TMI Blog2010 (3) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... earned senior Departmental Representative laid emphasis to differentiate section 10(23C)( iv ) and 10(23C)( iiiad ) of the Act and strongly relied upon the decision from Hon ble Uttrakhand High Court in CIT v. Queens Educational Society [2009] 177 Taxman 326. On the other hand, the learned counsel for the assessee strongly defended the impugned order by contending that firstly, the income was employed by the assessee as per the provisions of the Act in the construction of the building and secondly the aforesaid decision of Hon ble Uttrakhand High Court is not applicable to the facts of the case. Reliance was placed on the decision from Hon ble Punjab Haryana High Court in the ease of Pinegrove International Charitable Trust v. Union of India [2010] 188 Taxman 402. The crux of the arguments is that the assessee school exists solely for educational purposes and not for profit. 3. We have considered the rival submissions of learned representatives of both sides and perused the material available on the file. Brief facts are that the assessee school, during the year, received fees from students amounting to Rs. 30,76,275 (below the limit of Rs. one crore as provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed; or ( iv )any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or ( v )any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; ( vi )any university or other educational Institution existing solely for educational purposes and not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and ( b )does not invest or deposit its funds, other than ( i )any assets held by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973; ( ia )any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st June, 1998; ( ii )any assets (being debentures issued by. or on behalf of. any company or corporation), acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983; ( i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edical Institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business : Provided also that any notification issued by the Central Government under sub-clause ( iv ) or sub-clause ( v ), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification : Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, every notification under sub-clause ( iv ) or sub-clause ( v ) shall be issued or approval under sub-clause ( iv ) or sub-clause ( v ) or sub-clause ( vi ) or sub-clause ( via ) shall be granted or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or institution or university or educational institution or hospital or other medical institution, as the case may be, is established : Provided also that where the fund or institution referred to in sub-clause ( iv ) or trust or institution referred to in sub-clause ( v ) is notified by the Central Government or is approved by the prescribed authority, as the case maybe, or any university or other educational institution referred to in sub-clause ( vi ) or any hospital or other medical institution referred to in sub-clause ( via ), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that ( i )such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not (A)applied its income in accordance with the provisions contained in clause ( a ) of the third proviso; or (B)invested or deposited its funds in accordance with the provisions contained in clause ( b ) of the third proviso; or ( ii )the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were misused by any individuals for their personal gain. The Assessing Officer has disallowed the claim of the school whereas the proviso itself does not include provisions of section 10(23C)( iiiad ) in treating the amount as income from business or from profession. It seems that the learned Assessing Officer has wrongly interpreted the words "not for the purposes of profit", because the institution/school is primarily engaged in educational activities and construction of building is the prime activity to achieve the object of education. The income generated from school must be utilised exclusively for educational activities and not for the personal gain and if this condition is fulfilled/complied with then the income of the assessee must be treated as exempted. Section 10(23C)( iiiad ) is an independent section and has no direct or indirect link with the registration under section 12A because registration under section 12AA is only needed when exemption is claimed under section 11 of the Act. It is worth mentioning here that in its return, the assessee has claimed exemption under section 10(23C)( iiiad ) of the Act. Regular classes are conducted by the school from class 1 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts return for assessment year 1996-97 showing net deficit of Rs. 9,50,000 and for assessment year 2001-02 showed nil income. The Assessing Officer took the view that the assessee is not involved in charitable activity and reopened the case under section 147 of the Act and was of the view that the activity of letting out the building to other society to run educational institution does not constitute charitable purpose. The assessee preferred appeal before the learned CIT(A) who decided in favour of the assessee which was affirmed by the Tribunal. The Hon ble Uttarakhand High Court considered various decisions and affirmed the stand of the Tribunal. However, the Hon ble Uttarakhand High Court in the case Queens Educational Society ( supra ) wherein the assessee invested surplus funds in fixed assets like furniture and building with a view to expand institution and to earn more income decided against the assessee by holding that the assessee is not entitled to-exemption under section 10(23C)( iiiad ). The Hon ble High Court observed, "...The law is well-settled that if the profit is proved by an educational society then that will be the income of the society as the surplus amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n profits and the prescribed limit was not utilised to achieve the objects of the assessee society. In view of these facts with all respects to the decision of the Hon ble Uttarakhand High Court, we are of the considered opinion that there is no infirmity In the stand of the learned CIT(A). Even otherwise, for the sake of repetition, when two views are possible (we mean that when two decisions from High Courts are available) then the decision view which favours the assessee may be followed. 7. Before adverting to various decisions, we are supposed to analyse the conditions precedent for availing exemption under section 10(22), which are as under : ( a )The educational institution must actually exist, and mere taking of steps would not be sufficient. ( b )The educational institution need not be affiliated to any university or board: in fact a society it need not itself be imparting education and it is enough if it runs some schools or colleges. ( c )The educational institution must exist solely for educational purposes and not for purposes of profit. But merely because there is a surplus, it cannot be said that the educational institution exists for profit. ( d )If an ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact that in the earlier assessment year, the assessee was enjoying the exemption under erstwhile section 10(22). The proviso of section 10(23C) permits the investment and deposits of its surplus fund. It means that the institution can make some deposits and the same is permissible for earning interest income. In the instant case, the assessee petitioner is undoubtedly an educational institution which might have some deposits which are permissible as per the proviso to section 10(23C). From the audited accounts, one can easily see whether the funds were utilised for the expansion of educational institution/activity or for personal profits. The opposite parties have not brought any material on record to prove that the surplus earned by the assessee petitioner was utilised for personal profit/gain on anyone including the founder manager/director. Whatever fund was acquired, the same was utilised for the expansion of educational activities of institution. Initially there were five students and now the institution is imparting education to more than 34,000 students as pointed out during the course of arguments. Thus, the assessee is fully satisfying all the statutory requirements for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(1)( a ) has to be a "conscious accumulation" and not just a mass of unspent or unapplied profit. Our view finds support from the decisions from the Hon ble Apex Court in Addl. CIT v. A.L.N. Rao Charitable Trust [1995] 216 ITR 697 , CIT v. Radhaswami Satsang Sabha [1954] 25 ITR 472 (All.) and CIT v. State Bank of India [1988] 169 ITR 298 (Bom.). 9. If the aforesaid judicial pronouncements and the facts of the present appeal are analysed, it can be summed up that section 10(23C)( iiiad ) speaks about "any university or any other educational institution existing solely for educational purposes and not for the purpose of profit." Also prescribes that aggregate annual receipt of such institution should not exceed Rs. 1 crore (r. 2BC). Likewise sub-clause ( vi ) to section 10(23C) is also having same wordings subject to approval by the prescribed authority, therefore, it can be said that the issues involved in sub-clauses ( iiiad ) and ( vi ) are common, therefore, it has to be seen whether there is any activity of profit and also the application of income. An elaborate discussion/observation has been made by Hon ble Punjab Haryana High Court in the case of Pine ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
