TMI Blog2017 (2) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT ) are of the view that the ld. CIT was not justified in confirming the action of the AO for denying the exemption u/s 10(23C)(iiiad) of the Act to the assessee. Accordingly, the impugned order is set aside and the AO is directed to allow the claim of the assessee for exemption u/s 10(23C)(iiiad) of the Act.- Decided in favour of assessee - ITA No. 3476/Del/2012 - - - Dated:- 3-2-2017 - Sh. N. K. Saini, AM and Sh. C. M. Garg, JM Assessee by : Sh. Ved Jain, Adv., Ashish Goel, CA Revenue by : Sh. Amrit Lal, Sr. DR ORDER Per N. K. Saini, AM This is an appeal by the assessee against the order dated 19.03.2012 of ld. CIT(A), Karnal. 2. Following grounds have been raised in this appeal : 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of A.O. in holding that the assesses is not eligible for exemption under Section 10(23C)(iiiad) of the Act. (ii) That the above said action has been confirmed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e U/S 2(31), Section 10(23C)(iiiad) section 139 (4C)(e) of the Act which are not reproduced here by for the sake of repetition. i) It is respectfully submitted that for satisfying the conditions laid down U/S 10(23C)(iiiad) of the Act under which exemption has been claimed by the assessee, the following conditions has to be satisfied:- a) the assessee must be a University or other educational institution existing solely for educational purposes; b) not for purposes of profits. c) Aggregate annual receipts of such university or educational not exceed the amount of annual receipts as prescribed under rule 2BC(1) which is ₹ 1.00 Crores. In the case of assessee the aggregate annual receipts during the F.Y. 2004-05 was ₹ 81,11,290.00 which is within the limits prescribed. There is no allegation in the assessment order for A.Y. 2003-04 dated 20.12.2005 that the income of the assessee has been diverted or used by its members or their family/associates. Nor any such allegation is alleged in present notice. Hence it can be safely be argued that the activities of the institution is carried our without any motive to earn profits and income resultant is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution existed during the relevant year solely for educational purposes and not for the purposes of profits. After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cej.se to be are existing solely for educational purposes since object is not are to make profits. In view of law laid down by Hon'ble Supreme Court, the exemption has to be evaluated each year, which is being done by your good self in A.Y. 2004-05 since the exemption has to be evaluated each year, on the basis of facts circumstances of the case. The Hon'ble Supreme Court in Addl. CIT Vs. Surat Art Silk Cloth Manufacturer Association (1980) 121 ITR 1(SC) held as under:- When the purpose of a trust or institution is advancement of an object of general public utility, it is that object itself and not its accomplishment or carrying out which must not involve the carrying of any activity for profits. Merely there is an increase in assets fees or there is profit cannot be held as reason for disallowing claim for exemption U/S 10(23C)(iiiad) of the Act. d) That your good self assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me shall be transferred to a like minded trust duly approved by not less than of the trustees present at the meeting. Therefore, the assessee has also completed the requirement of a registered body under a statute, on which much impetus was given by the then Ld. AO and Ld. CIT(A) in proceedings relating to AY 2003-04, though not necessary. It is also pertinent to mention here that the Income Tax Act has no where provided that for claim of exemption under section 10(23C)(iiiad) the educational institution has to be a registered body under Societies . Registration Act or Indian Trust Act under any act. In view of above it is requested that, no addition is called for disallowance of exemption U/S 10(23C)(iiiad) of the Act, as proposed in the notice in view of the facts of the case and law on the subject. 6. The AO after considering the submissions of the assessee observed that for the assessment year 2003-04, it was held that the assessee s society solely exited for the purpose of profit and the exemption claimed u/s 10(23C)(iiiad) of the Act at ₹ 3,04,893/- was denied. The AO also reproduced relevant para of the said assessment order in para 5 of the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion existing solely for the purpose of profit. In the case of the assessee, out of gross receipt of ₹ 8111290/- net surplus inclusive of Endowment fund is shown at ₹ 1893376/- which is 23% of gross receipts. Similar is the position for Assessment Year 2003-04 where on gross receipts of ₹ 8545052/- surplus of ₹ 3048937/- has been shown and percentage of profit is 35%. The assessee has advanced the following amounts to the trustees of the trust which clearly proves that the trustees have complete control over the financial affairs of the alleged society/trust. Dharam Vati 600000/- Shamsher Singh 200000/- Lalit Mann 200000/- The above figures of profit proves beyond doubt that the assessee is earning sustained profits and diverting the funds of the trust for personal benefits of the trustees. The definition of institution defined in the judgement relied upon by the assessee merely defines the word institution. There is nothing in the alleged trust deed, preventing the application of profits or assets of the trust for the benefits of founder or anyone claiming through them the trustees. In the year under consideration, as mentioned above, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption to the trust. 7(vii) In regard to contentions mentioned in para (g) of reply, registration of trust on 22.01.2007 cannot correct the happenings earlier to that date. Hence, this ground is also not of any help to the assessee. 7. The AO also mentioned that in the case of M/s Queens Education Society Vs CIT, the Hon ble Uttaranchal High Court has held that the institution existing for the purpose of profit was not eligible for exemption u/s 10(23C)(iiiad) of the Act. He, therefore, by following the ratio laid down in the said case and considering this fact that the ITAT for the assessment year 2003-04 in the case of the assessee has held that the assessee trust existed for the purpose of profit and was not eligible for exemption u/s 10(23C)(iiiad) of the Act, made the addition of ₹ 18,93,376/- which was the excess of the income over expenditure. 8. Being aggrieved the assessee carried the matter to the ld. CIT(A) who observed that the issue was discussed with the Counsel of the assessee and it was noted as per order sheet entry dated 25.10.2011 as under: Relied on the submissions already filed. The facts stated to be that exemption claimed u/s 10(23C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order, the assessee preferred an appeal to the ITAT wherein vide order dated 12.06.2009, the action of the ld. CIT was sustained for completing the assessment by the AO after proper inquiry and the reassessment proceedings. It was further stated that the assessee submitted all the details as called for by the AO and it was submitted that there being no other activities then the educational activity, therefore, the income of the assessee would be exempt u/s 10(23C)(iiiad) of the Act. However, the AO did not grant exemption inter alia by relying on the judgment of Hon ble Uttarakhand High Court in the case of Queens Educational Society Vs CIT and thereafter the ld. CIT(A) instead of examining the issue as directed by the ITAT in a summarily manner dismissed the appeal of the assessee by holding that the exemption u/s 10(23C)(iiiad) of the Act was not available, in spite of the fact that the assessee had clarified each of the issue on the basis of which the assessment was reopened and the findings recorded against it vide revisionary order passed by the ld. CIT u/s 263 of the Act as well as by the ITAT in the preceding year. It was also stated that the AO wrongly held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Supreme Court in the case of Aditanar Educational Institution Vs Addl. CIT reported at 224 ITR 310. It was submitted that the judgment relied by the AO in the case of Queens Educational Society Vs CIT had been overruled by the Hon ble Supreme Court vide order dated 16.03.2015 reported at 275 CTR 449 (copy of the order was furnished which is placed on the record). It was accordingly submitted that the assessee for the year under consideration had complied with all the conditions for claiming the exemption u/s 10(23C)(iiiad) of the Act and it is an educational institution duly recognized and registered which applied its income only for education and has not distributed any profits, its receipts were less than ₹ 1 crore. Therefore, it was not required to get any approval from any income tax authority for claiming exemption u/s 10(23C)(iiiad) of the Act and that it is optional to get the registration u/s 12AA of the Act in case of an educational institution having annual receipts of less than ₹ 1 crore. It was contended that it was optional to claim exemption u/s 10(23C)(iiiad) of the Act or Section 11 of the Act as the assessee is an educational institution. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case also the trustees and the author had manifested a sum of ₹ 1.85 crore as corpus fund of the trust for fulfillment of its aims and objects. Therefore, even if the trust deed was unsigned and not witnessed as pointed out by the AO, the benefit of exemption cannot be denied to the assessee. In the present case, while denying the exemption u/s 10(23C)(iiiad) of the Act to the assessee, the AO relied on the decision of the Hon ble Uttarakhand High Court in the case of Queens Educational Society Vs CIT. The said judgment has been overruled by the Hon ble Supreme Court vide order dated 16.03.2015 reported at 275 CTR 449. In the instant case, it is not in dispute that the assessee is running a college of pharmacy which is duly approved by the Pharmacy Council of India as per Notification dated 24.05.2002 (copy of which is placed at page no. 36 of the assessee s paper book). The assessee is also registered and accredited institution of Directorate of Technical Education, Haryana which is evident from page no. 45 of the assessee s paper book which is the copy of the list of the institution affiliated for the session 2002-03 to the Technical Education, Haryana and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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