Pushpagiri Medical Society, Thiruvalla v. DCIT, Thiruvalla

ITA 565/COCH/2009 | 2001-2002
Pronouncement Date: 22-09-2011

Appeal Details

RSA Number 56521914 RSA 2009
Assessee PAN AAATP2418H
Bench Cochin
Appeal Number ITA 565/COCH/2009
Duration Of Justice 1 year(s) 9 month(s) 14 day(s)
Appellant Pushpagiri Medical Society, Thiruvalla
Respondent DCIT, Thiruvalla
Appeal Type Income Tax Appeal
Pronouncement Date 22-09-2011
Appeal Filed By Assessee
Bench Allotted Not Allotted
Tribunal Order Date 22-09-2011
Assessment Year 2001-2002
Appeal Filed On 08-12-2009
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN JM AND SANJAY AR ORA AM I.T.A. NOS. 565 566 & 567/COCH/2009 ASSESSMENT YEARS: 2001-02 2005-06 & 2006-07 PUSHPAGIRI MEDICAL SOCIETY THIRUVALLA [PAN:AAATP 2418H] VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 THIRUVALLA. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI ABRAHAM K. THOMAS CA-AR REVENUE BY MS. S. VIJAYAPRABHA JR. DR DATE OF HEARING 01/08/2011 DATE OF PRONOUNCEMENT 22/09/2011 O R D E R PER SANJAY ARORA AM: THESE ARE A SET OF THREE APPEALS BY THE ASSESSEE I.E. FOR THREE YEARS ARISING OUT OF A COMMON CONSOLIDATED ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I TRIVANDRUM (CIT(A) FOR SHORT) DATED 16.9.2009 DI SMISSING THE ASSESSEES APPEALS CONTESTING ITS ASSESSMENTS U/S. 143(3) OF THE INCOM E-TAX ACT 1961 ('THE ACT' HEREINAFTER) FOR THE ASSESSMENT YEARS (AYS) 2001-02 2005-06 AND 2006-07. AS THE APPEALS RAISE COMMON ISSUES THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON CONSOLIDATED ORDER. 2. THE BACK-GROUND FACTS OF THE CASE ARE THAT THE A SSESSEE IS A SOCIETY REGISTERED UNDER THE TRAVANCORE COCHIN LITERARY SCIENTIFIC AND CHAR ITABLE SOCIETIES REGISTRATION ACT NO. 12/1955 (VIDE CERTIFICATE NO. P.73/92 DATED 29.4.19 92) ISSUED BY THE DISTRICT REGISTRAR (GL) PATHANAMTHITTA). IT IS ALSO REGISTERED U/S. 1 2A OF THE ACT VIDE CERTIFICATE DATED I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 2 27.5.2003 BY THE COMMISSIONER OF INCOME-TAX KOTTAY AM (`CIT FOR SHORT). THE SAME THOUGH CLARIFIES THAT IT IS NOT INTENDED TO GIVE A FINDING AS TO WHETHER THE APPLICANT IS A CHARITABLE TRUST/SOCIETY/INSTITUTION AND IS ONLY T O THE EFFECT THAT ITS NAME IS ENTERED IN THE REGISTER MAINTAINED IN THE OFFICE OF THE CIT I.E. AS THE COMPETENT AUTHORITY. THE SOCIETY IS ENGAGED IN RUNNING SEVERAL EDUCATIONAL INSTITUTI ONS WHICH INCLUDE PUSHPAGIRI MEDICAL COLLEGE AND HOSPITAL PUSHPAGIRI INSTITUTE OF MEDIC AL SCIENCES AND RESEARCH CENTRE PURSHPAGIRI COLLEGE OF NURSING PUSHPAGIRI COLLEGE OF PHARMACY PUSHPAGIRI SCHOOL OF NURSING AND PUSHPAGIRI SCHOOL OF MULTIPURPOSE HEALT H WORKERS. IT IS ACCORDINGLY ALSO APPROVED U/S. 10(23C) OF THE ACT FOR A.Y. 2001-02 T O 2003-04. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS F OR A.Y. 2005-06 THE ASSESSEE WAS CALLED UPON TO FURNISH THE DETAILS OF UNSECURED LOA NS AS OUTSTANDING IN ITS BOOKS OF ACCOUNT AS AT THE YEAR-END I.E. ` 230.58 LAKHS. A SCRUTINY OF THE RELEVANT ACCOUNTS REPRODUCED AT PG. 2 OF THE ASSESSMENT ORDER REVEAL ED IT TO BE ACCOUNTED UNDER ONE ACCOUNT TITLED PERSONAL LOAN ACCOUNT. THE SAME BORE AN OPENING BALANCE OF ` 171.22 LAKHS AND FURTHER CREDITS FOR ` 42 LAKHS DURING THE YEAR WHICH WERE ALL IN CASH. WHILE THE FIRST FOUR ENTRIES WHICH WERE FOR ` 1 LAKH EACH BORE A NAME (OF THE CREDITOR) THE BALANCE THREE ENTRIES FOR A TOTAL OF (THE BALANCE) ` 38 LAKHS WERE WITHOUT ANY NAME. THE SAME IT WAS EXPLAINED ARE CANVASSED WHENEVER THE SOCIETY IS IN ACUTE NEED OF FUNDS. AS SUCH IT IS NOT IN A POSITION TO INSIST FOR PAYMENT S THROUGH `ACCOUNT PAYEE CHEQUES. WHEN SHOW CAUSED QUA APPLICATION OF SEC. 68 OF THE ACT IT WAS FURTHER EXPLAINED THAT THE ASSESSEE SOCIETY IS PATRONISED/SUPPORTED BY MALANK ARA CATHOLIC CHURCH WHICH HAS MORE THAN 100 PARISHIONERS WITH A MEMBERSHIP OF ABOUT 7 LAKH PEOPLE. WHENEVER THERE IS A DEARTH OF FUNDS MEMBERS OF VARIOUS PARISHES COME F ORWARD TO RENDER THE NECESSARY FINANCIAL HELP EITHER AS DONATIONS OR AS HAND LOAN S WHICH ARE MOBILISED BY THE VICAR OF VARIOUS PARISHES. THE FUNDS THUS COME FROM WELL- WISHERS WHO ARE MAINLY AGRICULTURISTS AND THUS HAVE NO PERMANENT ACCOUNT NUMBER (PAN). T HE AMOUNT GIVEN BY THE VARIOUS PARISHIONERS WERE LESS THAN ` 20 000/- IN EACH CASE. IT WAS SUBMITTED THAT THE P EAK AMOUNT OF CREDIT WORKS TO ` 32.36 LAKHS. I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 3 3.2 THE AO DID NOT FIND THE SAME ACCEPTABLE. THE B OOKS OF ACCOUNT DID NOT REFLECT OR DEPICT ANY COLLECTIONS AS ARE BEING STATED. THE ME DICAL COLLEGE HAD ITS OWN FEE STRUCTURE AND UNDER SUCH CIRCUMSTANCES THE EXPLANATION OF T HE PARISHIONERS BEING AGRICULTURISTS WITH NO PAN EXTENDING LOANS WAS NEITHER CREDIBLE NOR UNDERSTANDABLE. THE EXPLANATION OF THE CREDITS WAS THUS CONSIDERED AS NOT SATISFA CTORY. FURTHER NEITHER HAD THE ASSESSEE SUBMITTED ANY WORKING OF THE PEAK CREDIT NOR WERE T HE DETAILS IN RESPECT OF THE DEBIT ENTRIES AVAILABLE. HE ACCORDINGLY BROUGHT THE EN TIRE SUM OF ` 42 LAKHS