its objects which is one of enumerated heads which qualifies and comes within scope of charitable purpose as enumerated in section 2(15), it has to be accepted that trust is having a charitable purpose as its object and may qualify for claiming exemption in terms of sections 11 ...."
Gaur Brahmin Vidya Pracharini Sabha vs. CIT - 304 SOT 371 (DEL) "... Imparting of education is a charitable purpose as defined in section 2(15), irrespective of the fact that the assessee charges fee for imparting education - there is no condition that to become a charitable purpose, education should be imparted free ..." ITO vs. Kaushalya Medical Foundation - 31 SOT 119 (MUM) ACIT vs. Graphic Era Educational Society - 108 TTJ 608 (DEL) "... Assessee institution is duly recognized by HNB Garhwal University and strictly follows all University regulations with regard to admission, charging of fees and course curriculum and has on its governing body nominees of State Government, HNB University and AICTE functioning under Human Resource Ministry, and thus, in fact, Government managed - Therefore, the question of functioning like a commercial profit making :- 29 -: ITA 1332/10 & CO 94/10 institution is totally unfounded - Assets of the society cannot be shared or distributed amongst its members at any point of time..."
"...Assessee rendering education to general public falls within charitable purpose under section 2 (15) ..."
Reliable Educational & Alliance Society vs. CIT - 126 TTI 407 (DEL) "...Education is now clearly a charitable purpose within a meaning of section 2(15) ..."
DCIT vs. Beer Shiva Educational Social Welfare Society - 107 ITD 403 (DEL) "...Whether relief of poor, education and medical relief are charitable activities per se and if any institution is carrying out any of these objects, then such an institution would be pursuing a charitable purpose - Held, yes..."
"... Whether since running schools in a systematic manner was incidental to attainment of one of objects of society, assessee's case was covered under section 11(4A) and, therefore, expenditure incurred in commercial activity was not entitled to exemption under section 11(1)(a) ..."
Dy. DIT vs. Shanti Devi Progressive Education Society - (2011) 9 Taxmann.com 240 (DEL) O.P. Jindal Global University vs. CIT - 127 ITD 164 (DEL)
28. We have no difficulty in subscribing to this submission of the assessee, as the language of the statute is crystal clear and requires :- 30 -: ITA 1332/10 & CO 94/10 no interpretation, whatsoever, to hold that 'education' per se is a 'charitable purpose' u/s 2(15). We are surprised by the number of cases on this issue and amazed at the propensity of the Revenue to litigate on what is perhaps one of the simplest definitions under the Income Tax Act. Be that as it may, our task in subscribing to this submission is made easy by the direct decisions on this issue cited above, apart from the unequivocal pronouncement in the CBDT circular reproduced above.
29. In coming to the above conclusion, we have also followed the decision in the case of Jaypee institute of information technology society vs DGIT (Exemptions) 28 DTR 242 (Del), which has held that "
..... very fact that it is granted the status of deemed University by UGC is a clinching factor insofar as institutionalized education conducted by the petitioner is concerned ...", when the Revenue sought to deny exemption u/s 10(23C) on account of objects not considered as `educational' by it. No doubt the assessee became a `Deemed University' only from the following year. However, we are noticing this decision only for the purpose of reinforcing our finding that assessee was only engaged in the activity of education, which, per se, is a charitable purpose u/s 2(15).
:- 31 -: ITA 1332/10 & CO 94/10
30. As regards 'Education is NOT business', it was submitted before us, again, in our opinion rightly so, that 'education' can never be a business and that it was so held by the Apex court in the 5 Judges Bench in Unnikrishnan J.P. vs. State of Andhra Pradesh and others 1993 AIR 2178 - that "imparting education cannot be trade, business or profession .... it may perhaps fall under the category of occupation ...". The above ratio that "education is an 'occupation' " was reaffirmed in the 11 Judges bench of the Apex court in T.M.A. Pai Foundation and others vs. State of Karnataka - 8 SCC 481.
31. In the light of the categorical decisions of the constitution bench of the Apex court aforesaid, the Revenue's attempt to categorize the educational institution as a business has to be rejected and the assessment of its surplus as Business income was rightly set aside by the ld. CIT(A). As we have held, following the Apex Court judgments aforesaid, that the educational institution is not a business and that `education' per se is a `charitable purpose' in the earlier para, we uphold the order of the ld. CIT(A) allowing the exemption u/s
11.
32. As regards Exemption u/s 11 is for 'application' of income and NOT source, we find this argument by the ld.AR to be the most attractive and relevant proposition in support of the assessee's claim :- 32 -: ITA 1332/10 & CO 94/10 for exemption u/s 11. The assessee submitted that sec. 11 (1) provides that ".... following income shall not be included in the total income .....
• income derived from • property held under trust wholly for charitable or religious purposes to the extent it is applied for such purposes ....
33. The Hon'ble Supreme Court in Gangabai Charities vs. CIT 197 ITR 416 (SC) has upheld the aforesaid interpretation as under:
in page 419 - "... in order to claim the benefit of sec. 11 (1) (a) of the Act:
1. the income is derived from property held under the trust.
2. the trust is wholly for charitable or religious purposes.
3. the exemption is permissible to the extent to which to such income is applied to such purposes in India"
Again, in page 421 the Apex court went on to hold that:
"the crux of statutory exemption u/s 11(1)(a) of the Act is NOT the income earned from property held under trust, but the actual application of the said income for religious and charitable purposes".
