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TMI Blog2015 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ndition of “substantially financed” by the Government stands violated . Thus no hesitation to hold that the institution is “substantially financed by the Government”. Thus, fulfilling the third condition also for the eligibility for claiming exemption u/s. 10(23C)(iiiab) of the Act.It would not be out of place to mention here that even after the survey and search operation, the Government grants are still received by the Institution which establishes the fact that even in the eyes of the Government, the institution is solely existing for imparting education. We, therefore, direct the AO to grant exemption u/s. 10(23C)(iiiab) of the Act. In the case in hand, the exemption has been denied solely for the reason that the institution has received the capitation fees. This issue has been elaborately discussed by the Tribunal while restoring the registration u/s. 12A of the Act as mentioned elsewhere. There is not even a whisper in the orders of the authorities below which could suggest that the facts of the case are hit by the provisions of Sec. 13 of the Act. After considering the facts in totality in the light of the decision of the Tribunal in assessee’s own case while restoring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted certificate u/s. 80G vide order No. DIT(E)/MC/80G/2430/2009-10 dated 29.5.2009 for the period 1.4.2009 to 31.3.2012. It is also an approved institution u/s. 35(1)(ii) of the Act vide Notification No. 39/2009 dated 28.4.2009. 4.2. As mentioned elsewhere, the assessee-society is running various sections, colleges and institutions and has claimed exemptions u/s. 10(22) of the Act which is now 10(23C)(iiiab). The following chart will explain the position clearly. 4.3. AS can be seen from the aforementioned chart, exemption in A.Y. 2007-08 was granted by the Ld. CIT(A) vide order dated 7 The South Indian Education Society 7.12.2010 and no appeal has been filed against this order of the Ld. CIT(A). 4.4. For assessment year 2008-09, the First Appellate authority vide his order dated 28.8.29014 while disposing the appeals filed against the assessment orders made u/s. 153C r.w. Sec. 143(3) of the Act for assessment year 2005-06 to 2011-12 did not allow exemption u/s. 10(23C)(iiiab) of the Act. Thus the first grievance relates to nongranting of exemption u/s. 10(23C)(iiiab). 4.5. The second issue relates to the claim of exemption u/s. 11 of the Act. The facts on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts were not issued. This nonreceipted capitation fees was brought back subsequently by accepting cheques from third parties in exchange of unaccounted capitation fees 4.8. Since the Revenue authorities were of the firm belief that the assessee has been taking capitation fees thereby making the institution a profit making institution. The assessee was denied the benefits of exemption u/s. 11 also. 5. The third issue relates to the additions made on account of anonymous donation u/s. 115BBC of the Act. 5.1. We also find that the First Appellate authority has allowed the claim u/s. 11 of the Act in respect of receipts other than capitation fees. The Department has preferred an appeal against this action of the Ld. CIT(A) and the assessee is in appeal against the rejection of its claim u/s. 10(23C)(iiiab) of the Act as well as u/s. 11 of the Act. 6. We will first take up the issue relating to the granting of exemption u/s. 10(23C) of the Act. The provisions of Sec. 10(23C)(iiiab) of the Act read as under: 10(23C) (iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit and which is wholly or sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of Section 12AA(3) if the prominent activity of the assessee are not doubted being imparting of education and promotion of education. The assessee has been carrying on the activity in the field of education through its aided and unaided institutions since the year 1932. The various educational institutions run by the assessee are affiliated with the Boards of School Education and Universities. These activities in the field of education through various institutions are not in dispute and therefore, the genuineness of the same are not in dispute. The Commissioner has also accepted the fact of the activity of the assessee that the assessee is engaged in the educational activity but he has opined that the educational activity has been converted into commercial venture. Therefore, it is not the case of the Commissioner that the assessee has diverted its activity from education to some other field and therefore, the activity of imparting education is no more genuine. When nothing has been brought on record to say that the assessee has carried out the activities other then imparting and promoting the education then the cancellation of registration on the ground of accepting the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for their salaries and other incidental expenses. It, therefore, becomes necessary to charge