CREDITED DURING THE YEAR TO TAX U/S. 68 OF THE ACT. 4. FOR A.Y. 2006-07 THE FACTS ARE BROADLY SIMILAR. OUT OF THE FRESH LOANS (FOR THE YEAR) AT ` 345.20 LAKHS; THE ASSESSEE FURNISHED CONFIRMATIONS FROM THE CREDITORS (WHO WERE MAINLY DOCTORS WORKING AT HOSPITAL) TO THE EXTENT O F ` 133.90 LAKHS WHICH AMOUNT STOOD TRANSFERRED TO THE CAPITAL ACCOUNT. THE ASSESSEE IN FACT FILED THE RETURN ONLY ON 4.11.2008 I.E. BEYOND THE TIME FOR FILING THE REVISED RETURN U/S. 139(5) ADMITTING THE SAME ( ` 133.90 LAKHS) AS INCOME THOUGH CLAIMING EXEMPTION U/S. 10 (23C) IN ITS RESPECT PLACING RELIANCE ON THE DECISION IN THE CASE OF DIT (EXEMPTION) VS. A.M.M. HOSPITAL AND MEDICAL BE NEFIT SOCIETY 262 ITR 241 (MAD.) AND DIT (EXEMPTION) V . RAUNAQ EDUCATION FOUNDATION 294 ITR 76 (DELHI). THE SAID RELIANCE WAS FOUND UNACCEP TABLE BY THE AO. THE INCOME HELD EXIGIBLE FOR EXEMPTION IN THE SAID CASE HE ARGUED WAS DIVIDEND INCOME WHILE IN THE INSTANT CASE IT WAS ONLY A DEEMED INCOME FALLING U NDER NO SPECIFIC HEAD OF INCOME AS SALARY HOUSE PROPERTY BUSINESS ETC. I.E. UNDER CHAPTER IV AND ONLY ON ACCOUNT OF BEING AN UNEXPLAINED CREDIT (OR UNEXPLAINED INVESTM ENT) ETC. WHICH COMES INTO RECKONING ONLY ON AGGREGATION FOR COMPUTING THE TOT AL INCOME UNDER THE ACT UNDER CHAPTER VI THEREOF. 5. FOR A.Y. 2001-02 THE THIRD YEAR UNDER REFE RENCE THE PRINCIPAL FACTS AND THE POINT IN ISSUE IS ALSO THE SAME; THE ADDITION U/S. 68 BEING MADE FOR THE ENTIRE SUM OF ` 35.61 LAKHS FOUND CREDITED TO THE LOAN ACCOUNT DURING THE RELEV ANT PREVIOUS YEAR. THE ASSESSEE FAILED EVEN TO FURNISH ANY CONFIRMATIONS SAVE FOR A AMOUN T OF ` 3 LAKHS ASCRIBED TO ONE ELSAMMA JOSHY WHO HAD TO BE SUMMONED U/S. 131 AND THE EXPLANATION FOUND AS NOT I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 4 CREDIBLE WITH SHE BEING EMPLOYED WITH THE ASSESSEE DRAWING A SALARY OF ` 4500 PER MONTH. IN FACT ` 2.60 LAKHS OF THE LOAN AMOUNT AS ASCRIBED TO HER WA S ATTRIBUTED BY HER TO FURTHER BORROWINGS BY HER AND ONLY ` 0.40 LAKHS TO HER OWN SAVINGS. THE OTHER ADDITIONA L FACT FOR THIS YEAR IS THAT THE ASSESSMENT STANDS MA DE BY THE RECOURSE TO S.147 BY ISSUE OF NOTICE U/S. 148 ON 31.3.2008. 6.1 IN THE FIRST APPEAL IT WAS CONTENDED BY THE AS SESSEE THAT IT IS A NON-PROFIT MAKING CHARITABLE ORGANISATION WHICH HAD APPLIED ITS ENTI RE INCOME INCLUDING THAT DEEMED TO BE SO UNDER S. 68 OF THE ACT TOWARD ITS OBJECTIVES. A S SUCH THE BENEFIT OF EXEMPTION U/S. 10(23C) AS WELL AS U/SS. 11 AND 12 WOULD EXTEND T O SUCH INCOME AS WELL. RELIANCE WAS PLACED ON APART FROM THE DECISIONS I.E. BEFORE T HE AO THAT IN THE CASE OF ADITNAR EDUCATIONAL INSTITUTION & OTHRS. V. CIT (1997) 224 ITR 310 (SC) AND BRAHMIN EDUCATIONAL SOCIETY V. CIT (ASSTT.) 