Income Tax Appellate Tribunal - Bangalore
Children Education Society , Bangalore vs Assessee
ITA Nos.140 & 141/Bang/2010 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'B', BANGALORE
BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT
AND
SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
I.T.A No.140/Bang/2010
(Assessment Year : 2006-07)
M/s. Children Education Society,
No.40, I Phase, J. P. Nagar, Bangalore .. Appellant
v.
Deputy Commissioner of Income-tax,
Central Circle -1(3), Bangalore .. Respondent
I.T.A No.141/Bang/2010
(Assessment Year : 2006-07)
(By the Revenue)
Assessee by : Shri. S. Venkatesan, Chartered Accountant
Respondent by : Smt. Swathi S. Patil, CIT-II
ORDER
PER DR. O. K. NARAYANAN, VICE PRESIDENT :
These are two cross appeals filed by the assessee and the Revenue for assessment year 2006-07. These cross appeals are directed against the order passed by the Commissioner of Income-tax(A) -VI at Bangalore, dated.7.12.2009. The appeals arise out of the regular assessment completed u/s.143(3) of the IT Act, 1961.
ITA Nos.140 & 141/Bang/2010 Page - 2
2. The assessee is a society engaged in the field of education under the name and style "Childrens' Education Society". The society was registered under the Karnataka Society Registration Act, 1960 on 30.9.1974. According to the assessee, it is running as much as 39 educational institutions in different disciplines in and around Bangalore.
The return filed by the assessee society showed loss of Rs.1,52,63,919/-.
Some of the institutions run by the assessee society had positive surplus at the end of the relevant previous year whereas remaining institutions had a reverse position. The return filed by the assessee society was not accepted by assessing authority. The assessee society has all along claimed the status of "Artificial Juridical Person" whereas the assessment has been completed in the status of "Association of Persons". In addition to the change in status, the Assessing Officer has further disallowed the claim of exemption made by the assessee society u/s.10(23C)(iiiad) of the IT Act, 1961. The denial of the above exemption resulted in an addition of Rs.2,46,29,977/- towards the income of the assessee. The Assessing Officer has also added amounts available under different funds like building funds, infrastructure funds etc., treating those balances as the income of the assessee. The Assessing Officer has further made an addition towards donation and unexplained expenditure. In short, as against a negative income of Rs.1,52,63,919/-, the Assessing Officer has determined a total income of Rs.17,98,90,781/-. The various issues ITA Nos.140 & 141/Bang/2010 Page - 3 disputed by the assessee society were taken before the Commissioner of Income-tax(A) in first appeal.
3. The Commissioner of Income-tax(A) did not agree with the Assessing Officer on the question of status of the assessee society.
Following the orders passed by the Tribunal pertaining to earlier assessment years, the Commissioner of Income-tax(A) held that the correct status should be that of Artificial Juridical Person. The Commissioner of Income-tax(A), on the other hand has upheld the order of the assessing authority, declining the exemption u/s.10(23C)(iiiad).
The assessee had raised an alternate ground before the Commissioner of Income-tax(A) praying for the benefits available u/s.11 and 12 as the assessee society has already been granted registration u/s.12A as a result of the orders passed by the Appellate Tribunal for earlier assessment years. This alternate ground was also rejected by the Commissioner of Income-tax(A). The Commissioner of Income-tax(A) further confirmed the additions made by the Assessing Officer towards the building fund as well as infrastructure development fund. Another ground raised by the assessee before the Commissioner of Income-tax(A) was against the addition of Rs.17,51,540/- pertaining to donations received by the assessee society. This ground has been partly allowed by the Commissioner of Income-tax(A). He has confirmed the addition of ITA Nos.140 & 141/Bang/2010 Page - 4 Rs.19,95,000/- made by the assessing authority as unexplained expenditure. The grounds raised by the assessee against levy of interest have also been dismissed.
4. The assessee is aggrieved by the order of the Commissioner of Income-tax(A) inasmuch as almost all the substantial grounds raised by the assessee have been dismissed by the Commissioner of Income-tax(A) except the ground relating to the status and the nominal modification made in the addition of donations.
5. The Revenue is aggrieved against the finding of the Commissioner of Income-tax(A) that the status of the assessee should be assigned as Artificial Juridical Person. Therefore, these cross appeals before the Tribunal.
6. In the above context, we will consider first, the appeal filed by the assessee society.
7. The first ground raised by the assessee is general in nature as it challenges the order of the Commissioner of Income-tax(A) on general propositions of law which need not be individually adjudicated.
ITA Nos.140 & 141/Bang/2010 Page - 5
8. Ground nos.2 and 3 relate to the issue arising out of the finding of the Commissioner of Income-tax(A) that the correct status of the assessee should be Artificial Juridical Person as claimed by the assessee society.
The relevant grounds are extracted below :
i) The learned Commissioner of Income-tax(A) is not justified in upholding that the order passed by the Assessing Officer by not following the decision of the Hon'ble ITAT in the appellant's own case for the earlier years and consequently, the assessment made is contrary to law of judicial discipline and is liable to be annulled.
ii) Without prejudice to the above, the learned Commissioner of Income-tax(A) ought to have cancelled the assessment after holding that the appellant is liable to be assessed in the status of "AJP"
instead of "AOP" under the facts and in the circumstances of the appellant's case especially when the Hon'ble ITAT has held in earlier years that the appellant status is one of "AJP".
10. In paragraph 6 in page 12 of the assessment order, the learned assessing authority has discussed the history of the issue pertaining to the status of the assessee society. The assessee society has always filed its return in the status of Artificial Juridical Person. The status has been adopted but as an Association of Persons up to the assessment year 2005-
06. This issue was taken in appeal before the Tribunal. The Tribunal after considering the facts and circumstances and the constitution and objects of the assessee society, held that assessee should be assessed in the status of Artificial Juridical Person. This finding has been delivered ITA Nos.140 & 141/Bang/2010 Page - 6 by the Tribunal in 'B' Bench, for the assessment years 2000-01, 2001-02, 2002-03 in their order dated.23.2.2006, passed in ITA.387, 388, 1305/Bang/2005. The very same issue was again considered by the Tribunal through their order dated.11.7.2008 for assessment years 2003- 04, 2004-05 and 2005-06 in ITA Nos.329, 330 & 331/Bang/2008. In fact, up to the assessment year 2005-06, which is the immediately preceding assessment year in this case, the Tribunal has consistently held that the rightful status to be adopted in the case of the assessee society is Artificial Juridical Person. All these details have been fairly detailed by the Assessing Officer. But why the Assessing Officer has not followed the binding order of the Tribunal for so many earlier assessment years ?
