2021 (4) TMI 1116 - AT - Income Tax

Approval u/s 10(23C) rejected - since the assessee is having mixed nature of educational/other object clauses, it is not eligible for the impugned approval - impugned objects do not fall solely in the category of educational purposes and its trustees enjoyed unchecked extraordinary powers - HELD THAT - There can hardly be any dispute that section 10(23C)(vi) of the Act entitles the assessee to claim exemption relief when it receives any income on behalf of any university or other educational institution existing solely for educational than profitable purposes. We wish to observe here that Revenue s emphasis is on assessee s original clauses in its trust deed dated 19/11/1997 that the same also include some of the non-educational purposes as well. There is further no issue that as per the learned coordinate bench s discussion that assessee had in fact set up educational institutions in the years 1998-99 imparting education in various recognized colleges, namely, Roland Institute of Computer and Management Studies, Roland Supriya Junior college, Roland Junior College and Roland Institute of Technology. Coming to assessment years before i.e. AYs 2005-06 and 2007-08 to 2012-12, the assessee has placed on record its corresponding income and expenditure accounts indicating figures; after application of income (assessment year wise, surplus application) - all these assessment years except AY 2011-12 have seen more application than receipts since there is nothing left after considering accumulation, revenue expenditure and development heads in assessee s case. Relevant records indicate that AY 2011-12 s positive figure of ₹ 5,00,504/- is indeed less than the permissible 15% limit of gross receipts of ₹ 8,20,08,082/-; coming to ₹ 12,30,121/-. We thus observe that the assessee has applied and has utilizsed its gross receipts only for educational purposes as per the detailed evidence forming part of the case file. Whether the clinching statutory expression employed in section 10(23C)(vi) existing solely for educational purposes has to be read in isolation or in complete sense i.e. any university or college existing solely for educational purposes and not for purposes of profit ? - In our considered opinion, we ought to read this statutory provision as a whole only than in piece-meal. This is for the reason that the legislature has itself made it clear that the institution concerned has to exist only for educational and not for profit purposes. We wish to repeat that the department; in such a cases has to pin point the material against taxpayer before us which could suggest even an iota of material that it has ever existed for deriving profits or the object clauses reveal such an element therein. Whether CCIT has rightly held that assessee s trustees had unbridled powers and they had also received payments from the former? - We make it clear that there is no such condition in section 10(23C)(vi) of the Act qua the internal day to day running of an institution set up solely for carrying out educational activities. Hon ble apex court s decision Commissioner of Customs (Imports) Vs. M/s Dilip Kumar and Company, 2018 (7) TMI 1826 - SUPREME COURT has settled the law that only stricter interpretation needs to be applied both in taxing as well as a deduction provision. Mr. Goutham s concluding argument sought to highlight the fact that the assessee s have paid rent as well to its twin trustees in the impugned AYs which deserves to be taken as an undue benefit. The said rental payments are found @ ₹ 1.87 per sq.ft. and much less than that paid to unrelated party i.e. Shri Sushil Kumar @ ₹ 2.20 in AY 2005-06 and ₹ 2 per sq.ft in AY 2006-07. We thus decline all these Revenue s arguments alleging that assessee s twin trustees have derived undue benefit from the educational activities carried out in all these AYs. The CCIT s all impugned orders under challenge in first set of 14 appeals are held as not sustainable in the eyes of law. The same stand reversed therefore. These two assessees corresponding appeals seeking section 10(23C)(vi) approval are allowed as necessary corollary ordered accordingly. In view of the foregoing discussion as well as taking into consideration learned coordinate bench s decision in AY 2014-15 (supra) we allow the assessees claim of section 10(23C)(vi) relief approval raised. Reopening of assessment u/s 147 - AY 2005-06 - non granting the approval u/s 10(23C)(vi) - HELD THAT - The assessee demonstrated that there is no escapement of income, as the assessee followed the provision for accumulation of income u/s 11 of the Act. We also observe that once registration granted by the revenue department to the assessee u/s 12AA on 15/01/2003 BY CIT, Bhubneswar and it has not been withdrawn, then if the assessee is complying the other provisions of the Act, it cannot be held as there is any escapement of income . In this case, merely not granting the approval u/s 10(23C)(vi) does not amount to escapement of income as per the decision cited by the assessee as quoted supra. Respectfully following the above judgement we therefore, hold that the reopening merely on the basis of that the assessee has not got approval u/s 10(23C)(vi) is not justified. Another contention of the assessee is that there is no new material brought on record by the AO to reopen the assessment. He also contended that the objections were filed before the AO for the reasons recorded for reopening of the case which have not been disposed off, which is against the ratio laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., Vs. ITO . 2002 (11) TMI 7 - SUPREME COURT - After careful consideration of the submissions from both the sides, we are of the view that the AO has not followed direction of the Hon ble Jurisdictional High Court for passing the order within the stipulated time. In this regard, we find substance in the submission of the ld. AR that the orders passed by the AO is time barred. We conclude on the basis of material available on record that the AO has not passed the order as per the provisions of the law and not followed the law laid in this regard; therefore, the Hon ble Supreme Court as quoted supra the order passed is not valid and accordingly, we annul the assessment orders passed by the AO in all the three years under consideration - Reopening of assessments in AYs 2005-06 to 2007-08 are held as not sustainable in law and the same are hereby quashed.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Section 10(23C)(vi) approval.
3. Validity of amended Trust Deed.
4. Conditions for exemption under Section 10(23C)(vi).
5. Reopening of assessments under Section 147.
6. Exemption under Section 11 in the absence of Section 10(23C)(vi) approval.
7. Validity of assessment orders and compliance with legal procedures.

