M/s Children Education Society, Bangalore v. DCIT, Bangalore

ITA 140/BANG/2010 | 2006-2007
Pronouncement Date: 20-05-2010 | Result: Allowed

Appeal Details

RSA Number 14021114 RSA 2010
Assessee PAN RULES1997A
Bench Bangalore
Appeal Number ITA 140/BANG/2010
Duration Of Justice 3 month(s) 16 day(s)
Appellant M/s Children Education Society, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 20-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 20-05-2010
Date Of Final Hearing 19-04-2010
Next Hearing Date 19-04-2010
Assessment Year 2006-2007
Appeal Filed On 04-02-2010
Judgment Text
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 .. APPEL LANT 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 ACCOUN TANT RESPONDENT BY : SMT. SWATHI S. PATIL CIT-II O R D E R 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 A RE 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 REGU LAR 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 O F 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 RUNNIN G AS MUCH AS 39 EDUCATIONAL INSTITUTIONS IN DIFFERENT DISCIPLINES I N AND AROUND BANGALORE. THE RETURN FILED BY THE ASSESSEE SOCIETY SHOWED LOS S OF RS.1 52 63 919/-. SOME OF THE INSTITUTIONS RUN BY THE ASSESSEE SOCIET Y HAD POSITIVE SURPLUS AT THE END OF THE RELEVANT PREVIOUS YEAR WHEREAS RE MAINING INSTITUTIONS HAD A REVERSE POSITION. THE RETURN FILED BY THE AS SESSEE SOCIETY WAS NOT ACCEPTED BY ASSESSING AUTHORITY. THE ASSESSEE SOCI ETY 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 RE SULTED IN AN ADDITION OF RS.2 46 29 977/- TOWARDS THE INCOME OF THE ASSES SEE. THE ASSESSING OFFICER HAS ALSO ADDED AMOUNTS AVAILABLE UNDER DIFF ERENT 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 EXPENDITU RE. 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/-. TH E 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 PERTAIN ING TO EARLIER ASSESSMENT YEARS THE COMMISSIONER OF INCOME-TAX(A) HELD THAT THE CORRECT STATUS SHOULD BE THAT OF ARTIFICIAL JURIDIC AL PERSON. THE COMMISSIONER OF INCOME-TAX(A) ON THE OTHER HAND HA S 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 REGISTRAT ION 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) F URTHER CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS THE BUILDING FUND AS WELL AS INFRASTRUCTURE DEVELOPMENT FUND. ANOTHER G ROUND RAISED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX(A) W AS AGAINST THE ADDITION OF RS.17 51 540/- PERTAINING TO DONATIONS RECEIVED BY THE ASSESSEE SOCIETY. THIS GROUND HAS BEEN PARTLY ALLO WED BY THE COMMISSIONER OF INCOME-TAX(A). HE HAS CONFIRMED TH E ADDITION OF ITA NOS.140 & 141/BANG/2010 PAGE - 4 RS.19 95 000/- MADE BY THE ASSESSING AUTHORITY AS U NEXPLAINED EXPENDITURE. THE GROUNDS RAISED BY THE ASSESSEE AG AINST LEVY OF INTEREST HAVE ALSO BEEN DISMISSED. 4. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CO MMISSIONER OF INCOME-TAX(A) INASMUCH AS ALMOST ALL THE SUBSTANTIA L GROUNDS RAISED BY THE ASSESSEE HAVE BEEN DISMISSED BY THE COMMISSIONE R OF INCOME-TAX(A) EXCEPT THE GROUND RELATING TO THE STATUS AND THE N OMINAL 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 SH OULD BE ASSIGNED AS ARTIFICIAL JURIDICAL PERSON. THEREFORE THESE CROS S APPEALS BEFORE THE TRIBUNAL. 6. IN THE ABOVE CONTEXT WE WILL CONSIDER FIRST TH E APPEAL FILED BY THE ASSESSEE SOCIETY. 7. THE FIRST GROUND RAISED BY THE ASSESSEE IS GENER AL 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 O UT 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 OF FICER BY NOT FOLLOWING THE DECISION OF THE HON'BLE ITAT IN THE A PPELLANT'S OWN CASE FOR THE EARLIER YEARS AND CONSEQUENTLY THE AS SESSMENT MADE IS CONTRARY TO LAW OF JUDICIAL DISCIPLINE AND IS LIABL E TO BE ANNULLED. II) WITHOUT PREJUDICE TO THE ABOVE THE LEARNED COM MISSIONER OF INCOME-TAX(A) OUGHT TO HAVE CANCELLED THE ASSESSMEN T AFTER HOLDING THAT THE APPELLANT IS LIABLE TO BE ASSESSED IN THE STATUS OF 'AJP' INSTEAD OF 'AOP' UNDER THE FACTS AND IN THE CIRCUMS TANCES OF THE APPELLANT'S CASE ESPECIALLY WHEN THE HON'BLE ITAT H AS HELD IN EARLIER YEARS THAT THE APPELLANT STATUS IS ONE OF ' AJP'. 10. IN PARAGRAPH 6 IN PAGE 12 OF THE ASSESSMENT ORD ER THE LEARNED ASSESSING AUTHORITY HAS DISCUSSED THE HISTORY OF TH E ISSUE PERTAINING TO THE STATUS OF THE ASSESSEE SOCIETY. THE ASSESSEE SOCIE TY 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 TRIBU NAL. THE TRIBUNAL AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES AND T HE CONSTITUTION AND OBJECTS OF THE ASSESSEE SOCIETY HELD THAT ASSESSEE SHOULD BE ASSESSED IN THE STATUS OF ARTIFICIAL JURIDICAL PERSON. THIS FI NDING HAS BEEN DELIVERED ITA NOS.140 & 141/BANG/2010 PAGE - 6 BY THE TRIBUNAL IN 'B' BENCH FOR THE ASSESSMENT YE ARS 2000-01 2001-02 2002-03 IN THEIR ORDER DATED.23.2.2006 PASSED IN I TA.387 388 1305/BANG/2005. THE VERY SAME ISSUE WAS AGAIN CONS IDERED BY THE TRIBUNAL THROUGH THEIR ORDER DATED.11.7.2008 FOR AS SESSMENT YEARS 2003- 04 2004-05 AND 2005-06 IN ITA NOS.329 330 & 331/B ANG/2008. IN FACT UP TO THE ASSESSMENT YEAR 2005-06 WHICH IS T HE IMMEDIATELY PRECEDING ASSESSMENT YEAR IN THIS CASE THE TRIBUNA L HAS CONSISTENTLY HELD THAT THE RIGHTFUL STATUS TO BE ADOPTED IN THE CASE OF THE ASSESSEE SOCIETY IS ARTIFICIAL JURIDICAL PERSON. ALL THESE DETAILS HAV E BEEN FAIRLY DETAILED BY THE ASSESSING OFFICER. BUT WHY THE ASSESSING OFFIC ER HAS NOT FOLLOWED THE BINDING ORDER OF THE TRIBUNAL FOR SO MANY EARLI ER ASSESSMENT YEARS ? THE ANSWER OF THE ASSESSING OFFICER IS THAT THE DEC ISIONS OF THE TRIBUNAL ON THE ISSUE OF STATUS HAVE BEEN TAKEN BEFORE THE H ON'BLE HIGH COURT OF KARNATAKA IN DIRECT APPEALS FILED U/S.260A OF THE I T ACT 1961 TO KEEP THE MATTER ALIVE FOR FINAL ADJUDICATION BY THE COM PETENT COURT OF LAW. HE HAS FAIRLY CONCEDED IN THE ASSESSMENT ORDER THAT TH E STATUS HAS AGAIN BEEN ADOPTED AS ASSOCIATION OF PERSONS JUST FOR THE PURP OSE 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 ASSESSMEN T 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 DIRECTE D THE ASSESSING AUTHORITY TO ADOPT THE STATUS OF THE ASSESSEE SOCIE TY AS ARTIFICIAL JURIDICAL PERSON. SO MUCH SO THE ASSESSEE HAS NO GRIEVANCE. 