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TMI Blog2002 (4) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... l F-15/6, Krishan Ngr. New Delhi Applied 5. Mr. I.M. Kochar A-61, Priyadarshni Vr. New Delhi -- 3. During the year, Mrs. Usha Chopra, Mrs. Vandana Chawla and Mrs. Aradhana Sondhi were the Principals, Vice-Principals and Incharge, Pochanpur School, respectively. During the year, they were paid the following salaries and supervisory charges: Sl. No. Name Designation Salary Supervisory allowance Other Allow Total Amt. 1. Mrs. Usha Chopra Principal 4,34,880 3,09,000 - 7,43,880 2. Mrs. Vandana, Chawla Vice-Principal 2,20,200 1,06,500 3,26,700 3. Mrs. Aradhana Sodhi Incharge of P/Pur, 68,700 39,000 1,07,700 4. During the course of assessment proceedings, the AO asked the assessee to justify the payment of supervisory allowances to the abovenamed three persons. Vide letter dt. 10th Feb., 2000, the assessee explained the same. After considering the reply of the assessee, the AO observed that the reply of the learned authorised representative is very vague to say the least. No specific extra responsibilities have been mentioned which may warrant payment of supervisory allowance apart from salary. This is also a fact that no one else other than these family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such that there is constant movement of staff and students to various parts of the city for school related activities. It could be for inter-school competitions, exhibitions, visits to museum, special service projects, staff workshops, Government bodies, meetings with outside authorities. These staff members with or without students are often provided snack/lunch/refreshment which expenditure is reimbursed. Staff meetings are a regular part of our routine. These meetings may be for entire staff or for smaller groups during school hours or after. There is always a provision for some refreshment/lunch/snack, etc. at such meeting held at regular intervals. The school is divided into 8 houses; at such meetings various extra-curricular activities are engaged and children participating in such extra activities which often extend to beyond school hours, are often served some small snack etc. prizes are also given to children. The school has a myriad or activities taking place throughout the year. Dozens of dignitaries, visitors come to the school during the course of an academic session. These people could be from various walks of life--including Ministers, Sr. civil servants, journalists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the benefit of the students or in furtherance of their education. In CIT vs. Academy of General Education (1984) 38 CTR (Kar) 239 : (1984) 150 ITR 135 (Kar), it was held that the funds may be invested in any manner, but the income therefrom must be exclusively utilised for educational activities. The word 'solely' means 'exclusively' and not 'primarily'. With this meaning of the word, 'solely' in view, even if the assessee trust had spent to the extent of 90 per cent of its income towards educational purposes and only 10 per cent towards religious or other purposes, it could still not be held that the trust was existing solely for educational purposes. This is what the word 'exclusively' as distinguished from 'primarily' signifies. But if the balance 10 per cent activity was ancillary or incidental to educational purpose, the exemption cannot be denied to the assessee vide CIT vs. Maharaja Sawai Mansinghji Museum Trust (1987) 65 CTR (Raj) 46 : (1988) 169 ITR 379 (Raj). 9. The AO, therefore, denied exemption under s. 10(22) of the Act to the society. Aggrieved by the order of the AO, the appeal was filed. The CIT(A) confirmed the findings of the AO against which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to administration of the schools from where she draws the remuneration, she also visits various schools run by the society for administration purposes. Similar was the case with Shri R.L. Chopra and Smt. Vandana Chawla. The learned counsel stated that even assuming that the remuneration paid to them was excessive, it will not change the character of the society/institution. Still the institution solely existed for educational purposes. The reliance was placed on the decision of Hon'ble Rajasthan High Court (Jaipur Bench) in the case of Dy. CIT vs. Cosmo Politan Educational Society (1999) 157 CTR (Raj) 209 : (2000) 244 ITR 494 (Raj). In the said case, the Hon'ble Rajasthan High Court has held that if the income of the institution is misutilised or mismanaged for personal gains of the members, the action could be taken against the members of the society. It was stated that the SLP against the decision of the Hon'ble Rajasthan High Court has been dimissed by the Hon'ble Supreme Court as mentioned in (2000) 241 ITR 132 (St). 12. It was further stated that Mrs. Vandana Chawla was not the member of the society. Under Delhi School Education Act, 1973, which extends to whole of the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the members and their relatives have been recovered back upto financial year 1999-2000. Learned counsel clarified that earlier the institution did not have its own building. The institution was being run in the building owned by Mrs. Usha Chopra. By an agreement, the rent for the premises was fixed which was payable to Mrs. Chopra. Mrs. Chopra was paid a lumpsum amount of loan as advance rent which was being adjusted against the rent from year to year. Thus, it cannot be said that the advance of loan to Mrs. Chopra was without any educational purposes. Such advance was warranted for the purposes of carrying on educational activities. Subsequently, when the school constructed its own building, the payment of rent was stopped because the institution shifted to its own building. But as certain advances were still with Mrs. Chopra, the same were recovered back by financial year 1999-2000. This fact alone cannot lead to a conclusion that the advance to Mrs. Chopra was for the purposes of making profit. The AO/CIT(A) clearly omitted to consider this fatal fact that everybody wants to safeguard its assets. It was under these circumstances that the advances were paid to Mrs. Chopra. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel further argued that in the context of s. 10(22), the applicability of ss. 11 to 13 has no role to play. While relying on the decision of Hon'ble Supreme Court in Aditanar Educational Institution vs. Addl. CIT (1997) 139 CTR (SC) 7 : (1997) 224 ITR 310 (SC) at 318, the learned counsel stated that for the purposes of exemption under s. 10(22), the sole purpose means the dominance of that purpose. The learned counsel, therefore, argued that the AO may be directed to allow exemption under s. 10(22) of the Act. 16. On the other hand, learned Departmental Representative stated that the society has not been registered under s. 12A of the Act. It has not been granted exemption under s. 80-G of the Act. So, the institution cannot be said to be a public charitable institution. The society is run by the interested persons and so the institution. While referring to the decision Sole Trustee, Lok Shiksana Trust vs. CIT 1975 CTR (SC) 281 : (1975) 101 ITR 234 (SC) and in the case Addl. CIT vs. Surat Art Silk Mfg. Association (1979) 9 CTR (SC) 378 : (1980) 121 ITR 1 (SC) and CIT vs. Academy of General Education, Manipal, the learned Departmental Representative stated that the surplus must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Certain personal expenses have been debited to income and expenditure account of the society which had no relationship with imparting the education. The list of such expenses has been given in the annexures to the assessment order. (v) The society has given donation of Rs. 25,000 which has nothing to do with the educational purposes. 19. Sec. 10(22) of the Act under which the exemption has been claimed by the assessee reads as under: "Any income of university or other educational institution, existing solely for educational purposes and not for purposes of profits." 20. The Hon'ble Supreme Court in the case of Aditanar Educational Institution has held that the exemption was given to the income of an educational institution. Such educational institution will not cease to be one existing for educational purposes even if from these activities, some surplus results. Thus, the emphasis has been laid down by the Supreme Court on the objects of the institution. The Hon'ble Supreme Court at p. 312 of the report further observed that in order to avail the exemption under s. 10(22), the decisive or acid test is whether on overall view of the matter, the object is to make profit and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in the classical music generated an inter-action with "SPIC & MACAY", a leading society involved in the rejuvenation of Indian classical music, art and culture. In such programmes, the leading proponents of Indian classical music like Bhimsen Joshi, Hari Prasad Chourasia, Ustad Bismillah Khan have performed for the benefit of the students of the school. Under the circumstances, the supervisory charges paid to her were solely for the purposes of education. 24. As regards AO's observations regarding loans given to the members and relatives without interest, we find that such an observation made by the AO is incorrect. The society has charged interest @ 10 per cent on the loans advanced to the members/relatives. In this connection, it will not be out of place to mention that the society took over the schools run by Mrs. Usha Chopra. As the school did not had its building, the school agreed for the payment of rent to Mrs. Usha Chopra. The advance rent was paid to her which was being adjusted against the rent payable to her. When the institution constructed its own building and shifted there, the payment of rent was stopped and the entire outstanding amount was recovered by finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also carried out at periodical invervals by Department of Education. The school has to also interact with various other Departments including NCERT. Such dignatories have to be provided meals and refreshments. On various other occasions, like teachers' day, founder's day, Diwali and other festivals, eminent personalities are invited and the staff members were also presented with small gifts as a token of their work and zeal. Such gifts include sarees, suits, silver coins, etc. The expenditures on such items were, therefore, warranted by the educational purposes. By no stretch of imagination, such expenditure could be said to be misutilisation of the society's fund. The AO has mentioned above certain expenses on medical facilities to the members and the relatives. It was stated that while making these observations, the AO has altogether ignored the fact that any extra expenditure provided on the medical facilities to the members/relatives was recovered from them. Thus, no personal expenditure has been booked in the income and expenditure account of the society. We have also examined the donation of Rs. 25,000 given by the school. Such donation was given to another institution and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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