Income Tax Appellate Tribunal - Amritsar
The Managing Committee,, Mansa vs The Commissioner Of Income Tax ... on 11 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND
SH.N.K.CHOUDHRY, JUDICIAL MEMBER
I.T.A. No.469(Asr)/2016
Assessment Year:2015-16
The Managing Committee, Vs. CIT (Exemption,
Arya High School, Chandigarh.
Arya Samaj Gali, Mansa.
PAN: AABTM-4291N
(Appellant) (Respondent)
Appellant by: Sh. J.K.Gupta (Ld. CA)
Respondent by: Sh. Rahul Dhawan (Ld. DR)
Date of hearing: 02.08.2017
Date of pronouncement: 11.08.2017
ORDER
PER N. K. CHOUDHRY:
The assessee preferred the instant appeal by feeling aggrieved against the order dated 31st August, 2016 passed by the CIT(E), Chandigar, while dealing of registration u/s 10(23C)(vi).
2. The assessee has raised the following grounds of appeal.
"1. That on the facts and in the circumstances of the case and in law, the learned CIT(Exemption) has erred in denying the registration u/s 10(23C)(vi) of the Income tax Act, 1961.
2. That on the facts and in the circumstances of the case and in law, the learned CIT (Exemption) has erred in giving a finding that the trust is not doing charitable objects when assessee is running a higher secondary school which is one of the limb of charitable purpose.
3. That on the facts and in the circumstances of the case and in law, the learned CIT(Exemption) was only required to see if the objects are charitable and whether the society is genuine and nothing more.2 ITA No.469(Asr)/2016
Asst. Year: 2015-16
4. That the learned AO has given a clear finding in the assessment year 2011-12 that the assessee is engaged solely in educational activities after seeing books of account.
5. That the order in question was received on 05.09.2016. So, it is time barred. Accordingly, the assessee is entitled to exemption u/s 10(23C)(vi) of the Income tax Act, 1961.
6. That any other relief may kindly be granted to the assessee to whom it is found entitled at the time of hearing of appeal."
3. The brief facts of the case are as under:
The assessee is a Running School and to arrange all kind of financial help to needy students, to promote education (Elementary as well as vocational education) for children without any restriction of sex, caste, creed community and faith of the students, to reform, spread all kinds of education for the benefit of people of are and to start, run existing and/or new school, college, library or any other educational institution/centre keeping there objects in kind, to provide guidance to organizations engaged in the promotion of education, do to or to perform any other act which may be incidental or conducive to the attainment of main object of the society.
The application U/s. 10(23C)(vi) of the I.T. Act was filed before the Ld. CIT(E) on 13.08.2015 while claiming the exemption under the said section of the Act up to F.Y. 2014-15 relevant to the year 2015-16 because during that financial Year the gross receipt of the society exceeded Rs.1 Crore, therefore, the society apt to apply for approval under the said provision.3 ITA No.469(Asr)/2016
Asst. Year: 2015-16 However, the Ld. CIT(E), declined to grant registration u/s 10(23C)(vi) by holding that no evidence of accumulation of income after following the due process has been adduced either and further the Ld. CIT(E) observed as under:
"9. Vide reply dated 08.08.2016 the applicant society has submitted that, No TDS was deducted or liable to be deducted, as the employees do not fall in the tax bracket. In the instant case, it is further evidence that most of the teachers are being paid paltry monthly emoluments to the extent that none of them began the taxable limit. Even through the affiliation has been taken from Punjab School Education Board SAS Nagar, Mohali the necessary conditions of paying teachers as per 6th pay commission has not been followed. This not only compromises with the quality of education but also is a pointed towards generating unreasonable surplus. No separate balance sheet of the society has been filed.