12. THE GRIEVANCE OF THE ASSESSEE AS REFLECTED IN T HE TWO GROUNDS EXTRACTED ABOVE IS THAT THE COMMISSIONER OF INCOME- TAX(A) WHILE HOLDING THAT THE RIGHTFUL STATUS OF THE ASSESSEE IS ARTIFIC IAL JURIDICAL PERSON OUGHT TO HAVE BROUGHT THE MATTER TO A LOGICAL AND LAWFUL END BY ANNULLING THE IMPUGNED ASSESSMENT AS THE REVENUE HAS COMPLETED TH E ASSESSMENT ON A WRONG PERSON AND NOT ON THE ASSESSEE. THIS CONTENT ION WAS NOT ANYHOW ACCEPTED BY THE COMMISSIONER OF INCOME-TAX(A) AND H E DECLINED TO ANNUL THE ASSESSMENT. THE GRIEVANCE REFLECTED IN THE GRO UNDS EXTRACTED ABOVE IS EXACTLY TO THE POINT THAT THE COMMISSIONER OF INCOM E-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 CHART ERED ACCOUNTANT AT LENGTH ON THIS ISSUE. HE ARGUED THAT FOR ALL THE A SSESSMENT YEARS IN THE PAST THE TRIBUNAL HAS CONSISTENTLY HELD THAT THE L AWFUL STATUS OF THE ASSESSEE IS ARTIFICIAL JURIDICAL PERSON. THESE DEC ISIONS OF THE TRIBUNAL ITA NOS.140 & 141/BANG/2010 PAGE - 8 HAS NOT SO FAR BEEN DISTURBED BY ANY COMPETENT APPE LLATE AUTHORITY. THEREFORE THE FINDING AND DIRECTION OF THE TRIBUNA L DO EXIST AS ON DATE. THE ASSESSING OFFICER FALLING WITHIN THE JURISDICTI ON OF THE APPELLATE TRIBUNAL BANGALORE BENCHES SHOULD HAVE THEREFORE C OMPLETED THE ASSESSMENT IN THE STATUS OF ARTIFICIAL JURIDICAL PE RSON. HE HAS ERRED IN LAW IN REPEATING AND ASSIGNING THE WRONGFUL STATUS OF A SSOCIATION OF PERSONS. THE LEARNED CHARTERED ACCOUNTANT HAS FURTHER EXPLAI NED THAT THE GRIEVOUS ERROR COMMITTED BY THE ASSESSING OFFICER HAS BEEN P ERPETUATED BY THE COMMISSIONER OF INCOME-TAX(A) BY NOT ANNULLING THE ASSESSMENT ORDER. IT IS THE ARGUMENT OF THE LEARNED CHARTERED ACCOUNT ANT THAT THE COMMISSIONER OF INCOME-TAX(A) WAS SUBSTITUTING ONE ASSESSEE IN PLACE OF ANOTHER ASSESSEE BY CHANGING THE STATUS WHICH IS NO T CONTEMPLATED IN LAW. THE RIGHTFUL STATUS OF THE ASSESSEE SHOULD HAVE BEE N ARTIFICIAL JURIDICAL PERSON WHEREAS THE COMMISSIONER OF INCOME-TAX(A) HA S DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT IN THE STA TUS OF ARTIFICIAL JURIDICAL PERSON. IT MEANS THAT NO NOTICE OF ASSES SMENT WAS SERVED ON THE ASSESSEE IN THE STATUS OF ARTIFICIAL JURIDICAL PERS ON AND IF AT ALL NOTICES WERE ISSUED THOSE NOTICES WERE ISSUED ON A NON-EXI STENT 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 S TATUS FOR THE EARLIER ASSESSMENT YEARS BEFORE THE TRIBUNAL THE ASSESSEE HAD RAISED TWO GROUNDS ONE RELATING TO THE STATUS AND THE OTHER R ELATING TO ANNULMENT OF ASSESSMENT. THE TRIBUNAL HAS HELD THAT THE ASSESSE E SHOULD BE ASSESSED IN THE STATUS OF ARTIFICIAL JURIDICAL PERSON AS CLAIME D BY IT. BUT REGARDING THE SECOND LIMB OF THE ARGUMENT THE TRIBUNAL HELD THAT ASSESSMENTS COULD NOT BE ANNULLED FOR THE REASONS THAT ASSESSEE ITSEL F HAD FILED ALL THE RETURNS VOLUNTARILY IN THE STATUS OF ARTIFICIAL JURIDICAL P ERSON. THE TRIBUNAL OBSERVED THAT ONCE THAT STATUS IS ACCEPTED THE RET URN 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 F ACT TO DIFFER FROM THE VIEW ARRIVED AT BY THE TRIBUNAL FOR EARLIER ASSESSM ENT YEARS ON THIS VERY ISSUE OF ANNULMENT OF ASSESSMENT. FURTHER AS FAIR LY STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER RIGHT OR WRONG THE REVENUE IS PERPETUATING THE POSITION FOR THE PURPOSE OF KEEPIN G THE MATTER ALIVE BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT SO THA T THEY MAY HAVE THE BENEFIT OF ADJUDICATION BY A COMPETENT COURT OF LAW . THIS IS MENTIONED BY THE LEARNED ASSESSING OFFICER IN HIS ORDER. THEREF ORE 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 VOLUN TARILY 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 CONC LUSION MUST BE A CONSEQUENT ASSESSMENT. THEREFORE WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE ASSESSMENT SHOU LD 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 COMMIS SIONER OF INCOME-TAX(A) IS NOT JUSTIFIED IN UPHOLDING THE DEN IAL OF EXEMPTION OF RS.2 46 29 977/- U/S.10(23C)(IIIAB) AN D (IIIAD) OF THE ACT HOLDING THAT THE APPELLANT SOCIETY WAS EXIS TING FOR PURPOSES OF PROFIT UNDER THE FACTS AND IN THE CIRCU MSTANCES OF THE APPELLANT'S CASE ESPECIALLY WHEN SUCH FINDING OF TH E LEARNED COMMISSIONER OF INCOME-TAX(A) IS CONTRARY TO THE FA CTS ON RECORD AS WELL AS THE BINDING DECISION OF THE HON'B LE ITAT FOR THE ASSESSMENT YEAR UNDER APPEAL.' ITA NOS.140 & 141/BANG/2010 PAGE - 11 18. THE ASSESSING OFFICER HIMSELF HAS DETAILED IN P AGE 3 OF HIS ORDER THAT THE ISSUE RELATING TO EXEMPTION U/S.10(23C)(II IAD) HAS ALREADY BEEN ADJUDICATED BY THE APPELLATE TRIBUNAL IN SO MANY CA SES CONSIDERED FOR EARLIER ASSESSMENT YEARS IN ASSESSEE'S OWN CASE. T HE TRIBUNAL HAS HELD THAT THE OBJECTS OF THE ASSESSEE SOCIETY WERE NOTHI NG BUT CHARITABLE AS DEFINED UNDER THE IT ACT AND THE ASSESSEE SOCIETY D OES NOT EXIST FOR PROFIT MOTIVE INASMUCH AS THE SURPLUS GENERATED BY ITS VAR IOUS INSTITUTIONS HAS BEEN USED FOR THE DEVELOPMENT OF EXISTING AND NEW I NSTITUTIONS. THE ASSESSING OFFICER FURTHER OBSERVES THAT THE TRIBUNA L HAS ALSO HELD THAT EACH OF THE EDUCATIONAL INSTITUTION RECOGNIZED BY T HE SOCIETY OR EACH OF THE EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE AR E SEPARATE AND DISTINCT FROM ONE ANOTHER AND THEY COME WITHIN THE MEANING O F THE TERM 'OTHER EDUCATIONAL INSTITUTION' OCCURRING IN SECTION 10(23 C) AND THEREFORE INCOME FROM EACH SUCH EDUCATIONAL INSTITUTION IS LI ABLE FOR EXEMPTION UNDER THE PROVISIONS OF THE ACT. 19. HAVING STATED IN SO MANY WORDS AS ABOVE THAT TH E 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 PERTA INING TO ASSESSMENT YEAR 2006-07 ARE BEING DISCUSSED'. THEREFORE IT I S THE CASE OF THE ASSESSING OFFICER THAT HE COULD NOT FOLLOW THE ORDE RS 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 ASSE SSMENT YEAR 2006-07 ARE DIFFERENT AND ALL THE MORE THE RATIOS OF CERTA IN JUDGEMENTS HAVE TO BE CONSIDERED. THE ASSESSING OFFICER HAS MADE AN ATTE MPT 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 BASI S OF THE DISCUSSION HE CAME TO THE FOLLOWING FINDINGS : I) M/S. CHILDRENS' EDUCATION SOCIETY IS THE ONLY 'P ERSON' TO WHICH EXEMPTION U/S.10(23C)(IIIAD) CAN BE APPLIED ; II) THERE CANNOT BE A SELECTIVE APPLICATION OF SEC TION 10(23C)(IIIAD) TO EACH EDUCATIONAL INSTITUTION AS T HEY ARE NOT SEPARATE ASSESSEES. EACH SEPARATE EDUCATIONAL INST ITUTION RUN BY THE SOCIETY CANNOT FALL UNDER LEGAL DEFINITION O F 'PERSON' UNDER THE IT ACT AND THERE IS ONLY ONE PERSON TO WH ICH THE IT ACT WOULD APPLY ; III) THERE IS NO LEGAL DISTINCTION BETWEEN THE ASSE SSEE 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 ABOV E ; V) IN THE LIGHT OF THERE BEING NO LEGAL AS WELL AS COMMERCIAL DISTINCTION BETWEEN THE TWO FOLLOWING DOCTRINE OF A PPROBATE AND REPROBATE THERE CANNOT BE A SEPARATION FOR DETERMI NING THE AGGREGATE OF ANNUAL RECEIPTS SPECIFIED IN SECTION 1 0(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 SOC IETY 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 ASSESS ING OFFICER HELD THAT THE SOCIETY DOES NOT QUALIFY FOR EXEMPTION AND THE ASSESSEE'S CLAIM FOR EXEMPTION CANNOT BE GRANTED AND THEREFORE THE ENT IRE EXCESS OF INCOME OVER EXPENDITURE HAS TO BE TAXED. 