DDIT(Exemption), Ernakulam v. M/s. Kuttukaran Foundation, Cochin

ITA 102/COCH/2010 | 2005-2006
Pronouncement Date: 29-03-2012 | Result: Allowed

Appeal Details

RSA Number 10221914 RSA 2010
Assessee PAN AAATK2614G
Bench Cochin
Appeal Number ITA 102/COCH/2010
Duration Of Justice 2 year(s) 1 month(s) 20 day(s)
Appellant DDIT(Exemption), Ernakulam
Respondent M/s. Kuttukaran Foundation, Cochin
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 29-03-2012
Date Of Final Hearing 22-03-2012
Next Hearing Date 22-03-2012
Assessment Year 2005-2006
Appeal Filed On 08-02-2010
Judgment Text
1 ITA NO.102/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 102/COCH/2010 (ASSESSMENT YEAR 2005-06) D.D.I.T. (EXEMPTION) VS M/S KUTTUKARAN FOUNDATION ERNAKULAM SANJUAN TOWERS OLD RAILWAY STATION ROAD KOCHI 682 018 PAN : AAATK2614G (APPELLANT) (RESPONDENT) C.O. 04/COCH/2010 (ARISING OUT OF I.T.A NO. 102/COCH/2010) (ASSESSMENT YEAR 2005-06) M/S KUTTUKARAN FOUNDATION VS DY.CIT RANGE-2 SANJUAN TOWERS COCHIN-18 ERNAKULAM (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SMT. VIJAYAPRABHA ASSESSEE BY : SHRI P.J. JOHNEY DATE OF HEARING : 22-03-2012 DATE OF PRONOUNCEMENT : 29-03-2012 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONER O F INCOME-TAX(A)-II KOCHI DATED 30-11-2009 THE REVENUE FILED THE PRESENT APPEAL FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE FILED THE CROSS OBJECTIO N AGAINST THE VERY SAME ORDER OF COMMISSIONER OF INCOME-TAX(A). THEREFORE WE HEA RD THE APPEAL AS WELL AS THE 2 ITA NO.102/COCH/2010 CROSS OBJECTION TOGETHER AND DISPOSE THEM OFF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS GRANT OF EXEMPTION U/S 11 OF THE INCOME-TAX ACT. 3. SMT. VIJAYAPRABHA THE LD.DR SUBMITTED THAT THE ASSESSEE WAS A REGISTERED TRUST U/S 12A OF THE ACT. THE MAIN OBJECT OF THE A SSESSEE AS PER THE TRUST DEED WAS TO OPEN TAKEOVER OR RUN EDUCATIONAL INSTITUTION S LIKE SCHOOLS COLLEGE ETC. HOWEVER THE ASSESSEE HAS NOT ESTABLISHED OR RUN AN Y REGULAR SCHOOL OR COLLEGE SO FAR. THE ASSESSEE IS CONDUCTING COACHING CLASSES F OR STUDENTS OF VARIOUS COURSES WHO ARE APPEARING FOR OPEN UNIVERSITY / DISTANCE ED UCATION. ACCORDING TO THE LD.REPRESENTATIVE PREPARING THESE STUDENTS FOR EXA MINATION BY CONDUCTING COACHING CLASSES IS NOT A CHARITABLE ACTIVITY WITHI N THE MEANING OF SECTION 2(15) OF THE ACT. THEREFORE THE ASSESSEE IS NOT ENTITLED F OR EXEMPTION U/S 11 OF THE ACT. HOWEVER THE COMMISSIONER OF INCOME-TAX(A) WITHOUT C ONSIDERING THE REASONS FOR DISALLOWANCE MADE BY THE ASSESSING OFFICER ALLO WED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS ENTITLED FOR EXE MPTION U/S 10(23C)(IIIAD) OF THE ACT. THE LD.DR POINTED OUT THAT NO APPROVAL WAS GR ANTED U/ 10(23C) OF THE ACT. THE ASSESSING OFFICER AFTER EXAMINING THE ACTIVITY OF THE ASSESSEE CAME TO A DEFINITE CONCLUSION THAT NO REGULAR SCHOOL OR COLLE GE WAS MANAGED OR ESTABLISHED OR RUN BY THE ASSESSEE THEREFORE THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. THE LD.DR PLACED RELIANCE ON THE JU DGMENT OF THE SUPREME COURT IN SOLE TRUSTEE LOKA SHIKSHANA TRUST VS COMMISSIONER O F INCOME-TAX (1975) 101 ITR 234 (SC) AND PATNA HIGH COURT IN THE CASE OF BI HAR INSTITUTE OF MINING AND MINE SURVEYING VS COMMISSIONER OF INCOME-TAX (1994) 208 ITR 608 (PAT). 