TMI Blog2012 (5) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... Act have been satisfied, the income of the assessee for all assessment years is exempt. - ITA Nos. 1227 to 1230/Kol/2011 - - - Dated:- 29-11-2011 - Mahavir Singh, C.D. Rao, JJ. S.K. Tulsiyan for the Appellant D.R. Sindhal for the Respondent ORDER Mahavir Singh: These four appeals by assessee are arising out of common order of CIT(A), Siliguri in Appeal Nos. 36 to 39/CIT(A)/Slg/10-11 dated 05.09.2011. Assessments were framed by ACIT, Circle-Gangtok, Sikkim u/s.143(3)/147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Years 2004-05 to 2007-08 vide his different orders dated 29.12.2010. Since facts are common and grounds are exactly identically worded, for the sake of brevity, we dispose of all these appeals by this consolidated order. 2. The assessee University has raised following common grounds in all four years, Which are common, hence grounds from one appeal are being reproduced:- "I. That, as all the conditions prescribed in section 10(23C)(iiiab) of the I.T. Act were satisfied, the Ld.CIT(A) erred in not exempting the income of the appellant in terms of the said Section. 1(a). That, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that the University has ploughed in huge amount of fund through secured loans and loans from other organizations which stands at a shopping amount of over 120 crore as against Grant-in-Aid of just Rs.2.09 crore of which Rs.2.06 crore was received from the State Government. The AO also noted that even the institution cannot be accorded any benefit of undertaking any charitable activity and claimed to be an institution solely existing for charitable purposes and not for the purpose of profit as required under section 20(23C)(vi) of the Act. The AO noted that even registration u/s. 12AA of the Act w.e.f. 19.10.2010 and the effect of registration u/s. 12AA of the Act cannot be given retrospectively. According to him, registration granted u/s. 12AA of the Act vide dated 19.10.2010 is applicable only for and from F.Y. 2010-11 and subsequent financial years. He further noted that assessee University did not apply and obtain approval u/s. 10(23C) of the Act and according to him application dated 29.07.2009 to CCIT seeking approval u/s. 10(23C)(vi) of the Act was rejected vide order u/s. 10(23C) of the Act dated 12.07.2010. The AO also rejected the claim of the assessee u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot make an argument regarding the amount of income assessed by the AO in all four assessment years, the income determined by the AO is confirmed." Aggrieved against the order of CIT(A), the assessee came in appeals before us. 4. Before us Ld. Counsel Shri S. K. Tulsiyan, first of all, argued that the assessee filed its returns of income for AYs 2004-05 to 2007-08 claiming exemption of its income u/s 10(23C)(vi) of the Act in response to notices issued u/s. 148 of the Act. Subsequently, it filed revised Returns for all these AYs claiming exemptions of its income u/s. 10(23C)(iiiab) of the Act. Ld. Counsel stated that the assessee University was established in terms of an enactment passed by the Sikkim Legislative Assembly for the purpose of providing medical education and training in the state of Sikkim and it was substantially financed by the Sikkim Government and claimed that all the conditions prescribed in Sec. 10(23C)(iiiab) were satisfied in its case and therefore its income for these AYs is exempt. Ld. Counsel stated that the AO rejected the assessee's claim of exemption u/s. 10(23C)(vi) and 10(23C)(iiiab) of the Act and assessed the income as under: Asstt. Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal's order, wherein the assessee University was granted registration u/s. 12AA of the Act by ITAT vide its order in ITA No. 633/Kol/2010 dt.20.08.10 directing CIT Siliguri to grant Registration u/s.12AA of the Act. The assessee filed copy of this order in Paper Book. Ld. Counsel also argued that the assessee University was substantially financed by the government and all conditions prescribed in Sec. 10(23C)(iiiab) of the Act are satisfied and its income is exempt. 5. Ld. Counsel further stated in view of the direction of Tribunal's direction to the CIT to grant Registration to assessee u/s. 12AA of the Act by stating that CIT(A) erred in holding that the University did not exist solely for educational purposes but for making profit. Ld. Counsel stated that as pointed out by the AO as well as CIT(A) that assessee was charging exorbitant fees for the 80% seats allotted to non-Sikkimese students, he argued that a similar allegation was also made by the CIT, Siliguri in his order dt.29.01.10 while rejecting assessee's application for registration u/s. 12AA of the Act and on its appeal against the orders of the CIT, Tribunal vide its order in ITA No.633/Kol/2010 dt.20.8.10 to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough during the A.Ys.2004-05 to 2007-08 which are under appeals, the appellant had disclosed operating surpluses, a glance at the Income and Expenditure Account of these assessment years will show that in each year, the operating expenses were more than 85% of the gross receipts and it would be relevant to mention here that even the capital expenses incurred by for its expansion are also considered as application of its income. The profit generated during each of the assessment years was less than 15% of its gross receipts, which is permitted even to a Charitable Institution u/s.11 of the Act. 6. Ld. Counsel argued that CIT(A) erred in holding that it was not substantially financed by the Government as required u/s.10(23C)(iiiab) of the Act and further erred in comparing each year's government grants with its gross receipt from tuition fees etc. instead of taking into account the total government grant from the beginning till date. He further pointed out that the CIT(A) erred in observing that the land provided by the State Government did not form part of substantial funding by the Government and further the grant of Rs.30 crs. paid by the Sikkim State Government to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has to be made by comparing year wise and misinterpreting the meaning of the above term "wholly and substantially financed by the Government". We find that Hon'ble Delhi High Court while interpreting the provisions of section 13(3)(b) of the Act in the case of CIT vs. Charat Ram Foundation (2001) 250 ITR 64 (Del.) has held that there is no mention of the previous year in the provisions of section 13(3)(b) of the Act but it would be proper to take into account the actual contribution made in the entire period of the trust upto the date, which has to be taken into account. Hon'ble Delhi High Court has interpreted the expression "substantial contribution" has to be understood in its ordinary or popular sense and the language of the provision is crystally clear and it is not permissible to read the expression during the previous year into section 13(3)(b) of the Act. Hon'ble Delhi High Court held that the Tribunal was justified in rejecting the assessee's contention that only contribution received by the assessee trust during previous years relevant to the assessment years 1972-73 and 1973-74 could be taken into account in determining whether any one of the persons mentioned in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplex (University Complex) as per valuation report dated 6.1.2006 of Mr.Sachen C.Dewan, Government approved and Registered Valuer. 1.42 6. Sub-Total Annual grants received from the Government Sikkim from the financial year 1997-98 to 2009-2010. 118.30 23.37 Total 141.67 The total contribution to the University by Sikkim Government thus works out to about Rs.141.67 cr. This is certainly a substantial amount and therefore applying the decision of the Delhi High Court in the case of Charat Ram Foundation (supra) assessee University was substantially financed by the Government and therefore the condition prescribed in Sec. 10(23C)(iiiab) are satisfied. We find that only premise of the lower authorities for rejecting the claim of assessee regarding contribution of Rs. 30 crore, 25 acres of land and 7 acres of land was that (i) the lessee will hand over the entire property at the time of termination of lease in view of clause 5 of lease deed dated 15.09.1998 and according to CIT(A) this cannot be considered as part of Government funding. We are of the view that the CIT(A) has not gone into clause 4 of the said lease deed, which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary. But the judicial system works only if someone is allowed to have the last word and that last word, once spoken, is loyally accepted. The better wisdom of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system." From the above observation of the Hon'ble Supreme Court, it is clear that in any hierarchical system, whether it is judicial or administrative, it is imperative that the lower authorities must abide by the decision of the higher authorities. We are of the view that CCIT, Jalpaiguri was exercising quasi judicial power vested in him in terms of Sec.10(23C) of the Act and made these observations in the order, which seems as correct view of the Deptt in granting exemption to assessee u/s.10(23C)(iiiab) of the Act. 10. In view of the above facts, we are of the view that Assessee University is governed by a Governing Council consisting of 10 Members including the Chancellor, who is the Governor of the State of Sikkim. The University was a creation of Sikkim Legislative Assembly and it was controlled by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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