21. IN FIRST APPEAL WHILE CONCURRING WITH THE FIND INGS OF THE ASSESSING AUTHORITY THE COMMISSIONER OF INCOME-TAX(A) WENT A HEAD AND HELD THAT AS FAR AS ITS EARLIER ORDERS ARE CONCERNED THE APP ELLATE TRIBUNAL DID NOT HAVE THE BENEFIT OF CONSIDERING THE JUDGEMENT OF UT TARKHAND 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 COU RT AFTER CONSIDERING THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE C ASE OF ADITANAR EDUCATIONAL INSTITUTIONS (224 ITR 310) HAS HELD TH AT THE INVESTMENT IN THE FIXED ASSETS LIKE FURNITURE AND BUILDING ARE TH E PROPERTIES OF THE SOCIETY MAY BE CONNECTED WITH THE IMPARTING OF EDU CATION BUT THE SAME HAS BEEN CONSTRUCTED AND PURCHASED OUT OF THE INCOM E FROM IMPARTING EDUCATION WITH A VIEW TO EXPAND THE INSTITUTIONS AN D TO EARN MORE INCOME. THE COMMISSIONER OF INCOME-TAX(A) HELD THAT THE FAC TS OF THE ASSESSEE'S CASE ARE SIMILAR TO THE CASE CONSIDERED BY THE UTTA RKHAND HIGH COURT IN THE ABOVE CASE AND THEREFORE HELD THAT ASSESSEE S OCIETY 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 AN D 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 REL EVANT DISCUSSION BY THE TRIBUNAL IN THE SAID COMMON ORDER FOR IT RUNS T O 20 PAGES; BUT STILL OUT OF SHEER NECESSITY WE MAY PROCEED TO EXTRACT THE DI SCUSSION MADE BY THE TRIBUNAL ON THE ISSUE OF EXEMPTION U/S.10(23C) AS UNDER : 11. THE NEXT ISSUE RELATES TO CLAIM OF EXEMPTION UN DER SECTION 10(23C)(IIIAD) OF THE ACT READ WITH RULE 28 OF THE IT RULES. THE FACTS TO THE ASSESSEE RUNNING VARIOUS EDUCATIONAL I NSTITUTIONS HAVE BEEN EXTRACTED ELSEWHERE IN THIS ORDER. PLACIN G 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 EDUCA TIONAL INSTITUTIONS RUN BY IT EXISTED SOLELY FOR IMPARTING EDUCATION IN VARIOUS FIELD AND COURSE WAS EXEMPT UNDER SECTION 1 0(22) OF THE ACT. HE FURTHER SUBMITTED THAT OTHER INCOME DERIVE D BY THE ASSESSEE BY WAY OF BANK INTEREST DONATION HOSTEL INCOME AND TRANSPORTATION INCOME ETC. WHICH DID NOT ARISE FRO M EDUCATIONAL INSTITUTIONS I.E. WHERE TEACHING IS IMPARTED IS ALS O EXEMPT BECAUSE ASSESSEE WAS ALSO CONSIDERED AS OTHER EDUC ATIONAL 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 EDUCATION AL INSTITUTION REPORTED IN 118 .ITR 235 AND LATER AFFIRMED BY THE HONBLE 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 RECEIV ED BY THE ASSESSEE ON BEHALF OF EACH ONE OF THE EDUCATIONAL I NSTITUTIONS SATISFIES THE LEGAL POSITION AND THUS QUALIFIED FOR EXEMPTION OF INCOME AND MUST BE DEDUCTED FROM EXCESS OF INCOME O VER EXPENDITURE OF THE ASSESSEE-SOCIETY AS A WHOLE TO A RRIVE AT THE TOTAL TAXABLE INCOME OF THE ASSESSEE-SOCIETY. HE A LSO FILED RELEVANT COPIES OF INCOME AND EXPENDITURE STATEMENT OF EACH AND EVERY YEAR FROM EACH OF THE EDUCATIONAL INSTIT UTIONS RUN BY THE ASSSSSEE. 13. ON THE OTHER HAND THE LEARNED DR SHRI GUPA SUB MITTED 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 AL L THE INSTITUTIONS RUN BY THE ASSESSEE-SOCIETY. THE LEARN ED DR FURTHER POINTED OUT TO THE WRITTEN SUBMISSIONS DATED 1.4.20 04 FLIED BY THE AO BEFORE THE LEARNED CIT(A). BASED ON THOSE OB SERVATIONS THE LEARNED DR SUBMITTED THAT THE ASSESSEE OUGHT TO BE HELD AS EXISTING FOR PROFIT MOTIVE BECAUSE SEVERAL EDUCATIO NAL INSTITUTIONS HAVE REPORTED HIGH PERCENTAGE OF SURPL US IN THEIR ITA NOS.140 & 141/BANG/2010 PAGE - 16 RESPECTIVE INCOME & EXPENDITURE ACCOUNTS. THE ASSES SEE HAS GIVEN INTEREST-FREE ADVANCE TO A FIRM M/S OXFORD GI RLS 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 HO STEL. LIKEWISE THE TEAMED DR EXTRACTED SEVERAL OTHER ACT IVITIES AS FLIED IN THE WRITTEN SUBMISSION BY THE AO BEFORE TH E LEARNED CIT(A). THE LEARNED DR THEREFORE SUBMITTED THAT T HE ORDERS OF THE AUTHORITIES BELOW HAVE TO BE UPHELD IN THIS ISS UE. 14. THE LEARNED COUNSEL FOR ASSESSEE HAD REPLIED T O EACH AND EVERY POINT RAISED BY THE LEARNED DR IN HIS COUNTER ARGUMENT. HE ALSO FILED SYNOPSIS OF SUBMISSIONS MADE BEFORE T HIS TRIBUNAL SO THAT NONE OF HIS ARGUMENTS WOULD ESCAPE THE ATTE NTION OF THIS TRIBUNAL. THE SAME IS KEPT ON RECORD. ON THE QUESTI ON OF EXEMPTION UNDER SECTION 10(23C)(IIIAD) WE HAVE TAK EN MUCH PAIN TO BRING OUT NECESSARY FACTS BEFORE US TO MAKE PROPER AND JUST ADJUDICATION. IN PAGE 36 OF THE APPELLATE ORDE R 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 VA RIOUS SCHOOLS COLLEGES AND INSTITUTIONS RUN BY IT WHICH ARE EDUCATIONAL INSTITUTION AND THEREFORE IT IS ARGUED THAT SINCE ASSESSEES SOCIETY AND 22 EDUCATIONAL INSTITU TIONS RUN BY IT CANNOT BE REGARDED AS ONE THE EXEMPTION U/S.10(23C)(IAB) AND (IIIAD) IS REQUIRED TO BE EVA LUATED SEPARATELY WITH REFERENCE TO EACH SUCH EDUCATIONAL INSTITUTIONS RUN BY THE ASSASSEE SOCIETY . FROM THE PERUSAL OF THE ABOVE WE ARE OF THE VIEW T HAT THE LEARNED CIT(A) IS NOT JUSTIFIED TO AVER THAT VARIOU S 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 INSTIT UTIONS SHOULD HAVE AN INDEPENDENT EXISTENCE OF THEIR OWN DIFFERENT AND DISTINCT FROM THE ASSESSEE SOCIETY ; AND [B] THE VARIOUS SCHOOLS COLLEGES AND OTHER INSTITU TIONS SHOULD BE TOTALLY SEPARATE EDUCATIONAL INSTITUTIONS DIVORCED FROM THE PARENT CONTROLLING SOCIETY ; 15. THE LANGUAGE OF SECTION 10(23C) IS PLAIN AND SI MPLE AND THE CONSTRUCTION PLACED BY THE ASSESSEE ON THE SAID PRO VISIONS 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 INSTI TUTION IS EXEMPT SUBJECT TO CERTAIN CONDITIONS MENTIONED IN T HE 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 HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ACADEMY OF GENERAL EDUCATION REPORTED IN 150 ITR 135. AT PG E 139 OF THE AFORESAID DECISION THE HONBLE KAMATAKA HIGH CO URT OBSERVED