227 ITR 317 (KER.). 6.2 THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSE E HAD FAILED TO ESTABLISH THE GENUINENESS OF THE CREDITS SO THAT THE APPLICATION OF S. 68 BY THE AO WAS JUSTIFIED UNDER THE CIRCUMSTANCES. THERE WAS NO QUESTION OF THE IM PUGNED CREDITS BEING DONATIONS TOWARD CORPUS WHEN THE NAMES AND ADDRESSES OF THE DONORS THEMSELVES WERE NOT AVAILABLE. THE ASSESSEES CASE WAS TOTALLY UNSUBST ANTIATED AND COULD AT BEST BE REGARDED AS ANONYMOUS DONATIONS WHICH WOULD STAND TO BE COV ERED U/S. 2(24)(IIA) OF THE ACT. THE AO HAD THOUGH TREATED THE SAME AS UNEXPLAINED INCO ME U/S. 68 YET AND EVEN WITHOUT A CLAIM BY THE ASSESSEE TO THAT EFFECT ALLOWED IT CR EDIT FOR THE SAME AGAINST DEFICIT CLAIMED BY THE ASSESSEE PER ITS RETURN/S OF INCOME . THE ASSESSEES APPEALS WERE ACCORDINGLY DISMISSED. AGGRIEVED THE ASSESSEE IS IN APPEAL. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD AS WELL AS THE CASE LAW CITED. 7.1 WE ARE AT LOSS TO UNDERSTAND AS TO WHAT THE CONTROVERSY IS ALL ABOUT. THE ASSESSEES ACCOUNTS REFLECTED UNSECURED LOANS IN THE FORM OF A SINGLE CONSOLIDATED ACCOUNT. NO DETAILS ARE FURNISHED NOR POSSIBLY COULD BE I.E. IN THE ABSENCE OF ANY PRIMARY RECORDS; IT I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 5 NOT EVEN ISSUING A RECEIPT TO THE CREDITORS RATHER EXPLAINING THEM TO BE PERSONAL LOANS. THE ASSESSEE HAS ABYSMALLY FAILED TO PROVE THE GEN UINENESS OF THE SAME MAKING DIFFERENT CLAIMS BOTH AS TO THE SOURCE VIZ. AS B EING FROM DOCTORS; SUPPORT STAFF; PARISHIONER-MEMBERS OF THE CHURCH PATRONISING ITS C AUSE ETC. AS WELL AS QUA THE NATURE I.E. AS REPRESENTING LIABILITY TO BEING DONATIONS TO BEING DONATIONS TOWARD CORPUS. WHY WOULD THE ASSESSEE DEPEND ON AND WHY AND HOW COULD THE LOWLY PAID STAFF ASSIST IT AND MORE SO WHEN IT CLAIMS TO HAVE THE SUPPORT OF A MEM BERSHIP BASE OF SEVEN LAKH PEOPLE. AND THAT TOO WITHOUT ANY INTEREST AND BY ASSUMING LOANS ? FURTHER HOW COULD THESE BE CONSIDERED AS DONATIONS WHEN THE ASSESSEE ITSELF SH OWS THEM AS LOANS REPAID IN PART? THE CORPUS DONATIONS WOULD RATHER REQUIRE A FURTHER DECLARATION FROM THE DONOR AS TO HIS DONATION AS BEING SO WHILE HERE WE FIND THE IDENTI TY OF THE CREDITOR AS UNCONFIRMED/NOT DEFINITE. EXCEPT THE CONFIRMATIONS BY THE DOCTORS (WHICH STAND