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TMI Blog2014 (11) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... cational institution - The expression “existing” employed in this section does not convey the meaning of actual functioning of the institution - A society can be considered as existing for educational purposes during the construction period of the building etc. Whether assessee has actually worked in the field of education or grant of benefit under sec. 10(23C)(iiiad) is dependent on the fate of actually functioning of the school or it can be granted to the assessee during the construction period – Held that:- In the Memorandum of Association, assessee has only prescribed the objects pertaining to education of poor and needy people - It has provided that in order to fulfill its main objects of education, to give donations to the society/institution, who are in similar lines - When assessee had purchased this plot in the year 1999, no addition on account of unexplained investment was made - It was considered for the objects of the society - The assessee has given donations to Suhail Garg Siksha Sansthan which has already been registered under sec. 12AA - The assessee has produced copy of the letter dated 04.02.2008, assessment order of Suhail Garg Siksha Sansthan for AY 2008-09 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, the calculations are erroneous and excessive. 2. In ground Nos. 1 and 2, assessee is challenging reopening of the assessment. The brief facts are that assessee M/s. Takniki Siksha Sansthan was formed on 31.8.1998 with an object to help and educate poor and needy students at Village Shahpur Bhamarka in District Ghaziabad. It was registered under Societies Registration Act vide Registration No. 738-98-99. It has not filed return of income for assessment year 2008-09. Learned Assessing Officer of Shail Garg Siksha Sansthan while framing assessment order of that society came to know that assessee had donated a sum of ₹ 87 lacs to M/s. Shail Garg Siksha Sansthan. Therefore, he recorded the reasons for reopening of assessee s assessment and issued a notice under sec. 148 of the Act. The reasons recorded by the learned Assessing Officer read as under: 1.During the course of scrutiny of M/s. Shailgarg Siksha Snasthan it was seen that the donation was received with M/s. Takniki Siksha Sansthan to the tune of ₹ 87,00,000. On perusal of sale deed it was found that the donation was made on account of sale of land of the trust of M/s. Takniki Siksha Sansthan. Perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y while getting the sale deed registered. The value at the rate of ₹ 4,000 per sq. mtr. for a plot having area 3070 sq. mtr. comes out to ₹ 122,80,000 whereas the sales consideration actually received by the assessee was ₹ 88,12,128. When a reference was made to the DVO for determination of the market value of the property as contemplated in sec. 50C(2) of the Act, learned DVO has determined the fair market value of the property at ₹ 91,79,300. Thus, there was no substantial difference between the value declared by the assessee on actual receipt basis, vis- -vis the fair market value determined by the DVO. Learned First Appellate Authority has accepted the actual sales consideration disclosed by the assessee and also held that the sales consideration actually received by the assessee need not to be replaced under deeming provisions provided under sec. 50C. 4. The learned counsel for the assessee while taking us through the reasons for reopening pointed out that assessment was reopened on the ground that there was a difference of ₹ 49,12,000 in the total sales consideration deemed to have been disclosed by the assessee for the purpose of calculation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashed on the arguments advanced by the learned counsel for the assessee. 6. We have duly considered the rival contentions and gone through the record carefully. There is no dispute with regard to the proposition raised by the learned counsel for the assessee that if an assessment is reopened and on the basis of the reasons and no additions are made by the A.O. then, those issues for which it was reopened, Assessing Officer will be denuded from his powers to make any other addition on the issues which came to his notice during the reassessment proceedings. However, in the present case, learned Assessing Officer has observed that assessee is not entitled to exemption under sec. 11(1A). It has not disclosed the capital gain on sale of capital assets. Learned CIT(Appeals) has confirmed the addition to the extent of capital gain arose to the assessee on alleged actual sales consideration received by it. Thus, the assessee cannot take any benefit from the decision of the Hon'ble Delhi High Court, referred supra. The assessment was reopened for two reasons and on one of the reason, addition was confirmed by the Learned CIT(Appeals). In view of the above discussion, we reject ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation form by payment of ₹ 5,000 as a fee. This application form was purchased on 6th September 1999 and fee was paid through DD No. 662000 dated 02.09.1989. Since the society could not arrange the fund and, therefore, could not construct the building. Ultimately, it was resolved by the executive committee to advance the fund available with the society to a similar society. He drew our attention towards copy of the resolution passed by the executive committee in its meeting held on 25.2.2008, copy of the resolution is available on page 39. The learned counsel for the assessee further relied upon his submissions as reproduced by the Learned CIT(Appeals) on page Nos. 13 to 15 of the impugned order. Learned counsel for the assessee also relied upon the following judgments: i) AR Educational Society vs. CIT 253 ITR 589; ii) Nitya Education Society vs. JCIT 51 SOT 103; iii) ITO vs. Dhall Educational Society of India 27 SOT 391. 10. On the other hand, Learned DR relied upon the order of the Learned CIT(Appeals). 11. We have duly considered the rival contentions and gone through the record carefully. Learned Assessing Officer has denied exemption under sec. 10(23C)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious authoritative pronouncements relied upon by the learned counsel for the assessee, it reveals that benefit under sec. 10(23C)(iiiad) is solely not dependent on the actually functioning of an educational institution. The expression existing employed in this section does not convey the meaning of actual functioning of the institution. A society can be considered as existing for educational purposes during the construction period of the building etc. Thus, the stand of the revenue is that since assessee has not carried out any meaningful activity in the field of education, therefore, it should not be considered as an institution existing for the purpose of education. On the other hand, stand of the assessee is that it came into existence solely for the purpose of education. It has purchased a plot of land for construction of building but somehow it failed to arrange the funds and could not actually commenced the educational institution. Both these aspects have been considered in the case of Nitya Educational Society by the ITAT. It is pertinent to take note of the following discussion wherein ITAT has considered two judgments of Hon'ble Mumbai High Court as well as of Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be sufficient to attract the exemption under sec. 10(22) .. However, in a subsequent decision, Hon'ble Madras High Court has observed that this judgment requires reconsideration. The observations of the Hon'ble Madras High Court in the case of AR Educational Society are as under: The judgment of this Court in the case of Devi Educational Institution case (supra) laid emphasis on the word existing in Section 10(22) of the Act, and concluded that the institution must have been functional in the relevant previous year. The word existing is not the same thing as being functional. There is no doubt at all that the educational institution exists in the sense that the society has been formed, the society is a legal entity, its objects are clearly intended to bring into existence educational institution, for which preliminary steps have been taken, and the object of the institution is not profit. We are of the prima facie view that the width of the provision is not required to be cut down by insisting that the educational activity must have been carried on in the relevant previous year, even though there is no doubt whatsoever that the society was engaged in taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the decisions in Doon Foundation s case (1985) 154 ITR 208 (Cal.) and Secondary Board of Education Vs. ITO (1972) 86 ITR 408 (Orissa). In both these cases, the income derived at the preliminary stages of the establishment of the educational institutions concerned was held entitled to the exemption. In Doon Foundation s case (1985) 154 ITR 208 (Cal.), the assessee had only taken the preliminary steps towards the running of a teaching course; and the income derived during this period was held to be that of an educational institution. In the other case, Secondary Board of Education s case (1972) 86 ITR 408 (Orissa) had a fund constituted under the Orissa Secondary Education Act, 1953. One of the sources of the income of the Board was the profit from compilation, publication and printing and sale of text books. The income was to be utilized towards development and expansion of educational purposes and the surplus, if any, was to form part of a sinking fund to be devoted to the cause of education as and when necessary. The income derived from the activities mentioned above was treated as that of an educational institution and exempted. 14. Hon'ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed under sec. 143(3) of the Act and it has been considered as a society existing for the purpose of education, its income has been assessed at nil, benefit of sec. 11 and 12 has been granted. The total income as per income and expenditure account of this society for assessment year 2008-09 was ₹ 13,85,59,927. It had applied ₹ 12,71,19,355 towards its objects. The balance was less than 15%. Thus, this society has applied 85% of its receipt towards its objects and Assessing Officer has assessed the income at nil. Now, adverting to the facts of present assessee, if at the commencement of the society, its objects are for educational purposes and its investment in the land was not considered as unexplained investment and treated for advancement of educational objects then, how on sale of that plot and giving a corpus donation to a similar society as per the aims and objects, can be without educational purposes, not discernible in the order of the Learned CIT(Appeals). In the present case, it was sold after a considerable time but if, in a society, there were donations towards corpus for construction of building etc. but that was not sufficient and society decides to clos ..... 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