THAT WE MAY STATE AT THE OUTSET THAT THE ASSESSEE IN OR DER TO CLAIM THE BENEFIT OF SECTION 10(22) OF THE I. T. AC T 1961 NEED NOT NECESSARILY BE A SCHOOL OR COLLEGE WHERE EDUCATION IS IMPARTED. NOR SUCH SCHOOL OR COLLEGE S HOULD BE DIFFERENT FROM THE ASSESSEE WHO CLAIMS BENEFIT O F SCTION 10(22). THAT WOULD BE CLEAR IF WE PERUSE THEPROVISI ONS 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 HONBLE JURIS DICTIONAL HIGH COURT IT IS VERY CLEAR THAT THE ASSESSEE CLAI MING EXEMPTION U/S.10(22) NEED NOT BE A SCHOOL OR EDUCATIONAL INST ITUTION NOR THAT THE EDUCATIONAL INSTITUTION SHOULD BE A DIFFE RENT AND SEPARATE LEGAL ENTITY FROM THE ASSESSEE CLAIMING TH E EXEMPTION ALTHOUGH THE SAID DECISION IS IN THE CONTEXT OF SEC TION 10(22) 1T IS TO BE SEEN THAT THE RATIO OF THE SAID DECISION W OULD SQUARELY APPLY IN THE CONTEXT OF SECTION 10(23C) AS WELL ES PECIALLY ON ACCOUNT OF THE FACT THAT THE HONBLE COURT HAS DRAWN SUPPORT FROM THE LANGUAGE OF OTHER CLAUSES OF SECTION 10 WHICH ARE WORDED IN THE MANNER SIMILAR TO CLAUSE (2 3C) OF SECTION 10 THE ACT. 17. THE AUTHORITIES BELOW HAVE NOT DISPUTED THAT TH E ASSESSEE SOCIETY IS RUNNING SEVERAL EDUCATIONAL INSTITUTIONS EACH OF WHICH ARE DIFFERENT AND DISTINCT FROM ONE ANOTHER EVEN TH OUGH THEY ARE RUN AND CONTROLLED BY THE SAME ASSESSEE IN THE SENS E THAT DIFFERENT TRAINING IS IMPARTED IN DIFFERENT INSTITU TIONS. THUS THE LEARNED CIT(A) FELL IN ERROR WHEN HE UPHELD THE DEN IAL OF EXEMPTION TO THE ASSESSEE ON THE GROUND THAT THE VA RIOUS EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE ARE NO T SEPARATE LEGAL ENTITIES BY THEMSELVES. 18. THE LEARNED IT(A) HELD THAT THE ASSESSEE-SOCIET Y AS A WHOLE IS OTHER INSTITUTION OCCURRING IN SEC 10(23C) HAV ING REGARD TO THE RATIO OF DECISIONS RENDERED BY THE HON'BLE SUPR EME COURT AND HIGH COURT OF MADRAS IN THE CASE OF ADITANAR ED UCATIONAL ITA NOS.140 & 141/BANG/2010 PAGE - 19 INSTITUTION [SUPRA] AND HOST OF OTHER CONCURRING DE CISIONS. 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 ADITANARS CASE ARE DISCUSSED THREADBARE TO BRING OUT THE TRUE IMPORT OF THE SAID DECISION RENDERED. 19. M/S ADITANAR EDUCATIONAL INSTITUTION WAS A SOCI ETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT WIT H THE OBJECT OF ESTABLISHING RUNNING MANAGING AND ASSISTING COLLE GES SCHOOLS AND EDUCATIONAL ORGANIZATIONS EXISTING SOLELY FOR E DUCATIONAL PURPOSES. IT RECEIVED CERTAIN DONATIONS FROM A TRUS T 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 EDUC ATIONAL PURPOSES. THE AO HOWEVER TOOK THE VIEW THAT THE W ORDS 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 INSTITUTIO N 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 T HE MATTER TO THE HIGH COURT. 20. IN THE HIGH COURT THE DEPARTMENT CONTENTED THA T THE TERM OTHER EDUCATIONAL INSTITUTIONS OCCURRING IN SECTI ON 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 T HE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S. 10(22) BECAUSE THE ASSESSEE SOCIETY WAS NEITHER AN UNIVERSITY NOR AN OTHER E DUCATIONAL INSTITUTION HAVING REGARD TO THE PRINCIPLE OF EJUS DEM GENESIS. IN SO FAR AS ABOVE CONTENTION WAS CONCERNED THE HON BLE HIGH COURT HELD THAT THE TERM OTHER EDUCATIONAL INSTITU TION 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 NO T HAVE ANYTHING TO DO WITH THE UNIVERSITY. THE CATEG ORIES ARE SO DIFFERENT THAT THE UNIVERSITY CANNOT BE TH E GENUS AND THE OTHER EDUCATIONAL INSTITUTION THE SPECIES THEREOF. THUS THE COLLEGE HERE COMES UNDER THE OTH ER 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 ITS ELF WAS USED BY THE HONORABLE HIGH COURT WHEN STATING THE CONTEN TION OF THE DEPARTMENT TO MAKE CLEAR AND SUBTLE DISTINCTION BET WEEN THE ASSESSEE SOCIETY PER-SE AND THE VARIOUS EDUCATION AL INSTITUTIONS RUN BY IT. THIS DISTINCTION AROSE NO T BECAUSE THE TWO WERE ALTOGETHER DIFFERENT LEGAL ENTITIES BUT B ECAUSE THE FORMER WAS NOT GRANTED AFFILIATION BY ANY UNIVERSIT Y AND DID NOT BY ITSELF IMPART EDUCATION TO STUDENTS WHEREAS THE LATTER I.E. EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE SOC IETY WERE ITA NOS.140 & 141/BANG/2010 PAGE - 21 ACCORDED AFFILIATION BY AN UNIVERSITY AND THE ACTIV ITY OF IMPARTING EDUCATION TO STUDENT WAS ACTUALLY CARRIED OUT HERE. IN VIEW OF THIS SUBTLE DISTINCTION THE DEPARTMENT CONT ENDED THAT THE ASSESSEE SOCIETY PER-SE WAS NOT AN EDUCATIONAL I NSTITUTION WHICH ITSELF DID NOT IMPART EDUCATION. CONSEQUENTL Y THE DEPARTMENT CONTENDED THAT THE INCOME OF THE ASSESS EE 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 HONBLE HIGH C OURT HELD THAT THE ASSESSEE SOCIETY EFFECTUATES ITS OBJECTS B Y IMPARTING EDUCATION THROUGH THE MEDIUM OF COLLEGES ESTABLIS HED BY IT. THEREAFTER THE HONBLE HIGH COURT REJECTED THE CONT ENTION OF THE DEPARTMENT THAT ASSESSEE SOCIETY PER-SE WAS O NLY A FINANCIAL BODY AND REITERATED THAT ASSESSEE SOCIET Y PER SE ALSO CAME WITHIN THE SCOPE OF OTHER EDUCATIONAL INSTITU TION 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 HONBLE HIGH COURT MADE A CLEAR DI STINCTION BETWEEN ASSESSEE SOCIETY PER-SE AND VARIOUS EDUC ATION INSTITUTIONS RUN BY IT IN THE SENSE THAT ACTUAL ED UCATION 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 BO TH THE EDUCATIONAL INSTITUTIONS AND THE ASSESSEE SOCIETY W OULD COME UNDER THE AMBIT OF THE TERM OTHER EDUCATIONAL INST ITUTION OCCURRING IN SECTION 10(22). THE LEARNED CIT(A) DID NOT APPRECIATE THE TRUE IMPORT OF THE AFORESAID DECISIO N AND HE ERRED ITA NOS.140 & 141/BANG/2010 PAGE - 22 WHEN HE APPLIED THE RATIO OF THE AFORESAID DECISION TO THE ASSESSEES CASE TO CONCLUDE AND HOLD THAT ASSESSEE SOCIETY AS A WHOLE WAS REQUIRED TO BE CONSIDERED AS OTHER EDU CATIONAL INSTITUTION OCCURRING IN SEC 10(23C). IN OTHER WOR DS THE DECISION OF THE SUPREME COURT IN ADITANAR EDUCATION AL INSTITUTION (SUPRA) DOES NOT LAY DOWN THE PROPOSITI ON THAT THE SOCIETY RUNNING SEVERAL EDUCATION INSTITUTIONS CONS TITUTE ONE SINGLE EDUCATIONAL INSTITUTION WHICH IS THE INFE RENCE DRAWN BY THE CIT(A). 