34. While interpreting 'not involving any activity for profit' governing the 4th limb of sec. 2(15), the Supreme court in additional CIT vs. :- 33 -: ITA 1332/10 & CO 94/10 Surat Art Silk Cloth Manufacturers Association 121 ITR 1 (SC) has held that "so long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and It is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or NOT.
35. Other decisions in support of the above preposition relied on by the assessee are:
Dharmadeepthi vs. CIT 114 ITR 454 (SC) CIT vs. Aroor 115 ITR 418 (KAR) Additional CIT vs. A.L.N. Rao Charitable Trust 102 ITR 474 (KAR)
36. In the assessee's case, it is not the case of the Revenue that income has not been 'applied' for charitable purposes. We have held above that 'education' per se is a charitable purpose. The assessee's only source of income is the surplus arising from operating the educational institution, which is 'income derived from property held for charitable purposes'.
37. In the light of the aforesaid decisions of the Apex court, we have no hesitation in holding that as more than 75% of the income from property held for charitable purposes has been applied by the assessee for the educational institution of Vellore Engineering College, :- 34 -: ITA 1332/10 & CO 94/10 its entire income (regardless of the manner in which it was derived or head under which it is computed) is exempt u/s 11.
38. The ld.AR has made an alternate submission, after being careful to state that he was not admitting or conceding the contention of the Revenue that, even if the activity of education carried on by the assessee is treated as 'business' as it resulted in surpluses, its income would still be exempt under sec. 11(4A), which has been substantially liberalized from 1.4.1992. It was submitted before us that, as per the liberalized sec. 11(4A) a trust carrying on 'business' could still claim exemption u/s sec. 11, if:
• the business is incidental to the attainment of the objectives of the trust and • separate books of account are maintained in respect of such business.
39. The AR submitted that as assessee has satisfied both the conditions, even in the worst case scenario of the assessee's activity being categorized as 'business', its income would still be entitled to exemption u/s sec. 11 pursuant to sub-section 4A. A catena of decisions has been relied on to drive home this alternative submission, which too we approve.
ACIT vs. Thanthi Trust - 247 ITR 785 (SC) "...Further change of law - requirement that business should be incidental to attainment of objectives of trust -
:- 35 -: ITA 1332/10 & CO 94/10 satisfied - Income tax act, 1961, SS. 11(4A) (before and after amendment in 1992), 13(1)(bb)..."
"... Interpretation of taxing statutes - ambiguity - provision to be construed in manner that benefits ..."
"... The scope of sub-section (4A) of section 11, as amended in 1992, is more beneficial to a trust or institution than the scope of the sub-section before the amendment. As it stands amended in 1992, all that is required for the business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is a institution ..."
DIT(E) vs. Willington charitable trust - 330 ITR 24 (MAD) "... Charitable purpose - exemption - business income if utilized towards achievement of object of assessee - trust it would be incidental to achievement of object - assessing officer to decide as to whether such business income used for attainment of object ..."
"...Held, when a business income was used towards the achievement of the object of the trust it would be incidental to the achievement of the object of the trust notwithstanding the profit and gain involved therein. Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 (SC) applied ..."
"... Honourable apex court in the above said judgment was pleased to hold - sufficient is that the income derived from the business from a property held in trust by the assessee is utilized towards the attainment of the objectives - held that it is irrelevant if the business is run on a commercial expediency with a profit motive..."
"... We are of the view that when a business income is used towards the achievement of the object of the trust :- 36 -: ITA 1332/10 & CO 94/10 it would amount to incidental to the achievement of the object of the trust notwithstanding the profit and gain involved therein..."
CIT vs. Janakiammal Ayyandar Trust - 277 ITR 274 (MAD) "... Charitable purposes - charitable trust - exemption - businesses - effect of sub-section (4A) of section 11 - income of business applied for purposes of trust - income entitled to exemption - income tax act, 1961 sec. 11(4A) ..."
"...Effect of Supreme Court decision in Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 ..."
"... Supreme Court observed the scope of sub-section (4A) of section 11 of the income tax, as amended in 1992, is more beneficial to a trust or institution than the scope of the sub-section before the amendment. As it stands amended in 1992, all that is required for the business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is a business which is incidental to the attainment of the objectives of the trust or institution ..."
"... assessment years 1994-95 and 1993-94 ..."
CIT vs. Sri Narayana Gurtuviah Chetty Estate & Charities - 326 ITR 662 (MAD) "... AY - 1996-97 to 1999-2000 - Charitable purpose - exemption - charitable trust earning income by letting out property as Kalyana Mandapam - letting out activity for fulfilling objects of trust - income derived from property - trust entitled to exemption - income tax act, 1961, sec. 11 - Thanthi Trust (2001) 247 ITR 785 (SC) applied ..."
:- 37 -: ITA 1332/10 & CO 94/10 CIT vs. Bimetal Bearing Ltd. - 152 ITR 85 (MAD) ITO vs. Rao Bahadur AKD Dharmaraj Education Charity Trust - 273 ITR 256 (MAD) "... assessment year 1992-93, the respondent / assessee claimed exemption under sections 10(22) and 11 of the Income Tax Act ..."