Issue-wise Detailed Analysis:

1. Delay in Filing Appeals:
The Tribunal noted delays in filing certain appeals, ranging from 12 to 29 days. The assessees filed condonation petitions explaining the delays, attributing them to consultations with senior lawyers. The Tribunal, referencing the case law Collector Land Acquisition vs Mst. Katiji & Ors and University of Delhi Vs. Union of India, condoned the delays, emphasizing that the delays were neither intentional nor deliberate but due to circumstances beyond the assessees' control.

2. Section 10(23C)(vi) Approval:
The primary issue was the denial of Section 10(23C)(vi) approval. The Tribunal referenced a prior decision (ITA no. 433/CTK/2015, dated 29/05/2017 for AY 2014-15) that allowed the assessees' claim. The Tribunal reiterated that the assessees, being trusts existing solely for educational purposes and not for profit, were entitled to the exemption. The Tribunal found that the Principal Chief Commissioner of Income-tax (Pr. CCIT) had erred in denying the exemption based on the existence of non-educational objects in the original Trust Deed, which were subsequently deleted in the amended Trust Deed.

3. Validity of Amended Trust Deed:
The Pr. CCIT had declared the amended Trust Deed (dated 26-03-2012) invalid, arguing that the Governing Body Members lacked the mandate to delete or remove objects. The Tribunal disagreed, citing Clause 27 of the original Trust Deed, which allowed the Permanent Trustees to amend the clauses for the benefit of the Trust. The Tribunal emphasized that the amended Trust Deed, which focused solely on educational activities, was valid and should be considered for granting the exemption.

4. Conditions for Exemption under Section 10(23C)(vi):
The Tribunal highlighted that the predominant condition for approval under Section 10(23C)(vi) was that the institution must exist solely for educational purposes and not for profit. The Tribunal found that the assessees met this criterion, as they had amended their Trust Deed to focus exclusively on educational activities and had been running various educational institutions. The Tribunal also noted that the assessees' financial records indicated that their expenditures exceeded their incomes, further supporting their claim of existing solely for educational purposes.

5. Reopening of Assessments under Section 147:
The Tribunal addressed the reopening of assessments for AYs 2005-06, 2006-07, and 2007-08. The assessees argued that the reopening was based on the incorrect premise that their income had escaped assessment due to the lack of Section 10(23C)(vi) approval. The Tribunal found that the assessees were eligible for exemption under Section 11, as they had applied their incomes for charitable purposes. The Tribunal also noted procedural lapses, such as the failure to dispose of objections raised by the assessees regarding the reasons for reopening, as required by the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. ITO. Consequently, the Tribunal quashed the reopening of assessments.

6. Exemption under Section 11 in the Absence of Section 10(23C)(vi) Approval:
The Tribunal emphasized that the assessees' incomes were exempt under Section 11, given their registration under Section 12AA and their compliance with the conditions for charitable purposes. The Tribunal reiterated that the denial of Section 10(23C)(vi) approval did not preclude the assessees from claiming exemption under Section 11, provided they met the necessary conditions.

7. Validity of Assessment Orders and Compliance with Legal Procedures:
The Tribunal found that the assessment orders were not valid, as they were passed beyond the stipulated time and without disposing of the objections raised by the assessees. The Tribunal annulled the assessment orders for AYs 2005-06 to 2007-08, citing non-compliance with legal procedures and the lack of new material justifying the reopening of assessments.

Conclusion:
The Tribunal allowed the assessees' appeals, granting them Section 10(23C)(vi) approval and annulling the reopened assessments. The Tribunal emphasized the importance of adhering to legal procedures and recognized the assessees' compliance with the conditions for charitable purposes under Section 11.