certain fee from the students for meeting all these expenses. The charging of fee is incidental to the prominent objective of the trust i.e. imparting education. The trust was initially running the school in a rented building and the surplus, i.e. the excess of the receipts over expenditure. In the year under appeal (and in the earlier year appeals) has enabled the appellant to acquire its own property, acquire computers, library books, sports equipments etc. for the benefit of the students. And more importantly the members of the society have not utilized any part of the surplus for their own benefit. The A.O wrongly interpreted the resultant surplus as the main objective of the assessee trust. As held above, profit is only incidental to the main object of spreading education. If there is no surplus out of the difference between receipts and outgoings, the trust will not be able to achieve the objectives. Any education institution cannot be run in rented premises for all the times and without necessary equipment and without paying to the staff engaged in imparting education. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58,919,000 34% 2004-05 226,043,000 110,181,000 115,862,000 57,878,000 50% 2005-06 247,681,000 134,875,000 112,806,000 49,426,000 44% 2006-07 297,549,000 167,259,000 130,290,000 58,441,000 45% 2007-08 326,004,135 209,091,973 116,912,162 77,789,619 67% 2008-09 324,309,198 240,738,421 83,570,777 86,456,961 103% 2009-10 388,151,926 273,525,517 114,626,409 95,942,503 84% 2010-11 518,856,628 291,789,070 227,067,558 99,006,591 44% 2011-12 492,282,047 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served as under: Viewed from that angle, after excluding fees received from the students, when we look at the amount received by way of donation from others when compared to the amount granted by the Government, the grant of 36.42% of the total revenue do constitute substantial financial aid from the Government and thus the institution assessee is entitled to the benefit of the aforesaid provisions. 7.5. Similarly, in the case of National Education Society, the Hon ble High Court has considered whether 35.94% of contribution would amount to substantially financed by the Government and the Court answered yes . 7.6. Similarly, in the case of Indian Institute of Management (supra), the Hon ble Court accepted the contribution of 37.85% as sufficient for making the institution substantially financed by the Government . 7.7. Considering the aforementioned decision of the Hon ble Court in the light of the factual matrix of contribution as exhibited at para- 7.1 above, we have no hesitation to hold that the institution is substantially financed by the Government . Thus, fulfilling the third condition also for the eligibility for claiming exemption u/s. 10(23C)(iiiab) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a business activity resulting into making the institution for running for the purpose of making profit. In the case of ADIT Vs St. Francis Education Trust in ITA No. 2669/M/2012 the Tribunal after considering the decision in the case of Vodithala Education Society 20 SOT 353 has held in para-2.3. as under: 2.3. We have heard the rival submissions and perused the material before us. It is found that out of the total donation of ` 30.5 lakhs a sum of ` 1.98 lakhs was received from the students. A.O has not doubted the fact that the assessee is imparting education and as per the settled law of taxation imparting education is covered by the word charitable activity. If income earned by a trust is utilised for charitable purposes it cannot be held that trust is carrying out business. FAA has rightly pointed out that there is no evidence on record that profit earned by the assessee-trust were not utilised by it for non charitable purposes. It is also a fact that there is no instance of violation of provisions of sections 11-13 of the Act by the trust. In our opinion principles enumerated by the Hon ble Supreme Court in the cases of Gujarat Maritime Board and Surat City Gymkhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09 2009-10 2010-11 2001-12 Income 780326 1918321 1766853 2989134 997137 1113826 1114877 Expense 1844260 1532476 2088327 1663907 1927573 2434473 2018837 16.2. It can be seen from the above chart that the revenues are minuscule and except in A.Y. 2008-09 the expenditures are much higher than the income. Further it is an undisputed fact that this clause is very much there in the Memorandum of the society since its inception. Therefore, we do not find much weight in denying the benefits for such activity. We hold in favour of the assessee and against the Revenue. 17. The Ld. Departmental Representative has filed a book exhibiting various judicial decisions but have referred to only 2 decisions namely Vodithala Education Society 20 SOT 353 and Travancore Education Society in ITA No. 194 of 2014. The decision of Vodithala Education Society has been considered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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