"... Even though the - alleged to have been involved in carrying on business during the assessment year 1992- 93, nowhere in the order, have the authorities concerned stated that the nature of business said to have carried on by the respondent / assessee (trust) is in violation to the provision of section 11(4A) of the act - concededly, the object of the respondent / assessee (trust) is to establish, run, manage and assist colleges, schools and other educational institution solely for educational purpose and in that regard to raise or collect funds, donations, gifts - 10(22) ..."
CIT vs. Nahata Charitable Trust - 246 ITR 450 (MAD) "... Charitable purposes - charitable trust - exemption - exemption cannot be denied solely on ground that trust carries on business - Income tax Act, 1961 sec. 11..." Sri Aurobindo Ashram Harpegon Workshop Trust vs. ACWT - 271 ITR 553 (MAD) CIT vs. Pulikkal Medical Foundation Pvt. Ltd. - Pra 20, 28 & 29 - 210 ITR 299 (KER) CIT vs. Economic & Entrepreneurship Development Foundation - 188 ITR 540 (CAL) "... That since the assessee was registered under section 25 of the Companies Act, 1956, it could not have any profit to declare any dividend ..."
:- 38 -: ITA 1332/10 & CO 94/10 Governing body of Rangaraya Medical College vs. Tax Officer, A-ward, Circle I Kakinada - 117 ITR 284 (AP) "... Merely because certain surplus arose from society's operations, it cannot be held that the institution was run for purpose of profit so long as no person or individual was entitled to any portion of the profit and the said profit was utilized for the purpose and for the promotion of the objects of the institution ..."
CIT vs. Kshatriya Girl Schools Managing Board - 245 ITR 170 (MAD) Shanthi Devi Progressive Education Society vs. ADIT - 68 ITD 1 (DEL-TM) "... Assessment year 1993-94 - Assessee society, running two schools, was granted exemption under section 10(22) till assessment year 1992-93 - exemption was denied for assessment year 1993-94 on ground that it was collecting admission fee, donation and loans and thus had been a society for profit and not solely for educational purpose - whether since assessee had been doing these activities right from beginning and same was within powers given in memorandum, there was no reason to object to such collections - held, yes - since Revenue could not point out any case where any part of profit / income was diverted for purpose other than for educational purposes, exemption under section 10(22) could not be denied to assessee - held, yes ..."
"... has to be evaluated each year to find out ..."
"... Circular F.No. 194/16-17 IT (AI) ..."
"... It is quite apparent that their Lordships have not disapproved the practice of collecting funds through donations, gifts, etc., as long as these were ploughed back into the system itself i.e. of imparting education -
:- 39 -: ITA 1332/10 & CO 94/10 no distinction was drawn between donations which were voluntary or otherwise as has been done by the Id. Judicial Member ..."
ITO vs. Model Institute of Education & Research - 77 ITD 375 "... Whether basic test for determining whether institution exists for profit is application of profit and in instant case application of profit in shape of excess of income over expenditure by and large was for purpose of education - held, yes ..."
"... The institution might have had profit which was in the shape of excess of income over expenditure. If such excess called profit was distributed to the persons without any consideration then under those circumstances, it would be held that the institution was for the purpose of profit. If the excess over expenditure of income was subsequently spent within the institution directly and indirectly was for the development of various fields and branches closely linked with the system of imparting education, then under such circumstances, it could not be held that the institution was run for the purpose of profit. The basic test for determining whether the institution for profit is the application for profit..."
"... The institution may have profit which is in the shape of excess of income over expenditure. If such excess called profit is distributed to the persons without any consideration then under those circumstances, it will be held that the institution is for the purpose of profit. If the excess over expenditure of income is subsequently spent within the institution directly and indirectly for the development of various fields and branches closely linked with the system of imparting education then under such circumstances, it cannot be held that the institution is run for the purpose of profit. The basic test for determining the institution for profit is the application of profit ..."
:- 40 -: ITA 1332/10 & CO 94/10 Indian Institute of Bank vs. DDIT - 74 TTJ 523 (MUM) "...Fact that the assessee is earning surplus consistently in each year is not proof per se of a profit motive - memorandum of association of assessee prohibits distribution of profits to its members by way of dividends - that could not be permitted to be changed in absence of any strong factual or legal grounds ..."
"If the profits or income of trade or business is devoted towards charitable purpose and no part thereof is distributed among the members as dividends or bonus, then that trade or business is a means to an end. It is charity"
"The essential test of a charitable purpose is the destination of profits" if the profits continue to feed the charity, the mere occurrence of profits would not detract from the charitable nature of the enterprise"
CBDT circular No. 642 dt. 15.12.2002 also reinforces the assessee's submission in the following words:
"..... it is clarified .... w.e.f. 1st April 1992, profits and gains of business in the case of a trust or institution will not be liable to tax if the business is incidental to the attainment of the objectives of the trust or institution.
40. In the light of the aforesaid circular conceding the position in law in favour of the assessee and the aforesaid line of decisions of the Apex court, jurisdiction Madras High Court and other courts, we hold that, alternatively, the assessee is entitled to exemption u/s 11(4A), even in the event of its activity of running an education institution is categorized as a 'business'.
