The Indian Education Socirty, Hisar v. ITO, Hisar

ITA 5991/DEL/2016 | 2010-2011
Pronouncement Date: 14-11-2019 | Result: Allowed

Appeal Details

RSA Number 599120114 RSA 2016
Assessee PAN AAATI3921J
Bench Delhi
Appeal Number ITA 5991/DEL/2016
Duration Of Justice 2 year(s) 11 month(s) 20 day(s)
Appellant The Indian Education Socirty, Hisar
Respondent ITO, Hisar
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 14-11-2019
Assessment Year 2010-2011
Appeal Filed On 24-11-2016
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE : SHRI H.S. SIDHU JUDICIAL MEMBER AND SHRI O.P. KANT ACCOUNTANT MEMBER ITA NOS. 5991 & 5992/DEL/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 THE INDIAN EDUCATION SOCIETY VILL- CHICKANWAS HISAR. PAN- AAATI3921J (APPELLANT) VS. INCOME - TAX OFFICER WARD -2 HISAR. (RESPONDENT) APPELLANT BY SH. S. KRISHNAN ADVOCATE RESPONDENT BY SH. S.S. RANA CIT/DR ORDER PER O.P. KANT A.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS BOTH DATED 07/09/2016 PASSED BY THE LD. CO MMISSIONER OF INCOME-TAX (APPEALS)- HISAR [IN SHORT THE LD THE CIT(A)] FOR A SSESSMENT YEAR 2010-11 AND 2011-12. IN BOTH APPEALS A COMMON ISSUE HAS BEEN R AISED BY THE ASSESSEE AND THUS BOTH THESE APPEALS WERE HEARD TOGETHER AND DIS POSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR CONVENIENCE AND AVOID REPETI TION OF FACTS. DATE OF HEARING 17.10.2019 DATE OF PRONOUNCEMENT 14.11.2019 ITA NOS. 5991 & 5992/DEL/2016 2 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN ITA NO . 5991/DEL/2016 FOR ASSESSMENT YEAR 2010-11 IS REPRODUCED AS UNDER: THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN NOT GRANTING EXEMPTION AS CLAIMED U/S. 11 OF THE INCOME-TAX ACT 1961 ON ACCOUNT OF BUILDING FUND RECEIPTS OF RS.23 62 500/- RECEIVED O N CAPITAL ACCOUNT. THE ACTION BEING MOST ARBITRARY ERRONEOUS UNLAWFUL AN D UNJUST BE QUASHED WITH DIRECTIONS FOR RELIEF. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSING OFFICER MADE ADDITION CONSEQUENT TO CANCELLATION OF THE REGISTRATION BY T HE COMMISSIONER OF INCOME- TAX HISAR. SUBSEQUENTLY THE TRIBUNAL IN ITA NO. 9 41/DEL/2013 RESTORED THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA OF THE INCOME TAX ACT DATED 23/09/2008. IN VIEW OF THE REGISTRATION RESTO RED BY THE TRIBUNAL THE LEARNED CIT(A) IN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER DELETED CERTAIN ADDITIONS HOWEV ER RETAINED ACTION OF THE ASSESSING OFFICER IN NOT GRANTING EXEMPTION UNDER S ECTION 11 OF THE ACT ON ACCOUNT OF BUILDING FUND RECEIVED OF RS.23 62 500/- WHICH ACCORDING TO THE ASSESSEE WAS RECEIVED ON CAPITAL ACCOUNT. AGGRIEVED WITH THE ACTION OF THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL RAISING THE GROUND AS REPRODUCED ABOVE. ITA NOS. 5991 & 5992/DEL/2016 3 4. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE LEARNED CIT(A) IS NOT JUSTIFIED IN CONSIDERING THE BUILDING FUND RECEIVED AS CORPUS DONATION FOR APPLICATION OF 85% INCOME FOR CHARITABLE PURPOSES. HE SUBMITTED THAT SAID CLAUSE OF 85% APPLICATION APPLIES ONLY TO INCOME DERIVED F ROM PROPERTY UNDER SECTION 11(1)(A) AND 11(1)(B) OF THE ACT AND NOT ON THE INC OME IN THE FORM OF VOLUNTARY CONTRIBUTION UNDER SECTION 11(1)(D) OF THE ACT. ACC ORDINGLY HE SUBMITTED THAT ORDER OF THE LEARNED CIT(A) MIGHT BE SET ASIDE. 