23. THUS THE RATIO OF THE DECISION OF THE SUPREME C OURT IN ADITANAR CASE (SUPRA) FAR FROM SUPPORTING THE VIEW OF THE CIT(A) SUPPORTS THE CONTENTION OF THE ASSESSEE. FUR THERMORE IN ADITHINARS CASE AFTER REJECTING BOTH THE CONTENTI ONS OF THE DEPARTMENT THE HONBLE HIGH COURT CONCURRED WITH TH E 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 HONBLE 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 EDUCA TIONAL PURPOSES AND NOT FOR THEPURPOSE OF THE PROFIT WOULD BE REGARDED AS OTHER EDUCATIONAL INSTITUTION COMING WITHIN SE CTION 10(22) OF THE ACT. FROM THE ABOVE ALSO IT IS VERY CLEAR T HAT 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 EDUC ATIONAL INSTITUTION[SUPRA] : A SOCIETY BY MERELY RUNNING A COLLEGE CANNOT USE T HIS 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 CORRELATIO N BETWEEN THE INCOME EARNED AND THE EDUCATIONAL INSTI TUTION. 24. FROM THE ABOVE IT IS ONCE AGAIN CLEAR THAT A P ERSON CLAIMING EXEMPTION U/S.10(22) COULD BE A SOCIETY OR TRUST OR OTHER SIMILAR BODY. ALL THE INCOME OF SUCH PERSON I S 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 INS TITUTION WAS EXEMPT. THUS IT IS VERY CLEAR THAT THE TERMS UNI VERSITY AND OTHER EDUCATIONAL INSTITUTION OCCURRING IN SECTIO N 10(22) REFERS TO THE SOURCE OF INCOME DERIVED FROM EDUCATI ONAL INSTITUTIONS IN THE HANDS OF THE PERSON CLAIMING TH E EXEMPTION. THUS THE TERM OTHER EDUCATIONAL INSTITUTION REFE RS TO THE FOLLOWING: [I] A SCHOOL COLLEGE OR EDUCATIONAL INSTITUTION RU N BY A SOCIETY OR TRUST OR OTHER SIMILAR BODY; AND [II] THE ASSESSEE SOCIETY ITSELF IE. WHEN CONSID ERED DISTINCT FROM EDUCATIONAL INSTITUTIONS NOT BECAU SE THEY ARE DIFFERENT LEGAL ENTITIES BUT BECAUSE OF THE REA SONS MENTIONED EARLIER. 25. THE VERY PHRASEOLOGY EMPLOYED IN SECTION 10(23C ) DOES NOT SUPPORT THE CONTENTION OF THE AUTHORITIES BELOW THA T THE TERM OTHER EDUCATION INSTITUTION APPLIES TO THE ASSES SEE SOCIETY' AS ITA NOS.140 & 141/BANG/2010 PAGE - 24 A WHOLE. THIS IS BECAUSE SECTION 10(23C) EMPLOYS T HE FOLLOWING DISTINCT WORDS AND PHRASES : [A] THE WORDS PERSON AND ON BEHALF OF IN THE PH RASE 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 INST ITUTION ONCE AGAIN OCCURRING IN SUB-CLAUSE [IIIAB] & [IIIAD ] OF SECTION 10(23C). 26. IT CANNOT BE DISPUTED THAT. THE TERM PERSON R EFERS TO THE ASSESSEE CLAIMING EXEMPTION U/S.10(23C) AND IT GOE S WITHOUT SAYING THAT THE ASSESSEE/PERSON COULD BE CONSTITU TED 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 T HAT IT WAS NOT THE INTENTION OF THE LEGISLATURE TO GIVE A BLANKET EXEMPTION IN RESPECT OF ALL THE INCOME OF A PERSON. THE LEGISL ATURE VERY CLEARLY WANTED TO EXEMPT ANY INCOME EWHICH HAD SOME NEXUS WITH THE EDUCATIONAL INSTITUTION SUCH AS INCOME REC EIVED BY A PERSON ON BEHALF OF A UNIVERSITY OR OTHER EDUC ATIONAL INSTITUTION. THIS VIEW IS ALSO CONSISTENT WITH OBS ERVATION OF THE HONBLE MADRAS HIGH COURT IN ADITANAR [SUPRA] ALREA DY DISCUSSED EARLIER. . THUS THE TERM PERSON STANDS FOR THE ASSESSEE CLAIMING EXEMPTION AND THE TERMS UNIVERSI TY AND OTHER EDUCATIONAL INSTITUTION REFERS NOT ONLY TO ASSESSEE ITSELF BUT ALSO TO THE ACTIVITY PRODUCING THE INCOME WHIC H THE LEGISLATURE INTENDED TO EXEMPT. THUS THE LEARNED C IT(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 A FORESAID MANNER. 27. THE USE OF THE PHRASE SUCH UNIVERSITY OR EDUCA TIONAL INSTITUTION AFTER THE WORDS IF THE AGGREGATE ANN UAL RECEIPTS OF CLEARLY INDICATES THAT THE INTENTION OF THE LEG ISLATURE WAS THAT THE LIMIT SPECIFIED IN RULE 2BC SHOULD BE EVALUATED VIS-A-VIS THE AGGREGATE ANNUAL RECEIPT OF EACH AND EACH ONE OF TH E VARIOUS SCHOOLS COLLEGES INSTITUTIONS RUN BY THE ASSESSEE SOCIETY. THIS PLAIN MEANING IS ALSO CONFIRMED HAVING REGARD TO TH E USAGE OF WORD INSTITUTION IN SINGULAR CASE WHICH MAY KIND LY BE NOTED. CONSEQUENTLY THE REASONS ADDUCED BY THE AO IN THE A SSESSMENT ORDER FOR THE AYS 2000-01 AND 2001-02 WHEREIN IT WA S CONTENDED THAT THE LIMIT OF RS.1 CRORE WOULD HAVE T O BE EVALUATED AGAINST THE AGGREGATE ANNUAL RECEIPT OF A LL INSTITUTIONS PUT TOGETHER HAVING REGARD TO THE AGGREGATE IS A PPARENTLY A MISPLACED ONE. 28. FURTHERMORE THIS SUBTLE DISTINCTION BETWEEN TH E SCHOOLS COLLEGES AND EDUCATIONAL INSTITUTIONS RUN BY THE AS SESSEE SOCIETY AND THE ASSESSEE SOCIETY ITSELF IS NOT ONLY EVIDENT FROM THE LANGUAGE OF SECTION 10(23C)(IIIAD) BUT ALSO SUPPORT ED BY THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THANTI TRUST REPORTED IN 247 ITR 785 [SC] WHEREI N IT WAS HELD THAT THE WORDS AND PHRASES TRUST AND IN STITUTION 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 CALC UTTA ITA NOS.140 & 141/BANG/2010 PAGE - 26 HIGH COURT CATEGORICALLY HELD THAT THE TRUST WAS DIFFERENT FROM INSTITUTIONAND CONSEQUENTLY VIOLATION OF SEC TION 13 BY ANY ONE OF THE INSTITUTION RUN BY THE TRUST SHO ULD NOT DIS- ENTITLE THE TRUST FROM THE EXEMPTION CLAIMED U/S.11 OF THE ACT. THIS VIEW IS ALSO SUPPORTED BY THE OBSERVATION OF J URISDICTIONAL 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) WO ULD BE REQUIRED ONLY N RESPECT OF SUCH OF THOSE EDUCATIONA L INSTITUTIONS WHOSE AGGREGATE ANNUAL RECEIPTS EXCEEDS THE SUM OF RS.I CRORE SPECIFIED IN RULE 2BC. CONSEQUENTLY THE ASSESSEE C LAIM FOR EXEMPTION U/S. 10(23C)(IIIAD) IS VALID NOTWITHSTAN DING THE FACT THAT THE ASESSEE IS NOT NOTIFIED U/S. 10(23C)(VI) OF THE ACT. ACCORDINGLY THE SECOND OF THE REASONS ADDUCED BY T HE LEARNED CIT(A) FOR DENIAL OF EXEMPTION IS CLEARLY ERRONEOU S AND THE CLAIM OF THE ASSESSEE REQUIRES TO BE ALLOWED FOR TH E ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. 30. FURTHER IN RESPECT OF THE 3 EDUCATIONAL INSTIT UTIONS VIZ. THE OXFORD KANNADA NURSERY KANNADA PRIMARY ARID KANNAD A 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 REINFOR CED BY THE FACT THAT EVEN THE GOVERNMENT HAS GRANTED AID ONLY TO TH ESE EDUCATIONAL INSTITUTION AND NOT TO THE ASSESSEE SO CIETY. FURTHER MORE THE SAID GRANT IS WITH REFERENCE TO TH E SALARY EXPENDITURE OF THE SAID EDUCATION INSTITUTION AND N OT WITH ITA NOS.140 & 141/BANG/2010 PAGE - 27 REFERENCE TO THE ASSESSEE SOCIETY EXPENDITURE AT AL L. IN ANY CASE THE OBSERVATIONS BY THE LEARNED CIT(A) THAT THE 3 E DUCATIONAL INSTITUTIONS ARE NOT SUBSTANTIALLY AIDED BY THE GOV ERNMENT IS ERRONEOUS. HERE AGAIN THE CIT(A) DID NOT CONSIDER T HE FACT THAT THE EXEMPTION FOR BEING SUBSTANTIALLY FINANCED BY THE GOVERNMENT IS CONTAINED UNDER A DIFFERENT CLAUSE VI Z. SECTION 10(23C)(IIIAB) WHICH AGAIN GOES TO SHOW THAT LEGISL ATURE CONSIDERED FOR EXEMPTION THE INCOME OF THE EDUCATIO NAL INSTITUTIONS IN THE HANDS OF THE ASSESSEE ON DIFFER ENT PARAMETERS. THEREFORE THE PARAMETERS ARE CLEARLY ATTACHED TO T HE EDUCATIONAL INSTITUTION ITSELF AND NOT THE ASSESSEE CLAIMING THE EXEMPTION. 