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Commissioner of Income Tax (Exemption) Versus M/s. Chironji Lal Virendra Pal Saraswati Shiksha Parishad

2016 (1) TMI 236 - ALLAHABAD HIGH COURT

Eligibility for registration under Section 12AA - exemption claimed by the respondent society in respect of receipts for the Assessment Year 2010-2011 and 2011-2012 from the institution established and run by it - Held that:- In the instant case, there is nothing on record to indicate that the assessing officer proceeded to examine the status of the society and its annual receipts or income as a legal entity in itself. The assessing officer on the basis of the return filed has treated the income .....

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ing substantial questions of law:-

1. Whether the ITAT is justified in law under the facts and circumstances of the case, as the phrase 'Separate institute' for the purpose of availing exemption u/s 10 is nowhere defined in the Act. The assessee cited judgement in case of CIT Vs. Children Education Society (2013 (7) TMI 519 - KARNATAKA HIGH COURT ) where the assessee society was running as much as 22 educational institutes separately which were miles away from the fact of this case wh .....

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(Appeals)'s order, the assessee, in support of his claim of being two schools quoted the use of prefix 'COMBINED' on books of account of Society not Junior/Senior School in different books of accounts of the assessee which clearly indicates that these are merely two sections of a single School which were maintained for administrative ease and better monitoring.

3. Whether the ITAT is justified in law and on facts without appreciating the fact that as the assessee for the first time m .....

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ied the exemptions and treated the surplus of income over Expenditure as business income. Findings of the AO were based on material available on records and not on presumption. The two school theory of the assessee is bogus claim as there never existed two schools and merely only two sections which is also evident from the copy of balance sheet and other Annexures thereof which clearly indicated that there existed only two separate sections.

4. Whether Hon'ble ITAT is justified in law .....

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solely for educational purposes and not for purposes of profit, shall be one crore rupees."

5. Whether the ITAT is justified in law and on facts by allowing segregation of income to the assessee society however it is evident that the rule clearly guides for annual receipts and about aggregate receipts which includes income from all the sources, hence the AO was justified in taxing the surplus of the income over expenditure. - Income Tax Appeal No. - 150 of 2015 - Dated:- 5-1-2016 - Ho .....

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er the Societies Registration Act 1860. For the Financial Year 2009-2010 i.e. Assessment Year 2010-2011, the respondent assessee indicated receipt of a sum of ₹ 1,0,2,22,229/-. It claimed deduction and exemption as per the provisions of the Income Tax Act 1961 on the ground that it is existing solely for educational purposes. Admittedly, the society was not registered under Section 12AA nor did have any approval of the prescribed authority for exemption under Section 10 (23-C)(vi) of the I .....

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pplication for exemption had not been moved prior to 30th September, of the relevant assessment year, the request for exemption stood rejected. It was also recorded by the Officer that during the course of hearing the assessee came up with a plea that the society is running two separate schools, namely a Junior High School and a separate senior school from Class 9 to 12, and therefore, on account of existence of two separate schools, assessee claimed that the breakup of total receipts for both t .....

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ty of two separate institutions. The assessing officer, therefore, disallowed the claim of the status as urged by the respondent and a demand notice was accordingly issued. The assessee preferred an appeal and the learned Commissioner of Income Tax Appeals held that aggregate annual income means total annual receipt of each separate education institution and not the aggregate of the annual receipts of all the educational institutions run by the respondent society. It accordingly allowed the appe .....

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the Commissioner Income Tax in an appeal was an erroneous approach. The confirmation of the same by the Tribunal is equally erroneous, inasmuch as, neither the learned Commissioner nor the learned Tribunal have appreciated the fact that the assessee is the society that was claiming to have set up both the institutions that were in fact one and the same without separate existence. The aggregate income derived from running of the institution in the same premises by the assessee society was a comp .....

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e aforesaid submissions and we find that much would depend upon the status of the institutions and their legal identities for the purpose of treating their incomes separately. It is evident that the society is one and the same. The society was running the Junior High School and continues to do so. The distinction between the Junior High School section and the recognized Intermediate College has to be considered on the basis of recognitions of the institutions. A Junior High School is governed by .....

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el. A distinct legal entity, therefore, is created with the recognition of an Intermediate College. The question is as to whether the receipts claimed by the society upto the level of the Junior High School Classes, i.e. Class 8, can be treated to be a separate segregated receipt and would not form part of the aggregate income including that the Intermediate College so as to construe it as an aggregate receipt in the hands of the respondent assessee society. This will also have to be further exa .....

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ts annual receipts or income as a legal entity in itself. The assessing officer on the basis of the return filed has treated the income received from the two sections of the institution to be a receipt in the hands of the society without examining the legal status of either the Junior High School or the Intermediate College which stand recognized under different Acts. There is yet another issue which the Tribunal and the Commissioner Income Tax have not examined, namely as to whether during the .....

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(2) AWC 1561 and the decision in the case of Brijesh Tripathi Vs. State of U.P. and others, 2013 (11) ADJ 425 to contend that once an institution is upgraded to an Intermediate College, then the Junior High School loses its identity and it merges with the Intermediate College. This aspect of the law relating to educational institutions including the one presently involved also does not appear to have been examined either by the assessing officer or even by the appellate authorities while reversi .....

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inabove, we are of the considered opinion that the substantial questions of law as raised do arise for consideration on the facts and the legal issues raised in the present case. Admit on the following substantial questions of law:- 1. Whether the ITAT is justified in law under the facts and circumstances of the case, as the phrase 'Separate institute' for the purpose of availing exemption u/s 10 is nowhere defined in the Act. The assessee cited judgement in case of CIT Vs. Children Educ .....

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t 'taking recognition of Junior and Senior Section in normal administrative process it never connotes that there are two schools.' Further at page 3 of the Ld. CIT (Appeals)'s order, the assessee, in support of his claim of being two schools quoted the use of prefix 'COMBINED' on books of account of Society not Junior/Senior School in different books of accounts of the assessee which clearly indicates that these are merely two sections of a single School which were maintained .....

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