3 ITA NO.102/COCH/2010 4. ON THE CONTRARY SHRI P.J. JOHNEY THE LD.REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS CONDUCTING CLASSES F OR INDIRA GANDHI OPEN UNIVERSITY AND OTHER STUDENTS WHO ARE APPEARING FO R VARIOUS UNIVERSITY EXAMINATIONS. THEREFORE THE ACTIVITY OF THE ASSES SEE AMOUNTS TO IMPARTING KNOWLEDGE TO THE STUDENTS AND IS ENTITLED FOR EXEMPT ION U/S 11 OF THE INCOME-TAX ACT. REFERRING TO THE ORDER OF THIS TRIBUNAL IN AS SESSEES OWN CASE FOR ASSESSMENT YEARS 1998-99 199-2000 & 2000-01 ORDER DATED 29-01-2008 IN ITA NO 677 678 & 679/COCH/2006 THE LD.REPRESENTATIVE SUBMITTED THAT ON THE SAME SET OF FACTS THIS TRIBUNAL GRANTED EXEMPTION U/S 11 OF THE INCOM E-TAX ACT. ON A QUERY FROM THE BENCH WHETHER THE ASSESSEE OBTAINED APPROVAL U /S 10(23C) OF THE ACT THE LD.REPRESENTATIVE VERY FAIRLY SUBMITTED THAT NO APP ROVAL U/S 10(23C) IS GRANTED AND THE ASSESSEE IS CLAIMING EXEMPTION U/S 11 ON TH E GROUND THAT THE ASSESSEE TRUST WAS REGISTERED U/S 12A OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAR EFULLY GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. NO DOUBT THE ASSESSEE WAS R EGISTERED U/S 12A OF THE ACT. IT IS ALSO PERTINENT TO NOTE THAT MERE REGISTRATION WI LL NOT AUTOMATICALLY GRANT EXEMPTIONS U/S 11 & 12 OF THE INCOME-TAX ACT. REGIS TRATION U/S 12A IS ONLY TO IDENTIFY THE INSTITUTION AND THE ASSESSEE HAS TO ES TABLISH THAT THE INCOME FROM PROPERTY HELD UNDER TRUST WAS APPLIED FOR CHARITABL E PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. WE HAVE CAREFULLY GON E THROUGH THE PROVISIONS OF SECTION 2(15) OF THE ACT WHICH READS AS UNDER: 2(15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR EDUCATION MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UNITY; 4 ITA NO.102/COCH/2010 PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR FEE OR A NY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. THE ASSESSEE CLAIMS THAT THEY ARE TEACHING STUDENTS WHO ARE APPEARING FOR INDIRA GANDHI OPEN UNIVERSITY AND OTHER UNIVERSITIES ON DIS TANCE EDUCATION MODE. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSES SEE IS TEACHING THE STUDENTS FOR OPEN UNIVERSITY / DISTANCE EDUCATION CAN WE SAY THAT THE ACTIVITY OF THE ASSESSEE WOULD FALL WITHIN THE MEANING OF EDUCATION AS FOUND IN SECTION 2(15) OF THE ACT? THE APEX COURT HAD AN OCCASION TO CONSIDE R THIS ISSUE ELABORATELY IN SOLE TRUSTEE LOKA SHIKSHANA TRUST (SUPRA). THE APE X COURT WHILE CONSIDERING THE PROVISIONS OF SECTION 2(15) OF THE ACT FOUND THAT T HE WORD EDUCATION USED IN SECTION 2(15) CONNOTES THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE SKILL MIND AND CHARACTER OF STUDENTS BY NORMAL SCHO OLING. IN FACT THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 241 OF THE ITR: THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN SECTION 2(15) IN THE SYSTEMATIC INSTRUCTION SCHOOL ING OR TRAINING GIVEN TO THE YOUNG IS PREPARATION FOR THE WORK OF LI FE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC INSTRUCTION WHICH A PERSON HAS RECEIVED. THE WORD EDUCATION HAS NOT BEEN US ED IN THAT WIDE AND EXTENDED SENSE ACCORDING TO WHICH EVERY ACQUIS ITION 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. LIKEWISE IF YOU READ NEWSPAPERS AND MAGAZINES SEE PICTURES VISIT ART G ALLERIES MUSEUMS AND ZOOS YOU THEREBY ADD TO YOUR KNOWLEDGE. AGAIN WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPL E SOME OF WHOM ARE NOT STRAIGHT YOU LEARN BY EXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WAYS OF THE WORLD. IF YOU ARE NOT CAREFUL 5 ITA NO.102/COCH/2010 YOUR WALLET IS LIABLE TO BE STOLEN OR YOU ARE LIABL E TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. THE THIEF WHO REMOVES YO UR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MAKE YOU WISER THOUGH POORER. IF YOU VISIT A NIGHT CLUB YOU GET ACQUAINTED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOME OF THE NOT MUCH REVEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATION IN THE GREAT SCHOOL OF LIFE. BUT THAT IS NOT THE SENSE IN WHICH THE WORD EDUCATION IS USED IN CLAUSE (15) O F SECTION 2. WHAT EDUCATION CONNOTES IN THAT CLAUSE IS THE PROCE SS OF TRAINING AND DEVELOPING THE KNOWLEDGE SKILL MIND AND CHARACT ER OF STUDENTS BY NORMAL SCHOOLING. 6. IN VIEW OF THE ABOVE OBSERVATIONS OF THE APEX CO URT ALL KINDS OF TEACHING / ACQUIRING OF KNOWLEDGE DOES NOT FALL WITHIN THE MEAN ING OF EDUCATION AS USED IN SECTION 2(15) OF THE ACT. THE LEGISLATURE INTENDED THAT THERE SHOULD BE A SYSTEMATIC INSTRUCTION SCHOOLING OR TRAINING GIVEN TO STUDENTS BY WAY OF NORMAL SCHOOLING. THE PATNA HIGH COURT IN THE CASE OF BI HAR INSTITUTE OF MINING AND MINE SURVEYING (SUPRA) HAD AN OCCASION TO CONSIDER THE VERY SAME ISSUE. IN THE CASE BEFORE THE PATNA HIGH COURT THE ASSESSEE WAS R UNNING CLASSES AND VOCATIONAL TRAINING TO STUDENTS. THE ASSESSEE CLAIMED IT AS A CHARITABLE INSTITUTION WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THE PATNA HIG H COURT AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN COMMISSIONER OF INCOM E-TAX VS ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722 (SC) AND IN THE CASE OF COMMISSIONER OF INCOME- TAX VS SOLE TRUSTEE LOKA SHIKSHANA TRUST (1970) 77 I TR 61 (MYS) HAS OBSERVED AS FOLLOWS AT PAGE 615 OF THE ITR: IT IS TRUE THAT BY REASON OF THE FINANCE ACT 198 3 THE QUESTION AS TO WHETHER ANY CHARITABLE INSTITUTION I S BEING RUN WITH A PROFIT MOTIVE OR NOT HAS LOST ITS RELEVANT. HOWEVE R THE WORD CHARITABLE PREFIXING THE WORD INSTITUTION HAS T O BE GIVEN ITS FULL EFFECT. IT APPEARS THAT ONE OF THE PRINCIPAL PROJE CTS OF THE PETITIONERS INSTITUTION HAS THE OBJECT OF COACHING AND PREPARING THE STUDENTS FOR APPEARING IN VARIOUS EXAMINATIONS COND UCTED BY THE 6 ITA NO.102/COCH/2010 BOARD OF MINING EXAMINATION AND / OR MI(1) SECTION (A)(B) AND THE SAID COACHING OF STUDENTS IN AN INSTITUTE IS NOT I N OUR OPINION AN IMPARTING OF EDUCATION WHICH CAN BE SAID TO BE A PR OCESS OF TRAINING AND DEVELOPING KNOWLEDGE AND CHARACTER OF STUDENTS B Y NORMAL SCHOOLING. A COACHING INSTITUTE CANNOT BE SAID TO BE AN INSTITUTION WHERE NORMAL SCHOOLING IS DONE. THE DEFINITION OF CHARITABLE PURPOSE IS INCLUSIVE AND NOT EXHAUSTIVE. 7. IN VIEW OF THE ABOVE JUDGMENT OF THE PATNA HIGH COURT IT IS OBVIOUS THAT MERE CONDUCTING OF CLASSES FOR OPEN UNIVERSITY / DI STANCE EDUCATION CANNOT BE CONSTRUED AS CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THE ASSESSEE HAS TO NECESSARILY CONDUCT A REGULAR S CHOOL / COLLEGE IN WHICH THE STUDENTS ARE IMPARTED EDUCATION KNOWLEDGE TRAINING WHICH RESULTED IN CONFIRMAMENT OF DEGREE OR DIPLOMA BY THE GOVERNMENT OR GOVERNMENTAL AGENCY OR UNIVERSITY. THE OPEN UNIVERSITY IS OPEN TO ALL INDIVIDUAL WHO CAN APPEAR WITHOUT EVEN TAKING ANY TRAINING FROM THE COACHING C LASSES. IN OTHER WORDS THE STUDENT WHO IS APPEARING FOR