31. THE AO STATED THAT THE ASSESSEE-SOCIETY HAD ADO PTED DUBIOUS METHOD OF SPLITTING INSTITUTIONS ALLEGEDLY TO ENSUR E 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 EDUCATIO NAL INSTITUTION OCCURRING IN SECTION- 10(23C). THIS IS BECAUSE THE ASSESSEE WAS RECOGNIZING CERTAI N INSTITUTIONS AS SEPARATE AND DISTINCT FROM ONE ANOTHER MUCH BEF ORE THE INTRODUCTION OF THE SECTION 10(23C). AND RULE 2BC. OUR ATTENTION WAS INVITED TO THE ASSESSEES DETAILED WR ITTEN 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 AS SESSEE HAD COMMENCED THE OXFORD COLLEGE OF SCIENCE IN TH E YEAR ITA NOS.140 & 141/BANG/2010 PAGE - 28 1994-95. THEREAFTER WHEN THE ASSESSEE COMMENCED ANO THER INSTITUTION VIZ. THE OXFORD COLLEGE OF SCIENCE [MC A PROGRAMME] IN THE YEAR 1995-96 IT TREATED THE SAME AS SEPARATE AND DISTINCT FROM THE OXFORD COLLEGE OF SCIENCE W HICH WAS COMMENCED IN 1994-95. IT IS VERY DEAR THAT THE OBSE RVATIONS MADE BY THE AO COULD NOT AT ALL HAVE BEEN THE CONSIDERATION FOR THE TREATING THE AFORESAID 2 INST ITUTIONS AS DISTINCT FROM ONE ANOTHER INASMUCH AS THE PROVISION S 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 T HE YEAR 1995-96. THUS THE VIEW TAKEN BY THE AO IS UNFO UNDED IN LIGHT OF THE FACTS FOUND ON RECORD THAT THE ASSESSE E HAS BEEN TREATING THESE INSTITUTIONS AS SEPARATE MUCH BEFORE THE INTRODUCTION OF THE PROVISIONS OF SEC 10(23C). CON SEQUENTLY 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 DIF FERENT GROUND. 32. FURTHERMORE THE ASSESSEES METHOD OF RECOGNIZIN G AN EDUCATIONAL INSTITUTION IS SUBSTANTIATED BY A NUM BER OF DEFINITION OF THE TERM EDUCATIONAL INSTITUTION R ENDERED IN THE CONTEXT OF OTHER ACTS AND ALSO THE OBSERVATIONS OF THE HONBLE 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 ORDE R FOR THE AY ITA NOS.140 & 141/BANG/2010 PAGE - 29 2002- 03 WHERE THE ASSESSEES CONTENTION IN THIS RE GARD HAS BEEN SUCCINCTLY SUMMARISED BY THE. LEARNED CIT(A). IT I S THUS WELL FOUND THAT EACH OF THE EDUCATIONAL INSTITUTIONS REC OGNISED BY THE ASSESSEE AS BEING SEPARATE AND DISTINCT FROM ONE AN OTHER COME WITHIN THE MEANING OF THE TERM OTHER EDUCATIONAL I NSTITUTION OCCURRING IN SECTION 10(23C) AND THEREFORE THE INCO ME FROM EACH SUCH INSTITUTION IS LIABLE FOR EXEMPTION THER EFORE THE INCOME FROM EACH SUCH INSTITUTION IS LIABLE FOR EXE MPTION UNDER THE PROVISIONS OF THE ACT. 33. THE LEARNED COUNSEL FOR ASSESSEE HAD FILED SEPA RATE PAPER BOOK FOR EACH AND EVERY AY ENCLOSING THE CORRESPOND ENCE BETWEEN THE AO AND THE ASSESSEE WRITTEN SUBMISSION S FILED BEFORE THE LEARNED CIT(A) AND THE DETAILS OF VARIOU S INCOME & EXPENDITURE ACCOUNT UNDER VARIOUS HEADS ETC. WE HA VE TAKEN NOTE OF EACH AND EVERY DOCUMENT FILED THEREIN WHIC H 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 TH E 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 T HE INCOME-TAX ACT. 34. EDUCATIONAL INSTITUTION HAS NOT BEEN DEFINED UNDER THE INCOME-ACT AND THEREFORE TO UNDERSTAND THE MEANIN G 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 INSTITUT ION HAS BEEN ITA NOS.140 & 141/BANG/2010 PAGE - 30 DEFINED IN VARIOUS LEGISLATIONS RELATING TO THE REG ULATION OF EDUCATIONAL INSTITUTION AND THE GIST OF THE SAID DE FINITIONS HAS BEEN EXTRACTED AND FINISHED IN THE ASSESSEES LETTE R DATED 24-3- 2004 IN THE COURSE OF PROCEEDINGS FOR AY 2001-02. THE RELEVANT EXTRACTS OF THE SUBMISSIONS M ADE ARE REPRODUCED HEREUNDER IN SUPPORT OF THE ASSESSEES C ONTENTION. THE EDUCATIONAL INSTITUTION HAS BEEN DEFINED UNDE R THE KARNATAKA EDUCATIONAL INSTITUTION (PROHIBITION OF CAPITATION FEE) ACT 1984 AS SECTION 2(C) EDUCATIONAL INSTITUTION MEANS ANY INSTITUTION BY WHATEVER NAME CALLED WHETHER MANAGE D BY GOVERNMENT PRIVATE BODY LOCAL AUTHORITY TRUST UNIVERSITY OR ANY OTHER PERSON CARRYING ON THE ACTI VITY OF IMPARTING EDUCATION IN MEDICINE OR ENGINEERING LEAD ING TO A DEGREE CONFERRED BY A UNIVERSITY ESTABLISHED UNDER THE KARNATAKA STATE UNIVERSITIES ACT 1976 (KARNATAK A ACT NO 28. OF 1976) AND ANY OTHER EDUCATIONAL INSTI TUTION OR CLASS OR CLASSES OF SUCH INSTITUTION AS THE GOV ERNMENT 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 COURSE S RULES 1997 AS SECTION AS UNDER : SECTION 2(A) - AIDED INSTITUTION MEANS ANY INSTIT UTION 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 MEA NS AN EDUCATIONAL INSTITUTION WHICH IS NOT OWNED BY THE S TATE GOVERNMENT OR THE CENTRAL GOVERNMENT A LOCAL AUTHO RITY OR ANY OTHER AUTHORITY DESIGNATED OR SPONSORED BY T HE STATE GOVERNMENT OR THE CENTRAL GOVERNMENT OR A LOC AL AUTHORITY BUT WHICH IS RECOGNIZED BY THE STATE GOVERNMENT AND INCLUDES A COLLEGE AFFILIATED TO THE KARNATAKA UNIVERSITY OR THE UNIVERSITY AND A CONSTI TUENT COLLEGE OF THE BANGALORE UNIVERSITY NOT SIMILARLY O WNED 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 INSTITUTIO N IMPARTING EDUCATION REFERRED TO IN SECTION 3 AND IN CLUDES A PRIVATE EDUCATIONAL INSTITUTION BUT DOES NOT INCL UDE AN INSTITUTION UNDER THE DIRECT MANAGEMENT OF THE UNIV ERSITY OR OF THE CENTRAL GOVERNMENT OR A TUTORIAL INSTITUT ION. NOW COMING TO THE OBSERVATIONS OF THE HONBLE APEX COURT IN THE CASE T.M.A.PAI FOUNDATION & OTHERS (SUPRA) THE HONBLE 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. RM D CHAMARBAUGWALA (1957 SCR 874; AIR (1957) SC 699. EDUCATION HAS SO FAR NOT BEEN REGARDED AS A TRADE O R BUSINESS WHERE PROFIT IS THE MOTIVE. EVEN IF THERE IS ANY DOUBT ABOUT WHETHER EDUCATION IS A PROFESSION OR NO T IT DOES NOT APPEAR THAT EDUCATION WILL FALL WITHIN MEA NING 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 F OR THE PURPOSE OF DEVELOPMENT OF EDUCATION AND EXPRESSION OF INSTITUTIONS FURTHER AT PAGE 128 IN REPLY TO QUESTION NO.11 HI S 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 ADMINIS TER EDUCATIONAL INSTITUTION GUARANTEED UNDER THE CONSTI TUTION. ANS) THE EXPRESSION EDUCATION IN THE ARTICLES OF CONSTITUTION MEANS AND INCLUDES EDUCATION AT ALL LE VELS FROM THE PRIMARY SCHOOL LEVEL UP TO THE POST-GRADUATE L EVEL. IT INCLUDES PROFESSIONAL EDUCATION. THE EXPRESSION ED UCATIONAL INSTITUTION MEANS INSTITUTIONS THAT IMPART EDUCATI ON WHERE EDUCATION IS AS UNDERSTOOD HEREINABOVE. (B) HIS LORDSHIP SRI. SYED SHAH MOHAMMED QUADRI TH E HONBLE JUDGE OF THE SUPREME COURT OBSERVED IN PAGE 4 OF HIS EXPARTE JUDGMENT AS UNDER : EDUCATION IS NEITHER A TRADE OR BUSINESS NOR CAN I T FALL INTO PROFESSION . EDUCATION IS ESSENTIALLY A CHARITABLE OBJECT AND IMPARTING EDUCATION IS IN MY VIEW A KIND OF SERVIC E TO THE COMMUNITY THEREFORE IT CANNOT BE BROUGHT UNDER TR ADE OR BUSINESS NOR CAN IT FALL UNDER PROFESSION (C) HER LORDSHIP SMT. RUMA PAL THE HONBLE JUDGE O F THE SUPREME COURT OBSERVED IN PAGE 25 OF THE SEPARATE J UDGMENT AS UNDER: AN EDUCATIONAL INSTITUTION IS NOT A STRUCTURE OF B RICKS 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 EDUCATIO NAL INSTITUTIONS. AN EDUCATIONAL INSTITUTION DENOTES TH E. PROCESS OR ACTIVITY OF EDUCATION NOT ONLY INVOLVING THE EDUCATION BUT ALSO THOSE RECEIVING EDUCATION AN ANALYSIS OF THE ABOVE WOULD REVEAL THAT AN EDUCA TIONAL INSTITUTION REFERS TO THE PROCESS OR ACTIVITY OF PR OVIDING EDUCATION TO STUDENTS WHICH LEADS TO A DEGREE BEING CONFERRED ON THE STUDENT. THE TEST WHETHER AN INST ITUTION IS DIFFERENT FROM ANOTHER WOULD DEPEND ON THE DEGREE/CERTIFICATE BEING CONFERRED ON ACCOUNT OF TH E PROCESS OR ACTIVITY. IF THE DEGREE/CERTIFICATE BEIN G CONFERRED ON THE STUDENT IS DISTINCT FROM THE OTHER DEGREE/CERTIFICATE THEN THE ACTIVITY LEADING TO CON FERMENT OF THAT DEGREES/CERTIFICATES DESERVES TO BE TREATED AS DISTINCT AND SEPARATE INSTITUTION. ACCORDINGLY SINC E 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 O N THE STUDENT TO WHOM EDUCATION IS IMPARTED REQUIRES TO BE TREATED AS A SEPARATE INSTITUTION. THEREFORE SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED AS F AR AS POSSIBLE. THUS AN EDUCATIONAL INSTITUTION IS ONE WHICH IMPA RTS EDUCATION IN A PARTICULAR DISCIPLINE LEADING TO DEG REE/CERTIFICATE. EACH OF THE 28 EDUCATIONAL INSTITUTIONS RUN BY THE ASSESSEE- SOCIETY IMPART EDUCATION IN A DIFFERENT FIELD LEADI NG TO A DIFFERENT DEGREE. THUS EACH EDUCATIONAL INSTITUTIO N IS DIFFERENT FROM ONE ANOTHER AND IN RESPECT OF EACH OF SUCH EDU CATIONAL INSTITUTIONS THE EXEMPTION UNDER SECTION 10(23C)(II IAD) OF THE ACT HAS TO BE EVALUATED BECAUSE SECTION 10(23C)(III IAD) REFERS TO EDUCATIONAL INSTITUTIONS AND NOT THE PERSON CARRYIN G ON THE ACTIVITY OF IMPARTING EDUCATION. 35. FROM THE FACTS NARRATED BY BOTH SIDES AS WELL A S THE FACTS FOUND ON RECORD THE PRIMARY QUESTION NOW IS WHETHE R THE ASSESSEE SOCIETY BY RUNNING VARIOUS INSTITUTIONS EN UMERATED ITA NOS.140 & 141/BANG/2010 PAGE - 34 ELSEWHERE IN THIS ORDER IS FOR PROFIT MOTIVE OR NO T AND WHETHER IT IS BUSINESS OR NOT. FROM THE RECORDS IT IS SEEN T HAT THE ASSESSEE HAS BEEN ADMINISTERING VARIOUS EDUCATIONAL INSTITUT IONS 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 UNA MBIGUOUS TERMS THAT WHAT HAS BEEN DONE BY THE ASSESSEE SO FA R AND WHAT IS BEING DONE BY THE ASSESSEE AS OF NOW CANNOT BE CONSIDERED AS A BUSINESS OR WITH PROFIT MOTIVE. W ITHOUT SURPLUS NO NEW INSTITUTION IS POSSIBLE TO IMPART EDUCATION IN DIFFERENT AND NEW SUBJECTS. THE AUTHORITIES BELOW MISERABLY F AILED TO CONSIDER THIS ASPECT BY LOOKING TO THE HISTORY OF T HE ASSESSEE- SOCIETY. THEREFORE WE ARE NOT IMPRESSED UPON THE W AY IN WHICH THE FACTS HAVE BEEN CONSIDERED BY THE AUTHORITIES BELOW IN THIS ISSUE. 36. BESIDES THIS IT IS RELEVANT AT THIS JUNCTURE T O REFER TO THE DECISION OF THE APEX COURT IN THE CASE OF ADITANAR TRUST.(SUPRA) AND ALSO IN THE CASE OF ADITANAR EDUCATIONAL INSTIT UTIONS (224 ITR 310). THEREFORE FROM ALL THESE FACTS SUBMISSI ONS AND THE LEGAL PRONOUNCEMENTS WE FIND MUCH FORCE IN THE STA ND TAKEN BY THE ASSESSEE AND THE OBJECTS OF THE ASSESSEE SOCIET Y 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 I N THE ABOVE EXHAUSTIVE REPRODUCTION. A READING OF THE ABOVE EXTRACT BRING S 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 EXE MPTION U/S.10(23C). ALL THE NEW PROPOSITIONS OF FACTS AND LAW AS POINTE D OUT BY THE ASSESSING AUTHORITY ARE THE OFF BEATEN AND OFF REPEATED REASO NS 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 STYL E NATURE AND EDITING OF THE PROPOSITIONS THE PITH AND SUBSTANCE OF THE CON TENTIONS 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 IMPUGNE D ASSESSMENT YEAR FOR THE REASON OF EXISTENCE OF DIFFERENT FACTS. 24. NOW COMING TO THE FURTHER DISCUSSION MADE BY TH E CIT (A) IN THE LIGHT OF THE JUDGEMENTS OF THE UTTARKHAND HIGH COUR T IN THE CASE OF QUEEN EDUCATIONAL SOCIETY (319 ITR 160) WE AGREE W ITH THE LEARNED CIT(A) THAT THE SAID JUDGEMENT WAS DELIVERED BY THE HONBLE HIGH COURT RELYING ON THE JUDGEMENT OF THE SUPREME COURT IN TH E CASE OF MUNICIPAL CORPORATION OF DELHI V. CHILDREN BOOK TRUST (3 SCC 390) IN WHICH THE ISSUE WAS CONFINED TO THE CONCEPT OF CHARITABLE PUR POSES IN THE DELHI MUNICIPAL CORPORATION ACT IN THE CONTEXT OF LEVY OF PROPERTY TAX. BUT IT IS INTERESTING TO KNOW THAT IN TH E 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 THA T PROFIT IS UTILIZED ONLY FOR CHARITABLE PURPOSES YET IT CANNO T 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 TAXATI ON AND WOULD DEMAND EXEMPTION.' 25. IT IS SEEN FROM THE ABOVE THAT THE COURT WAS LI MITING THE SCOPE OF EXEMPTION TO SUCH INSTITUTIONS WHICH ARE MAKING A S YSTEMATIC 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 EXEMPT ION U/S.10(23C)(IIIAD) ARE THE ENDEAVOUR OF THE ASSESSEE TO EARN PROFIT/IN COME IN A SYSTEMATIC MANNER AND TO EXPAND THE INSTITUTIONS IN SUCH A MAN NER TO AUGMENT ITS INCOME/PROFIT IN FUTURE AND RUNNING INSTITUTIONS ON COMMERCIAL BASIS. 26. NONE OF THE ABOVE POSTULATES APPLIES TO THE ASS ESSEE IF THE DETAILED ORDERS OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS ARE LOOKED INTO. THE TRIBUNAL AFTER VERIFYING THE FACTS AND CIRCUMSTANCE S AND ALL OTHER ASPECTS ITA NOS.140 & 141/BANG/2010 PAGE - 37 HAS CATEGORICALLY HELD THAT THE ASSESSEE IS A CHARI TABLE INSTITUTION ENGAGED IN THE FIELD OF EDUCATION. THE TRIBUNAL HAS HELD T HAT 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 AVAILA BLE TO EDUCATIONAL INSTITUTIONS WAS ABOLISHED IN 1998. IN SUBSTITUTION SECTION 10(23C)(IIIAD) HAS BEEN INSERTED TO PROVIDE FOR EXE MPTION 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 AP PLY 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 LA W 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 JUDGEME NTS TIME AND AGAIN. AS ALREADY STATED THE LIMITED ISSUE CONSIDERED BY T HE 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 EXE MPTION UNDER THE MUNICIPAL LAW WHICH DOES NOT DEAL WITH THE COMPREHE NSIVE CONCEPT OF CHARITY EMBODIED IN SECTIONS 10 AND 11 OF THE IT AC T 1961. THE CONCEPT OF CHARITY AND EXEMPTION PROVIDED IN THE IT LAWS HA VE RECENTLY BEEN CONSIDERED BY THE HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF PINE GROVE INTERNATIONAL CHARITABLE TRUST AND OTHER S 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 EXEMPTI ON IS FILED BY AN EDUCATIONAL INSTITUTION THE SCOPE OF INQUIRY IS RE STRICTED ONLY TO ASCERTAIN THE GENUINENESS OF THE ACTIVITIES OF SUCH INSTITUTI ON. ONCE APPROVAL IS GRANTED FOR EXEMPTION THE MONITORING PROVISIONS CO ME INTO PLAY AND THE ASSESSING AUTHORITY HAS TO EXAMINE WHETHER THE COND ITIONS ON WHICH THE APPROVAL HAS BEEN GIVEN ARE FULFILLED OR NOT. THE COURT CONTINUED TO OBSERVE THE FACT THAT AN INSTITUTION HAS EARNED PRO FIT WOULD NOT BE THE DECIDING FACTOR TO CONCLUDE THAT THE EDUCATIONAL IN STITUTION EXISTS FOR PROFIT. EVEN IF THERE IS A SURPLUS IN THE HANDS OF THE EDUCATIONAL INSTITUTION AT THE END OF A PARTICULAR YEAR IT WOU LD BE STILL ENTITLED TO EXEMPTION U/S.10(23C) PROVIDED THE INSTITUTION SOLE LY 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 EXPE NDITURE HAS TO BE DEDUCTED ITA NOS.140 & 141/BANG/2010 PAGE - 39 FROM THE GROSS INCOME OF THE EDUCATIONAL INSTITUTIO N 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 PR OFIT' ACCOMPANYING THE WORDS 'EXISTING SOLELY FOR EDUCATIONAL PURPOSES' HA VE TO BE READ AND INTERPRETED IN VIEW OF THE THIRD PROVISO TO SECTION 10(23C)(VI) WHICH PRESCRIBES THE MODALITY FOR REALIZATION AND ACCUMUL ATION OF INCOME AT THE HANDS OF THE EDUCATIONAL INSTITUTIONS. THUS THE CO URT HELD THAT IT COULD NOT BE HELD TO BE AN EDUCATIONAL INSTITUTION EXISTING F OR 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 S TATUTORY PROVISIONS IN THE LIGHT OF VARIOUS JUDGEMENTS OF THE HON'BLE S UPREME COURT INCLUDING THE DECISION IN ADITANAR EDUCATIONAL INST ITUTION (224 ITR 310); THANTHI TRUST (247 ITR 785); AND T. M. A. PAI FOUND ATIONS & OTHERS V. STATE OF KARNATAKA & OTHERS ETC. IT IS AFTER CON SIDERING ALL THE ABOVE RELEVANT JUDICIAL PRONOUNCEMENTS ON THE SUBJECT THA T THE PUNJAB & HARYANA HIGH COURT HAS COME TO THE CONCLUSION THAT MERE SURPLUS OF RECEIPTS IN A PARTICULAR YEAR WILL NOT DISENTITLE A N EDUCATIONAL INSTITUTION TO ITA NOS.140 & 141/BANG/2010 PAGE - 40 CLAIM EXEMPTION U/S.10(23C) PROVIDED ALL OTHER COND ITIONS OF EDUCATIONAL/CHARITABLE ACTIVITIES ARE COMPLIED WITH . 30. THE LEGAL PROPOSITION EMBODIED IN THE ABOVE JUD GEMENT COVERS THE ISSUE IN THE PRESENT CASE DEALING WITH SURPLUS OF R ECEIPTS AVAILABLE IN THE HANDS OF THE ASSESSEE AS WELL AS THE ISSUES RELATIN G 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 UTTAR KHAND HIGH COURT IN THE CASE QUEEN EDUCATIONAL SOCIETY DELIVERED IN A D IFFERENT FACTUAL CONTEXT BY OVERLOOKING THE ORDERS OF THE TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS. 32. THEREFORE WE FIND THAT WE HAVE TO FOLLOW THE O RDERS OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS IN ASSESS EES OWN CASE ON THE SAME ISSUE AND HOLD THAT THE ASSESSEE IS ENTITLED F OR 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 DE LETED. 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 GR OUND ALTERNATE TO ITS GROUND RELATING TO EXEMPTION U/S.10(23C). THE ALTE RNATE GROUND IS THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S.11 AND 1 2. IT IS TRUE THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S.12A AT T HE INTERVENTION OF THE TRIBUNAL ON THE BASIS OF THE FINDING THAT THE ASSES SEE IS A CHARITABLE INSTITUTION. BUT AS THE ISSUE OF CHARITABLE INSTIT UTION HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE UNDER THE PROVISIONS OF L AW CONTAINED IN SECTION 10(23C)(IIIAD) THIS ALTERNATE GROUND DOES NOT SURV IVE. ACCORDINGLY IT IS TECHNICALLY REJECTED. 35. THE SIXTH AND SEVENTH GROUNDS RAISED BY THE ASS ESSEE 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 INF RASTRUCTURE DEVELOPMENT FUND RESPECTIVELY. THIS ISSUE WAS CONS IDERED BY THE TRIBUNAL IN PARA 51 OF ITS ORDER PASSED FOR THE ASS ESSMENT YEARS 1999-00 2000-01 2001-02 AND 2002-03 DATED.23.2.2006. AFT ER DISCUSSING THE ISSUE IN DETAIL AND RELYING ON THE JUDGEMENT OF TH E 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 CI T V. BIJLI COTTON MILLS P. LTD. (116 ITR 60) THE TRIBUNAL HELD THAT THE A SSESSING 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 TRIBUNA L. ACCORDINGLY WE DELETE THOSE ADDITIONS. THESE GROUNDS ARE DECIDED IN FAVOUR OF THE ASSESSEE. 37. THE EIGHTH GROUND RAISED BY THE ASSESSEE IS THA T THE CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION MADE TO THE EXT ENT OF 50% AS AGAINST A SUM OF RS.17 51 540/- ADDED BY THE AO. THIS ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES 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 MAT TER IN DETAIL THE TRIBUNAL HELD THAT SUCH A DISALLOWANCE IS NOT CALLE D FOR. EVEN OTHERWISE THE FUNDAMENTAL PRINCIPLE WITH REGARD TO TAXATION O F CHARITABLE INSTITUTION IS DONATION FOR AN EQUALLY CHARITABLE PURPOSE IS AP PLICATION OF FUND FOR CHARITABLE PURPOSES. ACCORDINGLY WE DELETE THE PAR TIAL DISALLOWANCE CONFIRMED BY THE CIT(A) IN THIS REGARD AND ALLOW T HIS 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 PROTECT IVE 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 REGAR DING THE LEVY OF INTEREST U/S.234A AND 234B WHICH ARE ONLY CONSEQUEN TIAL AND WHICH DO NOT CALL FOR ANY INDEPENDENT ADJUDICATION. 40. THE ASSESSEE IS PARTIALLY SUCCESSFUL IN ITS APP EAL. ITA NO.141/BANG/2010 BY THE REVENUE : 41. NEXT WE WILL CONSIDER THE APPEAL BY THE REVENU E IN ITA NO.141/BANG/2010. THE ONE AND ONLY GROUND RAISED B Y THE REVENUE IS REPRODUCED BELOW : 'THE DECISION OF THE ITAT IN ASSESSEE'S CASE FOR EA RLIER 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 KARNATA KA.' 42. THE QUESTION OF THE STATUS HAS ALREADY BEEN DIS CUSSED IN DETAIL IN DEALING WITH THE APPEAL FILED BY THE ASSESSEE AND W E HAVE DIRECTED THE ASSESSING AUTHORITY TO ADOPT THE STATUS AS ARTIFICI AL 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 PART LY 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