DCIT, Panipat v. M/s K.R. Education Society, Panipat

ITA 5908/DEL/2010 | 2007-2008
Pronouncement Date: 09-09-2011 | Result: Dismissed

Appeal Details

RSA Number 590820114 RSA 2010
Assessee PAN AAATJ8532D
Bench Delhi
Appeal Number ITA 5908/DEL/2010
Duration Of Justice 8 month(s) 15 day(s)
Appellant DCIT, Panipat
Respondent M/s K.R. Education Society, Panipat
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 09-09-2011
Date Of Final Hearing 28-07-2011
Next Hearing Date 28-07-2011
Assessment Year 2007-2008
Appeal Filed On 24-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH D BENCH D BENCH D BENCH D : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER SHRI A.D.JAIN JUDICIAL MEMBER ITA NO.5908/DEL/2010 ITA NO.5908/DEL/2010 ITA NO.5908/DEL/2010 ITA NO.5908/DEL/2010 ASSESSMENT YEAR : 2007 ASSESSMENT YEAR : 2007 ASSESSMENT YEAR : 2007 ASSESSMENT YEAR : 2007- -- -08 0808 08 DY.COMMISSIONER OF DY.COMMISSIONER OF DY.COMMISSIONER OF DY.COMMISSIONER OF INCOME TAX INCOME TAX INCOME TAX INCOME TAX PANIPAT CIRCLE PANIPAT CIRCLE PANIPAT CIRCLE PANIPAT CIRCLE PANIPAT PANIPAT PANIPAT PANIPAT. .. . VS. VS. VS. VS. M/S K.R.EDUCATION SOCIETY M/S K.R.EDUCATION SOCIETY M/S K.R.EDUCATION SOCIETY M/S K.R.EDUCATION SOCIETY 547 SECTOR 547 SECTOR 547 SECTOR 547 SECTOR- -- -11 11 11 11 HUDA HUDA HUDA HUDA PANIPAT. PANIPAT. PANIPAT. PANIPAT. PAN NO. PAN NO. PAN NO. PAN NO.AAATJ8532D. AAATJ8532D. AAATJ8532D. AAATJ8532D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S.NEGI SR.DR. RESPONDENT BY : SHRI VED JAIN AND SMT.RANO JAIN CAS. ORDER ORDER ORDER ORDER PER A.D.JAIN JM : PER A.D.JAIN JM : PER A.D.JAIN JM : PER A.D.JAIN JM : THIS IS DEPARTMENTS APPEAL AGAINST THE ORDER DATED 15.10.2010 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) KARNAL. THE SOLE GROUND RAISED IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN HOLDING THAT EXEMPTION U/S 1 1 OF THE I.T.ACT IS AVAILABLE TO THE ASSESSEE RESULTING IN D ELETION OF ADDITION OF RS.37 33 830/- WITHOUT APPRECIATING PRO PERLY THAT THE INVESTMENT MADE IN MAKING ADVANCE FOR THE PURCHASE OF LAND AND INVESTMENT IN FDRS DID NOT CON STITUTE APPLICATION OF INCOME AND AFTER EXCLUDING THESE INVESTMENTS THE ASSESSEE HAD NOT APPLIED 85% OF IT S INCOME FOR ITS OBJECTS AND FURTHER THAT THE DOMINAN T OBJECT OF THE SOCIETY IS PROFIT MAKING. 2. THE FACTS ARE THAT THE ASSESSEE IS A SOCIETY RUN NING FOUR EDUCATIONAL INSTITUTIONS IN AND AROUND PANIPAT IN H ARYANA. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D DECLARING NIL INCOME AND CLAIMING EXEMPTION U/S 11 OF THE IT ACT THE SOCIETY BEING REGISTERED U/S 12AA OF THE ACT. THE AO NOTED THAT THE ASSESSEE SOCIETY ITA-5908/DEL/2010 2 HAD MADE ADVANCES OF `4 50 000/- FOR PURCHASE OF LA ND AND HAD FURTHER INVESTED `20 LAKHS IN FDRS. IT WAS HELD THAT THE A DVANCES MADE FOR PURCHASE OF LAND AND INVESTMENT IN THE FDRS WERE NO T APPLICATION OF INCOME AND THAT AFTER EXCLUDING THE SAME THE ASSES SEE HAD NOT APPLIED 85% OF ITS INCOME FOR ITS OBJECTS AND THERE FORE EXEMPTION U/S 11 OF THE ACT WAS NOT AVAILABLE TO IT. IT WAS FURT HER NOTED THAT THE GROSS RECEIPTS OF THE ASSESSEE FROM ALL THE FOUR IN STITUTIONS WERE OF `1 13 73 238/- PLUS DONATIONS OF `38 750/- AS AGAI NST WHICH A SURPLUS OF `56 67 404/- HAD BEEN DECLARED WHICH WAS ALMOST 50% OF THE GROSS RECEIPTS. IN THESE FACTS THE AO HELD THAT THE ASS ESSEE SOCIETY HAD FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 11 OF THE ACT. AN ADDITION OF `37 33 830/- WAS THUS MADE TO THE INCOM E OF THE ASSESSEE SOCIETY OBSERVING THAT THE MAIN OBJECT OF THE ASSE SSEE SOCIETY WAS TO RUN EDUCATIONAL INSTITUTIONS AND TO IMPART EDUCATIO N BUT IT WAS CLEAR FROM THE RECEIPTS OF THE ASSESSEE SOCIETY THAT THE MAIN SOURCE OF THE INCOME WAS ON ACCOUNT OF FEES CHARGED FROM THE STUD ENTS WHICH WAS AN ACTIVITY IN THE NATURE OF TRADE COMMERCE AND BU SINESS DUE TO WHICH THE ASSESSEES ACTIVITIES COULD NOT BE SAID TO BE CHARITABLE ACTIVITIES FOR ADVANCEMENT OF GENERAL PUBLIC UTILIT Y. 3. BY VIRTUE OF THE IMPUGNED ORDER THE LEARNED CIT (A) DELETED THE ADDITION HOLDING THE ASSESSEE ENTITLED TO EXEMPTIO N UNDER SECTION 11 OF THE ACT. 4. CHALLENGING THE IMPUGNED ORDER THE LEARNED DR H AS CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT E XEMPTION WAS AVAILABLE TO THE ASSESSEE U/S 11 OF THE ACT; THAT A S SUCH THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF `37 33 830 /-; THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE INVESTMENT BY WAY OF MAKING ADVANCES FOR PURCHASE OF LAND AND INVESTMENT IN FDR S DID NOT CONSTITUTE APPLICATION OF INCOME AND THAT AFTER EXC LUDING THESE INVESTMENTS THE ASSESSEE HAD NOT APPLIED 85% OF IT S INCOME FOR ITS ITA-5908/DEL/2010 3 OBJECTS; AND THAT THE LEARNED CIT(A) HAS ALSO FAILE D TO CONSIDER THAT THE DOMINANT OBJECT OF THE ASSESSEE SOCIETY WAS TO MAKE PROFIT. THE LEARNED DR ALSO PLACED RELIANCE ON THE DECISION DAT ED 24.9.2007 OF THE HONBLE UTTARAKHAND HIGH COURT IN CIT HALDWA NI DISTRICT NAINITAL VS. QUEENS EDUCATIONAL SOCIETY IN ITA NOS.103 AN D 104 OF 2007 (COPY FILED ON RECORD) WHEREIN IT HAS BEEN HELD T O THE EFFECT THAT WHERE A SOCIETY OR BODY IS MAKING A SYSTEMATIC PROF IT EVEN THOUGH IT IS ONLY FOR CHARITABLE PURPOSE IT CANNOT BE SAID THAT THE SOCIETY COULD CLAIM EXEMPTION. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT H AS BEEN SUBMITTED THAT THE ADDITION WRONGLY MADE HAS RIGHTLY BEEN DEL ETED BY THE CIT(A); AND THAT QUEENS EDUCATIONAL SOCIETY HAS BEEN DIS SENTED FROM BY THE HONBLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. 327 ITR 73 (P&H) (COPY PLACED ON RECORD). 6. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE LEARNED CIT(A) WHILE DELETING THE ADD ITION HOLDING THE EXEMPTION U/S 11 OF THE ACT TO BE AVAILABLE TO THE ASSESSEE TOOK INTO CONSIDERATION THE FACT AS ALLEGED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE WAS ENGAGED IN EDUCATIONAL ACTIVITIES WHI CH WERE OF CHARITABLE NATURE IN ACCORDANCE WITH THE PROVISION S OF SECTION 2(15) OF THE ACT. IT HAS NOT BEEN PROVED OTHERWISE. MOREOV ER QUEENS EDUCATIONAL SOCIETY (SUPRA) IS OF NO AID TO THE DE PARTMENT. IT STANDS DISSENTED FROM BY THE HONBLE JURISDICTIONAL HIGH C OURT IN PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. (SUPRA) HOL DING AS FOLLOWS:- 8.8 WE HAVE NOT BEEN ABLE TO PERSUADE OURSELVES TO ACCEPT THE VIEW EXPRESSED BY THE DIVISION BENCH OF THE UTTARAKHAND HIGH COURT IN THE CASE OF QUEENS EDUCA TIONAL SOCIETY (SUPRA). THERE ARE VARIETY OF REASONS TO S UPPORT ITA-5908/DEL/2010 4 OUR OPINION. FIRSTLY THE SCOPE OF THE THIRD PROVI SO WAS NOT UNDER CONSIDERATION IN AS MUCH AS THE CASE BEFORE THE UTTARAKHAND HIGH COURT PERTAINED TO S. 10(23C) (III AD) OF THE ACT. THE THIRD PROVISO TO S. 10(23C)(VI) IS NO T APPLICABLE TO THE CASES FALLING WITHIN THE PURVIEW OF S. 10(23C)(IIIAD). SECONDLY THE JUDGMENT RENDERED BY THE UTTARAKHAND HIGH COURT RUNS CONTRARY TO THE PROVISI ONS OF S. 10(23C)(VI) OF THE ACT INCLUDING THE PROVISO THE REUNDER. SEC. 10(23C)(VI) OF THE ACT IS EQUIVALENT TO THE PR OVISIONS OF S. 10(22) EXISTING EARLIER WHICH WERE INTRODUCED W .E.F. 1 ST APRIL 1999 AND IT IGNORES THE SPEECH OF THE FINANC E MINISTER MADE BEFORE THE INTRODUCTION OF THE SAID PROVISIONS NAMELY S. 10(23C) OF THE ACT [SEE OBSE RVATIONS IN AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTES CASE (SUPRA)]. THIRDLY THE UTTARAKHAN D HIGH COURT HAS NOT APPRECIATED CORRECTLY THE RATIO OF TH E JUDGMENT RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF ADITANAR EDUCATIONAL INSTITUTION (SUPRA) AND WHI LE APPLYING THE SAID JUDGMENT INCLUDING THE JUDGMENT W HICH HAD BEEN RENDERED BY HONBLE THE SUPREME COURT IN T HE CASE OF CHILDREN BOOK TRUST (SUPRA) IT LOST SIGHT OF THE AMENDMENT WHICH HAD BEEN CARRIED OUT W.E.F. 1 ST APRIL 1999 LEADING TO THE INTRODUCTION OF THE PROVISIONS OF S. 10(23C) OF THE ACT. LASTLY THAT VIEW IS NOT CONSI STENT WITH THE LAW LAID DOWN BY HONBLE THE SUPREME COURT IN AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL IN STITUTE (SUPRA). 7. IN VIEW OF THE ABOVE FINDING NO ERROR WHATSOEVE R IN THE ORDER OF LEARNED CIT(A) THE SAME IS HEREBY CONFIRMED REJEC TING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 8. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER 2011. SD/- SD/- (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (A.D.JAIN) (A.D.JAIN) (A.D.JAIN) (A.D.JAIN) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 09.09.2011 VK. ITA-5908/DEL/2010 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR