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TMI Blog2014 (11) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Human Resource Development, Government of India, New Delhi and the fees collected by the assessee from the students for imparting such education having been approved by the AICTE - The assessee is spending the amount received by it by way of collection of tuition fees or collection of hostel fees is being spent for building necessary infrastructure for imparting the education in various fields which is the charitable purpose for which the trust was established - The assessee has also spent the said amount for raising the infrastructure necessary for carrying out the object of imparting education and thereby the assessee was found to be entitled for exemption u/s 11 and the view of the AO that there is contravention of Section 13 is found to be baseless by the CIT(A) after thread bare considering all the relevant facts – Decided against revenue. Application of income - Whether the Tribunal is correct in law in holding that capital expenditure incurred by the assessee Trust shall be allowed as application of income – Held that:- Educational Institution is eligible for exemption u/s 11, capital expenditure incurred by an Educational Institution is the basic necessity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee is a Trust registered under Section 12A of the IT Act with effect from 02.09.2002. It filed its return of income on 31.10.2007 for the assessment year 2007-08 disclosing its total loss at ₹ 3,96,54,653/-. On 03.12.2009, the Assessing Officer completed the assessment under Section 143(3) of the IT Act determining the total income at ₹ 03,06,53,610/-. In the assessment order, the Assessing Officer did not allow the benefit of exemption under Section 11 of the IT Act to the Trust on the ground that the assessee-Trust is making systematic profit year after year; incurred capital expenditure of ₹ 51,24,483/- and diverted income to capital funds amounting to ₹ 28,75,204/- which did not amount to application of income as per Section 11(1) of the IT Act. Depreciation of ₹ 95,90,956/- was also added to the income of the Trust. To support his view, the Assessing Officer relied upon the decision of Uttarakhand High Court in the case of Queens Education Society (supra). 4. Being aggrieved by the assessment order, the assessee went in appeal before the Commissioner of Income Tax (Appeal), who after considering the submissions of the assessee, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appeal for adjudication on the substantial questions of law as stated hereinabove. 7. Mr.J. Sahoo, learned Senior Advocate appearing for the respondent-Educational Institution submitted that no substantial question of law is involved in the case. The Tribunal is fully justified in granting exemption under Section 11 of the IT Act, 1961 for the assessment year 2007-08 for the reasons stated therein. The learned Assessing Officer is not correct in applying the ratio of Queens Education Society (supra), as that case is not in the context of the Organizations registered under Section 11 of the IT Act. The said judgment was rendered in the context of Section 10(23C) of the IT Act. Non-applicability of the ratio of Queens Education Society (supra) has been considered and decided by a number of High Courts and Tribunals and the Revenue has not been able to sustain its plea even in a single judgment in the light of plethora of decisions in favour of the assessee. There is strong reason for not applying the ratio of Queens Education Society (supra) in the case of the appellant. In support of the above contentions, Mr. Sahoo relied upon the decisions of different High Courts, viz., Pine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. 10. The Hon ble Supreme Court in the case of Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and others, (1999) 3 SCC 722, held as under: 6. If the question of law termed as a substantial question stands already decided by a larger Bench of the High Court concerned or by the Privy Council or by the Federal Court or by the Supreme Court, its merely wrong application on the facts of the case would not be termed to be a substantial question of law. Where a point of law has not been pleaded or is found to be arising between the parties in the absence of any factual format, a litigant should not be allowed to raise that question as a substantial question of law in second appeal. The mere appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for a person in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. We, therefore, agree with Beg, J. when he said in Sole Trustee, Loka Shikshana Trust Vs. CIT 1975 CTR (SC) 281 : (1975) 101 ITR 234 (SC), 256 that: If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity . 13. The aforesaid view has been cited with approval by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisos thereunder. Section 10(23C)(vi) of the Act is equivalent to the provisions of section 10(22) existing earlier, which were introduced w.e.f. 1-4- 1999 and it ignores the speech of the Finance Minister made before the introduction of the said provisions, namely, section 10(23C) of the Act [See observations in American Hotel Lodging Association, Educational Institute s case (supra)]. Thirdly, the Uttarakhand High Court has not appreciated correctly the ratio of the judgment rendered by Hon ble the Supreme Court in the case of Aditanar Educational Institution (supra) and while applying the said judgment including the judgment which had been rendered by the Hon ble Supreme Court in the case of Children Book Trust (supra), it lost sight of the amendment which had been carried out w.e.f. 1-4-1999 leading to the introduction of the provisions of section 10(23C) of the Act. Lastly, that view is not consistent with the law laid down by Hon ble the Supreme Court in American Hotel Lodging Association, Educational Institute (supra). 17. Apart from the above, perusal of the assessment order reveals that, for withdrawal of exemption, the Assessing Officer assigned various reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r carrying out the object of imparting education and thereby the assessee was found to be entitled for exemption under Section 11 of the I.T. Act and the view of the Assessing Officer that there is contravention of Section 13 of the I.T. Act is found to be baseless by the CIT(A) after thread bare considering all the relevant facts. On the overall consideration of the impugned orders, we found that the order of the leaned CIT(A) is in accordance of the majority views of judicial pronouncements that were rendered by various judicial forums stated in the impugned order. Hence, we find no infirmity in the order of the learned CIT(A) requiring no interference. 19. In view of the above, question No.(i) is not a substantial question of law. 20. Question No. (ii) is also not a substantial question of law as the respondent -Educational Institution is eligible for exemption under Section 11 of the IT Act for the reasons stated hereinabove and it is a settled position of law that capital expenditure incurred by an Educational Institution is the basic necessity if such expenditure promotes the object of the Trust. 21. The Hon ble Supreme Court in the case of S.RM. M.CT.M. Tiruppani T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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