:- 41 -: ITA 1332/10 & CO 94/10
41. As regards Corpus donations/capitation fees, the ld. AR submitted that on first principles, a donation towards the corpus fund is a capital receipt. Hence, he submitted that even in the absence of any specific provisions, a corpus donation is a capital receipt outside the ambit of 'income'. He relied on the following decisions:
Kilachanf Dev Chand Foundation vs. CIT - 172 ITR 382 (BOM);
CIT vs. Vanchi Trust - 127 ITR 227 (KER);
CIT vs. Bal Utkarsh Society - 119 ITR 137 (GUJ) He further submitted that a donation may be identified as a corpus donation -
• from the intention of the donor expressed in writing or implication • from its treatment in the accounts of the donee and • manner of utilization by the donee
42. It is claimed that corpus fund donations have a specific written direction to treat them as such by the donors, in support of which a copy of such donation receipt has been filed in page No.48 of the "statement of facts". The assessee is authorized to accept such corpus donations by clauses 3 and 5(p) of its trust deed filed in pages No.6 to 17 of the "statement of facts". Further, the assessee has credited the entire corpus donation of ` 1,26,50,000 to the corpus fund account. The ld AR contends, in our opinion rightly, that the :- 42 -: ITA 1332/10 & CO 94/10 Revenue has no basis whatsoever to rechristen the `corpus donation' as `capitation fee' except on his presumptions and assertions in the assessment order and on account of statements by Sri V. Sankar and Sri R. Vijayakumar.
43. The ld. AR has furnished a list of trustees during the year relevant to assessment year 2001-02, in which the name of Sri V. Sankar is not found. The assessee has also filed a certificate from the Trust that Sri V. Sankar was co-opted as a Trustee only on 15.12.2006. Similarly, Sri R. Vijayakumar, secretary to the Pro-Chancellor became an employee of Vellore Institute of Technology only on 2.8.2004, vide copy of his appointment order filed. He was transferred to be Secretary to the Pro-Chancellor only on 9.6.2006, as per copy of office order filed. It is claimed that the statements from the aforesaid 2 persons were obtained under duress and by coercion and have been retracted. Be that as it may, the fact remains that neither Sri V. Sankar nor Sri R. Vijayakumar were either employed or occupying any official position in the Trust during the year relevant to assessment year 2001- 02 and therefore, their statements have no evidentiary value for assessment year 2001-02 and are therefore, disregarded.
44. The assessee further claimed in its written submission that neither before nor after the Tamil Nadu Educational Institutions :- 43 -: ITA 1332/10 & CO 94/10 (Prohibition of collection of capitation fee) Act, 1992 and till the date of hearing, the assessee has ever been complained against or issued any notice for violation of the said Act. In the absence of any such accusation either in the assessment order or rebuttal by the ld.DR, we are inclined to accept the statement, especially since the assessee's reputation of an institution of renown is well known and accepted in many parts of the country. Assessee's submission that the "onus of proving that the apparent state of affairs is not really lies on the person alleging" as held in CIT vs. Daulatram Rawatmull 87 ITR 349 (SC) deserves acceptance. As we find that the Revenue has not discharged this onus and has merely made allegations, we hold that the taxation of corpus fund donations received ` 1,26,50,000 as capitation fees is without any basis.
45. The ld. AR relied on a line of cases which have held that collection of donation by an institution cannot be said to be with a profit motive.
DIT vs. Bagh Mutual Aid Education - 298 ITR 190 (DEL) DIT vs. Andhra Educational Society - 155 Taxman 157 (DEL) "... Donations and had applied entire funds for educational purposes in accordance with its objects and held that it was entitled to exemption under section 10(22) ..."
:- 44 -: ITA 1332/10 & CO 94/10 Shanthi Devi Progressive Education Society vs. ADI - 68 ITD 1 (DEL-TM) "... Exemption was denied for assessment year 1993-94 on ground that it was collecting admission fee, donation and loans and thus had been a society for profit and not solely for educational purpose - whether since assessee had been doing these activities right from beginning and same was within powers given in memorandum, there was no reason to object to such collections - since Revenue could not point out any case where any part of profit / income was diverted for purpose other than for educational purposes, exemption under section 10(22) could not be denied to assessee - held, yes ..."
Agarwal Shiksha Samiti Trust vs. CIT - 168 ITR 751 (RAJ)
46. We are inclined to follow the aforesaid line of decisions and hold that for all the above reasons and following the above judgments, the donations received by the assessee towards `corpus fund' can not be treated as `capitation fees'. We may add that, independent of the aforesaid decisions, another bench of this Tribunal, of which one of us was a member, has in the case of ACIT vs. Balaji Educational and Charitable Public Trust, ITA Nos. 1476 to 1482 /NDS/2010 dt. 5.4.2011, held that "in the absence of proper enquiries or evidence, donations received cannot be treated as capitation fees" following the decisions in:
Director of Income Tax (Exemptions) vs. Sri Belimatha Mahasamasthana Socio Cultural and Educational Trust - 46 DTR (KAR) 290 Maharashtra Academy of Engineering and Educational Research vs. CIT - 133 TTJ 706 (PUNE) :- 45 -: ITA 1332/10 & CO 94/10 Governing Body of Rangaraya Medical College vs. ITO - 117 ITR 284 (AP) Ramarao Adik Education Society vs. CIT - ITA No. 5742/MUM/2007 dt. 11.2.2008 Padanilam Welfare Trust vs Dy. CIT - I.T.A.No. 444/Mds/2010 dated 24.12.2010.
