ACIT, Pune v. Symbiosis Society, Pune

ITA 829/PUN/2009 | 2003-2004
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 82924514 RSA 2009
Assessee PAN AABTS4503R
Bench Pune
Appeal Number ITA 829/PUN/2009
Duration Of Justice 2 year(s) 8 month(s) 20 day(s)
Appellant ACIT, Pune
Respondent Symbiosis Society, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-03-2012
Assessment Year 2003-2004
Appeal Filed On 10-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER I.T.A. NO. 829/PN/2009 : A.Y. 2003-04 ASSTT. CIT CIR. 1(1) PUNE APPELLANT VS. SYMBIOSIS SOCIETY SENAPATI BAPAT ROAD PUNE-411 004 PAN AABTS 4503 R RESPONDENT ASSESSEE BY: SHRI SHARAD A SHAH DEPARTMENT BY: SHRI HARESHWAR SHARMA DATE OF HEARING: 10-1-2012 DATE OF PRONOUNCEMENT: 30-3-2012 ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDERS OF THE CIT-(A)-II PUNE DATED 27-4-2009 FOR A .Y. 2003-04 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN ALLOWING EXEMPTION U/S 10(23C)(VI) OF THE ACT AND NOT CONSIDERED THE FOLLO WING REASONS: (A) THE ASSESSEE DID NOT EXIST SOLELY FOR THE PURPOSE OF EDUCATION BUT EXIST FOR THE PURPOSE OF PROFIT AS THE FEE STRUCTURE OF THE 12 INSTITUTIONS WAS VERY HIGH. (B) THE ASSESSEE WAS CHARGING MONEY FROM STUDENTS FOR PLACEMENT YOGA MEDICAL INSURANCE MESS CHARGES HOSTEL CHARGES ETC. WHICH INDICATED PROFIT MOTIVE OF THE ASSESSEE. 2 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 (C) THE CONSTITUTION OF THE ASSESSEE SOCIETY INDICATED THAT IT WAS RUN ON COMMERCIAL BASIS AS PER THE OBJECTS. (D) THE SURPLUS GENERATED BY THE ASSESSEE WAS UTILIZED FOR PURCHASE OF IMMOVABLE PROPERTY AND THE ASSESSEE ALSO RECEIVED RENT THEREFROM WHICH INDICATED THE INTENTION OF THE ASSESSEE TO EARN PROFIT. (E) THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE WHICH HAD NO CONNECTION WITH THE CHARITABLE ACTIVITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN ALLOWING EXEMPTION U/S 11 O F THE ACT AND NOT CONSIDERED THE FOLLOWING REASONS:- (A) THE ASSESSEE SOCIETY HAD NOT PROPERLY SPECIFIED THE PURPOSE OF ACCUMULATION IN FORM NO. 10 (B) THE PROPERTIES OF THE ASSESSEE VESTED WITH THE MANAGING COMMITTEE THEREBY VIOLATING THE PROVISIONS OF SECTION 13(1)(C) (C) THE DIRECTORS OF THE SOCIETY HAD UNDERTAKEN SOME FOREIGN VISIT WHICH ALSO RESULTED IN VIOLATION OF SECTION 13(1)(C) (D) THE AMOUNT GIVEN TO SIEC AS WELL AS THE ASSETS TRANSFERRED TO SIEC RESULTED IN VIOLATION OF PROVISIONS OF SECTION 11(5). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN NOT CONSIDERED THE FACT THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(VI) OF THE ACT AS THE MOTIVE OF THE ASSESSE E IS TO EARN PROFIT. THERE IS PROFITEERING AND COMMERCIALIZATION OF EDUCATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN NOT CONSIDERED THE FACT THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION/S 11 OF THE ACT AS INCOME DERIVED FROM THE PROPERTY IS NOT WHOL LY FOR CHARITABLE PURPOSE. THE ACTIVITY OF THE ASSESS EE IS 3 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 NOT CHARITABLE. INCOME DERIVED FROM PROPERTY IS NO T APPLIED/ACCUMULATED FOR CHARITABLE PURPOSES. 5. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE AO RESTORED 2. THE ASSESSEE SOCIETY IS ENGAGED IN RUNNING OF VA RIOUS EDUCATIONAL INSTITUTIONS. AS PER THE ASSESSMENT OR DER THERE WERE 10 EDUCATIONAL INSTITUTIONS WHICH ARE BE ING RUN ON THE BASIS OF GOVERNMENT AID WHEREAS 14 OTHER INSTITUTIONS ARE THOSE IN WHICH NO AID IS BEING REC EIVED FROM THE GOVERNMENT. THE ASSESSEE SOCIETY HAD CLAI MED EXEMPTION U/S 10(23C)(VI) OF THE ACT. ASSESSEE IS A SOCIETY WHICH IS REGISTERED UNDER THE SOCIETIES REGISTRATIO N ACT 1860 AND IS ALSO A CHARITABLE TRUST UNDER THE BOMBA Y PUBLIC TRUST ACT 1950. THE ASSESSEE WAS ACCORDED APPROVAL U/S 10(23C)(VI) OF THE ACT BY THE CBDT AS AN EDUCATIONAL INSTITUTION FOR THE A.Y 1999-00 TO 2001 -02. WITH EFFECT FROM A.Y. 2002-03 THE PRESCRIBED AUTHOR ITY FOR GRANTING THIS APPROVAL U/S 10(23C)(VI) IS THE CCIT OR THE DGIT IN PLACE OF CBDT. THE ASSESSEE HAD MADE AN APPLICATION FOR APPROVAL FOR AY. 2002-03 ONWARDS BY APPLICATION DATED 28-3-2003. HOWEVER WHEN THE ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 28-3-2006 THE APPROVAL FROM THE CCIT WAS NOT YET RECEIVED BY THE ASSESSEE. THE ASSESSING OFFICER COMPLETED THE ASSE SSMENT AT A TOTAL INCOME OF RS. 34 50 77 047/- AGAINST THE RETURNED INCOME OF RS. NIL AFTER DENYING THE ASSESS EES CLAIM OF EXEMPTION U/S 10(23C)(VI) AS WELL AS U/S 1 1 WHICH WAS CLAIMED ALTERNATIVELY. SUBSEQUENTLY VIDE ORDE R OF CCIT PUNE NO. CC-II/PN/TECH- II/EXEMPT/10(23C)(VI) /5/2005-06 DATED 13-4-2006 EXEMPTION U/S 10(23C)(VI ) WAS GRANTED TO THE ASSESSEE FOR A.Y. 2002-03 TO 200 4-05. 4 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 3. LATER ON THE BASIS OF THE FINDING RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR THIS ASSESSMENT YEAR AND SUBSEQUENT ENQUIRIES INTO THE S TATE OF AFFAIRS OF THE ASSESSEE IN RESPECT OF THE SAME ISS UE DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2004-05 A PROP OSAL DATED 12-12-2006 WAS SENT BY THE DCIT CIR. 7 PUNE INTIMATING THE CCIT-II PUNE OF THE VIOLATIONS OF T HE PROVISIONS OF SECTION 10(23C)(VI) BY THE ASSESSEE. THIS INTIMATION WAS SENT UNDER PROVISO (E)(I) TO SECTION 143(3) OF THE ACT. AS A RESULT OF THIS THE CCIT II PUNE VIDE NO. CC- II/PN/10(23C)/2006-07/1691 DATED 15-12-2006 ISSUED A NOTICE TO THE ASSESSEE UNDER THE 13 TH PROVISO TO SECTION 10(23C)(VI) ASKING AS TO WHY THE EARLIER NOTIFICATI ON DATED 13-4-2006 BY WHICH THE ASSESSEE WAS APPROVED U/S 10(23C)(VI) FOR A.Y. 2002-04 TO A.Y. 2004-05 SHOULD NOT BE RESCINDED AND THE APPROVAL CONTAINED THEREIN SHOULD NOT BE WITHDRAWN. WITH THIS NOTICE THE INTIMATION UNDER P ROVISO (E)(I) TO SECTION 143(3) DATED 12-12-2006 SENT BY T HE DCIT CIR. 7 PUNE TO THE CCIT-II PUNE WAS ALSO ENCLOSED . AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE VIDE LETTER NO. CC-II/PN/10(23D)/2006-07 DATED 9-1-2007 PROCEEDINGS INITIATED BY THE CCITS NOTICE DATED 15 -12- 2006 WERE DROPPED. 4. BEFORE THIS THE ASSESSING OFFICER IN HIS ASSESS MENT ORDER DATED 28-3-2006 FOR THE YEAR UNDER CONSIDERAT ION OBSERVED THAT THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(VI) ON THE GROUND THAT IT IS EXISTING NOT SOLELY FOR EDUCATIONAL PURPOSES BUT FOR THE PUR POSE OF PROFIT AS WELL. HE HAS GIVEN THE INSTITUTION-WISE DETAILS OF THE SURPLUS GENERATED BY THE ASSESSEE SOCIETY. HE HAS ALSO MENTIONED THE FEE STRUCTURE OF VARIOUS INSTITUTIONS LIKE 5 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 SYMBIOSIS INSTITUTE OF TELECOM MANAGEMENT SYMBIOSI S CENTRE FOR INFORMATION TECHNOLOGY ETC. ON PAGE 42 OF HIS ORDER HE HAS STATED THAT THE ASSESSEE IS CHARGING ANNUAL FEE OF AROUND RS. 4 LAKHS PER STUDENT WHICH IS EXOR BITANT AND NOT AFFORDABLE FOR GENERAL PUBLIC. THE ASSESSI NG OFFICER HAS ALSO OBSERVED THAT CHARGING OF SUCH HIG H FEE DEPRIVED STUDENTS FROM LOWER INCOME CATEGORY FROM T AKING ADMISSIONS IN THE INSTITUTES RUN BY THE ASSESSEE SO CIETY. 4.1 THE ASSESSING OFFICER ALSO OBSERVED THAT THE IN COME FROM SALE OF PROSPECTUS IS EXORBITANT AS COMPARED T O PRINTING COST. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IS EARNING SURPLUS ON THIS ACCOUNT AS WELL . THE STAND OF THE ASSESSEE IN THIS REGARD HAS BEEN THAT THE EXPENDITURE ON CONDUCTING THE ENTRANCE EXAMINATION AND ADVERTISEMENT EXPENSES WAS ALSO MET BY THE RECEIPT FROM SALE OF PROSPECTUS. 4.2 THE ASSESSING OFFICER HAS ALSO GIVEN DETAILS OF MONEY COLLECTED FROM THE STUDENTS UNDER THE HEAD PLACEME NT CHARGES IN VARIOUS INSTITUTES. HE HAS ALSO GIVEN DETAILS OF EXPENDITURE INCURRED OUT OF THE PLACEMENT CHARGES W HICH HAVE BEEN INDICATED TO BE FOR GUEST ENTERTAINMENT CORPORATE PARTIES GIFTS ETC. PURPORTED TO BE THE PLACEMENT EXPENSES. THE EXPENDITURE ON PARTIES AT VARIOUS HO TELS FOR CORPORATE AND TRAVELLING FOR THE PURPOSE OF PLACEME NT ACTIVITY AS WELL AS ALUMINI MEET HAS BEEN EMPHASIZE D BY THE ASSESSING OFFICER. THERE IS A MENTION OF THE I NCOME AND EXPENDITURE ON ACCOUNT OF ALUMINI ACTIVITY TOU RS AND TRAVELS EXHIBITION EXPENSES VARIOUS FUNCTIONS AND PROGRAMMES ETC. 6 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 4.3 IT WAS ALSO NOTICED THAT THE SOCIETY HAD COLLEC TED INSURANCE PREMIUM CHARGES @ RS. 1 250/- FROM EVERY STUDENT AGAINST WHICH THE EXPENDITURE WAS MENTIONED TO BE LESS. 4.4. ALL THESE RECEIPTS AND EXPENDITURES WERE MENTI ONED IN RESPECT OF SOME OF THE INSTITUTES IN GREAT DETAIL B Y THE ASSESSING OFFICER FROM PAGE 6 TILL PAGE 25 OF THE ASSESSMENT ORDER WITH A VIEW TO PUT FORWARD THE PROPOSITION THAT ACTIVITY OF THE ASSESSEE CANNOT BE TREATED NECESSARILY AS EDUCATIONAL ACTIVITY BUT THE EDUCATI ONAL INSTITUTION WAS BEING RUN FOR THE PURPOSE OF PROFIT FOR WHICH ADVERTISEMENT CANVASSING ENTERTAINMENT OF CORPORATE FOR THE PURPOSE OF PLACEMENT ALUMINI ACT IVITY ETC. WERE IN THE NATURE OF BUSINESS PROMOTION. HE HAD ALSO INFERRED THAT DUE TO THE HIGH FEE STRUCTURE OF THE INSTITUTIONS BELONGING TO THE ASSESSEE SOCIETY THER E WAS HUGE SURPLUS WHICH ENABLED SUCH EXPENSES TO BE INCU RRED. 4.5 IN THIS BACKGROUND THE ASSESSING OFFICER HELD THAT THE ONLY REASONABLE SURPLUS CAN BE ACCEPTABLE. INCA SE A CHARITABLE TRUST IS GENERATING HIGH SURPLUS THE SA ME CANNOT BE ALLOWED. ACCORDING TO THE ASSESSING OFFI CER IT DEPENDS UPON THE MAGNITUDE OF THE PROFIT GENERATED BY THE ASSESSEE. THE EDUCATION MUST NOT BE A COVER FOR CAR RYING ON AN ACTIVITY WHICH HAS PROFIT MAKING AS ITS PREDO MINANT OBJECT. THE PROFITS GENERATED BY THE ASSESSEE YEAR AFTER YEAR CLEARLY IMPLY THAT THE INSTITUTE IS EXISTING F OR THE PURPOSES OF THE PROFIT. 4.6 THE ASSESSING OFFICER OBSERVED THAT THE SURPLU S GENERATED BY THE ASSESSEE IS MORE THAN 50% WHICH IS 7 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 EXCESSIVE AND THE TRANSFER OF RS. 33.25 CRORES OUT OF SURPLUS TO LAND AND BUILDING FUND DOES NOT MEAN IT HAS BEEN UTILIZED FOR THE PURPOSES OF THE TRUST DURING THE YEAR. FINALLY HE DECIDED THE ISSUE AGAINST THE ASSESSEE STATING THAT THE ASSESSEE SOCIETY IS ENGAGE ED IN PROFIT M AKING AND IS OPERATING ON COMMERCIAL LINES. SO NOT ENTITLED FOR EXEMPTIONS U/S 10(23C)(VI) OF THE ACT. 5. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED O N BEHALF OF THE ASSESSEE WITH REGARDS TO VARIOUS OBJE CTIONS RAISED BY THE ASSESSING OFFICER. THE STAND OF THE A SSESSEE WITH REGARDS TO ISSUE VIS--VIS SURPLUS AND ITS UTI LIZATION FOR THE PURPOSES OF EDUCATION WAS THAT THE ACTIVITI ES LIKE PLACEMENT ALUMINI MEETS CULTURAL EVENTS SPORTS A ND OTHER FUNCTIONS WERE ALSO RELEVANT AND CAME WITHIN THE AMBIT OF EDUCATIONAL ACTIVITY. ACCORDING TO THE AS SESSEE SURPLUS HAVE BEEN USED FOR EDUCATION PURPOSE ONLY. ACCORDING TO THE ASSESSEE THESE ACTIVITIES WERE T AKEN INTO CONSIDERATION BY THE NAAC (NATIONAL ASSESSMENT AND ACCREDITION COUNCIL) WHILE EVALUATING THE INSTITUTI ONS FOR VARIOUS GRADES AND RATINGS. HAVING CONSIDERED THE CONTENTIONS RAISED ON ALL ACCOUNTS CIT(A) ALLOWED EXEMPTION U/S 10(23C)(VI) OF THE ACT. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. MAIN THRUST OF LEARNED DR WAS THAT ORDER OF THE ASSESSING OFFICER IS JUSTIFIED. HE JUSTIFIED THE ORDER OF THE ASSESSING OFFICER WITH VARIOUS ANGLES AND SUBMITTED THAT ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10(23C)(VI) OF THE ACT A S IT WAS FOR PROFIT MOTIVE. ON THE OTHER HAND LEARNED AR SU PPORTED THE ORDER OF THE CIT(A) AND RAISED VARIOUS CONTENTI ONS FOR ENTITLEMENT OF EXEMPTION U/S 10(23C)(VI) OF THE ACT . 8 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND MATE RIAL ON RECORD WE FIND THAT THE CONCLUSION OF THE ASSES SING OFFICER WAS BASED ON PREMISE THAT THE FEE STRUCTURE OF THE 12 INSTITUTES WAS VERY HIGH. THE ASSESSING OFFICER STATED THAT THE FEE WAS BEING CHARGED AS MUCH AS RS. 4 LAK HS PER ANNUM PER STUDENT WHICH WAS NOT FOUND TO BE JUSTIF IED BY HIM. IN THIS REGARD THE EXPLANATION OF THE ASSESSE E WAS THAT THE FEE CHARGED BY THE IIM WAS MUCH MORE THAN THAT CHARGED BY THE ASSESSEE THOUGH IIM RECEIVED GOVERNM ENT GRANT ALSO. IN RESPECT OF ITS DISTANCE RUNNING PROG RAMME WHICH YIELDED THE MAXIMUM SURPLUS TO THE ASSESSEE ALSO IT WAS EXPLAINED THAT THE IGNOU (GOVERNMENT SPONSOR ED PROGRMAMME) WAS CHARGING MUCH MORE FEES FOR SIMILAR COURSES AS CONDUCTED BY THE ASSESSEE. 6.1 THE ASSESSEE SOCIETY WAS CHARGING MONEY FOR SAL E OF PROSPECTUS ALUMINI ACTIVITY PLACEMENT YOGA INSU RANCES AND OTHER SUCH CHARGES. THE ASSESSING OFFICER OBSE RVED THAT CHARGING FOR EACH OF SUCH ACTIVITIES LIKE PLAC EMENT ACTIVITY ALUMINI ACTIVITY VARIOUS CULTURAL ACTIVI TIES YOGA INSURANCE CHARGES HOSTEL CHARGES ETC. INDICATED T HE PROFIT MOTIVE OF THE ASSESSEE. THE STAND OF THE ASSESSEE IN THIS REGARD WAS THAT RELEVANCE OF THE ACTIVITIES LIKE PL ACEMENT ACTIVITY AND ALUMINI ACTIVITY WHICH SHOULD BE TREAT ED AS A PART AND PARCEL OF THE EDUCATIONAL ACTIVITIES AS T HIS WAS ESSENTIAL FOR THE BENEFIT OF THE STUDENTS AND EVERY MODERN AND REPUTED INSTITUTION HAS SUCH PLACEMENT CELLS AN D ALUMINI MEETS. SIMILAR WAS THE EXPLANATION IN RESPE CT OF SALE OF PROSPECTUS AND INSURANCE PREMIUM WHICH WAS INCLUDING MEDICAL FEES AND HEALTH CLUB FEES. IT WAS EXPLAINED THAT THE RECEIPTS ON ACCOUNT OF THESE HEA DS DID NOT RESULT IN PROFIT ARISING TO THE ASSESSEE. IT WA S ALSO 9 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 SUBMITTED THAT THE SAME HAS BEEN DULY CONSIDERED BY NAAC FOR THE PURPOSE OF GRADING OF THE INSTITUTIONS AND NO ADVERSE INFERENCE WAS DRAWN THEREON. IN THIS BACKRO UND OF EXPLANATION FURNISHED BY THE ASSESSEE IT WAS HELD BY NAAC THAT ALL SUCH ACTIVITIES WHICH ARE BEING CONDUCTED BY THE ASSESSEE I.E. PLACEMENT ACTIVITIES ALUMINI ACTIVIT IES SPORTS AND CULTURAL PROGRAMMES VARIOUS COLLEGE FUNCTIONS ETC. ARE FOR THE PURPOSE OF EDUCATION AND NOT IN THE NAT URE OF BUSINESS PROMOTION ACTIVITIES UNDERTAKEN BY A COMME RCIAL ORGANIZATION. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON THIS ACCOUNT. ACCORDING TO US VIEW OF THE CIT(A) ON THIS ISSUE IS REASONABLE. 6.2 CHARGING OF INSURANCE PREMIUM WAS CLAIMED TO B E FOR THE PURPOSE OF PROVIDING MEDICAL INSURANCE TO THE S TUDENT AND IT INCLUDED MEDICAL FEE AD HEALTH CLUB FEE ALSO . THE RATE OF PROSPECTUS WAS NOT EXCESSIVE. CONSIDERING T HE COMMENSURATE EXPENSES FOR CONDUCTING ENTRANCE EXAM AND COST OF PROSPECTUS OF OTHER INSTITUTIONS WHICH DID NOT LEAD TO PROFITEERING. THIS REASONED FINDING NEEDS NO INTERFERENCE FROM OUR SIDE. 6.3 REGARDING CHARGING STUDENTS RS. 1 200/- FOR 6 M ONTHS FOR MID DAY MEAL PROGRAMME RESULTED IN RECEIPTS OF RS. 11 95 099/-. INDORE BENCH OF THE TRIBUNAL IN THE C ASE OF ITO VS. LOKMANYA SHIKSHAN SAMITI (2008) 115 STTJ 13 5 (IND) HAD OCCASION TO ANALYSE THE ISSUE WHEREIN SU CH PROVIDING OF LUNCH TO STUDENTS AS WELL AS TRANSPOR TATION FACILITIES BY THE SCHOOL AUTHORITIES WAS HELD TO BE NOT FOR THE PURPOSE OF PROFIT BUT FOUND ANCILLARY ACTIVITY TO THE MAIN ACTIVITY OF IMPARTING EDUCATION. NOTHING CONT RARY WAS BROUGHT TO OUR KNOWLEDGE. ACCORDING TO US THE VIEW OF CIT(A) ON THIS ACCOUNT IS ALSO REASONABLE. 10 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 6.4. THE NEXT ISSUE IS WITH REGARD TO GENERATION OF SURPLUS BY THE VARIOUS INSTITUTES RUN BY THE SOCIETY. ACCOR DING TO THE ASSESSING OFFICER ONLY REASONABLE SURPLUS CAN B E ACCEPTABLE AND IF THE SOCIETY WAS GENERATING VERY H IGH SURPLUS THE SAME COULD NOT BE CONSIDERED AS CHARITA BLE ACTIVITY AND EXEMPTION U/S 11 CANNOT BE ALLOWED. T HE ASSESSING OFFICER HAS DISCUSSED THE CBDT CIRCULAR N O. 1112 DT. 29-10-1977. ACCORDING TO THIS CIRCULAR E VEN THOUGH SOME SURPLUS WAS GENERATED THE EXEMPTION WO ULD BE ALLOWABLE AND ONLY WHEN THE PROFIT WAS DIVERTED FOR THE PERSONAL USE OF THE PROPRIETOR OR THE TRUSTEES THEN THE EXEMPTION COULD BE DENIED. IT WAS ALSO MENTIONED I N THE INSTRUCTION THAT WHERE ALL THE OBJECTS OF THE TRUST WERE EDUCATIONAL AND THE SURPLUS IF ANY FROM RUNNING T HE EDUCATIONAL INSTITUTION WAS USED FOR EDUCATIONAL PU RPOSES ONLY THE INSTITUTION EXISTED FOR EDUCATIONAL PURP OSES ONLY AND NOT FOR THE PURPOSE OF PROFIT. THE ASSESSING O FFICER HAS IGNORED THE SPIRIT OF THE ABOVE INSTRUCTIONS IS SUED BY THE CBDT. THERE IS NOTHING ON RECORD TO SUGGEST TH AT PERSONAL BENEFIT AROSE TO THE ASSESSEE OR ANYBODY O N BEHALF OF IT AND PROFIT GENERATED BY THE INSTITUTION WERE NOT SOLELY APPLIED FOR EDUCATIONAL PURPOSES. ACCORDING TO THIS INSTRUCTION EVEN IN CASE WHERE SURPLUS WAS USED FOR NON- EDUCATIONAL PURPOSE WHEREIN EXEMPTION U/S 10(22) CO ULD BE DENIED THE INCOME COULD BE EXEMPT U/S 11 IF THE CONDITIONS GIVEN THERE WAS SATISFIED. HONBLE SUPR EME COURT IN THE CASE OF ADITNAR EDUCATIONAL INSTITUTIO N VS. ADDL. CIT (1997) 224 ITR 310 (SC) HELD THAT IN CASE ANY SURPLUS RESULTED INCIDENTALLY FROM THE ACTIVITIES L AWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTIONS IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE 11 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 OBJECT IS NOT ONE TO MAKE PROFIT. HONBLE KERALA H IGH COURT IN THE CASE OF CIT V.GEETHA BHAVAN TRUST (1995)(213 ITR 296)(KER) HELD THAT WHEN THE INCOME DERIVED FROM TH E INSTITUTIONS WAS USED ONLY FOR THE PURPOSE OF EDUCA TIONAL INSTITUTIONS AND WAS PLOUGHED BACK INTO THE INSTITU TIONS EXEMPTION U/S 10(22) WAS ALLOWABLE. THE QUANTUM OF SURPLUS WAS NOT RELEVANT AND THE ISSUE IS WHETHER T HE SURPLUS WAS UTILIZED FOR THE EDUCATIONAL PURPOSE OR NOT. IT IS CLAIM OF ASSESSEE THAT IT WAS DULY UTILIZED FOR THE EDUCATIONAL PURPOSES FOR THE PURPOSE OF EXPANSION O F THE EXISTING INSTITUTES AND OPENING OF ADDITIONAL INSTI TUTIONS CONSTRUCTION OF HOSTELS ETC. 6.5 HONBLE DELHI HIGH COURT IN CASE OF CIT V.DELHI KANNADA EDUCATION SOCIETY (2000) 246 ITR 731 (DEL) WHEREIN THE ASSESSEE SOCIETY WAS ESTABLISHED SOLELY FOR EDUCATIONAL PURPOSES. ITS INCOME FROM ITS PRIMARY S CHOOL WAS BEING USED FOR AIDING MIDDLE AND SECONDARY SCHO OLS. THE INCOME WAS NOT EARNED FOR THE PURPOSE OF PROFIT . THE PRIMARY SCHOOL WAS UNAIDED. INCOME FROM PRIMARY SCH OOL WAS USED FOR EDUCATIONAL PURPOSES AND NOT5 FOR PROF IT. THE INCOME OF PRIMARY SCHOOL WAS HELD EXEMPT U/S 10(22) OF THE ACT. FOLLOWING SAME ANALOGY THE SURPLUS ONE INSTITUTION USED FOR CONSTRUCTION OF OTHER INSTITUT IONS BY ASSESSEE SOCIETY FOR EDUCATIONAL PURPOSE WILL NOT D ISENTITLE ASSESSEE FROM EXEMPTION U/S 10(23C)(VI) OF THE ACT. IN SUM AND SUBSTANCE IN CASE THERE IS SURPLUS AND IF IT I S UTILIZED FOR THE PURPOSE OF EXPENDITURE FOR THE EDUCATIONAL INSTITUTION THEN EXEMPTION CANNOT BE DENIED. THER E WAS A DIFFERENCE BETWEEN THE CONCEPTS OF PROFIT VIS--VIS THE CONCEPT OF SURPLUS. SURPLUS AROSE WHEN ALL THE REQUIREMENTS HAVE BEEN MET AND ALL THE EXPENDITURE AND 12 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 OUTGOINGS HAVE BEEN CONSIDERED. IT WAS EMPHASIZED THAT WHEN THE SOCIETIES EXISTED FOR THE PURPOSE OF EDUCA TION AND THE SURPLUS GENERATED WAS NOT UTILIZED FOR THE PERS ONAL PURPOSE OF THE TRUSTEES THE EXEMPTION COULD NOT BE DENIED. THE PLOUGHING BACK TO THE SURPLUS INTO THE INSTITUT IONS THEMSELVES OR FOR THE PURPOSE OF EXPANSION OF INFRASTRUCTURE CONSTRUCTION OF BUILDING ETC. AS U TILIZATION FOR THE PURPOSE OF EDUCATION IS JUSTIFIED. THE COND UCTING OF BUSINESS AND GENERATION OF PROFIT DOES NOT DEBAR A SOCIETY OR TRUST FROM EXEMPTION U/S 10(23C) ALSO. THE QUAN TUM OF SURPLUS IS NOT RELEVANT. RELEVANT IS THAT INCOME I S UTILIZED TOWARDS THE ATTAINMENT OF EDUCATIONAL PURPOSES I.E . OBJECTS OF THE ASSESSEE. IN CASE THE RECEIPTS WERE LARGELY INVESTED IN THE DEVELOPMENT OF INFRASTRUCTURE IT CA NNOT BE STATED THAT THE SAME WAS BEING SIPHONED OFF. IN VIE W OF THE ABOVE DISCUSSION WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS GRANTED EXEMPTION TO ASSESSEE UNDER SECTION 10(23C(VI) OF ACT SAME IS U PHELD. 7. AS RESULT APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2012. SD/- SD/- G.S. PANNU SHAILENDRA KUMAR YADAV ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 30 TH MARCH 2012. ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-(A)- PUNE 4. THE CIT I PUNE 5. THE D.R A BENCH ITAT PUNE 6. GUARD FILE BY ORDER SR. PRIVATE SECRETARY 13 ITA NO. 829/PN/2009 SYMBIOSIS SOCIETY A.Y. 2003-04 INCOME TAX APPELLATE TRIBUNAL