The answer of the Assessing Officer is that the decisions of the Tribunal on the issue of status have been taken before the Hon'ble High Court of Karnataka in direct appeals filed u/s.260A of the IT Act, 1961, to keep the matter alive for final adjudication by the competent court of law. He has fairly conceded in the assessment order that the status has again been adopted as Association of Persons just for the purpose of keeping the matter alive before the Hon'ble jurisdictional High Court.
11. When the issue came before the Commissioner of Income-tax(A), the Commissioner of Income-tax(A) held that in view of the specific direction of the Tribunal for the earlier assessment years which is binding ITA Nos.140 & 141/Bang/2010 Page - 7 on the Commissioner of Income-tax(A), the status of the assessee society has to be reckoned as Artificial Juridical Person. He accordingly accepted the contention of the assessee and directed the assessing authority to adopt the status of the assessee society as Artificial Juridical Person. So much so, the assessee has no grievance.
12. The grievance of the assessee as reflected in the two grounds extracted above is that the Commissioner of Income-tax(A) while holding that the rightful status of the assessee is Artificial Juridical Person, ought to have brought the matter to a logical and lawful end by annulling the impugned assessment as the Revenue has completed the assessment on a wrong person and not on the assessee. This contention was not anyhow accepted by the Commissioner of Income-tax(A) and he declined to annul the assessment. The grievance reflected in the grounds extracted above is exactly to the point that the Commissioner of Income-tax(A) ought to have cancelled the assessment as the assessment has been made on a wrong person.
13. We heard Shri. S. Venkatesan, the learned Chartered Accountant at length on this issue. He argued that for all the assessment years in the past, the Tribunal has consistently held that the lawful status of the assessee is Artificial Juridical Person. These decisions of the Tribunal ITA Nos.140 & 141/Bang/2010 Page - 8 has not so far been disturbed by any competent appellate authority.
Therefore, the finding and direction of the Tribunal do exist as on date.
The Assessing Officer falling within the jurisdiction of the Appellate Tribunal, Bangalore Benches should have therefore completed the assessment in the status of Artificial Juridical Person. He has erred in law in repeating and assigning the wrongful status of Association of Persons.
The learned Chartered Accountant has further explained that the grievous error committed by the Assessing Officer has been perpetuated by the Commissioner of Income-tax(A) by not annulling the assessment order.
It is the argument of the learned chartered accountant that the Commissioner of Income-tax(A) was substituting one assessee in place of another assessee by changing the status which is not contemplated in law.
The rightful status of the assessee should have been Artificial Juridical Person whereas the Commissioner of Income-tax(A) has directed the Assessing Officer to redo the assessment in the status of Artificial Juridical Person. It means that no notice of assessment was served on the assessee in the status of Artificial Juridical Person and if at all notices were issued, those notices were issued on a non-existent assessee stated to be in the status of Association of Persons.
14. We have also heard the learned senior officers of the Revenue on this point.
ITA Nos.140 & 141/Bang/2010 Page - 9
15. This is not an issue coming for the first time before the Tribunal.
Even in the past, while adjudicating the issue of status for the earlier assessment years before the Tribunal, the assessee had raised two grounds, one relating to the status and the other relating to annulment of assessment. The Tribunal has held that the assessee should be assessed in the status of Artificial Juridical Person as claimed by it. But regarding the second limb of the argument, the Tribunal held that assessments could not be annulled for the reasons that assessee itself had filed all the returns voluntarily in the status of Artificial Juridical Person. The Tribunal observed that once that status is accepted, the return is always validated and the assessment is also validated in the correct status of Artificial Juridical Person. Therefore, the Tribunal declined to accept the contention of the assessee to annul the assessments.
16. We do not find any reason either in law or in fact to differ from the view arrived at by the Tribunal for earlier assessment years on this very issue of annulment of assessment. Further, as fairly stated by the Assessing Officer in the assessment order, right or wrong, the Revenue is perpetuating the position for the purpose of keeping the matter alive before the Hon'ble jurisdictional High Court so that they may have the benefit of adjudication by a competent court of law. This is mentioned by the learned Assessing Officer in his order. Therefore, the Revenue has ITA Nos.140 & 141/Bang/2010 Page - 10 every right to keep the matter alive praying for a decision by a higher court of law. So also, as held by the Tribunal for the earlier assessment years, the returns were filed by the assessee voluntarily in the status of Artificial Juridical Person and the dispute related only to the status. Once the correct status is assigned, the return is to be processed in that status.
It does not invalidate the return. Therefore, when there is a valid return voluntarily filed by the assessee, the logical conclusion must be a consequent assessment. Therefore, we are unable to accept the contention of the assessee that the assessment should be annulled.
Therefore, in result, ground nos.2 and 3 extracted above, are rejected.
17. The next ground raised by the assessee dealing with the issue of exemption u/s.10(23C)(iiiad), is extracted below :
"Without prejudice to the above, the learned Commissioner of Income-tax(A) is not justified in upholding the denial of exemption of Rs.2,46,29,977/- u/s.10(23C)(iiiab) and (iiiad) of the Act holding that the appellant society was existing for purposes of profit under the facts and in the circumstances of the appellant's case especially when such finding of the learned Commissioner of Income-tax(A) is contrary to the facts on record as well as the binding decision of the Hon'ble ITAT for the assessment year under appeal."
ITA Nos.140 & 141/Bang/2010 Page - 11
18. The Assessing Officer himself has detailed in page 3 of his order that the issue relating to exemption u/s.10(23C)(iiiad) has already been adjudicated by the Appellate Tribunal in so many cases considered for earlier assessment years in assessee's own case. The Tribunal has held that the objects of the assessee society were nothing but charitable as defined under the IT Act and the assessee society does not exist for profit motive inasmuch as the surplus generated by its various institutions has been used for the development of existing and new institutions. The Assessing Officer further observes that the Tribunal has also held that each of the educational institution recognized by the society, or each of the educational institutions run by the assessee are separate and distinct from one another and they come within the meaning of the term "other educational institution" occurring in section 10(23C) and therefore, income from each such educational institution is liable for exemption under the provisions of the Act.