47. The alternate submission of the ld. AR, again wearing the hat of caution by stating that without admitting or conceding that, even if the corpus donations received are in deed capitation fees, as more than 75% of that amount has also been applied for charitable purposes, the said donations would still be exempt u/s 11 (1)(a). As we have already held that the corpus fund donations received cannot be treated as capitation fees and as the factual matrix of the details are not available, we refrain from expressing our decision on this issue. The ld. AR then advanced an interesting argument on the interpretation of 'voluntary' by relying on the decision in CIT vs. Bengal Mills and Steamers Presbyterian Association 140 ITR 586 (CAL) that, in the absence of a legal right to collect donations by the assessee and an enforceable obligation to pay the donations against the donor, all donations received by the assessee are only 'voluntary'. Under these circumstances, it was held by the Calcutta High Court that, as :- 46 -: ITA 1332/10 & CO 94/10 "... the association had no claim or right to the recurrence of the contributions with unfailing regularity and in those circumstances, the contributions were non recurring in character and could not be regarded as income".
48. We find direct support to the aforesaid construction of the term `voluntary' in Abdul Salam vs UOI AIR 1969 All 223 - at 228 where, the meaning of the term has been explained as under:
"Means doing of something as the result of free exercise of the will, but not something done under a legal duty."
49. Even de-hors the above judgments we fail to see as to how a donation, even if paid at the time of admission, and for the purpose of securing admission into the assessee's institution can be said to be not 'voluntary'. After all, educational institutions have proliferated in the past 2 decades on account of the Government's initiative to rope in the private sector to perform its constitutional obligation of providing education to its citizens. Hence, a student or his parents have the right of choosing the educational institution and can never be compelled to choose a particular institution or pay donation for securing admission into such institution. Hence, if a student or his parents are so particular to gain admission into an institution and for that purpose are willing to donate money for the improvement of the institution, then it appears to us to be a 'voluntary' act and therefore, :- 47 -: ITA 1332/10 & CO 94/10 even if the donations were paid at the time of or to secure admission into the institution, it will not cease to be 'voluntary' so as to fall outside the ambit of sec. 11(1)(d) or 12(1). We may add that if such donations were collected from students/parents after the admission, then the Revenue's case may be on a better footing, as then, it could be said that such donations were not `voluntary', but under compulsion, as the student was at the mercy of the institution. However, we fail to see how the assessee could have compelled a student/parent before being admitted to its institution. We are inclined to look at this matter from another dimension too. Sec. 2(24)(iia), sec. 11(1)(d) and sec. 12(1) all use the term 'contribution' and not 'donation'. Neither of these 2 terms have been defined by the Income Tax Act. We will therefore, have to adopt the plain English meaning of these words some of which are:
Contribution Law Definition
1. The right of a debtor who has paid the entirety of a debt owed by her and others to recover the others Â' proportionate share of the debt.
2. The right of a joint tortfeasor who has paid more than her proportionate share of a judgment to recover the amount in excess of her share from the other tortfeasors.
3. The right of a joint tortfeasor to demand that the other tortfeasors supply their proportionate share of what is required to compensate the injured party.
4. A payment made by a co-debtor or joint tortfeasor of her proportionate share of what is due. See also indemnity.
:- 48 -: ITA 1332/10 & CO 94/10 Webster's New World Law Dictionary Copyright © 2010 by Wiley Publishing, Inc.,Hoboken, NewJersey.
Used by arrangement with John Wiley & Sons, Inc DONATION, contracts. The act by which the owner of a thing, voluntarily transfers the title and possession of the same, from himself to another person, without any consideration; a gift.(q.v.) A donation is never perfected until it is has been accepted, for the acceptance (q.v.) is requisite to make the donation complete. Vide Assent, and Ayl. Pand. tit. 9 Clef des Lois Rom. h.t.
A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856 The Oxford Dictionary defines `contribution' as:
"a sum of money that is given to a person or an organization in order to help pay for something - contribution (to something) a sum of money that you pay regularly to your employer or the government in order to pay for benefits such as health insurance, a pension, etc. - monthly contributions to the pension scheme National Insurance contributions -
contribution (to something) the act of giving something, especially money, to help a person or an organization;
`Donation' is defined by the Oxford Dictionary as:
"something that is given to a person or an organization such as a charity, in order to help them; the act of giving something in this way"
50. On reading the above two terms, it appears to us that -
:- 49 -: ITA 1332/10 & CO 94/10
1. Contribution' is a term of wider import than 'donation' and it includes 'donation'.
2. While 'contribution' may have quid pro quo, a donation does not have quid pro quo.
3. 'Contribution' may be either 'voluntary' or under a legal or contractual obligation, but a 'donation' can only be 'voluntary'.
51. We then have to ascertain the meaning of `voluntary', which has been defined as:
vol·un·tar·y adj.
• Done or undertaken of one's own free will: a voluntary decision to leave the job.
• Normally controlled by or subject to individual volition:
voluntary muscle contractions.
• Capable of making choices; having the faculty of will. • Supported by contributions or charitable donations rather than by government appropriations: voluntary hospitals.
Law a. Without legal obligation or consideration: a voluntary conveyance of property.
b. Done deliberately; intentional: voluntary manslaughter. [Middle English, from Latin volunt rius, from volunt s, choice, from velle, vol-, to wish; see wel-1 in Indo-European roots.] Synonyms: voluntary, intentional, deliberate, willful, willing These adjectives mean being or resulting from one's own free will. Voluntary implies the operation of unforced choice: "Ignorance, when it is voluntary, is criminal" (Samuel Johnson).
Intentional applies to something undertaken to further a :- 50 -: ITA 1332/10 & CO 94/10 plan or realize an aim: "I will abstain from all intentional wrongdoing and harm" (Hippocratic Oath).
Deliberate stresses premeditation and full awareness of the character and consequences of one's acts: taking deliberate and decisive action.
Willful implies deliberate, headstrong persistence in a self- determined course of action: a willful waste of time. Willing suggests ready or cheerful acquiescence in the proposals or requirements of another: "The first requisite of a good citizen ... is that he shall be able and willing to pull his weight" (Theodore Roosevelt).
The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.
52. When we read sections 2(24)(iia), 11(1)(d) and 12(1) using the phrase "'voluntary' contribution" in the light of the plain English meanings of the aforesaid terms, the wisdom of the legislature in qualifying the term 'contribution' by 'voluntary' becomes crystal clear. As explained above, since 'contribution' may be either 'voluntary' or under a legal or contractual obligation, the statute has prescribed that 'voluntary contributions' will be deemed to be income - Otherwise, such contributions will be capital receipts on first principles. As contributions pursuant to legal or contractual obligations are income on first principles, there was no need to specify such contributions in the definition aforesaid. In this regard, the decision in the case of CIT vs. Hyderabad Race Club Charitable Trust, 262 ITR 194 (AP) is :- 51 -: ITA 1332/10 & CO 94/10 revealing. In that case the Hon'ble Andhra Pradesh High Court, after examining the meaning of 'contribution' has held that, even the income from licensing of racing and betting can be "voluntary" 'contribution' within the meaning of sec. 12. This judgement directly endorses the meaning that we have understood in the above para. The Bombay High Court in the case of CIT vs Trustees of Visha Nima charity trust 138 ITR 564 (Bom) held that Sale proceeds of tickets for an entertainment show and advertisement charges for a souvenir are `voluntary contributions' u/s 12(1).
53. In the case of CIT vs. Sri Billeswara Charitable Trust - 145 ITR 29 (MAD) it has been held in page 29 - "........ When Parliament speaks of income derived from voluntary contributions, which voluntary contributions are ordinarily windfalls, the legitimate implication to be read into the statue is that voluntary contributions per se are not regarded as income at all. On a proper construction of sec. 12(1) and sec. 12(2) of the I.T. Act, 1961, voluntary contributions directed to be held as part of the corpus of the donee cannot be held to be income for the purpose of applying sec. 12(2) ..." . In page 32-33 - "... The matter may be looked at from the point of view of the charity as well. It may be that a charity lives on voluntary contributions and public donations. In most cases, the charities may have to wait :- 52 -: ITA 1332/10 & CO 94/10 too long to obtain the donations or voluntary contributions. The charity may also have to look everywhere, even heavenward, for contributions and donations of money and windfalls. There is no exercise of control over windfalls in the sense that one cannot say that some more is expected or would come in or that enough had already been secured. The essence therefore, of a windfall or voluntary contribution as opposed to income is that it is unexpected. The characteristic of income is that it is a periodical monetary return coming in with regularity or at least expected regularity. So, voluntary contributions per se are not dealt with by sec. 12(1) of the Act. They need not be, in order to stand outside the field of taxation, because, they are windfalls and hence the very antithesis of income and, therefore, there is no need to exempt them or to exclude them from the total income. They stay out on account of their innate character as non-income. What sec. 12(1) meant before its amendment in 1972 was that while voluntary contributions are non-income, even what is undoubtedly income of charities, is not to be charged to tax, if the source of such income is traceable to voluntary contributions. To put it differently, Parliament was extremely charitable to charities. That was the liberality of sec. 12(1) of the Act, as it stood prior to April 1, 1973, that voluntary contributions are non-income and even income derived from such :- 53 -: ITA 1332/10 & CO 94/10 contributions are exempt from tax in certain circumstances went unnoticed and was lost sight of. Added to this, section 12(1) had also been interpreted in such a manner and in a slanting fashion as well, with the result that advantage was taken of it to put down in the statute book the receipt theory about voluntary contributions. Under the present section, the expression "income .....derived from voluntary contributions" has been avoided and voluntary contributions are straight away deemed to be income. This shows that but for the deeming, those would not be taxable gesture of parliamentary alms giving to charities. The section now keeps out only voluntary contributions tied up with a direction that the charity must use it as part of the trust corpus. For the rest, what is undoubtedly non-income, is now deemed to be income on the basis of precedents, which Parliament had take advantage of to cut down the amplitude of exemption from taxation enjoyed by the charities..." .
54. Per Page 783 of Volume 783 of CORPUS JURIS SECUNDUM:
"However, the expression "Donation" is not equivalent to "Gift"; but a donation .... need not have all of the essentials of a gift.
55. Thus, a Gift must be without a consideration, but a donation may be for a consideration; and a Gift must be entirely executed, while a Donation need not be. The term Donation is more aptly used to :- 54 -: ITA 1332/10 & CO 94/10 describe that which is given to a public cause or charity than to indicate a bounty to an individual (CORPUS JURIS SECUNDUM, VOL. 38, PAGE 783).
56. Viewed in this perspective, we have no doubt in our mind that the 'corpus donations' received by the assessee pursuant to specific written direction from the donor to that effect as per a sample copy of the receipt filed before us that these `corpus donations' are only 'voluntary contributions' envisage by sections 2(24)(iia), 11(1)(d) and 12(1) and therefore, we hold that these corpus donations are exempt u/s 11(1)(d).
57. The ld.AR further advanced another attractive argument by relying on CIT vs. Tollygunge Club Limited - 107 ITR 776 (SC) to submit that the corpus donation, even assuming, without admitting, was collected at the time of admission, it will not form part of 'income' of the trust but would only be a capital receipt. In that case, a surcharge was levied on the admission of members into a club for the purpose of charity and the surcharge was claimed to be held in trust for charitable purposes and was actually expended for charitable purposes. It was held that "... the surcharge was not a part of the price for admission but was a payment made for the specific purpose of being applied to local charities.
:- 55 -: ITA 1332/10 & CO 94/10 ... the only requisites which must be satisfied are that there should be "purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes"
58. Applying the ratio of this decision, it was submitted that even assuming, without admitting that the corpus donations were received at the time of admission, the fact that it was received with a specific written direction from the donor that the donation was towards the corpus fund of the trust followed up by the factum of actual application of the donation for the capital purposes of the trust would, by virtue of the ratio of the said judgment would take the corpus donations received outside the ambit of income being a capital receipt. As this attractive argument is fortified by the aforesaid decision of the Apex court, we accept the same and hold that, even on this score, the corpus donation received cannot be treated as capitation fee receipt.
59. Regarding Assessing Officer's power to determine whether trust is charitable, it was submitted that once the trust is registered u/s 12A, the Assessing Officer has no loco-standi to decide as to whether it is 'charitable' or otherwise. Explaining the scheme of assessment of trusts, it was contended that the prerogative of deciding and registering a trust as 'charitable' or 'religious' vested with the Commissioner of Income Tax at the threshold level of granting :- 56 -: ITA 1332/10 & CO 94/10 registration u/s 12A / 12AA. It was further submitted that once the trust is registered by the CIT under a particular category, the process of definition and classification of the activity ceases and that thereafter the Assessing Officer is not empowered to review the decision making in the domain of the higher authority - the Commissioner of Income Tax. The aforesaid submission was reinforced by the ld.AR by relying the following cases:
ACIT vs. Surat City Gymkhana - 300 ITR 214 (SC) "... Charitable trust - registration - further probe into objects after registration - not permissible ..."
"...The registration of a trust under section 12A of the income tax act, 1961, once done is a fait accompli and the Assessing Officer cannot thereafter make further probe into the objects of the trust ..."
Hiralal Bhagwati vs. CIT - 246 ITR 188 (GUJ) "... Once the registration under section 12A(a) of the Act was granted, the income tax officer was not justified in refusing the benefits on the ground that it was not for the benefit of the public at large ..."
ADIT (Exemption) vs. Raistani Siksha Samithi - 23 SOT 124 (HYD) "... Charitable trust - exemption under section 11 - role of Assessing Officer after registration under sec. 12AA - after registration under sec. 12AA, the role of Assessing Officer is limited to denying exemption under sec. 11 qua income not found applied for charitable purposes and does not extend to holding that trust or institution is not established for charitable purpose hence not eligible for exemption under sec. 11 ..."
:- 57 -: ITA 1332/10 & CO 94/10 "... The role of the Assessing Officer in such cases stops here. But he cannot go further overruling a superior authority to hold that the trust or institution is not established for charitable purpose. Therefore, the Assessing Officer has exceeded his jurisdiction in saying that the assessee is not entitled to exemption under sec. 11. He can say so, only when the income is not applied for the stated purpose, but not otherwise ..." ITO vs. Trilok Tirath Vidyavati Chuttani Charitable Trust - 90 ITD 569 (CHD) "...When once the character of the institution being charitable is accepted by the Commissioner at the time of granting registration, the Assessing Officer cannot question the charitable character of the institution at the time of completing the assessment and the assessee cannot be denied exemption in respect of income on the ground that it is not a charitable institution ..." Calicut Islamic Cultural Society vs. ACIT - 28 SOT 148 (COCH) "... Once the registration is granted to the assessee by the Commissioner of Income Tax, Assessing Officer cannot go into probing the objects and the purposes of the trust or institution and that is within the exclusive domain and jurisdiction of the Commissioner of Income Tax. What Assessing Officer can do that he can at the most investigate the matter within the four corners of sec. 13. In this case the Assessing Officer has gone with investigating and probing the basic objects of the trust by entering into shoes of the Commissioner of Income Tax and such exercise is not permissible ..." ITO vs. Baba Dhall Educational Society of India - 27 SOT 391 (DEL) "...Once registration was granted by the CIT under sec. 12AA, it could not be said that the objects of the trust were not charitable - on the date when assessment was framed, the order of CIT registering the trust under sec. 12A / 12AA was available with the Assessing Officer ..."
:- 58 -: ITA 1332/10 & CO 94/10
60. The ld. AR further submitted that the power/duty of the Assessing Officer during assessment are as under:
(i) To determine whether the required % of
income has been applied / accumulated in
accordance with sec. 11;
(ii) To determine whether conditions laid down in
sec. 12A have been complied with and
(iii) To determine whether sec. 13 has been violated.
It was submitted that the Assessing Officer cannot travel beyond the aforesaid functions and usurp the powers of the Commissioner of Income Tax, to determine as to whether the activities of the trust are charitable.
61. As this submission by the ld. AR is on the basis of the direct decision of the Apex court in ACIT vs. Surat City Gymkhana - 300 ITR 214 (SC), apart from the other decisions on this issue cited above, we respectfully follow the decision of the Apex court and hold that the Assessing Officer has no power to determine whether the activity of the assessee was charitable in nature and therefore, even on this score the denial of exemption u/s 11 by holding that the activity of the trust was not charitable deserves to be rejected.
62. For all the reasons aforesaid, we uphold the order of the ld. CIT(A) in holding that the trust is eligible for exemption u/s 11 in respect of its surplus from education activities and corpus donations received and dismiss the Revenue's appeal.
:- 59 -: ITA 1332/10 & CO 94/10
63. In the result, the appeal filed by the Revenue stands dismissed.
64. The grounds raised in the cross objection regarding levy of tax at maximum marginal rates will be of academic interest in view of our above finding. The levy of surcharge and interest u/s 234A and 234B, being now mandatory, would have a consequential effect. As we have upheld the order of the ld. CIT(A) and no tax liability would arise, the cross objection on levy of tax at maximum margin rate, levy of surcharge and levy of interest u/s 234A and 234B become academic and therefore, infructuous.
65. As regards the issue on the validity of reassessment is concerned, we find that although the return was filed u/s 139(4) on 21.11.2002 claiming refund of TDS of ` 10150/-, no assessment order was passed nor an intimation issued u/s 143(1). Although the assessment order claims that the return was processed u/s 143(1) by the ADIT - III (Exemptions) in para 10.1, page 5 of the order, the date of 'processing' is not specified in the order. Thus, assessee's claim that the original return filed on 21.11.2002 was not acted upon, especially as the refund of ` 10150/- claimed was not issued, appears to be acceptable. The ld.AR has relied upon the following cases to contend that when the return filed u/s 139 is not acted upon under :- 60 -: ITA 1332/10 & CO 94/10 either section 143(1) or section 143(3), the Assessing Officer is precluded from resorting to reassessment proceedings u/s 147.
Trustees of H.E.H. The Nizam Supplemental Family Trust vs. CIT - 242 ITR 381 (SC) State of Assam vs. Deva Prasad Barua - 75 ITR 18 (SC) CIT Vs. M.K.K.R. Muthukaruppan Chettiar - 78 ITR 69 (SC) Estate of A.M.K.M. Karuppan Chettiar vs. CIT - 72 ITR 403 (SC) CIT vs. Raman Chettiar - 55 ITR 630 (SC) Ganshyamdas vs. CIT - 51 ITR 557 (SC) CIT vs. Ranchondas Karsondas - 36 ITR 569 (SC) CIT vs. K.M. Pachayappan - 304 ITR 264 (MAD) CIT vs. Qatalys Software Technologies Ltd. - 308 ITR 249 (MAD) A.S.S.P. & Co. vs. CIT - 172 ITR 274 (MAD) N. Naganatha Iyer vs. CIT - 60 ITR 647 (MAD) S.M. Muthia devar vs. CIT - 39 ITR 107 (MAD) KLM Royal Dutch Airlines vs. ADIT - 292 ITR 49 (DEL) CIT vs. Rajendra G. Shah - 247 ITR 772 (BOM) Hooghly Mills Co. Ltd. vs. ACIT - 253 ITR 296 (CAL) Soolchand Ramsewak vs. CIT - 73 ITR 466 (ALL) Hargovind Singh Naram Singh vs. CIT - 90 ITR 435 (BOM) Mahendra Mohansukar vs. ITO - 112 ITR 47 (CAL) CIT vs. Badriprasad Bianwala - 133 ITR 433 (CAL) Indian Tubelo Ltd. vs. ITO - 272 ITR 439 (CAL) S.P. Kochhar vs. ITO - 145 ITR 255 (ALL) Sathish Chandra Arya vs. ITO - 146 ITR 334 (MP) Nilofel Hamed vs. ITO - 235 ITR 161 (KER) Motorola Inc. vs. CIT - 95 ITD 269 (DEL-SB)
66. We are not inclined to agree, as all the aforesaid judgments were rendered prior to the scheme of intimations u/s 143(1) and the introduction of Explanation 2(b) to section 147 which clearly encompasses the case of the assessee. We therefore, uphold the order :- 61 -: ITA 1332/10 & CO 94/10 of the ld. CIT(A) confirming the validity of the reassessment proceedings and dismiss this cross objection of the assessee.
67. In the result, the cross objection filed by the assessee stands dismissed.
68. To summarize the result, both, the appeal of the Revenue and the cross objection of the assessee stand dismissed.
The order pronounced in the open court on 9.6.2011.
Sd/- Sd/-
(N.S. SAINI) ( HARI OM MARATHA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 9th June, 2011
RD
Copy to: Appellant /Respondent/CIT(A)/CIT/DR