5. ON THE CONTRARY THE LD. DR SUBMITTED THAT ASSES SEE HAS NOT FILED ANY EVIDENCES THAT THE VOLUNTARY CONTRIBUTION BY THE DO NOR WERE WITH SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS O F THE TRUST OR THE INSTITUTION THEREFORE IN ABSENCE OF ANY SUCH EVIDENCES ORDER OF THE LEARNED CIT(A) IS JUSTIFIED IN TREATING THE AMOUNT RECEIVED ON ACCOUN T OF BUILDING FUND OF RS. 23 62 500/-AS INCOME RECEIVED FROM PROPERTY UNDER S ECTION 11(1)(A) AND 11(1)(B) OF THE ACT WHICH IS REQUIRED TO BE UTILIS ED AS MINIMUM PRESCRIBED PERCENTAGE FOR CHARITABLE PURPOSES. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE ASSESSEE CONTENDED THAT DEVELOPMENT FUN D IS CHARGED FROM THE STUDENTS FOR DEVELOPMENT OF THE INFRASTRUCTURE OF T HE SOCIETY/COLLEGE/INSTITUTION FOR CONSTRUCTION OF THE BUILDING AND PURCHASE OF CA PITAL ASSET. THE ASSESSEE ITA NOS. 5991 & 5992/DEL/2016 4 SUBMITTED THAT THIS FUND IS PART OF THE CORPUS FUND OF THE SOCIETY AND HAS BEEN SHOWN AS PART OF THE CAPITAL FUND OF THE SOCIETY. THE LD. CIT(A) OBSERVED THAT THIS AMOUNT OF RS.23 62 500 COLLECTED AS DEVELOPMENT FEE HAS BEEN CREDITED TO THE BALANCE SHEET AND HAS NOT BEEN TAKEN TO THE INCOME AND EXPENDITURE ACCOUNT. THE LD. CIT(A) DENIED THE EXEMPTION IN RESPECT OF A MOUNT OF DEVELOPMENT FUND OF RS.23 62 500/-OBSERVING AS UNDER: 4.5 IT IS FOR CONSIDERATION AS TO WHETHER THE AMOUN T OF RS. 23 62 500/- COLLECTED BY THE APPELLANT ON ACCOUNT OF DEVELOPMEN T FUND BEING PART OF CORPUS FUND AND CREDITED TO THE BALANCE SHEET IS EL IGIBLE FOR DEDUCTION AS PER PROVISIONS OF SECTION 11 SECTION 12 SECTION 12 A SECTION 12AA AND SECTION 13 OF THE I.T. ACT 1961. IN VIEW OF GRANT OF REGISTRAT ION TO THE APPELLANT U/S 12AA OF THE I.T. ACT THE SURPLUS OF INCOME OVER EXPENDIT URE SHALL NOT BE CHARGEABLE TO TAX. HOWEVER THE APPELLANT HAS CHOSEN TO NOT SH OW THE ABOVE AMOUNT IN ITS INCOME AND EXPENDITURE STATEMENT. THEREFORE THE EXEMPTION AVAILABLE TO THE APPELLANT IN VIEW OF RESTORATION OF ITS REGISTR ATION U/S 12AA REGARDING SURPLUS OF INCOME OVER EXPENDITURE IN THE CASE OF A N EDUCATIONAL INSTITUTION EXISTING WHOLLY FOR EDUCATIONAL PURPOSES IS NOT AVA ILABLE WITH RESPECT TO ABOVE AMOUNT COLLECTED AS DEVELOPMENT FUND AND CRED ITED TO THE BALANCE SHEET OF THE APPELLANT. SECTION 12 OF THE I.T. ACT C REATES A DEEMING FICTION THAT ANY VOLUNTARY CONTRIBUTION RECEIVED BY AN EDUCATION AL INSTITUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES SHALL FOR THE PURPOSES OF SECTION 11 BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST AND P ROVISIONS OF SECTION 11 AND SECTION 13 SHALL APPLY ACCORDINGLY. THE APPELLAN T IN THIS CASE HAS ALSO CLAIMED THAT IT IS ENTITLED TO EXEMPTION OF THESE F UNDS AS PER SECTION 11 OF THE I.T. ACT. THE APPELLANT HAS STATED THAT 85% OF THE FU NDS SO COLLECTED ARE BEING ACCUMULATED FOR APPLICATION TOWARDS PURPOSES OF EDU CATION FOR WHICH THE INSTITUTION HAS BEEN ESTABLISHED. ITA NOS. 5991 & 5992/DEL/2016 5 4.6 HOWEVER FOR THE VOLUNTARY CONTRIBUTION (AS CLA IMED BY THE APPELLANT) RECEIVED BY THE APPELLANT ON ACCOUNT OF DEVELOPMENT FUND AND CREDITED TO THE BALANCE SHEET TO BE ELIGIBLE FOR EXEMPTION U/S 11 OF THE I.T. ACT THE INSTITUTION HAS TO COMPLY WITH CERTAIN PROCEDURAL R EQUIREMENTS LAID DOWN IN SECTION 11 IN THIS REGARD. AS THE APPELLANT HAS TAK