ACCEPTED BY THE REVENUE THOUGH AGAIN WITHOUT ADEQUATE ENQUIRY THE SAME B EING AGAIN IN CASH WITH THE ASSESSEE NOT EVEN AS MUCH AS ISSUING A RECEIPT) AND WHICH C REDITS ALSO RAISE SUBSTANTIAL DOUBTS AS TO THEIR GENUINENESS IN VIEW OF THE SUBSEQUENT TRANSFER OF THE AMOUNT RECEIVED TO THE CAPITAL ACCOUNT IMPLYING OF IT REPRESENTING DONATI ONS AND NOT LOANS. THE ASSESSEE DOES NOT EVEN HAVE A PRIMA FACIE CASE I.E. QUA THE NON-APPLICATION OF S. 68 WHICH STANDS CORRECTLY APPLIED (SEE NOTE 1) AND NOR AS WOULD BE APPARENT FROM THE IMPUGNED ORDER AS WELL AS THE ARGUMENTS RAISED BEFORE US DOES THE AS SESSEE SERIOUSLY AGITATE THE SAME; THE MAIN THRUST OF ITS ARGUMENT/S IS THAT IN VIEW OF IT BEING AN EXEMPT ORGANISATION U/S. 10(23C) THE DEEMED INCOME U/S. 68 MUST ALSO BE CON SIDERED AS AN EXEMPT INCOME. IN ANY CASE IT IS ALSO REGISTERED AS A CHARITABLE INS TITUTION SO THAT SECTION 68 INCOME OUGHT TO BE CONSIDERED AS APPLIED TOWARD ITS EXPENDITURE BO TH REVENUE AND CAPITAL. THE REVENUE THOUGH NOT ACCEPTING THE ASSESSEES PLEA STATING O F SEC. 68 AS BEING A DEEMED INCOME AND NOT THAT ARISING OR SHOWN TO BE ARISING OUT OF THE ACTIVITIES OF THE SOCIETY OR FOR WHICH IT HAS BEEN FORMED OR GRANTED EXEMPTION HAS ALL T HE SAME GRANTED THE CLAIMED BENEFIT TO THE ASSESSEE. EVEN AS OBSERVED BY THE LD. CIT(A) T HIS IS PRECISELY WHAT THE AO HAS DONE ADJUSTING THE DEFICIT CLAIMED BY THE ASSESSEE FOR E ACH OF THE RELEVANT YEARS. THE SAID DEFICIT IS AS IT APPEARS IN RESPECT OF THE DEPREC IATION; THE ASSESSMENT ORDER FOR THE LAST OF THE ASSESSMENT YEARS UNDER REFERENCE I.E. AY 2006 -07 BEARING THE DETAILS OF THE CARRIED I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 6 FORWARD UNABSORBED DEPRECIATION. NO DEMAND FOR EACH OF THE THREE YEARS UNDER APPEAL AND AS IT APPEARS THE INTERVENING YEARS AS WELL BEING A.Y. 2002-03 TO 2004-05 ARISES IN CONSEQUENCE OF APPLICATION OF SEC. 68 WHICH ONLY G OES TO REDUCE THE DEFICIT ON ACCOUNT OF LOSS AND/OR DEPRECIATION WHICH STANDS CLAIMED AT A HUGE FIGURE FOR EACH OF THE ASSESSMENT YEARS. 7.2 THE PREMISE OF THE SAID ADJUSTMENT IS ONLY THAT THE INCOME IMPUTED IN RESPECT OF THE UNEXPLAINED CREDITS APPEARING IN THE ASSESSEES BOOKS OF ACCOUNT STAND AS ANY OTHER INCOME GENERATED EITHER FROM ITS ACTIVITIES OR BY W AY OF FUNDS RECEIVED - AGAIN EITHER BY WAY OF PROVED CREDITS/LIABILITIES OR AS VOLUNTARY C ONTRIBUTIONS - EITHER EXPENDED TOWARD ITS ACTIVITIES OR APPLIED FOR ITS OBJECTS I.E. FORMIN G PART OF THE FUNDING OF THE SOCIETY ALBEIT FROM ITS INCOME. THIS IS AS ONLY SUCH A VIEW WOULD SANCTION A SET OFF OF THE SAID RECEIPT AGAINST LOSSES WHICH IS ONLY THE EXCESS OF EXPENDI TURE OVER INCOME ARISING FROM REGULAR SOURCES AND DEPRECIATION WHICH STANDS ALLOWED. IN VIEW THEREOF THE DIFFERENCE BETWEEN A SEC. 68 INCOME (I.E. UNEXPLAINED CREDIT) OR S. 2(2 4)(IIA) INCOME I.E. VOLUNTARY CONTRIBUTIONS DISSOLVES AND BECOMES NOTIONAL AND I RRELEVANT. 7.3 THE ASSESSEE HAS NOT MADE OUT ANY CASE WITH REG ARD TO CORPUS DONATIONS WHICH WOULD REQUIRE IN ADDITION A DIRECTION FROM THE DO NORS THAT THE DONATION MADE IS TOWARD CORPUS WITH EVEN THE IDENTITY OF THE CREDITOR/S BE ING UNPROVED. THE RECIPIENT-SOCIETY WOULD THEN CREDIT THE SAME TO ITS CAPITAL ACCOUNT INVESTING IT IN THE FORM OF FINANCIAL OR PHYSICAL ASSETS. HOWEVER THIS IS AGAIN NOT MATERI AL AS THE ASSESSEE CANNOT POSSIBLY MAKE A DOUBLE CLAIM I.E. ONCE AT THE TIME OF RECEIPT BY CLAIMING IT AS A CORPUS DONATION AND SECONDLY UPON APPLICATION OF FUNDS FOR ITS PURPOSE TOWARD WHICH INCLUDING AGAINST DEPRECIATION IT HAS BEEN ALLOWED FULL SET OFF. THI S IS ALL WHAT LED US TO STATE AT THE BEGINNING OF THE DISCUSSION THAT WE ARE UNABLE TO S EE AS TO ABOUT WHAT AND WHY IS THE ASSESSEE AGGRIEVED; ITS CLAIM HAVING BEEN IN EFFECT ACCEPTED. 7.4 WE ARE ACUTELY AWARE WHEN WE MAKE THE FOREGOIN G OBSERVATION/S THAT THE APPROVAL U/S. 10(23C) STANDS NOT EXTENDED BY THE CO MPETENT AUTHORITY TO THE ASSESSEE FROM A.Y. 2004-05 ONWARDS (VIDE ORDER U/S. 10(23C) DATED 6.12.2010/COPY PLACED ON I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 7 RECORD). THE MATTER IS SUB-JUDICE BEFORE THE HONBL E HIGH COURT. HOWEVER THIS SHOULD BE OF NO CONSEQUENCE. THIS IS AS THE CREDIT STANDS ALR EADY ALLOWED TO THE ASSESSEE BY THE REVENUE AND WITHOUT REFERENCE TO OR DE HORS ITS STATUS U/S. 10(23C). THE QUESTION OF BEING QUALIFIED OR ELIGIBLE FOR EXEMPTION U/S. 10(2 3C) OR NOT ASSUMES SIGNIFICANCE ONLY WHEN THERE IS A POSITIVE INCOME WHICH MAY BE SUBJE CT TO TAX BY THE REVENUE WHILE IN THE INSTANT CASE BOTH THE RETURNED AND THE ASSESSE D INCOME IS AT NIL ON ACCOUNT OF UNABSORBED DEPRECIATION BEING DETERMINED AT ` 522.04 LAKHS FOR THE LAST OF THE RELEVANT ASSESSMENT YEARS (A.Y. 2006-07). AS SUCH THE SAID WITHDRAWAL OF THE APPROVAL IS AGAIN OF NO SIGNIFICANCE. 