TMI Blog2016 (1) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... I. T. A. No. 673/Chd/2014 and Stay Application No. 20/Chd/2015 - - - Dated:- 18-1-2016 - Bhavnesh Saini (Judicial Member) And Annapurna Mehrotra (Accountant Member) For the Appellant : Ajay Vaidya For the Respondent : Sushil Kumar, Departmental Representative ORDER Bhavnesh Saini (Judicial Member) 1. The appeal of the assessee as well as the stay application have been heard together and are disposed of through this common order. 2. The assessee in its appeal has challenged the order of the learned Commissioner of Income-tax (Appeals), Shimla, dated May 26, 2014, for the assessment year 2011-12 on the following amended grounds of appeal: (a) That the impugned orders as passed by the respondents are bad in law and against the fact and in the circumstances of the case. The learned Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) has erred in law and fact of the case by treating the appellant under the provisions of section 10(23C)(vi) without appreciating the functioning and the objective of the appellant board that its income is covered by the provisions of section 10(23C)(iiiab). Further, the respondent has treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen market through book depots with the motive of earning profit and earned of ₹ 9,48,34,214 and the profit so earned was also not utilised for the benefit of students for which the earmarked fund was allocated by the education department. Thus, the board has failed to apply the fund allotted by the State Government to the specific direction to the extent of ₹ 11,90,38,662 and ₹ 9,48,34,214 which is the profit earned by utilising the earmarked fund in carrying out activities in the nature of trade, commerce and business in the form of printing, publishing and sale of the books. Accordingly the assessee was issued a show-cause notice and the assessee made para-wise submissions which are again enumerated on pages 5 to 7 of the assessment ORDER. 4(ii) The Assessing Officer also recorded the statement of secretary of the board to find out the exact utilisation of the earmarked funds allocated by the Directorate of Education for free distribution of text books to the students belonging to other backward classes, schedule caste and schedule tribes and whether the board has received any mandate for utilisation of the earmarked funds for other purposes. After consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Vide order dated June 30, 2009, approval under section 10(23C)(vi) of the Act with effect from the assessment year 2009-10 relevant to the financial year 2008-09 was granted to the Board. Thereafter, vide letter dated December 23, 2009, the appellant submitted to the Chief Commissioner of Income-tax stating the reasons why the approval which has been granted under section 10(23C)(vi) is required to be modified and the appellant be granted exemption under rule 10(23C)(iiiab) of the Act. (ii) Vide letter dated March 11, 2010, the Chief Commissioner of Income-tax passed an order and held that the HP Board of School Education is not wholly or substantially financed by the Government. Hence, the board does not appear to satisfy the condition of section 10(23C)(iiiab). The question whether section 10(23C)(iiiab) exemption is allowable or not is an assessment issue and will be decided in due course. The Chief Commissioner of Income-tax declined to intervene in the matter and treated the application as rejected. (iii) During the assessment proceedings for the assessment year 2011-12 the Assessing Officer came to the conclusion that the board has not been adhering to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carefully considered. It is noted that the appellant board had applied for grant of exemption under section 10(23C)(vi) and the said exemption was granted by the Chief Commissioner of Income-tax, Shimla, with effect from the assessment year 2009-10. The appellant's request for the condonation of delay in filing the application for approval under section 10(23C)(vi) and for grant of exemption with effect from the assessment year 2005-06 has been rejected by the Chief Commissioner of Income-tax, Shimla. Therefore, there is no strength in the appellant's argument that it should be granted exemption under section 10(23C)(vi) of the Act. Simultaneously, the appellant is claiming exemption under section 10(23C)(iiiab). Thus, the appellant is trying to take the benefit of the provisions of two different sections of the Act at the same time. It is, however, noted that the claim of the then appellant under section 10(23C)(iiiab) is otherwise also not legally sustainable. As per the provisions of section 10(23C)(iiiab), the concerned university or other educational institution must be wholly and substantially financed by the Government. As per the assessment record of the appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the learned Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee following the order of his predecessor for the assessment year 2006-07 dated which order has been confirmed by the Income-tax Appellate Tribunal Chandigarh-A Bench in the case of the same assessee in I. T. A. No. 405 of 2012, the assessment year 2006-07, vide order dated September 13, 2013 and the appeal of the assessee has been dismissed. The findings of the Tribunal in paragraphs 9 to 12 are reproduced as under : 9. We have heard the rival submissions and perused the material available on record. Section 10(23C)(iiiab) of the Income-tax Act provides as under : '10.(23C)(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government ; or. . .' 10. The condition of the above provision would show that university and other educational institutions must exist solely for education purposes and not for the purposes of profits and which is wholly and substantially financed by the Government. The Assessing Officer has given a specific finding against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner of Income-tax (Appeals) on the basis of evidence or material on record but it was stated that no evidence or material has been filed on record to contradict the above finding of fact recorded by the learned Commissioner of Income-tax (Appeals). The learned counsel for the assessee only relied upon the two unreported judgments as above, however, the said judgments could not be considered favourable in favour of the assessee in the absence of any evidence or material on record in favour of the assessee. Thus, the findings of fact recorded by the learned Commissioner of Income-tax (Appeals) above have not been rebutted through any material, therefore, we conclude that the assessee miserably failed to satisfy the requirement of section 10(23C)(iiiab) of the Income-tax Act in the assessment year under appeal. 11. In view of the above discussion, we do not find any error in the order of the learned Commissioner of Income-tax (Appeals) in reject ing the claim of the assessee under section 10(23C)(iiiab) of the Income-tax Act. 12. In the result, the appeal of the assessee is dismissed. 10. In the assessment year 2006-07, it was found that the assessee does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects for meeting of establishment, administration and office expenses for which the fund was not allocated. Thus, the assessee violated the provisions of section 11(4) of the Income-tax Act. The Assessing Officer further noted that the assessee board has stated to have utilised only ₹ 12.75 crores for printing of text books which includes establishment and office expenses of ₹ 2.05 crores, payment of audit fees of ₹ 12 lakhs, royalty to authors of ₹ 1.58 crores, purchase of paper of ₹ 6.11 crores, printing of text books of ₹ 2.07 crores and payment of rent of ₹ 21,91,055, etc. Thus, the board has incurred only ₹ 10,00,01,870 on printing of the books from which the board has printed 69,50,143 text books for free distribution to the specified class of the students as per the Himachal Pradesh Government Notification but the board even has not distributed these total text books to these categories of students but sold major portion of these text books in the open market through book depots with the motive of earning profits and earned profit of ₹ 9,48,34,214. The Assessing Officer, therefore, found that the assessee was found to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantify the amount received under this head ? Answer Yes, the board has received ₹ 24,66,13,426 for distribution of free text books to the students from class 1 to 10th to the students belonging to other backward classes, schedule caste and schedule tribes. Question No. 2 : Please explain whether there was a mandate from the Directorate of Education that payment allocated for free distribution of text books to the students belonging to other backward classes, schedule caste and schedule tribes for utilising this allocated fund for other purposes such as sale of the books to the other category, of students through book depots and utilising the fund for examination or other purposes ? Answer No, we have not received any mandate from the Directorate of Education for utilised of abovementioned allocate funds for other purpose such as sale of books and utilisation of fund for exam. Question No. 3 Please explain whether the fund allocate of ₹ 24,66,13,426 for the purpose of distribution of free text books to the students belonging to other backward classes and schedule caste and schedule tribe had been utilised for other purposes, other than purpose for specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese activities has been utilised for examination activities. Question No. 8 Please explain whether the board has received any type of wholly or substantially financial support from the Government, for running of day-to-day activities and for the fulfilment of objects of Board other than allocation of fund made by the Directorate of Education, H. P. of ₹ 24,66,13,426 for distribution of free text books for the students belonging to backward classes, scheduled caste and scheduled tribe ? Answer No, we have not received any financial support from the Government of H. P. for functioning/fulfilment of objects of the Board other than funds mentioned above for distribution of free text books for specific objective to the students belong to other backward classes, schedule caste and schedule tribe. 12. The Assessing Officer in view of the statement of the secretary of the assessee board and material on record found that the assessee board has received ₹ 24.66 crores for free distribution of text books to the backward classes, scheduled caste and scheduled tribe students but the same have been utilised in contravention of the objects for which the funds were allocated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, etc., assessee board has not received any financial support wholly or substantially from the Government. It is also brought on record that whatever funds were given for specific purpose of free distribution of the text books to specified class of students, have been misused in violation of the notification. The board has failed to utilise earmarked funds given by the State Government for the specific purpose. It is also not in dispute that text books which have been printed by the assessee board have been sold in open market through book depots with the motive of earning profits and assessee/earned ₹ 9.48 crores. The copy of the revised income and expenditure account for the year ending March 31, 2011, is filed at page 163 of the paper book which shows that the assessee has received income from students' fees in a sum of ₹ 17.89 crores and also received book income of ₹ 34.19 crores. The learned counsel for the assessee has filed details of income from books (private) in the assessment year under appeal which shows that the assessee has received income on sale of books through private depots in a sum of ₹ 9,53,65,751 and the amount reimbursed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments submitted that the secretary of the board has made a wrong statement before the Assessing Officer. However, he has admitted that Secretary of the Board has never retracted from her statement at any stage later on. It, therefore, stands clear that the statement of the secretary of the board was clear admission on the part of the assessee board to prove that the assessee is not entitled for any exemption/deduction under section 10(23C)(iiiab) of the Act. 15. The hon'ble Punjab and Haryana High Court in the case of Hotel Kumar Palace v. CIT [2006] 283 ITR 110 (P H) held as under (headnote) : Held, that as noticed, by the Commissioner, income from catering business was estimated by the Assessing Officer, on the basis of the statement of the partner, recorded during the course of search, and diaries seized in these proceedings. The Tribunal had also observed that in his statement, the partner had admitted that income from catering business was not fully recorded in the books of account. This finding was never under challenge. The block assessment was valid. 16. The hon'ble Supreme Court in the case of ITO v. Mangat Ram Norata Ram Narwana [2011] 336 ITR 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the board. The board has received ₹ 24.66 crores for distribution of free text books to the students belonging to other backward classes/scheduled castes/schedule tribes and according to the income and expenditure account, the cost of the books has been shown in a sum of ₹ 17.06 crores and ultimately the total book income of the assessee including interest has been shown at ₹ 34.19 crores and as such, the assessee board has misused the funds provided by the State Government for limited purposes. Thus, the assessee is not wholly or substantially financed by the Government. The assessee earned ₹ 9.48 crores on sale of text books which were sold through private booksellers for other students, so the funds given by the State Government for the benefit of other backward classes/scheduled castes/scheduled tribes students have not been utilised by the assessee board. The notification of the Government of Himachal Pradesh dated November 21, 1996, thus, has been violated by the assessee board. 19. Similarly, when the assessee raised the issue before the Chief Commissioner of Income-tax, Shimla, in connection with the approval under section 10(23C)(vi) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see board that the assessee board received ₹ 24.66 crores for distribution of free text books to the reserved category students is corroborated by the receipts issued by the assessee board on receipt of the aforesaid amount in which it is specifically mentioned that the amounts in question have been received for supply of free text books. Therefore, the assessee cannot earn profit out of the same transaction which is specifically directed by the State Government. The contention of the learned counsel for the assessee is, therefore, rejected that the assessee can print and publish the text books for other students out of the same amount which was received for a specific purpose. 19(ii) The learned counsel for the assessee lastly contended that the principle of res judicata does not apply to the Income-tax proceedings, however, the learned Departmental representative submitted that the rule of consistency does apply to the Income-tax proceedings and issue is covered in favour of the Revenue by order of the Income-tax Appellate Tribunal, Chandigarh Bench in the case of the same assessee for the assessment year 2006-07, dated September 13, 2013 (supra). 20. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1953, the Secretary Board of Education, Orissa has a fund. One of the sources of income of the board is profit from compilation, publication, printing and sale of text books. The profit so earned entered into the board fund. The income and expenditure of the board is controlled and the entire expenditure is to be directed towards development and expansion of education purpose. The issue was under section 10(22) of the Income-tax Act. (iii) The decision of the Madhya Pradesh High Court in the case of CIT v. Madhya Pradesh Rajya Pathya Pustak Nigam [2009] 226 CTR (MP) 497 in which the issue was under section 10(22) of the Income- tax Act and the matter has been remanded to the Assessing Officer for re-consideration. 21(i) The decision of the hon'ble Supreme Court in the case of Assam State Text Book Production and Publication Corporation Ltd. v. CIT [2009] 319 ITR 317 (SC) in which also the issue was under section 10(22) of the Income-tax Act and matter was restored to the Assessing Officer for considering the issue de novo in the light of the judgment of the Rajasthan High Court and the Orissa High Court with reference to the Central Board of Direct Taxes Circular dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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