EN THE AMOUNT COLLECTED AS DEVELOPMENT FUND TO THE BALANCE SHEET AND NOT TO TH E INCOME EXPENDITURE ACCOUNT IT HAS AS PER PROVISIONS OF SECTION 11 NO T APPLIED THE INCOME FOR EDUCATIONAL PURPOSES. IT SEEKS TO ACCUMULATE 85% OF THIS INCOME FOR APPLICATION TO EDUCATIONAL PURPOSES IN A LATER YEAR . IN SUCH CIRCUMSTANCES IT HAS TO FULFILL TO FOLLOWING CONDITIONS LAID DOWN IN SECTION 11(2) OF THE INCOME TAX ACT: A) THE TRUST IS TO GIVE A NOTICE TO THE INCOME TAX OF FICER SPECIFYING THE PURPOSES FOR WHICH INCOME IS BEEN ACCUMULATED AND T HE PERIOD OF ACCUMULATION. B) THE INCOME SO ACCUMULATED IS TO BE INVESTED IN GO VERNMENT OR OTHER APPROVED SECURITIES OR DEPOSITED IN POST OFFICE SAV INGS BANKS SCHEDULED BANKS CO-OPERATIVE BANKS AND APPROVED FINANCIAL CO RPORATIONS. 4.7 THE APPELLANT ALTHOUGH CLAIMING EXEMPTION U/S 1 1 HAS NOT FURNISHED ANY EVIDENCE THAT IT HAS FULFILLED THE AFORESAID CO NDITIONS SPECIFIED IN SECTION 11 FOR CLAIM OF EXEMPTION FOR THE ABOVE ACCUMULATED AMOUNT. THE CASE OF OBIT VS. SHANTI DEVI PROGRESSIVE EDUCATIONAL SOCIETY (2012) 340 ITR 320 (DEL) QUOTED BY THE APPELLANT DOES NOT HELP THE APP ELLANT AS THAT JUDGEMENT HAS BEEN RENDERED IN THE CONTEXT OF EXEMPTION U/S 1 0(22) OF THE I.T. ACT. IT IS NOT THE CASE OF THE APPELLANT THAT IT WAS CLAIMING DEDUCTION/EXEMPTION U/S 10(22) OF THE IT ACT. THE HON'BLE COURT IN THAT CASE HAS EXAMINED CORPUS FUND AND LOAN RECEIVED FROM PARENTS IN THE CONTEXT OF EX EMPTION U/S 10(22) OF THE LT. ACT. THE APPELLANT HAS CLAIMED EXEMPTION OF INCOM E ON THE BASIS OF GRANT OF REGISTRATION U/S 12AA OF THE I.T. ACT. THE APPEL LANT'S SURPLUS OF INCOME OVER EXPENDITURE WAS HELD NOT CHARGEABLE TO TAX IN VIEW OF ITS REGISTRATION U/S 12AA BEING RESTORED BY ITAT. THE CLAIM OF EXEMPTION R EGARDING DEVELOPMENT FUND CREDITED TO BALANCE SHEET AND NOT TO INCOME EX PENDITURE ACCOUNT IS TO ITA NOS. 5991 & 5992/DEL/2016 6 BE ALLOWED IN THE CONTEXT OF SECTION 11 12 AND 13 OF THE I.T. ACT. THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE BEFORE AO OR IN THESE PROCEEDINGS THAT IT HAD INFORMED THE AO REGARDING ACCUMULATION OF FUNDS OR ELSE INVESTMENTS OF ACCUMULATED FUNDS IN SPECIFIED SECUR ITIES. 4.8 IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES THE AMOUNT OF RS. 23 62 500/- COLLECTED AS DEVELOPMENT FUND AND CREDI TED TO THE BALANCE SHEET AS CAPITAL ACCOUNT IS HELD NOT TO BE ELIGIBLE FOR E XEMPTION U/S 11 OF THE I.T. ACT. ACTION OF THE AO IN HOLDING THE SAID AMOUNT TO BE CHARGEABLE TO TAX IS THEREFORE UPHELD. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 7. THE REQUIREMENT OF THE APPLICATION OF THE INCOME DERIVED FROM PROPERTY HELD FOR CHARITABLE AND RELIGIOUS PURPOSE HAS BEEN PRESCRIBED IN SECTION 11 OF THE ACT WHICH IS REPRODUCED FOR READY REFERENCE: 11. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63 THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME ( A ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHO LLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APP LIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART F OR APPLICATION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMUL ATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY; ( B ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PART ONLY FOR SUCH PURPOSES THE TRUST HAVING BEEN CREATED BEFORE THE COMMENCEMENT OF THIS ACT TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND W HERE ANY SUCH INCOME IS FINALLY SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE I NCOME FROM SUCH PROPERTY; ( C ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST ( I ) CREATED ON OR AFTER THE 1ST DAY OF APRIL 1952 F OR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFARE IN WHICH INDIA IS INTERESTED TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSI DE INDIA AND ( II ) FOR CHARITABLE OR RELIGIOUS PURPOSES CREATED BEF ORE THE 1ST DAY OF APRIL 1952 TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA: ITA NOS. 5991 & 5992/DEL/2016 7 PROVIDED THAT THE BOARD BY GENERAL OR SPECIAL ORDER HAS D IRECTED IN EITHER CASE THAT IT SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PE RSON IN RECEIPT OF SUCH INCOME; ( D ) INCOME IN THE FORM OF VOLUNTARY CONTRIBUTIONS MAD E WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTI TUTION. 8. IT IS EVIDENT FROM SECTION 11(1)(D) OF THE ACT THAT THERE IS NO CONDITION OF PRESCRIBED AMOUNT OF APPLICATION OF THE INCOME RECE IVED IN THE FORM OF VOLUNTARY CONTRIBUTION MADE WITH A SPECIFIC DIRECTION THAT TH EY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION THUS THE LEARN ED CIT(A) IS NOT JUSTIFIED IN CONSIDERING THE DEVELOPMENT FUND RECEIVED UNDER SEC TION 11(1)(A) OR 11(1)(B) FOR THE PURPOSE OF APPLICATION OF INCOME UPTO 85% T OWARDS CHARITABLE PURPOSES. BUT WE FIND THAT LD CIT(A) HAS NOT EXAMINED THE BUI LDING DEVELOPMENT FUND IN THE LIGHT OF THE REQUIREMENT OF SECTION 11(1)(D) OF THE ACT THAT DONORS SHOULD SPECIFICALLY DIRECT THAT SAID VOLUNTARY CONTRIBUTIO N SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION. THEREFORE THE ISSUE WH ICH ARISES IN THIS CASE IS WHETHER THE CONTRIBUTION RECEIVED FOR CONSTRUCTION OF BUILD ING ETC. FROM THE STUDENT FALLS UNDER THE VOLUNTARY CONTRIBUTION FOR CORPUS OF THE TRUST AS PER SECTION 11(1)(D) OF THE ACT OR NOT. AS THIS IMPORTANT REQUIREMENT OF THE LAW HAS NOT BEEN EXAMINED EITHER BY THE LD. CIT(A) OR BY THE ASSESSI NG OFFICER WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF TH E ASSESSING OFFICER FOR DECIDING AFRESH WITH THE DIRECTION TO THE ASSESSEE TO PRODUC E NECESSARY DOCUMENTARY ITA NOS. 5991 & 5992/DEL/2016 8 EVIDENCE TO SUBSTANTIATE THAT DONORS HAVE SPECIFICA LLY DIRECTED TO TREAT THE DEVELOPMENT FUND GIVEN BY THEM SHALL FORM PART OF T HE CORPUS OF THE TRUST OF THE INSTITUTION. THE ASSESSING OFFICER SHALL AFTER VERI FICATION OF THE DOCUMENTARY EVIDENCES PRODUCED BY THE ASSESSEE DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE GROUND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN ITA NO. 5922/DEL/2016 FOR ASSESSMENT YEAR 201 1-12 IDENTICAL ISSUE OF BUILDING FUND RECEIVED OF RS. 35 26 200/- HAS BEEN RAISED. THE ISSUE BEING IDENTICAL TO THE ISSUE RAISED IN ITA NO. 5921//DEL/ 2016 FOR ASSESSMENT YEAR 2010-11 FOLLOWING OUR FINDING ABOVE THE ISSUE IN DISPUTE IN THE YEAR UNDER CONSIDERATION IS ALSO RESTORED TO THE FILE OF THE A SSESSING OFFICER FOR DECIDING THE SAME AFRESH AS DIRECTED IN ITA NO. 5921/DEL/2060 . THE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER 2019. SD/- SD/- (H.S. SIDHU) (O.P. KA NT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH NOV. 2019 *AKS*