7.5 WE WISH TO STATE THAT THE ISSUE IS NO LONGER RES INTEGRA AT LEAST INSOFAR AS THE STATE OF KERALA IS CONCERNED WITH THE HONBLE JURISDICTI ONAL HIGH COURT HAVING CONFIRMED THE ORDER BY THE TRIBUNAL IN THE CASE OF CIT (ASSTT) V. MUSLIM EDUCATIONAL SOCIETY 1 ITR (TRIB.) 527 (COCHIN) DATED 31.3.2009 PASSED RELYIN G ON THE DECISION IN THE CASE OF RAUNAQ EDUCATION FOUNDATION (SUPRA) VIDE ITS JUDGMENT IN I.T.A. NO. 1711/2007 DATED 4.10.2010. FURTHERMORE THE RATIO OF THE SAID DECI SIONS WOULD TO OUR MIND EQUALLY APPLY TO THE ASSESSEES OTHER PLEA I.E. OF IT BEING A C HARITABLE INSTITUTION SO THAT SEC. 68 INCOME OUGHT TO BE SUBJECT TO THE PROVISIONS OF SS. 11 AND 12 EVEN AS IT WOULD REQUIRE FILING OF THE NECESSARY REPORT FROM AN ACCOUNTANT IN THE PRES CRIBED FORM. HOWEVER AS AFORE- STATED THE SAID RATIO WOULD COME INTO PLAY OR EFFE CT ONLY ON THE ASSESSEE REPORTING OR BEING ASSESSED AT A POSITIVE INCOME WHICH IS NOT S O IN THE INSTANT CASE. IN FACT THE LAW W.E.F. 1.4.2007 STANDS AMENDED BY INSERTION OF SEC. 115BBC PROVIDING FOR SUBJECTING ANONYMOUS DONATIONS WHICH IS WHAT THE RECEIPTS IN THE INSTANT CASE ASSESSED AS DEEMED INCOME U/S. 68 QUINTESSENTIALLY ARE TO TAX SEPARA TELY. HOWEVER EVEN AS CONTENDED BY THE ASSESSEE ITSELF THE SAME COMES INTO EFFECT ONL Y FROM A.Y. 2007-08 ONWARDS. 7.6 AGAIN WE ARE ALSO AWARE THAT THE APEX COURT/HI GHER COURTS OF LAW AS IN THE CASE OF MUNICIPAL CORPORATION OF DELHI V. CHILDREN BOOK TRU ST (1992) 3 SCC 390 HAVE CLARIFIED THAT WHERE THE SOURCE/S OF FUNDS WITH A PUBLIC CHAR ITABLE INSTITUTION AS THOSE ENGAGED IN THE FIELD OF EDUCATION IS NOT TRANSPARENT OR ESTAB LISHED IT WOULD NOT BE INCORRECT TO INFER I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 8 THAT THE SAME CAME FROM THOSE WHO STAND TO BENEFIT FROM ITS ACTIVITIES I.E. THE EDUCATIONAL SERVICES. CAPITATION FEES HAVING BEEN DISAPPROVED BY THE APEX COURT THE SOURCE BECOMES TAINTED WITH ILLEGALITY (REFER: SIND COOPERATIVE HOUSING SOCIETY V. ITO 317 ITR 47 (BOM.) AND WALKESHWAR TRIVENI COOPERATIVE HOUSING SOCIETY LTD. V. ITO 88 ITD 159 (MUM.)(SB). HOWEVER THIS COULD IMPACT THE ASSESSEES STATUS AS A CHARITABLE OR AN APPROVED INSTITUTION (U/S. 10(23C)) BUT NOT THE ASSESSMENT OF ITS INCOME I.E. THE SAME CONSTITUTES A DIFFERENT MATTER ALTOGETHER WITH WHI CH WE ARE NOT CONCERNED. IN FACT THIS CONSTITUTES AMONG THE SEVERAL GROUNDS ON WHICH ITS APPLICATION U/S. 10(23C) STANDS REJECTED BY THE CCIT TRIVANDRUM. THIS SHALL CLARI FY THE LEGAL POSITION VIS--VIS THE REVENUES REFERENCE TO THE ASSESSEE BEING A MEDICAL INSTITUTION WITH A SEPARATE FEE STRUCTURE AND THE ADVERSE INFERENCE/S SOUGHT TO BE DRAWN THERE-FROM. 7.7 FINALLY WE MAY TAKE UP THE ASSESSEES CHALLENG E TO THE ACTION U/S. 147 FOR A.Y. 2001-02. THE SAME THOUGH RAISED PER ITS GROUND/S OF APPEAL WAS NOT PRESSED OR AGITATED AT THE TIME OF HEARING. EVEN THE WRITTEN ARGUMENTS SUBMITTED DURING THE HEARING DO NOT RAISE ANY PLEA IN THIS REGARD. NOTICE U/S. 148 HAS BEEN ISSUED WITHIN THE PRESCRIBED TIME AND DULY RESPONDED TO BY THE ASSESSEE WITHIN THE 30 DAY PERIOD NORMALLY ALLOWED FOR FILING OF THE RETURN. THE SAME WE FIND STOOD ALSO RAISED BEFORE THE FIRST APPELLATE AUTHORITY THOUGH NOT ADJUDICATED UPON BY HER PERH APS FOR THE SAME REASON SO THAT THE CHALLENGE IS EVEN OTHERWISE NOT MAINTAINABLE BEFORE US. 7.8 IN VIEW OF THE FOREGOING WE FIND NO INFIRMITY LEGAL OR FACTUAL; THE FACTS BEING RATHER UNDISPUTED IN THE IMPUGNED ORDER. THE ASSES SEE ACCORDINGLY FAILS. SO HOWEVER FOR ONE OF THE YEARS I.E. AY 2006-07 THE ASSESSE E CLAIMS THAT THE CREDIT DEEMED AS ITS INCOME U/S. 68 IS INCLUSIVE OF THE CREDIT BALANCE A S CARRIED FORWARD FROM THE IMMEDIATELY PRECEDING YEAR. CLEARLY THE SAME CANNOT BE AS SEC . 68 COULD BE APPLIED ONLY TO THE SUMS CREDITED IN THE ACCOUNTS FOR THE RELEVANT YEAR. THE ASSESSING OFFICER SHALL WHILE PASSING THE APPEAL-EFFECT GIVING ORDER TO THIS ORDER SATISF Y HIMSELF ON THIS SCORE AND IF AND TO THE EXTENT FOUND VALID ALLOW RELIEF FOR THE SAME ALLO WING DUE OPPORTUNITY OF BEING HEARD IN I.T.A. NOS. 565-567 /COCH/2009 (FOR ASSTT. YEARS 20 01-02 2005-06 & 2006-07 9 THE MATTER TO THE ASSESSEE FOR THE PURPOSE. FURTHER IN CASE OF A DISAGREEMENT EITHER QUA FACT OR QUANTUM HE SHALL ADJUDICATE PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 8. IN THE RESULT THE ASSESSEES APPEALS FOR AY 200 1-02 & 2005-06 ARE DISMISSED WHILE ITS APPEAL FOR AY 2006-07 IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 22ND SEPTEMBER 2011 GJ COPY TO: 1. PUSHPAGIRI MEDICAL SOCIETY THIRUVALLA [2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 THIRUVALLA. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I TRIV ANDRUM 4. THE COMMISSIONER OF INCOME-TAX 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE . NOTE1: SOME OF THE RELEVANT CASE LAW IS: A. GOVINDA RAJULU MUDALIAR V. CIT (1958) 34 ITR 807 (SC) SREELEKHA BANERJEE & OTHRS. V. CIT (1963) 49 ITR 112 (SC) KALEKHAN MOHAMMED HANIF V. CIT (!963) 50 ITR 1(SC) CIT V. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) S UMATI DAYAL V. CIT (1995) 214 ITR 801 (SC) CIT VS. P. MOHANAKALA &OTHERS 291 ITR 278 (SC) OCEANIC PRODUCTS EXPORTING CO. VS. CIT 241 ITR 497 (KER.) CIT VS. ANNAMMAKUTTY JOSE 221 CTR (KER.) 474