Income Tax Appellate Tribunal - Chandigarh
M/S Mahatma Gandhi State Institute Of ... vs Dcit, Chandigarh on 30 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.270/Chd/2017
(Assessment Year : 2013-14)
M/s Mahatma Gandhi State Vs. The D.C.I.T.,
Institute of Public Administration, Circle-1(Exemption),
Punjab Institutional Area, Chandigarh.
Sector 26, Chandigarh.
PAN: AAAJM0319A
(Appellant) (Respondent)
Appellant by : Shri T.N.Singla
Respondent by : Shri Ravi Sarangal, CIT DR
Date of hearing : 26.09.2017
Date of Pronouncement : 30.10.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Th i s a p p e a l ha s b e e n f i l e d by t h e a s s e s s ee a ga i n st the o r d er of L d . CI T ( A p p ea l s ) - 2 , C h a n d i ga r h d a t ed 0 1 . 1 2 . 2 0 16 r e l ati n g t o a ss e s s m ent y e a r 2 01 3 - 1 4 .
2. Th e a s s e s s e e i n t h e p r e s e n t a p p e al i s a g g r i e v e d by t h e a c t i on o f th e L d . CI T ( A p p e a l s) i n u p h ol d i n g th e o r d e r o f the A s s e s s i ng Officer d e ny i n g the a s s e s s e e 's claim of e x e m p t i o n u nd e r s e c t i o n 1 0 ( 2 3 C) ( i i i a b ) o f t h e I nc o m e Ta x A c t , 1 9 6 1 ( i n sh or t ' t h e Ac t ' ) .
3. Brief fa c t s r e l at i n g to the c as e are that t he assessee is a society r e g i ste r e d w i th Sub R e g i s t r ar , C h a n d i g a rh a nd e s t a b l i s h ed as an I ns t i t u te by the G o v e r n m e nt o f Pu n j a b w i th t h e f ol l o w i n g o b j e c ts : 2
i. To undertake and assist in the organization of training and study courses, conferences, seminars and lectures.
ii. To undertake aid, promote and coordinate research and training through its own or other agencies, including Universities and other institutions of standing.
iii. To establish wings for'(i) Education, Training and Orientation, (ii) Research including Action Research,
(iii) Consultancy; (iv) Publications and such others as may be necessary to achieve the objects.
iv. To analyses specific problems encountered in the planning and implementation of projects; policies and programme of the Government and to suggest suitable remedial measures.
v. To prepare, print and publish papers, periodicals and books in furtherance of the objects of the Society. vi. To establish and maintain libraries and information services. vii. To collaborate with other institutions, organizations, associations and societies, in India or abroad interest in similar objects; and viii. To offer fellowships, scholarships, prizes and stipends in furtherance of the objects of the Institutions.
4. Th e i n c o m e o f t h e a s s e s s ee s oc i e t y w a s c l ai me d a s exempt u n de r se c t i o n 10(23C)(iiiab) of th e A ct for the i m p u g n e d a s s e ssm e n t y e ar . Th e m a i n s o u r c e o f i n c o m e o f t h e a s s es s e e w er e g r a nt s i n a i d f r o m t h e Go v e rn m e n t of P u n j a b an d t he C e n t r al G o ve rn m e n t , re n t a l i n c o m e a nd training fees. Th e A s s e s s i n g O f f i c e r d e n i ed th e a s s e ss e e e x e m p t i o n un d e r s e c t i o n 1 0 ( 2 3C ) ( i i i a b ) f o r th e r ea s o n t h a t h e f o u n d t h a t th e a s s e s s e e d i d n o t f u l f i l l t h e c o n d i t i o ns 3 under s e ct i o n 10(23C)(iiiab) of existing solely for the p u r p o s e of e d u cat i o n a n d n o t f or p r o f i t mo t i v e s i nc e ;
a ) t h e o b j ec t s & a c t i v i ti e s o f th e a s s e s s ee w e re n o t c o v e r e d un d e r "ed u c a t i o n "
b ) i t w a s e a r n i ng i n c o me f ro m l et t i n g ou t i t s pr em i s e s a n d r u n n i n g c oa c h i n g c l a ss e s w h i c h a c t i vi t i e s w e r e b e y o n d i ts s t a te d o b j e c t s .
5. Th e A s s e s s i n g O f f i c e r a l s o n o t e d t h a t t h e a s s e s s ee h a d initially not claimed the said exemption in the return of i n c o m e fi l e d and f u r t h er h a d fi l e d a u di t r e po rt i n F o rm No.10B which was applicable for assessees who claim exemption u n de r s e c t i o n 1 1 . Th e A s s e s s i n g O f f i c e r a l s o f o u n d t h a t t h e as s e s s e e h ad m a de a d v a n c e s t o P un j a b S m a l l I n du s t r i es & E x po r t C o r po r a t i on L t d ( h e re i n a f te r r e f e r r e d a s P S I E C ) , w h i c h wa s i n c on t r a v e nt i o n o f t he p r e sc r i b e d m o d e s o f i n v e s t m e nt s a s p e r s e c t i o n 1 1 ( 5 ) o f t h e A c t. For the a b o v e s a i d r e a so n s , t h e A s s e s si n g O f f i c e r h e l d t h a t t h e assessee w as not eligible fo r exemption u nd er s e c t i on 1 0 ( 2 3 C ) ( i i i a b ) of t h e A c t a n d , th e r e f o r e , m a d e a d d i t i o n on a c c o u n t of s u r pl u s o f R s .2 , 0 7 , 99 ,1 3 6 / - .
6. B e f o r e t h e L d . C I T ( A p p e a l s ) , th e a s s e s s e e m ad e d e t a i l e d s u b mi s si o n s t o t h e e f f e ct t h a t i t h a d be en a l l o we d e x e m p t i o n u / s 1 0 ( 2 3 C ) ( i i i a b ) c l a i m e d i n e a r l i e r y e a r s on i d e n t i c a l s e t of f a c t s a n d t h a t al l a c t i vi t i e s w e r e p a r t a n d p a r c e l o f a n d i nc i d e n t a l to the main activity of imparting e d u c a t i o n an d th a t t h e e n t i re i nc o m e e a r n e d, w he t h e r f r o m 4 e d u c a t i o na l a c t i v i t i e s o r f r o m re n t a l i n co m e , wa s u t i l i zed f o r t h e p u r po s e o f i m p a r t i ng e du c a t i o n o nl y a nd t h a t t h e a d v a n c e g i ve n t o P S I E C w a s f o r d e v e l o p m en t o f va c a n t l a nd o f t h e i n s ti t u t i on f o r e x t e n si o n o f i t s i nf r a s tru c t u r e f o r e d u c a t i o na l p u rp o s e . Th u s t h e a s s e s s e e c o n t e nd e d t h a t i t h a d f u l f i l l e d a l l t h e c o n d i t i on s s t i p u l a t e d un de r s e c t i o n 10(23C)(iiiab) of the Act. Th e L d . C I T ( A p p e a l s ) r e j e c t e d t h e c o n t e n t i on s r a i se d b y t h e a ss e s se e a n d u p h el d th e o r d e r o f t h e A s s e s s i ng O ff i c e r s t a t i ng t h a t t h e A s s e s s i n g Of f i c e r h a d g i v e n d e t a i l e d f i n d i n g s o n t h e i ss u e t h a t t h e as se s s e e w a s n o t e x i s t i n g s o l el y f o r t h e p u r p os e o f i m p a rt i n g e d u c a t i on and not for making profits. Th e r e l e v a n t f i n di n g s o f t h e L d . CI T ( A p p e a l s) a t p a r a 6 . 3 and 6 . 3 . 1 o f t h e or d e r a r e a s under:
"6.3. The submission of the appellant, assessment order and relevant facts on the record have been carefully considered. Appellant has mainly placed reliance on the judgement of Hon'ble Supreme Court in the case of Visvesvaraya Technological University (supra). On perusal of the judgement it is seen that Hon'ble Court has laid down that entitlement for exemption u/s 10(23C)(iiiab) is subject to two conditions. Firstly the educational institutional or the university must be solely for the purpose of education and without any profit motive. Secondly it must be wholly or substantially financed by the government. From perusal of the total receipts and the grant received from government, it is seen that the appellant is substantially financed by the government as the grants to the assessee exceeds 50% of total receipts. So far as the condition that the educational institution is solely for the purpose of the education and without any profit motive, assessing officer has given detailed findings vis-a-vis objects and activities of the 5 assessee society as mentioned in the MOA. The appellant is getting sufficient grants from the government even than it is indulging in the activities of providing training to various organizations and also providing coaching for competitive examinations and these activities do not come under the purview of education. Appellant is also collecting revenue from letting out the premise to various organizations and on account of these activities the rent and fees from training and coaching classes have been increasing from year to year and as a result surplus is also generated over the years. The letting out of premises from rent is not an object as per the MOA of the assessee society. Assessing Officer has also mentioned that assessee has not claimed the exemption u/s 10(23C)(iiiab) of the Act in. the return of income and the claim was made during assessment proceeding. It was also noticed that assessee has audited books of accounts as per form 10B which is applicable only for the assessee's who claimed exemption u/s 11 but assessee is not registered u/s 12AA of the Act. For claiming deduction u/s 10(23C)(iiiab) of the Act, assessee was required to file audit report in form 10BB of the Act which was not done. It has also been noted that appellant has given advances to Punjab Small Industries and Export Corporation Ltd. (PSIEC), which are recoverable of Rs.31.98 crore and the assessee could not file the reason and purpose for such advance before the assessing officer.
6.3.1 The totality of the circumstances narrated above suggest that assessee is indulging into the activities which are not as per the objects and is not existing solely for the purpose of education as it has a profit motive. The advances recoverable from PSIEC has not been explained by the appellant. It has been held by Hon'ble Supreme Court in the case of American Hotel & Lodging Association, Educational Institute vs. CBDT 2008 (301) ITR 86 SC that in order to ascertain whether the institute is carried on with the object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is 6 established. The outstanding balance with PSIEC is in violation of provision of section 10(23C) read with section 11(5) of the Act. During the assessment proceeding assessee failed to explain the reason and purpose of these advances and during appeal proceeding also it was not established that these advances have been made as per the objects of the institution. Therefore, assessing officer has given reasoned finding that assessee is not eligible for exemption u/s 10 (23C)(iiiab) of the Act and the same are upheld. Grounds of appeal No. 2, 3, 4, 5 and 6 are dismissed."
7. A g g r i e v e d b y th e s a m e , t h e a ss e ss e e h as c o m e up i n a p p e a l b e f o re u s r a i s i ng t h e f o l l o w i n g gr o u n d s :
1. That the order of Learned Commissioner of Income Tax (A) is bad, against the facts & Law.
2. That the Learned Commissioner of Income Tax (A) has wrongly upheld the activities of the appellant as non educational.
3. That the Learned Commissioner of Income Tax (A) has wrongly denied the exemption u/s 10(23C)(iiiab) of the Income Tax Act, 1961.
4. That the Learned Commissioner of Income Tax (A) has wrongly disallowed whole of the expenses incurred during the year by the appellant.
5. That the Learned Commissioner of Income Tax (A) has wrongly treated the surplus as income of the appellant, which is to be transferred/adjusted by the government in the following years.
6. That the receipts which didn't belong to appellant has been wrongly treated as income of the appellant
7. That the Learned Commissioner of Income Tax (A) has wrongly treated payment to PSIEC as violation of the provision of section 10(23C) r.ws. 11(5) of the Act.
8. That the appellant craves leave to add, alter, amend or withdraw any grounds of appeal before the final hearing.
8. G r o u n d N o s . 1 a n d 8 r a i s e d b y t h e a s s e s s e e a re g e n e r a l i n n a t ure a n d , t he r e f o re , n e e d n o a d j u d i ca t i o n .
9. Ground Nos.2, 3 & 7 ra i s e d b y t h e a s se s s e e a r e vis-à-vis t he denial of exemption u nde r section 1 0 ( 2 3 C ) ( i i i a b ) o f t h e A c t b y hol d i n g t ha t t h e a s s e s s e e 's 7 activities w er e n o n - e d u c at i o n a l and f or the purpose of e a r n i n g p r o fi t an d t h e p a y m e n t m a d e t o P S I EC w a s i n v i o l a t i o n o f s e c ti o n 1 1 ( 5 ) o f t h e A c t . S i n c e t h e gr o u n d s a r e i n t e r r e l at e d the y are being taken up to g e t h e r for a d j u d i c a ti o n .
10. Before us, the Ld. counsel for the a s s e s s ee c o n t e n d e d t ha t th e f i n d i n g s o f t he L d . CI T ( A p p e a l s ) t h a t t h e a s s e s s e e w as i nd u l g i n g i n a c t i v i t i e s w h i ch c o ul d n o t b e said to be for the p u r p os e of e d u c a t i on , w a s f a c t u a l ly i n c o r r e c t. Th e L d . c o u n s e l f o r t he a s s e s s e e p o i nte d o u t t h a t t h e b a s i s f o r a rri v i n g a t s u c h f i nd i n g s i s t h a t t he a s s e s s e e is c o l l ec t i n g r ev e n u e f ro m l et ti n g out the pre m i s e s to v a r i o u s or g a n i zat i o n s a n d a l s o ch a r g i n g f e e s fr om t r a i n i n g a n d c o a c hi n g c l a s s e s , b ot h o f w h i c h a l l e g e d l y h a v e b e e n h e l d t o n o t c ome u n d e r t h e p urv i e w o f e d u c a ti on . Th e L d . c o u n s e l f or t h e a s s e s s e e po i n t e d o u t t h a t i t w a s e x p l a i n e d t o t h e L d . CI T ( A p p e a l s ) t h a t t he t r a i n i n g a n d s t ud y c o u r s es c o n d u c t e d b y t he a s s e s s ee s o ci e t y w e r e i n p u r su an c e t o th e stated o bj e c t s of the i ns t i t u ti o n . L d . C ou n s e l for the a s s e s s e e p o i n t ed o u t t h at t h e as s e s s e e h a s b een c a r r y i n g o u t t h e s e ac t i v i ti e s s i n c e i nc e p t i on , c l a i m i n g e x e mp t i o n u /s 1 0 ( 2 3 C ) ( i i i a b ) a nd h a s ne v e r b e en f o u n d t o be c ar r y i n g ou t activities not in the n a tu r e of imparting e d uc a t i o n . In s u p p o r t L d . C o uns e l f o r t h e a s s e ss e e d r e w o u r a t te n t i o n to the following:
a ) Th a t i n t h e p r e c e d i n g y e a rs i . e . a s s e s sm e n t y e a r s
2 0 1 0 - 1 1 a n d 2 01 2 - 1 3 th e a ss e ss e e h a d b e e n a l l o w e d 8 t h e c l a i m o f e x em p t i o n u n d er s ec t i o n 1 0 ( 2 3C ) ( i i i a b ) o n t h e s a m e s e t o f fa c t s . Th e L d . c o u n s e l f o r t h e a sse s s e e d r e w o u r a t t e n ti o n t o t h e a s s es s m e n t o r d e r f or t h e i m p u g n e d y e a r s p l a c e d at P a pe r B o o k p a ge N os . 25 t o
27.
b) Th a t the as s e s s e e s o c i et y had been i s su e d a c e r t i f i ca t e f o r no n d e d uc t i o n o f t a x a t so u r c e fo r t he y e a r s 2 0 0 1 -0 2 an d 2 0 0 2 - 0 3 , on t h e p r e m i s e th a t i t was c o v e re d under the p ro v i s i o n s of se c t i o n 1 0 ( 2 3 C ) ( i i i a b ) o f t h e Ac t . Th e L d . c o u n s e l f or t he a s s e s s e e d r e w o u r a t t e n t i on t o t h e s a i d c e r ti f i c a te i s s u e d t o t h e M a n a g e r , I CI CI B a n k L t d . , S e cto r 9 , Sector 35, Ch an d i g a r h and Ma n a g e r , HDFC Bank, S e c t o r 7 P a n c h ku l a , p l a ce d a t P ap e r B o o k p a g e No . 2 4 .
c) Th e c o m m u n i c a t i o n r e c ei v e d f r o m t h e o f f i c e of t h e Chief Commissioner of I n c o me Ta x , N.W Region, C h a n d i g a rh s t a ti n g that as p er the p r o v i s i ons of s e c t i o n 1 0( 2 3 C ) ( i i i a b ) i t wa s n o t r e q u i r e d to s e e k a n y a p p r o v a l f o r c l a i m i n g t h e s a i d e xe m p t i o n .
11. Th e L d . c o u n s e l f o r t h e a s s e ss e e s t a t e d t h a t i t i s e v i d e n t f r o m t h e a b o v e t h a t th e a s s e s s e e h a d al l a l o n g b ee n a l l o w e d e x e m pt i on u n d e r s e c ti o n 1 0 ( 2 3 C ) ( i i i a b ) o f t h e A c t b y t h e R e v e n u e a n d h a d b e e n r e c o gn i z e d a s b e i n g el i g i b l e f o r the same also. Th e L d . c o u n s e l f o r t h e a s s e s se e s t a t e d t h a t s i n c e t h e r e wa s n o c h a n g e i n t h e f a c t u a l ci r cu m s t a n c e s f r o m t h e p r e c e d i n g y e a r s , t h e r e w a s n o r e a s o n to h o l d t h a t 9 t h e a s s e s s e e w as n o t e n t i t l e d to c l a i m e x e m p t i o n u n d e r s e c t i o n 10 ( 2 3 C ) ( i i i a b ) o f t h e Ac t .
12. Th e L d . c o u n s e l f o r t h e a s se s se e f u r t h e r s u bm i t t e d that t he i nc o me e a r n ed on ac c o u n t of r en t i n g out of b u i l d i n g /c o n f e ren c e hall w as ea r n e d in r el a t i o n to the e d u c a t i o na l a c ti v i t i e s c ar r i e d ou t b y i t as s t at e d i n i ts objects by letting out the p r em i s e s an d i nf r as t r u c t u r es o w n e d b y t h e a sse s s e e s o ci e t y fo r t h e s t a t ed o b j ec ti v e s .
13. F u r t h e r t h e L d . c o u n s e l f o r t h e a s s e s s e e p o i nt e d o u t t h a t t h e o t h e r re a s o n f o r d e n y i n g t h e a s s e s s e e e x e m p t i o n under s e ct i o n 10(23C)(iiiab) wa s the a dv a n c es given to PSIEC w h i c h a s p e r t h e L d . CI T ( A p p e a l s ) ha v i n g n o t b e en e x p l a i n e d b y t he a s s e s s e e w e r e he l d t o be i n co n tr a v e n t i o n o f t h e p r e s cr i b ed m o d e s o f i n v es t m e n t a s p er s ec t i o n 11 ( 5) o f t h e A c t . Th e L d . c o u n s e l f o r t he a s s e s s e e p o i nte d o u t t h a t i t w a s s u b m i tt ed t o t h e L d . CI T ( A p p e a l s ) t h at t h e s a i d a d v a n c e h a d be en g i v e n f o r d e v el o p m e n t o f va c an t l a n d o f the i n s t i t ut i o n for extension of its i n f r a s tr u c t u r e f or e d u c a t i o na l p u r po s e . Th e L d . c o un s e l f o r th e a s ses s e e d r e w o u r a t t e n ti o n t o p a r a 6 . 2 ( i v ) o f the CI T( A ) o r d e r wh e r e i n t h e s u b m i s s i on s o f t h e a s s e ss e e m ak i n g t h e a b o v e a v e r m e n ts w e r e r e pr o d u c e d. Th e L d . c o un se l f o r th e a s se s se e f u r t h er s u b m i t t e d t ha t co p y o f a g r e e m e nt w i t h P S I E C i n th i s r e g a r d h a d b e e n f i l e d be f o r e t h e Ld . CI T ( A p p e a l s ) . Th e L d . c o u n s e l f o r t h e a s s e s s e e f u r t h e r s t a t ed t h a t i t h a d n o w b e e n a b l e t o p r o c u r e a l l t h e b i l l s an d d et a i l s o f t he c on s t r u ct i o n w ere u n d e r t a k en b y PS I EC w hi c h ha s b e e n d u l y r ec o nc i l e d wi t h 10 t h e b o o k s o f a cc o u n t o f P SI E C a n d c e r t i f i ed b y C h a r t e r e d A c c o u n t a nt s . Th e L d . c o un s e l fo r t h e a s se s s e e s t a t e d t hat it wished to submit these documents as a d d i t i o n al e v i d e n c e s a n d p l e a d e d th a t th e sa m e m a y b e a d mi t t e d si n ce t h e y w e n t t o t h e r o o t o f t h e m a t t er t o s u b s t a n t i at e t h e c l a i m o f t h e a ss e s s e e.
14. Th e L d . D . R . , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d. CI T ( A p p e al s ) .
15. We have heard both the parties and have gone t h r o u g h th e o r der s o f t he a u t h or i t i e s b e l o w a n d pe r u s e d t he d o c u m e n t s p l a c ed b e f o r e u s .
16. Th e issue before us pertains to denial of exemption u/s 1 0 ( 2 3 C ) ( i i i a b) of the Ac t w hi c h g r a n ts e x e m p t i o n t o u ni v e r s i t i e s o r o t he r e d u c at i o n a l i n s t i t u t i on s existing so l e l y for e d u c a ti o n pu r p o s e and no t for the p u r p o s e of p r o fi t a n d w hi c h ar e w h o l l y o r s ub s t a n t i a l l y f i n a n c e d b y th e G o v e r n m e n t. Th e r e a s o n f o r d e n i a l o f exemption is no n f u l f i l l m en t of the basic c o n d i t i o ns p r e s c r i b ed t he r ei n o f e x i s ti n g so l e l y f o r th e pu r p o s e o f e d u c a t i o n an d no t f o r t h e p u rp os e o f p r o f i t an d f u r t h e r t he i n v e s t m e nt o f fu n d s o f t h e s oc i e t y i n m o d es o t h e r t h an those p r e s cr i b ed u/s 11(5) of the Act. Th e r e a s o n i ng b e h i n d r e a c h i n g t o th i s c o n c l usi o n b y t h e R e v en u e i s t h e fact that the as s e s s e e is i n d ul g i n g in activities which include p r ov i d i ng training to va r i o u s o r g an i z a ti o n s a nd p r o v i d i n g c o a c hi n g f o r c o mp e t i ti v e e x a m s wh i c h a s p e r t h e R e v e n u e d o no t c o m e u n d e r th e p u r v i e w o f e d uc a t i o n a n d 11 f u r t h e r c o l l e ct i ng r e v e n ue b y l e tt i n g o u t t h e i r pr e m i s e s t o v a r i o u s or g a n i zat i o n s a n d c o l l ec ti n g f e e s f r o m t he t r a i n i ng a n d c o a c hi n g c l as s e s r e s ul t i n g i n s u r p l u s t h u s est a b l i s h i ng t h e p r o fi t mo t i ve o f th e a ss e s se e s o c i et y . F ur t h e r t he advances made to P u nj a b Sm a l l I n du s t r i es & E x p or t Corporation h a ve been h el d to be in vi o l a t i on of the p r o v i s i o ns o f s e c t i o n 1 1 ( 5 ) o f t he A c t w h i c h p r e s c r i b e s t he m o d e s i n w h i c h m o n e y i s t o b e i n v e s t e d o r dep o s i t e d b y c h a r i t a b l e s o c i e ti e s / i n s t i t u t i o ns .
17. We find merit in the contentions of the Ld. c o u n s e l f o r as se s s e e t ha t i t ha s n o t v i o l at e d t h e ba s i c c o n d i t i o n o f e x i s t i n g s o l e l y f o r e d u c a t i o n a n d no t f o r t h e p u r p o s e o f p r o fi t . U n d i s p u t e dl y, t h e a s s e s s e e so c i e t y h a s been in e x i s t enc e since 2 8 . 3 .19 7 4 , e s t a b l i s h ed by the G o v e r n m e nt o f Pu n j a b , wi t h t h e s t a t e d ob j e c t o f p r o v i d i n g education & t ra i n i n g to Public service a d mi n i s t r a ti ve o f f i c e r s a n d wa s b e i n g a d m i n i s t e re d b y s e n i o r o f f i c e r s o f t he s t a t e g o v er n m e nt . I t i s a l so n o t d i s p u t e d th a t t he a s s e s s e e society has b ee n c o n s i s t e nt l y claiming e x e mp t i o n u /s 1 0 ( 2 3 C ( i i i a b ) of t h e A c t , wh i c h ha s a l s o b ee n a l l o w e d t o i t e v e n a f t e r s c r u ti n y a s s e s s m e n t i n t w o y e a r s i . e . a s s e s s m e nt y e a r s 2 01 0 - 1 1 an d 2 0 1 1 -1 2 a n d i n a s se s s m e nt y e a r 2 0 01 - 02 the a s s e s s ee had been g r an t e d a c e r t i f i c at e by the R e v e n u e f o r n on d e d u c t i o n o f ta x a t so u r c e o n t h e b a nk i n t e r e s t w hi c h i t e a r n e d f o r t he r e a s o n t h a t i t s i n c o m e e n j o y s e x e m pt i on f r o m t h e t a x a t i o n u / s 1 0 ( 2 3 C ) ( i i i a b ) o f t h e A c t . C l e a r l y , t h e R e v e n u e h a s c o ns i s t e n t l y b e en a cc e p t i n g i n 12 t h e p a s t t h a t t h e a s s e s s e e i s e x i s t i n g f o r t h e p u r p o s e of e d u c a t i o n o n l y a n d n o t f or p r of i t a n d i s t h u s e n t i t l e d to claim e xe m p t i on u/s 10 ( 2 3 C ( i i i a b ) of the Ac t . In the i m p u g n e d y e a r no c h a n ge i n t h e fa c t s o f t h e c a se h a v e b ee n b r o u g h t to o u r n o t i c e a s c o m p ar e d t o t he p r e c ed i n g y e a rs. For this r e as on alone we f ai l to u n d e r st an d how a d i a m e t r i ca l l y o pp o s i t e v i e w c a n b e t a k e n b y t h e R e v e n ue t h a t t he a c ti v i t i e s o f t h e as s e ss e e s o ci e t y a r e n o t i n t he n a t u r e of i m p art i n g e d uc a t i o n an d n o t fo r t h e p u r p o s e of e a r n i n g pr o f i t .
18. E v e n o t h e r wi s e , w e f i n d t h a t t he a c t i v i t y o f t r ai n i n g a n d c o n d u c ti n g s t u d y c o u r se s , c o n f e r e n ce s , s em i n a r s a n d l e c t u r e s to P ub l i c s e r v i c e a dm i n i s t r at i v e o f fi c e r s i n t h e f i e l d o f pu b l i c ad m i n i s t r at i o n ta n t a m o u n ts t o no t h i n g e l se but i m p a rt i n g e d u c a t i o n. A l l t h e s t a t ed o b je c t s o f t he a s s e s s e e s o c i et y a r e ai m e d at di f f u s i n g c e r t ai n b r a n c h of k n o w l e d g e i .e . Pu b l i c a d m i n i s t r at i o n b y c o n d u c ti n g t r a i n i n g p r o g r a m m es , s t ud y c o u r s e s , co n fe r e n c e s , s em i n a rs , l e c t u r e s o r b y p r o m o t i n g r e s e a r c h a n d tr a i n i n g , p u b l i s h i n g p a p e r s a n d p e ri o d i c al s a n d m a i n t a i n i ng l i b r a ri e s an d i n f o r m a t i on services in t he area of P ub l i c a d m i n i s t r at i o n . Th e u n d e r t a k i n g o f tr a i n i n g an d s t udy c o u r s e s i s c ar ri e d o u t i n a s t r u c tu r e d ma n n e r b y c o n duc t i n g r eg u l a r co u r s e s fo r imparting i n s tru c t i o n an d t ra i n i n g on v a r i ous s u b j e ct s r e l a t e d t o p ub l i c a d m i n i st r a t i on . Th e a c t i v i ti e s un d e r t a k e n therefore is in the nature of imparting e d uc a t i o n . Th e H o n ' b l e G u ja r a t H i g h C o u r t d ea l t w i t h a n i d e n t i ca l i s s u e i n 13 the case of Gu j a r a t S t at e Co - o p e r a t i v e Union vs CI T r e p o r t e d i n 1 9 5 I TR 2 7 9 . I n t h e sa i d c a s e a l s o t he a s s e s se e society was e st a b l i s h e d with the o b je c t of s p r e a d i ng e d u c a t i o n r e l at i n g t o co o p e r a ti ve m o v e m en t b y c o n d u c t i ng c o u r s e s , t r ai n i ng p r o g r a m m e s, r e s e a r c h a n d s tu d y o f t he s u b j e c t , o p e ni n g l i b r a ri e s an d pu b l i s h i n g p e ri o di c a l s an d l i t e r a t ur e o n t he s u b j e c t. Th e qu e s t i o n be f o r e th e H o n ' b l e High court was whether the as s e s s e e had b ee n rightly denied exemption u/s 1 0 ( 2 2) of th e I nco m e Ta x A c t , 1 9 6 1 ,h o l d i ng i t s a c t i v i t i e s t o b e n o t e d u c a t i o na l i n v i e w o