DCIT, Kurukshetra v. Ambedkar Education Society, Kurukshetra

ITA 668/CHANDI/2011 | 2007-2008
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 66821514 RSA 2011
Assessee PAN AAAAA8053C
Bench Chandigarh
Appeal Number ITA 668/CHANDI/2011
Duration Of Justice 2 year(s) 4 month(s) 20 day(s)
Appellant DCIT, Kurukshetra
Respondent Ambedkar Education Society, Kurukshetra
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-10-2013
Date Of Final Hearing 30-10-2013
Next Hearing Date 30-10-2013
Assessment Year 2007-2008
Appeal Filed On 10-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.668/CHD/2011 ASSESSMENT YEAR : 2007-08 THE DY. COMMISSIONER OF VS AMBEDKAR EDUCATION S OCIETY INCOME TAX KHERI MARKANDA CIRCLE KURUKSHETRA. KURUKSHETRA. PAN : AAAAA8053C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY : SHRI K.R.CHHABRA DATE OF HEARING : 30.10.2013 DATE OF PRONOUNCEMENT : 31.10.2013 O R D E R PER SUSHMA CHOWLA JM THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE CIT(APPEALS) DATED 02.03.2011 RELATING TO ASSESSMEN T YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL : ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN LHOLDING THAT EXEMPTION UNDER SECTION 10(23C)(IIIAD ) IS AVAILABLE TO THE ASSESSEE WITHOUT APPRECIATING PROPERLY THAT THE INV ESTMENTS MADE IN CAPITAL ASSETS DID NOT CONSTITUTE 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 DOMINANT OBJECT OF THE SOCIETY IS PROFIT MAKING. 2 3. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) IN GRANTING EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT TO THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS EDUCATIONAL SOCIETY WHICH HAD CLAIMED ITS INCOME TO BE EXEMPT U NDER SECTION 10(23C)(IIIAD) OF THE ACT. THE ASSESSEE WAS SHOW C AUSED TO EXPLAIN AS TO WHY IT WAS EXISTING FOR THE PURPOSE OF PROFIT IN VIEW OF THE SURPLUS EARNED BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE IS INCORPORATED AT PAGE 1 & 2 OF THE ASSESSMENT ORDER UNDER WHICH IT WAS EXPLAINED THAT THE TRUST HAS BEEN ESTABLISHED F OR EDUCATIONAL PURPOSES AND THE SURPLUS HAS BEEN INVESTED IN CAPIT AL ASSETS FOR CARRYING ON EDUCATIONAL ACTIVITIES WHICH IN-TURN AR E ELIGIBLE TO BE ALLOWED AS AN EXPENDITURE. 5. THE ASSESSING OFFICER RELYING UPON THE RATIO LA ID DOWN BY THE HON'BLE UTTRANCHAL HIGH COURT CIT VS IN M/S QUEENS EDUCATIONAL SOCIETY (2009) 177 TAXMAN 326 HELD AS UNDER: M/S QUEEN EDUCATION SOCIETY VS. CIT THE HON'BLE UT TARANCHAL HIGH COURT HAS HELD THAT THE INSTITUTION EXISTS FOR THE PURPOSE OF PROFIT IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C) (I IIAD) OF IT.ACT. THE HON'BLE HIGH COURT HAS OBSERVED AS UNDER: - 'IN OTHER WORDS WHAT WE WANT TO STRESS IS WHERE A SOCIETY OR BODY IS EARNING SYSTEMATIC PROFIT EVEN THOUGH THAT PROFIT IS UTILIZED ONLY FOR CHARITABLE PURPOSE YET IT CANNOT BE SAID THAT IT CPULD CLAIM EXEMPTION. IF MERELY QUALITATIVE TEST I S APPLIED TO SOCIETIES EVEN SCHOOLS WHICH ARE RUN ON COMMERCIAL BASIS MAKING PROFIT WOULD GO OUT OF THE PREVIEW OF TAXATION AND WOULD CLAIM EXEMPTION.' THE HON'BLE COURT HAS FURTHER HELD THAT INVESTMENT IN THE FIXED ASSETS LIKE FURNITURE AND BUILDINGS WERE THE PROPER TIES OF THE ASSESSEE AND MIGHT HAVE BEEN CONNECTED WITH THE IMP ARTING OF EDUCATION BUT THE SAME HAD BEEN CONSTRUCTED AND PU RCHASED OUT OF INCOME FROM IMPARTING THE EDUCATION WITH A VIEW TO EXPAND THE INSTITUTION AND TO EARN MORE INCOME. ON EXAMINATION OF ACCOUNTS BOOKS IT HAS BEEN NOTIC ED THAT THE SOCIETY HAS NOT CARRIED OUT ANY ACTIVITY EXCEPT RUN NING A SCHOOL. DURING THE YEAR THE SOCIETY HAS RECEIVED A SUM OF RS. 43 85 8527- ON ACCOUNT OF FEE FROM STUDENTS BUILDI NG FUND & 3 INTEREST AND AFTER MEETING THE EXPENSES HAS SHOWN S URPLUS RS. 21 82 2257-. THE QUANTUM OF PROFIT SHOWS THAT THE S OCIETY EXIST FOR THE PURPOSE OF PROFIT. 6. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE NO T ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT A ND INCOME OF RS. 21 82 225/- WAS ASSESSED IN THE HANDS OF THE ASSESS EE. 7. THE CIT(APPEALS) VIDE PARA 1.04 HELD AS UNDER : 1.04 THE ISSUE IS CONSIDERED. AS DISCUSSED ABOVE THAT TH E AO NOTED IN HIS ORDER THAT THERE WAS SURPLUS OF RS.21 82 225 7- AND HENCE INFERRED THAT THE APPELLANT SOCIETY DOES EXIST FOR THE PURPOSE OF PROFIT RELYING ON THE DECISION OF THE UTTARANCHAL HIGH COURT IN THE CASE OF M/S QUEENS EDUCATIONAL SOCIETY (SUPRA). IN THIS REGARD THE APPELLANT SUBMITTED THAT THE AO DID NOT CONSIDER TH E AMOUNT OF CAPITAL EXPENDITURE OF RS.71 05 7587- SPEND FOR THE CREATION OF FIXED ASSETS WHICH WERE NECESSARY FOR RUNNING THE EDUCATI ONAL INSTITUTION . THE PLEA OF THE APPELLANT IS TENABLE. THERE WOULD B E AS SUCH NO SURPLUS AFTER CONSIDERING THE CAPITAL EXPENDITURE. FURTHER IN VIEW OF THE FINDINGS OF THE JURISDICTIONAL PUNJAB A ND HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARI TABLE TRUST(SUPRA) DECISION OF THE UTTARANCHAL HIGH COUR T IN THE CASE OF M/S QUEEN EDUCATIONAL SOCIETY IS NOT APPLICABLE TO THE CASES FALL WITHIN THE PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT. THE FINDINGS OF THE AO CAN THEREFORE NOT BE SUSTAINED AND HENCE IT IS HELD THAT EXEMPTION U U/S10(23C)(IIIAD) OF THE INCO ME-TAX ACT 1961 IS AVAILABLE TO THE APPELLANT SOCIETY IN THE YEAR U NDER CONSIDERATION. 8. WE FIND THAT THE HON'BLE PUNJAB & HARYANA HIGH C OURT IN PINEGROVE INTERNATIONAL CHARITABLE TRUST VS UNION O F INDIA AND OTHERS CWP NO. 6031 OF 2009 HAS OVERRULED THE RATIO LAID DOWN BY HON'BLE UTTRANCHAL HIGH COURT IN M/S QUEENS EDUCATI ONAL SOCIETY VS CIT (SUPRA) AND HELD THAT EVEN WHERE SURPLUS IS EAR NED BY THE EDUCATIONAL SOCIETIES IT MAY NOT BE TERMED AS THE SOCIETY IS NOT EXISTING FOR CHARITABLE ACTIVITIES. THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL C HARITABLE TRUST VS UNION OF INDIA & ORS (SUPRA) HAD ALLOWED THE EXEMPT ION UNDER SECTION 10(23C)(IIIAD) OF THE ACT TO THE ASSESSEE T HEREIN WHO IN TURN WAS RUNNING EDUCATIONAL INSTITUTION DESPITE THE FAC T THAT IT HAD EARNED SURPLUS FROM YEAR TO YEAR. THE CASE OF THE ASSESSE E IS SQUARELY 4 COVERED BY THE RATIO LAID DOWN BY THE HON'BLE PUNJA B & HARYANA HIGH COURT IN PINEGROVE INTERNATIONAL CHARITABLE TR UST VS UNION OF INDIA & ORS (SUPRA) WHICH IN TURN HAD OVERRULED TH E RATIO LAID DOWN BY UTTRANCHAL HIGH COURT IN M/S QUEEN EDUCATIONAL S OCIETY (SUPRA). IN ANY CASE THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION HAD MADE CAPITAL EXPENDITURE OF RS. 71 05 758/- FOR THE CREATION OF FIXED ASSETS FOR RUNNING THE EDUCATIONAL INSTITUTION WHIC H AS PER THE CIT(APPEALS) WAS NOT CONSIDERED BY THE ASSESSING OF FICER. THE LD. DR FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAI D FINDING OF THE CIT(APPEALS). IN VIEW THEREOF WE FIND MERIT IN T HE CLAIM OF THE ASSESSEE. UPHOLDING THE ORDER OF THE CIT(APPEALS) WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2013. SD/- SD/- ( T.R.SOOD) (SUSHMA C HOWLA) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 31 ST OCTOBER 2013 POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) THE CIT DR ASSISTANT REGISTRAR ITAT CHD.