19. Having stated in so many words as above that the issue has been already adjudicated by the Appellate Tribunal, the Assessing Officer has proceeded to take a different view for the impugned assessment year 2006-07 on the ground that "certain new facts pertaining to assessment year 2006-07 are being discussed". Therefore, it is the case of the Assessing Officer that he could not follow the orders of the Tribunal ITA Nos.140 & 141/Bang/2010 Page - 12 passed for the earlier assessment years on the very same issue for the reason that the facts relating to the impugned assessment year 2006-07 are different and all the more, the ratios of certain judgements have to be considered. The Assessing Officer has made an attempt to discuss these new facts and circumstances in a detailed manner in paragraph 5 of his order running from page nos. 3 to 11. On the basis of the discussion, he came to the following findings :
i) M/s. Childrens' Education Society is the only "person" to which exemption u/s.10(23C)(iiiad) can be applied ;
ii) There cannot be a selective application of section 10(23C)(iiiad) to each educational institution as they are not separate assessees. Each separate educational institution run by the society cannot fall under legal definition of 'person' under the IT Act and there is only one person to which the IT Act would apply ;
iii) There is no legal distinction between the assessee society and each of the individual institutions run by it ;
iv) There is no commercial distinction between the two also as has been pointed out in the factual discussion above ;
v) In the light of there being no legal as well as commercial distinction between the two following doctrine of approbate and reprobate, there cannot be a separation for determining the aggregate of annual receipts specified in section 10(23C)(iiiad) r.w.rule 2BC ;
vi) Therefore, as the aggregate annual receipts of the society exceeded the specified limit of Rs.1 crore, the society does not qualify for exemption u/s.10(23C)(iiiad) ;
ITA Nos.140 & 141/Bang/2010 Page - 13
20. In the light of the above findings, the Assessing Officer held that the society does not qualify for exemption and the assessee's claim for exemption cannot be granted and, therefore, the entire excess of income over expenditure has to be taxed.
21. In first appeal, while concurring with the findings of the assessing authority, the Commissioner of Income-tax(A) went ahead and held that as far as its earlier orders are concerned, the Appellate Tribunal did not have the benefit of considering the judgement of Uttarkhand High Court in the case of Commissioner of Income-tax v. Queen Educational Society and St Paul Senior Secondary School (319 ITR 160). The Commissioner of Income-tax(A) found that the Uttarkhand High Court after considering the judgement of the Hon'ble Supreme Court in the case of Aditanar Educational Institutions (224 ITR 310), has held that the investment in the fixed assets like furniture and building are the properties of the society, may be connected with the imparting of education, but the same has been constructed and purchased out of the income from imparting education with a view to expand the institutions and to earn more income.
The Commissioner of Income-tax(A) held that the facts of the assessee's case are similar to the case considered by the Uttarkhand High Court in the above case and, therefore, held that assessee society was not entitled for the exemption contemplated u/s.10(23C)(iiiad).
ITA Nos.140 & 141/Bang/2010 Page - 14
22. On going through the facts and circumstances and propositions made by the Assessing Officer and confirmed by the Commissioner of Income-tax(A), we find that the entire issue in its all fine details has been elaborately considered by ITAT 'B' Bench, Bangalore, in assessee's own case for the assessment years 2000-01, 2001-02 and 2002-03 through their order dated.23.2.2006, passed in ITA Nos.387, 388, 1305/Bang/2005. We are hesitant to extract the relevant discussion by the Tribunal in the said common order for it runs to 20 pages; but still out of sheer necessity we may proceed to extract the discussion made by the Tribunal on the issue of exemption u/s.10(23C), as under :
11. The next issue relates to claim of exemption under section 10(23C)(iiiad) of the Act read with rule 28 of the IT Rules. The facts to the assessee running various educational institutions have been extracted elsewhere in this order. Placing reliance on the facts, the assessee claimed exemption as above. The learned counsel for assessee submitted that income received by the assessee society from each one of the several educational institutions run by it existed solely for imparting education in various field and course was exempt under section 10(22) of the Act. He further submitted that other income derived by the assessee by way of bank interest, donation, hostel income, and transportation income etc., which did not arise from educational institutions i.e. where teaching is imparted is also exempt because assessee was also considered as 'other educational institution' even though it did not directly impart education.
ITA Nos.140 & 141/Bang/2010 Page - 15 For this proposition, he relied on the decision of the Madras High Court in the case of ACIT v Aditanar Educational Institution reported in 118 .ITR 235 and later affirmed by the Hon'ble Apex Court reported in 224. ITR
310.
12. The learned counsel for assessee also clarified the position of law from the AY 1999-00 on wards. He also took us to the provisions of sec.10(23C) of the Act and also rule 2B of the IT Rules. He, therefore, submitted that income received by the assessee on behalf of each one of the educational institutions satisfies the legal position and thus qualified for exemption of income and must be deducted from excess of income over expenditure of the assessee-Society as a whole to arrive at the total taxable income of the assessee-society. He also filed relevant copies of Income and Expenditure statement of each and every year, from each of the educational institutions run by the asssssee.
13. On the other hand, the learned DR Shri Gupa submitted that the educational institutions run by the assessee do not exist solely for educational purposes. The limit of Rs.1. crore mentioned in rule 2BC would require to be evaluated with reference to the aggregate of annual receipts of all the institutions run by the assessee-society. The learned DR further pointed out to the written submissions dated 1.4.2004 flied by the AO before the learned CIT(A). Based on those observations, the learned DR submitted that the assessee ought to be held as existing for profit motive because several educational institutions have reported high percentage of surplus in their ITA Nos.140 & 141/Bang/2010 Page - 16 respective Income & Expenditure Accounts. The assessee has given interest-free advance to a firm M/S Oxford Girls Hostel and had also paid subsidy of Rs 2.12 crores during the previous year 2000-01 relevant to AY 2001-02. Three persons related to the Chairman of the assessee-society managed the hostel.
Likewise, the teamed DR extracted several other activities as flied in the written submission by the AO before the learned CIT(A). The learned DR therefore, submitted that the orders of the authorities below have to be upheld in this issue.
14. The learned counsel for assessee had replied to each and every point raised by the learned DR in his counter argument. He also filed synopsis of submissions made before this Tribunal so that none of his arguments would escape the attention of this Tribunal. The same is kept on record. On the question of exemption under section 10(23C)(iiiad), we have taken much pain to bring out necessary facts before us to make proper and just adjudication. In page 36 of the appellate order for AY 2000- 01, the learned CIT(A) observed as under:
"It is the contention of the assessee Society that it itself is not an educational institution and it is only various schools, colleges and institutions run by it which are educational institution and therefore it is argued that since assessee's Society and 22 educational institutions run by it cannot be regarded as one, the exemption u/s.10(23C)(iüab) and (iiiad) is required to be evaluated separately with reference to each such educational institutions run by the assassee society" .
From the perusal of the above, we are of the view that the learned CIT(A) is not justified to aver that various schools, colleges and institutions run and controlled by the assessee do ITA Nos.140 & 141/Bang/2010 Page - 17 not satisfy the following criteria for the purpose of being eligible for deduction under section 23C.