f t h e m e a n i n g gi v e n b y t h e S u p re m e c o u r t i n S o l e Tr u s t e e , L o k a S h i k s h a n a Tr u s t v s CI T 1 0 1 I TR 2 3 4 . Th e H o n ' b l e H i g h C o u r t h e l d t h a t t h e o b j e c ts o f t h e a s s e s s ee i n d i c a t e d t h a t t h e s o c i e t y w a s e s t a b l i sh ed f o r d i f f u si o n o f c e r t a i n b r a n c h o f k n o w l e d g e a n d t h e r e fo r e w a s i n t h e n a t u r e o f i m p a r t i n g e d uc a ti o n . F u r t h e r r e f er r i n g t o t h e d e c i s i o n o f t h e s u p r e m e c o u r t i n L o k S hi k s h a na ( s u p r a) , t he co u r t h e l d t h a t t h e o b s er v a ti o n o f t h e ap e x co u r t t h at e d uc a t io n m e a n s s c h o o l i n g w o ul d m e a n , t h a t s c h o o l s , i n s t r u ct s or e d u c a t e s a n d t h e o b s e rv a ti o n s o f t h e a pe x c o u r t w e r e no t i n t e n d e d t o g i v e a n a r ro w o r p e d a n t i c se n s e t o t h e w o r d e d u ca t i o n . Th e r e l e v a n t f i n d i ng o f t h e Hi g h C ou rt a r e a s u n d e r :
"The controversy which we are called upon to decide is, therefore, whether the assessee is an educational institution existing solely for educational purposes and not for purposes of profit within the meaning of s. 10(22) of the Act. Under s. 10(22) of the Act, it is provided that in computing the total income of a previous year of any person, any income falling within the said clauses, i.e., any income of a University or other educational institution existing solely for educational purposes and not for purposes of profit, shall not be included. The objects of the assessee-Co-operative Union as also the activities actually carried on by it will throw considerable light on the question whether the assessee-Co-operative Union is existing 14 solely for educational purposes or not. Bye-Laws 2 of the assessee- Co-operative Union, a copy of which is placed on record by the consent of both the learned counsel for our consideration, enumerates therein eight objects of the assessee- Co-operative Union and they read as under:
(i) to impart education to members of co-operative societies and to workers in the Co-operative Movement;
(ii) to act as a co-ordinating agency on all matters pertaining to Co-
operative education and function as a body of experts in matters relating to education;
(iii) to function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters;
(iv) to further the spread of the Co-operative Movement;
(v) to promote the study of problems connected with Co-operation and carry on research in the same;
(vi) to open circulating libraries, to publish periodicals, books, pamphlets, and literature in general on co-operation; rural development and allied subjects;
(vii) to conduct training classes, training centres, schools, colleges, prescribe courses of instruction for them, conduct examination and award certificates or diplomas; and
(viii) to run a printing press.
The activities carried on by the assessee-Co-operative Union have been briefly summarised at Annexure 'A' to the order of the CIT(A) dt. 22nd Nov., 1983 and the said list of activities is referred to in para 5 of the order of the CIT. The fact that these activities are carried on by the assessee-Co-operative Union has not been disputed. The list of activities at Annexure 'A' gives particulars of the courses conducted by the assessee-Co-operative Union and their duration. The assessee conducts Courses for Higher Diploma in Co- operation (condensed)--18 weeks, Diploma in Land Development Banking--12 weeks, Certificate Course in Co-op. Credit & Banking--10 weeks, and Specialised short-term courses/Orientation Courses. The assessee also conducts Seminars. It also appears that the assessee has been running four co- operative training which conduct junior basic courses of 24 weeks duration for Diploma in Co-operation, Special Course for employees of Urban Co-op. Banks, Dist. Co-op. Banks and Market Class, and also Seminars. The assessee also conducts Co-operative Education Programme, Consumer Education Programmes (Project), Women Co-op. Education Programme, Special Training Classes in the District under Co-op. Education and Industrial Projects of the nature and duration as mentioned in detail in the said list of its activities. It is not suggested that the assessee-Co- operative Union is doing any activity other than those enumerated in the said list.
4. From the nature of the activities of the assessee, it is abundantly clear to us that the assessee is existing solely for educational purposes. It was sought to be contended by the learned counsel for 15 the Revenue that having regard to the objects enumerated in cls.
(iii), (iv), (vi) and (viii) of the Bye-law 2 of the Bye Laws of the assessee, it cannot be said that the assessee was existing solely for educational purposes. In cl. (iii) of the Bye-law 2, the object enumerated is that the assessee will function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters. Under cl. (iv), its object is to further the spread of the Co-operative Movement. Clause (vi) refers to objects of opening circulating libraries, publishing periodicals, books, pamphlets, and literature in general on co- operation, rural development and allied subjects, while cl. (viii) refers to running of a printing press. It is difficult to accept the contention of the Revenue that these clauses indicate any object other than educational for which the assessee seems to have been established. On totality of the objects enumerated in Bye-law 2, it is clear to us that the assessee-Co-operative Union is existing solely for educational purposes and even the objects which are enumerated in cls. (iii), (iv), (vi) and (viii) are referable to such purposes. It will not be open to read any of these clauses in isolation torn of its context for the purposes of urging that the assessee is not existing solely for educational purposes as envisaged under s. 10(22) of the Act. It is obvious that the objects of functioning as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters, promoting the study of problems connected with co- operation and carrying on research in the same and of opening circulating libraries, publishing periodicals, books, pamphlets and literature are connected with educational purposes for which the assessee-co- operative Union is established. The object of running a printing press as enumerated in cl. (viii) has to be read in context of the object of publishing periodicals, books, pamphlets and literature. Therefore, so read, it becomes part of the educational activities of the assessee-Co-operative Union. The subsidiary objects such as printing and publishing books and literature on the relevant subjects are in our judgment ancilliary and do not detract from its exclusively educational character. The question whether an educational institution is existing solely for educational purposes or not can also be resolved with reference to the activities actually carried on by it and, as noted above, the list of activities of the assessee clearly indicates that it is existing solely for educational purposes. It cannot be doubted that the assessee was a society for diffusion of a certain branch of knowledge of the co- operative movement in various fields governing human life and the activities for the purposes were carried out in an organised and systematic manner by conducting regular courses for imparting instruction and training on various subjects included in the curricula as is reflected from the list of its activities. There is no dispute about the fact that the assessee-Co-operative Union is given financial assistance by the Government. The resolutions of the Government dt. 15th Feb., 1968 and 10th Dec., 1982 [mentioned in para 8 of the order of the CIT(A)] clearly indicate that the grants sanctioned by the Government are for educational purposes. The Government had sanctioned Rs. 15 lakhs for the year 1982-83 which appears to have been raised to Rs. 20 lakhs from the year 1988-89. We are fully satisfied from the nature of the activities of the assessee-Co-operative Union and its objects that the assessee is existing exclusively for educational purposes and not for the purposes of profits. The assessee was publishing two Journals : (1) "Sahakar", a weekly Journal having circulation of 6,700 copies, and (2) "Gram Swaraj", a monthly magazine having circulation of 7,150 copies. Both these Journals 16 were published in connection with the activities of the assessee and on the subject of co-operative movement. The assessee was also having an audio-visual unit for exhibiting films on co-operative movement to educate the masses. It also appears that the assessee maintained a rich library on the subject of co-operation. As noticed above, from the objects of the assessee, it is conducting training centres and colleges for various courses having bearing on the field of co-operative movement. It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in "lok shikashana trust's case (supra), for holding that the assessee is not entitled to exemption under s. 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Lok Shikashana Trust's case (supra) the Supreme Court while dealing with the provisions of s. 11 r/w s. 2(15) of the Act which defines 'charitable purposes' observed as under :
"The sense in which the word 'education' has been used in s. 2(15) in the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge....... But that is not the sense in which the word 'education' is used in cl. 15 of s. 2. What 'education' connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling."
The Supreme Court in the above observations by referring to the systematic instruction, schooling or training given to the young has only cited an instance in order to indicate as to what the word 'education' appearing in s. 2(15) of the Act which defines 'charitable purposes' is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word 'education', persons other then 'young'. The expression 'schooling' also means "that schools, instructs or educates" (The Oxford English Dictionary, Vol. IX 217). The Supreme Court has observed that the word 'education' also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word 'education'. By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge and hidden mysteries of life, the Supreme Court has indicated that the word 'education' is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate proper confines of the word 'education' in the context of the provisions of s. 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these observations, in para 17 of its judgment, that the word 'education' is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word 'education' only to scholastic instructions but other form of education also are included in the word 'education'. As noticed above, the word 'schooling' also means instructing or educating. It, therefore, cannot be said that the word 17 'education' has been given an unduly restricted meaning by the Supreme Court in the said decision. Though in the context of the provisions of s. 10(22) the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing time and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift for the better in the institutional setup. Advancement of knowledge bring within its fold suitable methods of its dissemination and though the primary method of sitting in a class-room may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in acceptance of new ideas and development of appropriate means to reach them to the recipients."
19. I n v i e w o f t h e a bo v e w e h o l d t h at t h e a c t i v i t i e s c ar r i e d out by the a sse s s e e society of c o n d u c t i ng c ou r s e s and t r a i n i n g p r o g r amm e s a m o u nt s t o e d u c a t i o n.
20. M o r e o v e r t h e f i nd i n g o f t h e L d . CI T( A ) t h a t t he a s se s s ee i s c o n d u c t i ng c o a c h i n g c l a ss e s f o r c o m p e t i t i v e e x a m s i s i n c o r r e c t. Th e s a m e h a s n e i t h e r b e e n s t a t e d i n t h e o b j e c ts of the assessee society nor do we find that any such s u b m i s s i on w a s e v e r m a de b y t he a s s e s se e b ef o re t h e l o w e r a u t h o r i t i e s . W e f a i l t o u n d e r s t an d t h e b a s i s o f a r r i v i n g at t h i s f i n di n g b y th e R e v e n u e. Th e r e f o r e th e c a s e l a w r e l i ed u p o n b y t h e R ev e n u e , t o h o l d t h a t t h e a c t i vi t i e s o f t h e a s s e s s e e ss s o c i et y a r e n o t i n t he n a t u r e o f e d uc a ti o n , i n t he c a s e o f B i ha r I n s t i t u t e o f M i n i n g 2 0 8 I TR 6 0 8 d o e s n ot a p p l y i n t he c a se b e f o r e u s , s i nc e i n t h e sa i d ca s e i t w a s h e l d t h a t c o a c hi n g c l a s s es a r e no t e d u c a ti o n a l i ns t i t u t i o ns .
21. F u r t h e r w e ag r e e w i t h t h e L d .C o un s e l f o r t h e a s s es s e e that the r e v e nu e earned from letting out p re m i s e s to v a r i o u s o r g a ni z at i o n s i s i n c i d e nt a l t o t h e m a i n o b j e c t o f imparting e d u ca t i o n t h ro u g h training p r o g r am m e s a nd 18 study c ou r s e s c o n d u c t e d. The a s s e s se e h as all al o n g c o n t e n d e d t h a t t h e a c t i v i t y o f l e t t i n g o u t i t s pr e m i s e s i s u n d e r t a k en d u r i n g t h e c o ur s e o f c a r r y i n g o u t i t s a c t i v i t i es o f i m p a r t i n g t r ai n i n g a n d c o n d u ct i n g s t u d y c o u r se s . It is n o t t h e c a s e o f th e R e v en u e , n o r h a s i t b e e n p o i nt e d o u t to u s t h a t l e t t i n g ou t o f th e p r em i se s o f th e a s se s se e s o c i et y h a s b e e n d o n e f o r a n y o t h e r p u r p o s e o t h e r t h an l e t t i n g i t o u t d u r i n g t h e co u r s e o f c o n d u c ti n g t r a i n i n g p ro gr a m s a n d s t u d y c ou r s e s . Th e r e f o r e , t h e r ev e n u e e ar n e d t h er e f r o m ar e i n c i d e n t al t o c a rr y i n g o u t o f t h e m a i n o b j e c ti v e s o f a s s e s s e e s o c i e t y o f i m p a rt i n g t r ai n i n g t o t h e p ub l i c a d mi n i s t r a ti o n o f f i c e r s o f t he G ov e r n m e n t o f P u nja b .
22. F u r t h e r w e a l s o f i n d n o m e ri t i n t h e c o nt e n t i on of t he R e v e n u e t h a t pr o f i t ma k i n g i s i t s ma i n ob j e ct i v e o f t h e assessee s oc i e t y . Th e B a l a n ce Sheet and I n co m e & E x p e n d i t ur e a cco u n t o f t h e a s s es s e e f o r t h e y e ar e n d e d o n 3 1 . 0 3 . 2 0 13 , p l ace d b e f o re u s at p a p e r b o ok p a ge N o s . 8 0 & 8 1 s h o w t h a t t he d u r i n g t h e y e ar t h e a s s e s s e e ha d e a r n e d no surplus at all, on the contrary it had excess of e x p e n d i t ur e o v e r i n c o m e of a p p ro x . R s . 1 .9 5 c r o re s a n d i ts a c c u m u l a te d l o ss e s o v e r t h e y ear s w a s R s . 7 .1 8 cr o r e s . Th e e n t i r e f un d s o f th e a s s e s se e s t and i n v e s t ed i n fi xe d a s s e t s, fund i n v e s tm e n ts and advances none of w h i ch , e x c e pt a d v a n c e s t o P SI E C , h a v e be e n f o u n d t o be n ot f o r t h e p u r p o s e of t h e as s e s s e e s o b j e c ts . .
2 3 . A s f o r t h e a r g um e n t o f t h e L d . D R t ha t th e a dv a n c es m a d e t o P u n j a b S m a l l I n d u s tr i e s & E x p o r t C o r p or a t i o n L t d . 19 n o t b e i n g i n a c co r d a n c e w i t h t ha t p r e s c r i b ed u /s 1 1 ( 5 ) o f t h e A c t , w e f i nd n o m e r i t i n t h i s c o n t e n t i on o f t he R e v e n ue also. Th e a s s e ss e e h a s a l l a l o ng c l a i m e d be f o r e t h e l o w er a u t h o r i t i e s t h a t t h e p u r p o s e o f m a k i n g s u c h a dv a n c e s w as for d e v e l o p me n t of vacant l an d of the i n st i t u t e for e x p a n s i o n o f i ts i n f r a s t r u ct u r e. C o p y o f t h e a g r e e m e nt e n t e r e d i n to w i th P S I E C w a s a l s o f i l e d b e f or e t h e l o w e r authorities. I n v i e w o f t he s a me , t h e p u r po s e o f m a k i ng a f o r e s a i d a d va n ce s w a s f o r d e v el o p i n g th e i n f r a s tr u c t u r e o f t h e a s s e s s ee s o ci e t y f o r f u r th e r i n g i t s o b j e c t i v es , w h i c h i s an a p p l i c at i o n of income in fu r t h e r a n ce of its stated o b j e c t i v es a n d cl e a r l y n o t a n i n ve s t m e n t i n v i o l ati o n o f t h e m o d e s o f i nv e s tm e n t s p r e sc r i b ed u / s 1 1 ( 5 ) o f t he A c t w h i c h p r e s c r i b es t h e mo d e s i n wh i c h a cc u m u l a t e d m o n e y i s t o be i n v e s t e d o r d e po s i t e d b y s o c i e ti e s o r i n st i t u t es c l a i m i ng e x e m p t i o n u / s 11 o f t h e A c t .
24. Th e r e f o r e , w e ho l d t h a t th e a c ti v i t i e s of t h e a ss e s s ee s o c i e t y a re e d u ca t i o n a l a nd n o t f o r t h e p u rp o s e o f m a k i ng p r o f i t a n d t h u s a s s e s s e e s o ci e t y f u l f i l l s b a s i c c o n d i t i o n of c l a i m i n g e x e m p ti o n u / s 1 0( 2 3 C ) ( i i i a b ) o f t h e A c t.
25. In view of the above, we hold that the assessee is e n t i t l e d t o c l a i m e x e m p t i o n u / s 10 ( 2 3 C ) ( i i i a b ) o f th e A c t .
G r o u n d o f a p p e al N o s . 2 , 3 & 7 t he r e f o r e ar e a l l o we d
26. G r o u n d No . 4 i s c o n s e q ue n t i a l t o t h e d e n i al of e x e m p t i o n u / s 10 ( 2 3 C ) ( i i i a b ) w h i c h h a v i ng b e en a l l o w e d t o t h e a s s e ss e e as a b o v e b e co m e s i n f r u c t u o us .
20
27. G r o u n d N o s .5 & 6 a r e a l t e r n a t i ve g r o u n d s r a i se d by the a s s e s s ee contending th a t the r e c e i p ts did not c o n s t i t u te i nc o me i n t h e fi r s t p l a c e . N o a r g um en t s o n t h e said g r o un d s we r e a d v a n ce d by the L d . Co u n se l for t he a s s e s s e e a n d e ve n o t h e r w i s e s i n c e t h e a s s e s s ee h a s b e en h e l d e l i g i bl e f o r e x e m p t i o n u /s 1 0 ( 2 3 C ) ( i i i a b ) i n p a r a 1 4 o f o u r o r d e r a b o v e, t h e s a i d g r o u n ds a r e o f n o c o n se qu e n c e .
28. Th e appeal of the assessee therefore s ta nd s a l l o w e d i n a b o ve t e r m s .
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 30 t h October, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh