TMI Blog2003 (9) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... ion though its school namely, "Sherwood Academy". It has also recorded that assessee started with a junior section and later on the institution got affiliation from Council for the Indian School Certificate Examination w.e.f. 26th Oct., 1992, as per certificate issued by the Council for the Indian School Certificate Examination, the copy of which is appearing at p. 21 of the paper book. The contention of the assessee was that at present there were 1,200 students getting education in the said school upto 12th standard. 3. For asst. yr. 1996-97, the year under consideration, the assessee filed return showing Nil income as the Society claimed the benefit of s. 10(22) of the IT Act, 1961 (hereinafter referred to as the Act). The assessment, however, was completed at an income of Rs. 3,56,650 under s. 143(3) of the Act. It transpires from the record that CIT, Lucknow called for the record of the assessee for asst. yr. 1996-97 and observed that assessee had not filed "Smriti Patra" containing the object of the Society. The AO, without having examined as to whether the assessee-Society fulfilled the condition of s. 10(22) of the Act, had concluded that the income of the Society was exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for claiming exemption under s. 10(22) of the Act and AO proceeded to complete the assessment of the assessee-Society in the status of an AOP. Proceeding further the AO was of the view that the assessee-Society had claimed depreciation to the extent of Rs. 38,865 which was not allowable to the assessee. Addition of Rs. 6,50,925 appearing in the balance sheet of the assessee-Society was also made. Three deposits of Rs. 20,000 received from Shri Brijesh Agarwal, Rs. 35,000 received from Shri Hitesh Agarwal and Rs. 15,000 received from Shri Ramesh Agarwal were treated as unexplained making an addition of Rs. 70,000. The AO also noted that assessee had shown Rs. 9,04,946 as interest given to depositors while total of the interest given to the depositors was Rs. 7,22,599 and the excess of Rs. 1,82,346 was added as excessive claim by the assessee. Rs. 68,490 was added which were claimed by the assessee as honorarium in respect of the director of the academy Shri K.B. Lal. Rs. 84,018 was added to the total income by invoking provisions of s. 43B of the Act and in all total income was assessed at Rs. 21,10,360. 5. Before the learned CIT(A), several pleas were raised and after considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was associated with any object other than running the said school. The learned counsel also submitted that no doubt, there were other objects of the assessee-Society, but all were related to development of the students and villagers, but those other objects were not pursued by the assessee-Society except running the institution for education of students. 7. Referring to the provisions of s. 10(22) of the Act, learned counsel submitted that the only two requirements to be established for claiming the exemption under this section and one out of them is that educational institution should exist solely for educational purposes. The second requirement is that it must not be for the purpose of profit. The learned counsel, placed reliance on the decision of the Hon ble Supreme Court of India in the case of Aditanar Educational Institution vs. Asstt. CIT (1997) 139 CTR (SC) 7 : (1997) 224 ITR 310 (SC), in which it was laid down that in case an educational institution is formed for sole purpose of establishing, running, managing or assisting schools and colleges, then the institution is to be extended the benefit of exemption under s. 10(22) of the Act irrespective of the surplus over ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed by us on 8th July, 2003. The contention of the assessee is that assessee-Society is also registered under s. 12A of the Act. The assessee-Society had received during the year Rs. 63,30,308 as fees from the students and has incurred total expenditure of Rs. 1,26,36,471 and there was deficit/shortfall of Rs. 63,06,163 which is also proved from the audited income and expenditure account and balance-sheet. Once the registration has been granted by the CIT under s. 12A as is evident from copy of certificate granting registration under s. 12A by the CIT appearing at p. 22 of the paper book, the assessee cannot be denied the benefit of exemption of its income under s. 11 of the Act as laid down by the Hon ble Madhya Pradesh High Court in the case of Madhya Pradesh Madhyam vs. CIT Anr. (2002) 175 CTR (MP) 92 : (2002) 256 ITR 277 (MP) in which it was laid down that IT authorities are bound by registration and once they have registered an institution as charitable, they cannot go behind the registration in the assessment proceedings. They are bound prima facie by such registration. However, the right to conduct the proceedings of cancellation in accordance with law cannot be denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished which are appearing at pp. 34 to 44 of the paper book of the Department and assessee has also compiled the same in additional paper book and the same are appearing at pp. 15 to 30 of the paper book. The AO committed totalling mistake as such details are duly audited and there was no element of profit. The amount of Rs. 68,490 was in respect of expenses incurred about the guest-house which was being managed by Shri K.B. Lal, director of the academy and it cannot be said that director was using that amount for his own purposes and additions were unwarranted. 12. On the basis of factual as well as legal position, learned counsel submitted that matter was not properly looked into by the AO and the learned CIT(A) as assessee has fulfilled all the requirements for claiming exemption under s. 10(22) of the Act and in alternative under s. 11 of the Act. 13. As against it, the learned Departmental Representative reiterated the same submission and submitted that assessee had not been able to prove on record that it was meant solely for educational purposes as it was having multifarious objects as laid down in "Smriti Patra". The learned Departmental Representative submitted furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hool has about 1,200 students which is upto 12th standard. These facts have not been disputed by the Department. The contention of the assessee that it was not carrying on any other object had not been challenged by the learned Departmental Representative nor AO or learned CIT(A) had got any material on record to the effect that assessee was found engaged in other activities or objectives or object except running the school in the name of "Sherwood Academy" Once these are the facts, then the only conclusion is that assessee-Society was solely existing for running the educational institution. We may refer to the decision of Hon ble Calcutta High Court in the case of Birla Vidhya Vihar Trust vs. CIT (1981) 24 CTR (Cal) 307 : (1982) 136 ITR 445 (Cal) referred to by Tribunal, Allahabad Bench in the case of Maharishi Institute of Creative Intelligence vs. Asstt. CIT, in which the Lordships have concluded that assessee may have objects other than educational object, but that will not be of any material effect. The reasoning is fully applicable to the facts of the case in hand as no doubt that assessee-Society was having other objects, but these objects are not relevant particularly when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department and it is also not the case of the Department that assessee had not spent Rs. 85,73,308 for raising construction of school building and purchases of plant and machinery as evident from copies of balance sheet and P L a/c, which are part of audit report. So, assessee is also entitled to get benefit of registration under s. 12A. 22. It is also settled proposition of law that AO cannot travel beyond the direction passed by the CIT under s. 263 of the Act. One direction was relating to making enquiry about the claim of the assessee for exemption under s. 10(22) of the Act, and the other was in respect of examination of deposits below Rs. 50,000 and other deposits. The AO examined the deposits and made addition in respect of three depositors of Rs. 70,000 only and these deposits have been found explained by the learned CIT(A). The conclusion is that one of the directions of the CIT carry no weight as all the deposits as per the Department are genuine. About examination of claim for exemption under s. 10(22) of the Act, we have already concluded that assessee was entitled to exemption under s. 10(22) of the Act. Both the directions of the CIT stand fulfilled and so far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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