OPEN UNIVERSITY OR DIS TANCE EDUCATION CAN PREPARE HIMSELF INSTEAD OF GOING TO A COACHING CLASS LIKE TH E ONE CONDUCTED BY THE ASSESSEE. SO A MERE COACHING CLASS FOR PREPARING T HE STUDENTS TO ATTEND THE EXAMINATION CONDUCTED BY OPEN UNIVERSITY OR BY THE OTHER UNIVERSITY OR DISTANCE EDUCATION CANNOT BE CONSIDERED TO BE A REGULAR AND SYSTEMATIC SCHOOLING WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THEREFORE THE ACTIVITY OF THE ASSESSEE IS NOT EDUCATION INSTITUTION WITHIN THE MEANING OF S ECTION 2(15) OF THE ACT. THEREFORE THE ASSESSEE IS NOT ENTITLED FOR EXEMPTI ON U/S 11 OF THE ACT. 8. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THIS BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1998-99 29 99-2000 AND 2000-01. THE EARLIER BENCH OF THIS TRIBUNAL HAD NO OCCASION TO C ONSIDER THE JUDGMENT OF THE APEX COURT IN THE CASE OF SOLE TRUSTEE LOKA SHIKSHAN A TRUST (SUPRA) AND THE PATNA HIGH COURT DECISION IN THE CASE OF BIHAR INST ITUTE OF MINING AND MINE 7 ITA NO.102/COCH/2010 SURVEYING (SUPRA). THEREFORE IN VIEW OF THE JUDGM ENT OF THE APEX COURT IN THE CASE OF SOLE TRUSTEE LOKA SHIKSHANA TRUST (SUPRA) AN D THE PATNA HIGH COURT DECISION IN THE CASE OF BIHAR INSTITUTE OF MINING A ND MINE SURVEYING (SUPRA) THE DECISION OF THIS TRIBUNAL IN ASSESEES OWN CASE FOR THE EARLIER YEARS IS NOT APPLICABLE TO THE FACTS OF THIS CASE. 9. FURTHERMORE WHEN THE ASSESSEE WAS CLAIMING THE EXEMPTION U/S 11 WE ARE UNABLE TO UNDERSTAND HOW THE COMMISSIONER OF IN COME-TAX(A) COULD SAY THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10(23C)( IIIAD) OF THE ACT. ADMITTEDLY NO APPROVAL WAS GRANTED BY THE CONCERNED AUTHORITY FOR APPROVAL U/S 10(23C) OF THE ACT. THEREFORE THE COMMISSIONER OF INCOME-TAX( A) IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE ASSESSEE IS A CHARITABLE INSTITUTION. IN VIEW OF THE ABOVE THE IMPUGNED ORDER OF THE COMMISSIONER OF IN COME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 10. WE FURTHER FIND THAT THE ASSESSING OFFICER REJE CTED THE REGISTRATION GRANTED U/S 12A AND COMPLETED THE ASSESSMENT AS AOP. ONC E THE REGISTRATION WAS GRANTED U/S 12A BY THE COMMISSIONER THE ASSESSING OFFICER AS A SUBORDINATE OFFICER TO THE COMMISSIONER CANNOT CANCEL THE REGIS TRATION. IT IS FOR THE COMMISSIONER TO CANCEL THE REGISTRATION PROVIDED TH E CONDITIONS U/S 12AA(3) ARE SATISFIED. THEREFORE THE CANCELLATION / REJECTION OF REGISTRATION U/S 12A AND COMPLETION OF ASSESSMENT UNDER AOP BY THE ASSESSI NG OFFICER IS WITHOUT JURISDICTION. THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSING OFFICER HAS EXCEEDED HIS JURISDICTION IN REJECTING THE REGISTRA TION AND ASSESSING THE ASSESSEE AS AOP. AS ALREADY OBSERVED IT IS OPEN TO THE C OMMISSIONER TO CONSIDER THE CASE OF THE ASSESSEE AND PASS NECESSARY ORDER U/S 1 2AA(3) OF THE ACT. 8 ITA NO.102/COCH/2010 11. SINCE THE CROSS OBJECTION IS FILED ONLY TO SUPP ORT THE ORDER OF COMMISSIONER OF INCOME-TAX(A) IT BECOMES INFRUCTUOU S. THEREFORE THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MARCH 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 29 TH MARCH 2012 PK/- COPY TO: 1. DDIT (EXEMPTION) ERNAKULAM 2. M/S KUTTUKARAN FOUNDATION SANJUAN TOWERS OLD RAILWA Y STATION ROAD KOCHI 3. THE COMMISSIONER OF INCOME-TAX(A)-II KOCHI 4. THE COMMISSIONER OF INCOME-TAX KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH