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TMI Blog2017 (3) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Society is running an educational institution in the name of "Auckland Academy". The assessee has filed its return of income on 30.10.2003 showing income at Rs. Nil. The assessee has shown net profit of Rs. 2,62,971/- on the gross annual receipt of Rs. 41,99,249/- and claimed exemption of Rs. 2,62,971/- u/s 10(23C)(iiiad) of the Act. The AO examined the claim and held that the assessee society registered on 09.12.1998, and applied for registration u/s 12A on 02.04.2007 before the CIT(A), Indore, which has not been decided, hence, the assessee is not eligible for benefit u/s 11 & 12 of the Act. With regard to exemption u/s 10(23C)(iiiad), the AO observed that in the assessment order u/s 143(3) dated 15.11.2006, for assessment year 2004-05, it was held that the assessee was not existed primarily for educational purposes as it has given loan of Rs. 1.25 crores to M/s. Sheetu Educational Services Pvt.Ltd., Indore, ( for short - SESPL ), hence, the assessee has diverted the funds to its sister concern. Further, the assessee had neither utilized/expanded its income/funds wholly and exclusively for educational purposes nor for the objects of the institution. The AO further obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the said school building was also used for the purpose of running of the school of the society. Hence, the amount as advanced for the construction of the school building was not contravention of the provisions of Section 13 of the Act. Thus, the assessee has properly utilized its entire income for the purpose of educational activities. Further, the bus fee and other receipts are directly linked with the educational activities of the society and, therefore, the assessee solely engaged in the educational activities. The AO's interpretation that bus used for the purpose of running on hire is factually not correct as the buses used for pick up and drop of the students and bus fee was separately charged from the students. Hence, for the purpose of allowability of depreciation, the same has been considered as bus run on hire otherwise all the buses are used for pick and drop of the students only. 2.4.1 The ld. Authorized Representative of the assessee further submitted that it is not in dispute that gross receipts of the assessee is Rs. 48,66,663/-, which is less than Rs. 1 crore and the assessee solely existed for educational purposes. Hence, it is eligible for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he objects of these trusts are educational and the surplus, if any, from running the educational institution is used for educational purposes only, it can be held that the institution is existing solely for educational purposes and not for the purposes of profit." 2.4.4 The ld. Authorized Representative of the assessee further relied upon the following decisions :- (a) OASIS Educational Society vs. ADIT (Exemptions), 132 TTJ 59 ( Hyd Bench - I.T.A.T. ) (b) Aditanar Educational Institution etc. vs. Addl. CIT, 224 ITR 310 ( S. C.) (c) ACIT vs. VATSALYA Senior Secondary School, 130 TTJ 27 (Ind. I.T.A.T. ) 2.5 The ld. Departmental Representative relied on the orders of the lower authorities. 2.6 We have considered the facts, rival submissions and perused the material available on record. The undisputed fact of the case are that the assessee society does not possess registration u/s 12A of the Act for the year under consideration. Therefore, exemption in Section 11 & 12 is not available to assessee. We find that the assessee is in possession of lease hold land which belongs to individual family member of trustees. The entire amount of Rs. 1.25 crore, given to M/s. SESPL by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see society. 2.6.2 We also find support from the decision relied by the ld. Authorized Representative of the assessee in the case of St. Joseph's Upper Primary School vs. ITO, 16 TTJ 389 (Hyd.- Trib), wherein the school was housed in two buildings owned by the society. The other belongs to Smt. Rajamma, who was daughter in law of Secretary of the Society, the first and second floor was constructed by borrowings from the society. But the society has benefit of housing of its school without paying any rent. It was for this reason that interest was not charged. It was held that there was no misuse of any authority so as to make the society's professed objects as not being real and, therefore, society cannot be deprived of benefit of exemption u/s 13 of the Act. We find that the facts of the present case is identical as here the building was constructed on the amount given by society in which society is running school. Therefore, the assessee society is eligible for exemption u/s 10(23C)(iiiad) of the Act. The ld. Authorized Representative of the assessee also relied in the case of Oasis Educational Society vs. ADIT (Exemption) 132 TTJ 59 (Hyd), wherein the preamble read..... that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was approved by Apex Court in Aditanar Educational Institution vs. Addl. CIT, (1997) 224 ITR 310 ( S.C.). 2.6.6 In the light of above discussion, facts and circumstances, we find that the assessee society is engaged in the running of school and amount of surplus has also been utilized by the assessee for construction of school building, which was also used by the assessee, hence, the society is engaged in the charitable purpose u/s 2(15) of the Act. Since the gross receipts of society is less than Rs. 1 crore, therefore, it is eligible for exemption u/s 10(23C)(iiiad) of the Act. We also find that the facts of the present case are squarely covered by the above decisions discussed above. Therefore, we are of the considered opinion that the lower authorities were not justified in not allowing the deduction to the assessee u/s 10(23C)(iiiad) of the Income-tax Act, 1961. Accordingly, the AO is directed to treat the Society as covered by Section 10(23C)(iiiad) of the Act and allow the relief accordingly. Accordingly, ground nos.1.1 & 1.2 are allowed. 3. Ground no. 2.1 & 2.2 reads as under:- " 2.1 That on the facts and in the circumstances of the case, the ld. CIT(A) erred in maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, rival submissions and perused the material available on record. Since, the claim of assessee that the recipient has paid due tax in the light of second proviso to Section 40(a)(ia), we deem fit to restore this issue to the file of the AO for verification and if found correct allow the same as the ratio laid down in the case of Ansal Land Mark Township P.Ltd. [160 - 161/2015 dated 26.08.2015 ] 4. Ground No. 4 states as under :- "That on the facts and in the circumstances of the case, the ld. CIT(A) erred in maintaining disallowance of Rs. 28,648/- out of kitchen expenses without properly appreciating the facts of the case and submission made before him even when there was no specific defects were pointed out by the AO in the books of accounts of the assessee." 4.1 The assessee has claimed kitchen expenses of Rs. 5,75,486/- out of which Rs. 1,89,000/- were claimed as reimbursement to Imperial Academy and for balance of Rs. 2,86,484/- only ledger copy was filed. On spot inquiry, the Inspector found that no meal was provided to students, considering the genuineness, the AO disallowed Rs. 28,648/- being 10% of expenses of Rs. 2,86,480/- as inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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