10. Taking all the aforesaid into consideration it can safely be concluded that education needs to be and altruistic and charitable intent where the focus cannot be in any sense shifted to profit making and commercialization. Even though generation of reasonable surplus have been allowed but the same are required to be redeployed in education and the facts of such redeployment would vary from case to case. The applicant in this case apart from charging fees under several additional heads in addition to admission fee has also resorted to pursuing several other methods, which were better left to commercial enterprises, to generate income and passing them off as charitable. Notwithstanding the fact that the above doesn't exemplify the criteria of solely for education and not for profit it is also true that the applicant in this case is a society and not a University or other educational Institution and to that extent not covered by the provisions of section 10(23C)(vi). The application under Section 10 (23C) (vi) for grant of registration is accordingly rejected."
4. The assessee feeling aggrieved against the order passed by the CIT(E) preferred the instant appeal which is under consideration and in support of its case submitted that the assessee society is running educational institution under the name and style of Arya Senior Secondary School at Mansa and it exists for exclusively for educational purpose and not for the profit and further submitted that the objection 4 ITA No.469(Asr)/2016 Asst. Year: 2015-16 of the CIT(E) are wrong, false and frivolous to the extent that most of the teachers are being paid paltry monthly emoluments to the extent that none of them crossed the taxable limit. Although, the affiliation has been taken from Punjab School Education Board, SAS Nagar, Mohali but the necessary conditions of paying teachers as per 6th Pay Commission has not been followed. This is not only compromise with the quality of education but also is a pointed towards generating unreasonable surplus. No separate balance sheet of the society has been filed.
The contrary to the facts as none of the employee or specially teacher has not raised any objection with regard to their pay structure and voluntarily there are doing their work with sincerity and even otherwise the assessee's school is having high reputation then the Govt. Schools of vicinity and spreading the knowledge among the students for their inner or outer growth. Lastly the Ld. AR submitted that no doubt there is a generation of reasonable surplus but the same has been utilized for the purchase of the land for further development of the School.
5. On the contrary the Ld. DR submitted that the order passed by the CIT(E) is legal, reasonable, logical and speaking order and does not required to be interfered with and drown our attention to the judgment passed by the Jurisdictional High Court in the case of Dr. Maharaj Krishana Kapur Educational Charitable Trust & Management Society vs. 5 ITA No.469(Asr)/2016 Asst. Year: 2015-16 Union of India, [Civil Writ Petition No.2047 of 2009] citation 2010(326 ITR 0385) and submitted that excess accumulation has to be applied for the objects of the society and if the percentage of income applied for educational purpose is less than the limit prescribed under clause-(a) of third proviso to Sec.10(23C), then the exemption can be declined.
6. We have gone through with the facts and circumstances of the case specially the documents filed and from the details of assets as on 31st March, 2013 it shows that the assessee has incurred expenses on the purchase of land which goes to show that the assessee was earlier utilized the fund for the development of institution and of its extension.
Further according to the judgment passed by the Hon'ble Apex Court in the case of Chief Commissioner vs. St. Peter's Educational Society, 385 ITR 66 (SC) as relied upon by the assessee society whereby it was held that the institution makes profit does not necessarily mean it exists for profit and an overall view in year in question object was to make profit as opposed to educating persons to be seen.
Further, the Hon'ble Apex Court in the case of Visvesvaraya Technological University vs. ACIT, 384 ITR 37 (SC), whereby it was held that there could be no manner of doubt that the surplus accumulated over the years had been ploughed back for educational purposes and in the said case the Hon'ble Apex Court reminded the conditions of 6 ITA No.469(Asr)/2016 Asst. Year: 2015-16 principle laid down in Queen's Education Society vs. CIT [2015] 372 ITR 699 (SC) which for the sake of brevity and convenience are reproduced herein below.
"11. Thus, the law common to section 10(23C)(iiiad) and (vi) may be summed up as follows.
1. Where an educational institution carries on the activity of edu- cation primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for edu- cational purposes and becomes an institution for the purpose of making profit.
2. The predominant object test must be applied--the purpose of education should not be submerged by a profit making motive.
3.
4. A distinction must be drawn between the making of a surplus | and an institution being carried on 'for profit'. No inference arises ' that merely because imparting education results in making profit, it becomes an activity for profit.
5. If after meeting the expenditure, a surplus arises incidentally from the activity carried only the educational institution, it will not; cease, to be one existing solely for educational purposes.
6. The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons."
The observation of the CIT(E) is not correct to the extent that the assessee is a society and not university or other educational institution and to that extent not covered by the provisions of Sec.10(23C)(iv) because the ITAT, "A" Bench, Chennai in the case of Senguthat Matriculation Higher Secondary School Vs. CIT in ITA No.2008/Mads/2015 dealt with the same issue by observing as under:
"The primary condition u/s.10(23C)(vi), the assessee shall exist solely for educational purposes and not for purposes of profit. The Chief Commissioner of Income Tax without observing that the assessee not solely existing for educational purpose, he went on proposition that the assessee is not having Memorandum of Association or Trust deed so as to carry on the function of 7 ITA No.469(Asr)/2016 Asst. Year: 2015-16 the assessee. But the fact brought on record suggests that the assessee is an "AOP", managed by Sengunther Education Board which is a registered body under the Society Registration Act in the year 1946 vide Registration No.S/8/1946. The above education board is managing the assessee school with the committee Members of the said Education Board and constituted the office Bearers of the institution and duly filing the return of income. It is to be observed that there is no expressed definition for "Institution" under the Income Tax Act. Hence, we have to consider the General meaning defined in the Webster's New Dictionary, the word "Institution" means an established or organized Society or Corporation, an establishment, especially one of Public Character, or one effecting a community; a Foundation. Further, this Tribunal, Delhi Bench 'G' Bench in I.T.A.NO:3360(DEL) of 2008 dated 30.04.20 10 in deciding the Appeal in the case St.Thomas Girls Senior Secondary School, New Delhi Vs. Director of Income Tax(Exemption), New Delhi have held that the word Institution is wide enough to include a school, which has been established for imparting Education. Merely because the Assessee School does not have power to purchase, acquire, or sell the property, does not mean that the school will cease to exist as an Institution. Thus the 'status' of the Assessee could be A.O.P. in the absence of any Memorandum of Association or Trust Deed. Considering the above decision of the I.T.A.T, Delhi Bench, in the present case also the above Matriculation School which is managed by Education Board and granted permission by the Director of School Education as early as 07.10.1997 is an "Institution" qualifying for exemption U/s. 10(23C)(vi) of the I.T. Act. Hence, the exemption sough for the above "Institution" is to be granted. Accordingly, we direct the CCIT to grant exemption U/s 10(23C) (vi) of the Act."
Now, coming to the instant case, as it reflects from the details of four assessment years i.e. of 2012-13, 2013,14, 2014-15 & 2015-16, that the amount of receipt has been exceeded more than 1 Crore, therefore, the assessee preferred the registration u/s 10(23C)(iv) and in the previous year as it reflects from the balance sheet, the assessee utilized the amount for the purchase of land for further extension of the School Building etc. that certainly goes to prove that the same is being utilized for the educational purposes only because the Ld. CIT(E) failed to bring on record any contrary material to the fact. Further as discussed above, the assessee is also covered within the provisions of Sec.10(23C)(vi) of the Act for grant of registration because in the Act, the institution has 8 ITA No.469(Asr)/2016 Asst. Year: 2015-16 not been categorized and it has to be given a general meaning as specified in the dictionary as observed by the ITAT, Bench at Madsras (supra). In overall consideration of the facts and material and judgments relied upon by the parties, we also found support by the judgments passed by the Hon'ble Jurisdictional High Court as relied upon by the Ld. DR because excess accumulation in the instant case has certainly applied for the objects of the society itself, therefore, we do not find any hesitation to allow the registration to the assessee society U/s 10 (23C)(vi) of the Act.
Hence, we direct the Ld. CIT(E) to grant exemption U/s 10(23C)
(vi) of the Act from the date of application.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 11.08.2017.
Sd/- Sd/-
(T. S. KAPOOR) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:11.08.2017.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order