[a] The various schools,. colleges and other institutions should have an independent existence of their own different and distinct from the assessee Society ; and [b] The various schools, colleges and other institutions should be totally separate educational institutions divorced from the parent controlling society ;
15. The language of section 10(23C) is plain and simple and the construction placed by the assessee on the said provisions are consistent with the scheme of the Act and to give effect to the plain meaning of the statute. All that is provided is that income received by a person on behalf of educational institution is exempt subject to certain conditions mentioned in the relevant clauses. The point considered by the learned CIT(A) for holding that the educational institution are to be separate and distinct etc. is directly contradictory to the ratio of the decision of the Hon'ble Karnataka High Court in the case of CIT V. Academy of General Education reported in 150 ITR 135. At pge 139 of the aforesaid decision the Hon'ble Kamataka High Court observed that "we may state at the outset that the assessee in order to claim the benefit of Section 10(22) of the I. T. Act, 1961 need not necessarily be a school or college where education is imparted. Nor such school or college should be different from the assessee who claims benefit of Sction 10(22). That would be clear if we peruse theprovisions of various sub-section of Section 10 viz., ss. 10[3], 10[4], 10[4A], ....... 10[22A] and 10(23)".
ITA Nos.140 & 141/Bang/2010 Page - 18
16. From the above observation of the Hon'ble jurisdictional High Court it is very clear that, the assessee claiming exemption u/s.10(22) need not be a school or educational institution, nor that, the educational institution should be a different and separate legal entity from the assessee claiming the exemption Although the said decision is in the context of Section 10(22) 1t is to be seen that the ratio of the said decision would squarely apply in the context of Section 10(23C) as well, especially on account of the fact that, the Hon'ble Court has drawn support from the language of other clauses of section 10, which are worded in the manner similar to clause (23C) of section 10 the Act.
17. The authorities below have not disputed that the assessee society is running several educational institutions each of which are different and distinct from one another even though they are run and controlled by the same assessee in the sense that, different training is imparted in different institutions. Thus, the learned CIT(A) fell in error when he upheld the denial of exemption to the assessee on the ground that the various educational institutions run by the assessee are not separate legal entities by themselves.
18. The learned IT(A) held that the assessee-society as a whole is 'other institution' occurring in Sec 10(23C) having regard to the ratio of decisions rendered by the Hon'ble Supreme Court and High Court of Madras in the case of Aditanar Educational ITA Nos.140 & 141/Bang/2010 Page - 19 Institution [supra] and host of other concurring decisions. The aforesaid conclusion drawn by the CIT(A) is against the true import of the above decisions sought to be followed. The facts and ratio laid down in case of Aditanar's case are discussed threadbare to bring out the true import of the said decision rendered.
19. M/s Aditanar Educational Institution was a Society registered under the Societies Registration Act with the object of establishing, running, managing and assisting colleges, schools and educational organizations existing solely for educational purposes. It received certain donations from a Trust by name of THANTI TRUST during 3 different previous years. It filed NIL returns in respect of each of the 3 previous years claiming exemption u/s10(22) on the round that it was an educational institution existing solely for educational purposes. The AO however took the view that, the words "Other Educational Institution" Occurring in Section 10(22) after the words "University" should be construed by applying the principle of ejusdem genesis and since the society by itself is not engaged in the activity of imparting education like school or college, it cannot be "other educational institution" and, therefore, its income by way of donations received was taxable. The Tribunal found that the income of the Assessee is exempt u/s.10(22) of the Act, and the Department carried the matter to the High Court.
20. In the High Court, the Department contented that the term "other educational institutions" occurring in Section 10(22) ITA Nos.140 & 141/Bang/2010 Page - 20 after the words "University" should be construed by applying the principle of ejusdem genesis and consequently the assessee was not eligible for exemption u/s. 10(22) because the "assessee society was neither an "University" nor an "other educational institution" having regard to the principle of ejusdem genesis. In so far as above contention was concerned the Hon'ble High court held that the term "Other Educational institution"
occurring in Sec 10(22) should not be construed by applying the principle of ejusdem genesis. It was then held in page [240] that:
"Any educational institution would fall within the scope of Section 10(22) even though it may have or may not have anything to do with the University. The categories are so different that the "university" cannot be the genus, and the "other educational institution" the species thereof. Thus the college here comes under the "other educational institution".
It was further contended by the Department that the institution, in order to qualify for exemption u/s. 10(22) the assessee should itself be the educational Institution, and that it was not enough if it ran an educational institution. The word "itself" was used by the Honorable High court when stating the contention of the department to make clear and subtle distinction between the assessee society" per-se and the various "educational institutions" run by it. This distinction arose, not because the two were altogether different legal entities but, because the former was not granted affiliation by any university and did not by itself impart education to students whereas the latter i.e., "educational institutions" run by the "assessee society" were ITA Nos.140 & 141/Bang/2010 Page - 21 accorded affiliation by an university and the activity of imparting education to student was actually carried out here. In view of this subtle distinction the Department contended that the "assessee society" per-se was not an "educational institution"
which itself did not impart education. Consequently the department contended that the income of the "assessee society"
per-se, such as the donations received from Thanthi Trust was not eligible to be exempt u/s.10(22).
21. On the aforesaid contention, the Hon'ble High Court held that the assessee society effectuates its objects by imparting education through the medium of "colleges" established by it. Thereafter the Hon'ble High Court rejected the contention of the department that "assessee society" per-se was only a financial body and reiterated that "assessee society" per se also came within the scope of "other educational institution"
occurring in Sec10(22) as already held by it. Thus the subtle distinction between "assessee society" per-se and "education institution" was once again underlined.
22. Further, the Hon'ble High Court made a clear distinction between "assessee society" per-se and various "education institutions" run by it in the sense that actual education is imparted in the latter whereas the former is only an administrative wing where no educational activities are actually carried out. The Hon'ble court further held that both the educational institutions and the assessee society would come under the ambit of the term 'other educational institution"
occurring in section 10(22). The learned CIT(A) did not appreciate the true import of the aforesaid decision and he erred ITA Nos.140 & 141/Bang/2010 Page - 22 when he applied the ratio of the aforesaid decision to the assessee's case to conclude and hold that "assessee society as a whole" was required to be considered as "other educational institution" occurring in Sec 10(23C). In other words, the decision of the Supreme Court in Aditanar educational Institution (supra) does not lay down the proposition that, the Society running several education institutions constitute one single "educational institution", which is the inference drawn by the CIT(A).
23. Thus the ratio of the decision of the Supreme Court in Aditanar case (supra), far from supporting the view of the CIT(A) supports the contention of the assessee. Furthermore, in Adithinar's case, after rejecting both the contentions of the Department the Hon'ble High court concurred with the ratio of the decision in Karta Educational Society (supra) wherein it was held that:
"a educational society could be regarded as an educational institution if the Society was running an educational institution"
This view was also endorsed by the Hon'ble Supreme Court, while upholding the High Courts' decision,' when it observed that an "educational Society" or 'trust" or "other 'similar body"
running an educational institution solely for educational purposes and not for thepurpose of the profit would be regarded as "other educational institution" coming within Section 10(22) of the Act. From the above also, it is very clear that the words "educational Society" refers only to the "asssesee society" per se and not to the "assessee society as a whole" as concluded by.
ITA Nos.140 & 141/Bang/2010 Page - 23 the authorities below. This view is also confirmed by the
following observations in the case of Aditanar educational Institution'[supra] :
"a society by merely running a college cannot use this provision as an instrument for exemption in respect of all its sources of income which had no connection with the educational activity. There must be some correlation between the income earned and the educational institution".
24. From the above it is once again clear that a "person" claiming exemption u/s.10(22) could be a society or trust or other similar body. All the income of such person is not exempt u/s.10(22) of the Act. Only that part of the income of the person, from a source having direct nexus with educational activities i.e., from a "university" or "other educational institution", was exempt. Thus, it is very, clear that the terms "university" and "other educational institution" occurring in section 10(22) refers to the source of income derived from educational institutions in the hands of the person claiming the exemption. Thus, the term "other educational institution" refers to the following:
[i] a school, college or educational institution run by a society or trust or other similar body; and [ii] the "assessee society" itself ie., when considered distinct from "educational institutions", not because they are different legal entities but because of the reasons mentioned earlier.
25. The very phraseology employed in section 10(23C) does not support the contention of the authorities below that the term "other education institution" applies to the "assessee society" as ITA Nos.140 & 141/Bang/2010 Page - 24 a whole. This is because section 10(23C) employs the following distinct words and phrases :
[a] the words "person" and "on behalf of" in the phrase "any income received by any person on behalf of any [b] the terms "University" and "other educational institution" occurring in sub-clause [iiiab] & [iiiad] of Section 10(23C) ; and [c] the phrase "such university or educational institution"
once again occurring in sub-clause [iiiab] & [iiiad] of Section 10(23C).
26. It cannot be disputed that. the term "person" refers to the assessee claiming exemption u/s.10(23C) and it goes without saying that the "assessee/person" could be constituted as a Society or as a trust or in any manner permissible under law. A "person" claiming exemption u/s.10(23C) could be in receipt of income from various sources. The use of the words "on behalf of" occurring in the said section clearly reveals that it was not the intention of the legislature to give a blanket exemption in respect of all the income of a "person". The Legislature very clearly wanted to exempt any income ewhich had some nexus with the educational institution such as income received by a "person" on behalf of "a university" or "other educational institution". This view is also consistent with observation of the Hon'ble Madras High Court in Aditanar [Supra] already discussed earlier. . Thus the term "person" stands for the assessee claiming exemption and the terms "university" and "other educational institution" refers not only to assessee itself but also to the activity producing the income, which the legislature intended to exempt. Thus, the learned CIT(A) erred ITA Nos.140 & 141/Bang/2010 Page - 25 in as much as he did not appreciate that the term "other educational institution" ought to be construed in aforesaid manner.
27. The use of the phrase "such university or educational institution" after the words "if the aggregate annual receipts of" clearly indicates that the intention of the legislature was that the limit specified in Rule 2BC should be evaluated vis-a-vis the aggregate annual receipt of each and each one of the various schools, colleges, institutions run by the assessee Society. This plain meaning is also confirmed having regard to the usage of word "institution" in singular case, which may kindly be noted. Consequently the reasons adduced by the AO in the assessment order for the AYs 2000-01 and 2001-02 wherein it was contended that the limit of Rs.1 Crore would have to be evaluated against the aggregate annual receipt of all institutions put together having regard to the '"aggregate" is apparently a misplaced one.
28. Furthermore, this subtle distinction between the schools, colleges and educational institutions run by the assessee Society and the assessee society itself is not only evident from the language of Section 10(23C)(iiiad) but also supported by the ratio of the decision of the Hon'ble Supreme Court in the case of THANTI TRUST reported in 247 ITR 785 [SC] wherein it was held that the words and phrases "trust" and "institution" refer to entities which are differently constituted and also the ratio of the decision of the Calcutta High Court in the caseof RAI BAHADUR BISSWESWARIAL MOT1LAL KALWASIYA TRUST reported in 252 ITR 84 [CAL] wherein the Calcutta ITA Nos.140 & 141/Bang/2010 Page - 26 High Court categorically held that the "trust" was different from "institution"and consequently violation of Section 13 by any one of the "institution" run by the "trust" should not dis- entitle the trust from the exemption claimed u/s.11 of the Act. This view is also supported by the observation of jurisdictional High Court of Karnataka in the case of ACADEMY OF GENERAL EDUCATION, MANIPAL (150 ITR 135).
29. For the various arguments advanced above it is also submitted that the notification u/s.10(23C)(vi) would be required only n respect of such of those educational institutions whose aggregate annual receipts exceeds the sum of Rs.I Crore specified in Rule 2BC. Consequently the assessee claim for exemption u/s. 10(23C)(iiiad) is valid, notwithstanding the fact that the aseéssee is not notified u/s. 10(23C)(vi) of the Act. Accordingly the second of the reasons adduced by the learned CIT(A) for denial of exemption is clearly erroneous and the claim of the assessee requires to be allowed for the advancement of substantial cause of Justice.
30. Further, in respect of the 3 educational institutions viz., The Oxford Kannada Nursery, Kannada Primary arid Kannada High School, which are in receipt of grant to meet the salary of teachers, the CIT(A) failed to appreciate that the subtle distinction between the assessee Society and the 3 eductional institutions run by the assessee Society is reinforced by the fact that even the Government has granted aid only to these educational institution and not to the "assessee society". Further more the said grant is with reference to the salary expenditure of the said education Institution and not with ITA Nos.140 & 141/Bang/2010 Page - 27 reference to the assessee Society expenditure at all. In any case the observations by the learned CIT(A) that the 3 educational institutions are not substantially aided by the Government is erroneous. Here again the CIT(A) did not consider the fact that the exemption for being substantially financed by the Government is contained under a different clause viz., Section 10(23C)(iiiab) which again goes to show that legislature considered for exemption the income of the educational institutions in the hands of the assessee on different parameters. Therefore, the parameters are clearly attached to the educational institution itself and not the assessee claiming the exemption.
31. The AO stated that the assessee-society had adopted dubious method of splitting institutions allegedly to ensure that aggregate annual receipts do not exceed Rs.1 Crore in order to lay a claim u/s.10(23C)(iiiad) r.w. rule 2BC. While adjudicating on this issue the learned CIT(A) has held that the said issue was not germane to the question of denying exemption u/s.10(23C) in as much as he had held that the ssessee society as a whole came within the meaning of the term "other educational institution" occurring in Section- 10(23C).
This is because the assessee was recognizing certain institutions as separate and distinct from one another much before the introduction of the Section 10(23C). and Rule 2BC. Our attention was invited to the assessee's detailed written submissions filed before the learned CIT(A) placed at pages 48 to 55 of the paper book for the AY 2002-02.
It has been clearly brought out therein that the assessee had commenced "The Oxford College of Science" in the year ITA Nos.140 & 141/Bang/2010 Page - 28 1994-95. Thereafter when the assessee commenced another institution viz., The Oxford College of Science [MCA Programme] in the year 1995-96 it treated the same as separate and distinct from The Oxford College of Science, which was commenced in 1994-95. It Is very dear that the observations made by the AO could not at all have been the consideration for the treating the aforesaid 2 institutions as distinct from one another inasmuch as the provisions of Rule 2BC were introduced several years later. Similarly the assessee has been treating the two institutions. The Oxford College of Management which was commence in the previous year 1994- 95 as separate from The Oxford College of Business Management [MBA Programme] which was commenced in the year 1995-96. Thus the view taken by the AO is unfounded in light of the facts found on record that the assessee has been treating these institutions as separate much before the introduction of the provisions of Sec 10(23C). Consequently nothing turns much on these observations of the AO, which the learned CIT(A) has held as not germane although for different reason that he upheld the action of the AO on a different ground.
32. Furthermore the assessee's method of recognizing an "educational institution" is substantiated by a number of definition of the term "educational institution' rendered in the context of other Acts and also the observations of the Hon'ble Judges of the Supreme Court in case of T.M.A. Pai [2002] 8 SCC 481. The learned counsel for assessee draw our attention to pages 49 to 55 of paper book for AY 2001-02 and also to Page [35] of the appellate order for the AY ITA Nos.140 & 141/Bang/2010 Page - 29 2002- 03 where the assessee's contention in this regard has been succinctly summarised by the. learned CIT(A). It is thus well found that each of the educational institutions recognised by the assessee as being separate and distinct from one another come within the meaning of the term "other educational institution"
occurring in Section 10(23C) and therefore the income from each such institution is liable for exemption therefore the income from each such institution is liable for exemption under the provisions of the Act.
33. The learned counsel for assessee had filed separate paper book for each and every AY enclosing the correspondence between the AO and the assessee, written submissions filed before the learned CIT(A) and the details of various Income & Expenditure Account under various heads etc. We have taken note of each and every document filed therein, which was already placed the AO as well as the learned CIT(A). From the facts appearing on record, it is seen that different degree/certificates are being given to the successful students by the educational institutions run by the assessee. This is clear from the name of each of the institutions. Each educational institution is different. Further, the term 'educational institution' has not been defined in the Income-tax Act.
34. 'Educational Institution' has not been defined under the Income-Act, and therefore, to understand the meaning of the term 'Educational Institution', reference has to be mace to other relevant legislation where the term has been defined. It is submitted that the said term 'Educational Institution' has been ITA Nos.140 & 141/Bang/2010 Page - 30 defined in various legislations relating to the regulation of educational Institution and the gist of the said definitions has been extracted and finished in the assessee's letter dated 24-3-
2004 in the course of proceedings for AY 2001-02. The relevant extracts of the submissions made are reproduced hereunder in support of the assessee's contention. The 'Educational Institution' has been defined under the Karnataka Educational Institution (Prohibition of Capitation Fee) Act, 1984 as section 2(c) -- 'Educational Institution' means any institution by whatever name called, whether managed by Government, private body, local authority, trust, university or any other person carrying on the activity of imparting education in medicine or engineering leading to a degree conferred by a University established under the Karnataka State Universities Act 1976 (Karnataka Act No 28. of 1976) and any other educational institution or class or classes of such institution as the Government may, by notification, specify.
Similarly, though not educational Institution yet, the word 'Institution' has been defined under the Karnataka Selection of Admission to Engineering, Medical and Dental Courses Rules 1997 as Section as under :
Section 2(a) - "Aided Institution' means any institution which receives Grant-in-Aid from the Government"
Section 2(i) - 'Institution' means any institution or college affiliated to a University in Karnataka and carrying on the activity of imparting education in Engineering, Technology (including electronics, Computer Science and Textiles), medicine or allied subjects such a dental surgery.
ITA Nos.140 & 141/Bang/2010 Page - 31 In the Karnataka Private Educational Institutional Discipline & Control Act, 1975, Private Educational Institution has been defined u/s 2(d) as under:
Section 2(d)- "Private Educational Institution' means an educational institution which is not owned by the State Government or the Central Government, a local authority or any other authority designated or sponsored by the State Government or the Central Government or a local authority but which is recognized by the State Government and includes a college affiliated to the Karnataka University or the University and a constituent college of the Bangalore University not similarly owned but does not include a University College".
Under the Karnataka Educational Act, 1983 (Act No.1 of 1995) Educational Institution has been defined u/s 2(14) as --
[14] "Educational Institution" means any Institution imparting education referred to in section 3 and includes a private Educational Institution but does not include an institution under the direct management of the University or of the Central Government or a tutorial institution."
Now, coming to the observations of the Honble Apex Court in the case T.M.A.Pai Foundation & Others (supra), the Hon'ble Chief Justice of India at para 20, page 13 observed as under:
"Education" is per se regarded as an activity that is charitable in nature (See the State of Bombay v. RMD Chamarbaugwala (1957 SCR 874; AIR (1957) SC 699. Education has so far not been regarded as a trade or business where profit is the motive. Even if there is any doubt about whether education is a profession or not,, it does not appear that education will fall within meaning of the expression occupation' ITA Nos.140 & 141/Bang/2010 Page - 32 Further at para 57 page 38 his Lordship observed as under:
"There can, however, be reasonable revenue surplus which may be generated by educational institution for the purpose of development of education and expression of institutions"
Further at page 128, in reply to question No.11, his Lordship observed as under:
Q) What is the meaning of the expression 'Education' and Educational institutions' in various provisions of the Constitution? Is the right to establish and administer educational institution guaranteed under the Constitution.
Ans) The expression 'education' in the Articles of Constitution means and includes education at all levels from the primary school level up to the post-graduate level. It includes professional education. The expression 'educational institution' means institutions that impart education where education is as understood hereinabove.
(b) His Lordship Sri. Syed Shah Mohammed Quadri, the Hon'ble Judge of the Supreme Court observed in page 4 of his exparte judgment as under :
"Education is neither a trade or business nor can it fall into profession'' .
"Education is essentially a charitable object and imparting education is in my view, a kind of service to the community therefore, it cannot be brought under 'trade or business' nor can it fall under 'profession'
(c) Her Lordship Smt. Ruma Pal, the Hon'ble Judge of the Supreme Court observed in page 25 of the separate judgment as under:
"An educational institution is not a structure of bricks and mortar. It is the activity which carried on in the ITA Nos.140 & 141/Bang/2010 Page - 33 structure, which gives it its character as educational institutions. An educational institution denotes the. process or activity of education not only involving the education but also those receiving education' An analysis of the above would reveal that an educational institution refers to the process or activity of providing education to students which leads to a degree being conferred on the student. The test whether an institution is different from another would depend on the degree/certificate being conferred on account of the process or activity. If the degree/certificate being conferred on the student is distinct from the other degree/certificate then the activity leading to conferment of that degrees/certificates deserves to be treated as distinct and separate institution. Accordingly since the degree 'Bachelor of Computer Application or 'B.C.A' is distinct from the other degrees conferred the leading to conferment of this degree/certificates on the student to whom education is imparted requires to be treated as a separate institution. Therefore, separate books of account have been maintained as far as possible."
Thus, an Educational Institution is one, which imparts education in a particular discipline leading to degree/certificate. Each of the 28 Educational Institutions run by the assessee- society impart education in a different field leading to a different degree. Thus each educational institution is different from one another and in respect of each of such educational institutions the exemption under section 10(23C)(iiiad) of the Act has to be evaluated because section 10(23C)(iiiiad) refers to educational institutions and not the person carrying on the activity of imparting education.
35. From the facts narrated by both sides as well as the facts found on record, the primary question now is whether the assessee society by running various institutions enumerated ITA Nos.140 & 141/Bang/2010 Page - 34 elsewhere in this order, is for profit motive or not and whether it is business or not. From the records, it is seen that the assessee has been administering various educational institutions wherein different subjects are being taught to the students studying therein. The growth of number of institutions and surplus there-from cannot be attributed to the term 'profit'. The way in which institutions grew one by one indicates in unambiguous terms that what has been done by the assessee so far and what is being done by the assessee as of now cannot be considered as a business or with profit motive. Without surplus no new institution is possible to impart education in different and new subjects. The authorities below miserably failed to consider this aspect by looking to the history of the assessee- society. Therefore, we are not impressed upon the way in which the facts have been considered by the authorities below in this issue.
36. Besides this, it is relevant at this juncture to refer to the decision of the Apex Court in the case of Aditanar Trust.(supra) and also in the case of Aditanar Educational Institutions (224 ITR 310). Therefore, from all these facts, submissions and the legal pronouncements, we find much force in the stand taken by the assessee and the objects of the assessee society are nothing but charitable as defined under the Income-tax Act. This issue covers for AYs 1999-00 to 2002-03."
23. The sum and substance of the issue of exemption u/s.10(23C) has been discussed at length by the Tribunal as found in the above exhaustive reproduction. A reading of the above extract brings home the simple fact ITA Nos.140 & 141/Bang/2010 Page - 35 that no different facts are available as far as the impugned assessment year is concerned to reconsider the question of exemption u/s.10(23C).
All the new propositions of facts and law as pointed out by the assessing authority are the off beaten and off repeated reasons every time pointed out by the assessing officer in the past and dealt with by the Tribunal in the respective second appeals. Except for the style, nature and editing of the propositions, the pith and substance of the contentions are the same and similar for all the assessment years including the present assessment year. Therefore, there is no basis to say that the decisions of the Tribunal for earlier years are not applicable to the impugned assessment year for the reason of existence of different facts.
24. Now coming to the further discussion made by the CIT (A) in the light of the judgements of the Uttarkhand High Court in the case of Queen Educational Society (319 ITR 160), we agree with the learned CIT(A) that the said judgement was delivered by the Hon'ble High Court relying on the judgement of the Supreme Court in the case of Municipal Corporation of Delhi v. Children Book Trust (3 SCC 390) in which the issue was confined to the concept of charitable purposes in the Delhi Municipal Corporation Act in the context of levy of property tax. But it is interesting to know that in the said decision of Municipal ITA Nos.140 & 141/Bang/2010 Page - 36 Corporation of Delhi v. Children Book Trust (3 SCC 390), the Supreme Court has held as under :
"In other words, what we want to stress is, whether a society or body is making a systematic profit, even though that profit is utilized only for charitable purposes, yet it cannot be said that it could claim exemption. If, merely qualitative test is applied to societies, even school which are run on commercial basis making profit would go out of the purview of taxation and would demand exemption...."
25. It is seen from the above that the Court was limiting the scope of exemption to such institutions which are making a systematic profit with a view to expand itself. The court also refers to schools and institutions run on commercial basis. The Uttarkhand High Court has held, as extracted by the CIT(A) in his order that exemption would not be given in such cases where the institutions are expanding to earn more income.
Therefore, the necessary ingredients to deny exemption u/s.10(23C)(iiiad) are the endeavour of the assessee to earn profit/income in a systematic manner and to expand the institutions in such a manner to augment its income/profit in future and running institutions on commercial basis.
26. None of the above postulates applies to the assessee if the detailed orders of the Tribunal for earlier assessment years are looked into. The Tribunal after verifying the facts and circumstances and all other aspects ITA Nos.140 & 141/Bang/2010 Page - 37 has categorically held that the assessee is a charitable institution engaged in the field of education. The Tribunal has held that the object of assessee society is not to make profit. It has been held by the Tribunal that the surplus earned by the assessee society is deployed in expanding its educational activities run on charitable basis.
27. Section 10(22) under which exemption was available to educational institutions was abolished in 1998. In substitution, Section 10(23C)(iiiad) has been inserted to provide for exemption to educational institutions in cases where the total receipts are less than Rs.1 Crore for a particular assessment year. If the total receipts exceeds the prescribed limit of Rs.1 Crore, the said institution has to apply for exemption under the law stated in Section 11 of the IT Act, 1961. But for this regulatory amendments brought in the relevant provisions of law, the basis of exemption remained the same with general exemption u/s.11 and special exemption u/s.10.
28. The whole range of issues raised and considered in this appeal were subject matters of various cases in which the Hon'ble Supreme Court and various High Courts have rendered judgements time and again.
As already stated the limited issue considered by the Hon'ble Supreme Court in the case of Municipal Corporation of Delhi v. Children Book ITA Nos.140 & 141/Bang/2010 Page - 38 Trust (3 SCC 390) was the issue of property tax exemption under the Municipal law which does not deal with the comprehensive concept of charity embodied in sections 10 and 11 of the IT Act, 1961. The concept of charity and exemption provided in the IT laws have recently been considered by the Hon'ble Punjab & Haryana High Court in the case of Pine Grove International Charitable Trust and Others v. Union of India (230 CTR (P & H) 477). After analyzing the scheme of exemption provided in Section 10(23C), the Hon'ble High Court has observed that at the initial stage, when the application for exemption is filed by an educational institution, the scope of inquiry is restricted only to ascertain the genuineness of the activities of such institution. Once approval is granted for exemption, the monitoring provisions come into play and the assessing authority has to examine whether the conditions on which the approval has been given are fulfilled or not. The Court continued to observe the fact that an institution has earned profit would not be the deciding factor to conclude that the educational institution exists for profit. Even if there is a surplus in the hands of the educational institution at the end of a particular year, it would be still entitled to exemption u/s.10(23C) provided the institution solely exists for educational purposes. The court has also examined the rule regarding the application of the funds available in the hands of an educational institution. It has observed that the capital expenditure has to be deducted ITA Nos.140 & 141/Bang/2010 Page - 39 from the gross income of the educational institution in determining whether 85% of the income has been applied for its objects. The court has held that the words "not for the purposes of profit" accompanying the words "existing solely for educational purposes" have to be read and interpreted in view of the third proviso to Section 10(23C)(vi) which prescribes the modality for realization and accumulation of income at the hands of the educational institutions. Thus the court held that it could not be held to be an educational institution existing for the purpose of making profit so as to be disentitled to exemption u/s.10(23C) for the reason that it is earning substantial profits year after year.
29. The Hon'ble Punjab and Haryana High Court while delivering its judgement in the above mentioned case of Pine Grove International Charitable Trust (230 CTR 477) has considered the statutory provisions in the light of various judgements of the Hon'ble Supreme Court including the decision in Aditanar Educational Institution (224 ITR 310);
Thanthi Trust (247 ITR 785); and T. M. A. Pai Foundations & Others v.
State of Karnataka & Others, etc., It is after considering all the above relevant judicial pronouncements on the subject that the Punjab & Haryana High Court has come to the conclusion that mere surplus of receipts in a particular year will not disentitle an educational institution to ITA Nos.140 & 141/Bang/2010 Page - 40 claim exemption u/s.10(23C) provided all other conditions of educational/charitable activities are complied with.
30. The legal proposition embodied in the above judgement covers the issue in the present case dealing with surplus of receipts available in the hands of the assessee as well as the issues relating to specified funds like infrastructure development fund, building fund, etc.,
31. In the facts and circumstances of the case, we find that the CIT(A) has gone wrong in relying on the judgement of Uttarkhand High Court in the case Queen Educational Society delivered in a different factual context by overlooking the orders of the Tribunal passed in assessee's own case for earlier assessment years.
32. Therefore, we find that we have to follow the orders of the Tribunal for the earlier assessment years in assessee's own case on the same issue and hold that the assessee is entitled for exemption u/s.10(23C)(iiiad). Accordingly, we set aside the orders of the lower authorities on this point and direct the assessing authority to grant exemption to the assessee u/s.10(23C)(iiiad).
33. As a result, addition of Rs.2,46,29,977/- is deleted. This issue is decided in favour of the assessee.
ITA Nos.140 & 141/Bang/2010 Page - 41
34. The fifth ground raised by the assessee is a ground alternate to its ground relating to exemption u/s.10(23C). The alternate ground is that the assessee is entitled for exemption u/s.11 and 12. It is true that the assessee has been granted registration u/s.12A at the intervention of the Tribunal on the basis of the finding that the assessee is a charitable institution. But as the issue of charitable institution has been adjudicated in favour of the assessee under the provisions of law contained in section 10(23C)(iiiad), this alternate ground does not survive. Accordingly, it is technically rejected.
35. The sixth and seventh grounds raised by the assessee are that the CIT(A) has erred in confirming the additions of Rs.28,04,505/- & Rs.16,39,73,678/- relating to building fund and infrastructure development fund respectively. This issue was considered by the Tribunal in para 51 of its order passed for the assessment years 1999-00, 2000-01, 2001-02 and 2002-03, dated.23.2.2006. After discussing the issue in detail, and relying on the judgement of the Punjab and Haryana High Court in the case of CIT v. Duttom Enterprises (197 CTR 606) and the decision of the Supreme Court in the case of CIT v. Bijli Cotton Mills P. Ltd., (116 ITR 60), the Tribunal held that the assessing authority was not justified in making such an addition.
ITA Nos.140 & 141/Bang/2010 Page - 42
36. Following the above order we find that there is no justification to deviate from the orders and findings of the Tribunal. Accordingly, we delete those additions. These grounds are decided in favour of the assessee.
37. The eighth ground raised by the assessee is that the CIT(A) is not justified in upholding the addition made to the extent of 50% as against a sum of Rs.17,51,540/- added by the AO. This issue was considered by the Tribunal in assessee's own case for assessment years 2003-04, 2004- 05 and 2005-06, through their order dated.11.7.2008 passed in ITA nos.329 to 331/Bang/2008. After discussing the matter in detail, the Tribunal held that such a disallowance is not called for. Even otherwise, the fundamental principle with regard to taxation of charitable institution is donation for an equally charitable purpose is application of fund for charitable purposes. Accordingly, we delete the partial disallowance confirmed by the CIT(A) in this regard and allow this ground raised by the assessee.
38. The next ground raised by the assessee is that the CIT(A) is not justified in upholding the addition of Rs.19,95,000/- as unexplained expenditure. This issue is remitted back to the AO to reconsider the issue in the light of the finality reached on the protective addition made in the ITA Nos.140 & 141/Bang/2010 Page - 43 hands of Shri. Narasaraju. The assessing authority may decide after hearing the assessee.
39. The last ground raised by the assessee is regarding the levy of interest u/s.234A and 234B which are only consequential and which do not call for any independent adjudication.
40. The assessee is partially successful in its appeal.
ITA No.141/Bang/2010 - By the Revenue :41. Next, we will consider the appeal by the Revenue in ITA No.141/Bang/2010. The one and only ground raised by the Revenue is reproduced below :
"The decision of the ITAT in assessee's case for earlier years directing the Assessing Officer to adopt the status as Artificial Juridical Person instead of Association of Persons, which has been followed by the Commissioner of Income-tax(A), has not been accepted by the Revenue and a reference appeal u/s.260A is pending before the Hon'ble High Court of Karnataka."
42. The question of the status has already been discussed in detail in dealing with the appeal filed by the assessee and we have directed the assessing authority to adopt the status as Artificial Juridical Person.
Therefore, this ground of the Revenue fails.
ITA Nos.140 & 141/Bang/2010 Page - 44
43. In result, appeal filed by the assessee is partly allowed and the appeal filed by the Revenue is dismissed.
Order pronounced on Thursday, the 20th day of May, 2010, at Bangalore.
Sd/- Sd/-
(SMT. P. MADHAVI DEVI) (DR. O. K. NARAYANAN)
JUDICIAL MEMBER VICE PRESIDENT
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, New Delhi
7. GF, ITAT, Bangalore
By Order
Asst.Registrar
ITAT
Bangalore