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TMI Blog2017 (1) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee should have filed its return of income within the due date as prescribed u/s 139(1) of the Act read with Explanation 2 to Section 139(1) of the Act and in accordance with the provisions of Section 139(4) of the Income-tax Act, 1961. Since the assessee has failed to furnish the return as per the terms and conditions laid down while granting the registration to the Society, the AO has correctly rejected and held that the assessee is not eligible to exemption u/s 11 as its registration has been ceased to exist for the assessment year under consideration for non-compliance of the terms and conditions stipulated while granting certificate u/s 12AA by the Commissioner of Income-tax, Bhopal. - Decided against assessee Addition as surplus on sale of land as short term capital gain - Held that:- We have considered the facts and find that the assessee is found to be eligible for exemption u/s 10(23C)(iiiad) of the Act, hence surplus earned on account of sale of land at ₹ 58.68 lakhs has been applied for purchase of construction of land amounting to ₹ 276 lakhs. Hence, the surplus earned on this transaction by the Society not taxable, as the income of the society is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of ₹ 9,41,272/- and making further additions of ₹ 58,63,000/- for STCG on sale of land and of ₹ 62,67,200/- for unexplained cash credits u/s 68 received mainly from society members. The assessee society has been denied claimed exemption u/s 11 and u/s 10(23C)(iiiad) as claimed during assessment proceedings. 4. Being aggrieved the assessee filed the appeal before the ld. CIT(A). 5. During the course of appeal proceedings, the assessee has submitted that the assessee society was entitled to exemption u/s 10(23C)(iiiad) as its gross receipts are less than ₹ 1 crore. It has further stated that a copy of the Memorandum of the Society was provided to the AO. The very first three objects mentioned in the memorandum are dedicated to the providing of education through establishment of schools, there are other objects also mentioned in the memorandum, which are all charitable in nature as spelt out in Section 2(15) of the Income-tax Act, 1961. But these objects are not pursued at all by the assessee. However, in the opinion of the assessee, merely on the basis of there being other objects mentioned in the memorandum of which only educational objects are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reliance in the case of Harf Charitable Trust, 63 taxmann.com 53 (P H), wherein it was held that merely because one of the clauses of the trust deed of the assessee trust provide that the trust could carry on other business as decided by the trustees, it would not per se dis-entitle trust from being considered for registration u/s 10(23C)(vi). In the case of ITO vs. Shri Balaji Prem Asharam, 64 taxmann.com 112 (Chd), where assessee- trust was carrying out activity of education during relevant year and its receipt from said activity was less than Rs. One crore, assessee s claim for exemption u/s 10(23C)(iiiad) of the Act could not be rejected on ground that it had mentioned other objects also in trust deed. The ld. Authorized Representative of the assessee further relied in the case of Allahabad Young Men s Christian Association, 371 ITR 23 ( All), wherein it was held that merely because there are other objects of society does not mean that educational institution is not existing solely for educational purpose. Same view was also held in the case of Neeraj Janhitkari Gramin Sewa Sansthan v. Chief Commissioner of Income-tax, (2014) 49 taxmann.com 535 (Alld.) and C.P. Vidya Niketan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see further submitted that case laws relied upon by the ld. CIT(A) are distinguishable on facts. The Ld. Authorized Representative of the assessee submitted that in the case of Delhi Stock Exchange Association, 225 ITR 235 ( S. C.), the assessee was running a stock exchange and did not had a clause that the profits shall be used for charitable purposes. But the profits could be distributed to shareholders. In that background, it was held that there must be an obligation to spend the money exclusively and essentially on charity. In the present case, there was no such obligation, more so, profit could be distributed by way of dividends. Distribution of profits, is a very different thing from having other charitable objects. In the case of Dharmaposhanam Co., 114 ITR 463 ( S. C.), the Trust was partly a charitable trust and partly for profit purposes. It was doing certain business like manufacturing of kuris and money lending as a commercial activities. It was, therefore, held that such objects are not charitable purposes but for the purpose of profit. In the present case, the other objects are also charitable and it cannot be said that the objects are for profit making. In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution do not exceed the amount of annual receipts as may be prescribed; or 11. The perusal of the above provision shows that the exemption u/s 10(23C)(iiiad) of the Act is available to an institution, which is solely exists for educational purposes. Therefore, the phrase used as solely means that not for the purposes of profit. Therefore, plain reading of the said Section means that an educational institution, which is engaged solely for the purpose of imparting education is solely for the purpose of imparting education is qualifies for the exemption u/s 10(23C)(iiiad). The solely words used therein means that the assessee institution is not carrying out other activities of earning of profit. We have gone through the case laws relied upon by the ld. Authorized Representative of the assessee. We find that in the case of CIT vs. Children s Educational Society, (2013) 34 taxman.com 285 (Karnataka), wherein it was held that if an assessee is running several educational institutions and if any of them is wholly or substantially financed by the Government, then the income from such educational institution received by the assessee is not included while computing its total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their income excess over expenditure holding that Society was not existing solely for educational purpose, since it included certain objects in its Memorandum not connected with education and was, therefore, not entitled for exemption u/s 10(23C)(iiiad) Assessee filed appeal before Commissioner (Appeals) who allowed appeal for both assessment years holding that Society had not carried on any activity other than educational activity and granted exemption Revenue filed appeal before tribunal Tribunal allowed appeal holding that Society included certain objects, not connected with education in its memorandum of objects and, therefore, it cannot be regarded as existing solely for purposes of education Held, in absence of any allegation or material against society showing that they are involved in any other activities than educational activities, it cannot be denied exemption u/s 10(23C(iiiad) View taken by Tribunal is not correct. 12. This view is also supported by the decision in the case of Rampyari Devi Charitable Trust vs. DGIT, (Del) in W.P.No.4725/2012 and C.M. No. 9795/2012 dated 24 th September, 2015, wherein the Hon'ble Supreme Court has held as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions :- The return shall be regularly filed by the Society within the prescribed time as per sub-section 4A read with Explanation -2 below sub-section (1) of Section 139. The certificate shall cease to have effect in case of non- compliance of this requirement. 16. Since the assessee society for the year under consideration has filed its return of income on 29.09.2011. Hence, the return is delayed by almost one year, therefore, the AO held that the certificate granting registration u/s 12A is ceased to exist. Consequently, the AO held that the assessee is not entitled for exemption u/s 11 of the Act. 17. Aggrieved with the order, the assessee filed appeal before the ld. CIT(A), who echoed the assessment order of the AO. 18. Aggrieved the assessee filed the appeal before us. 19. The Ld. Counsel for the assessee submitted that the assessee has filed its return of income u/s 139(4A), hence, the registration granted by the CIT, Bhopal, has not ceased to be exist as the return so filed is as per the conditions prescribed by granting the registration to the Society. 20. The ld. Sr. Departmental Representative supported the order of the A.O. 21. We have conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was found to be liable and the land transferred in the name of the assessee w.e.f. 12.11.2003, the ld. CIT(A) has held that the assessee has to pay long term capital gain on sale of this land. Accordingly, the AO was directed to compute long term capital gain on such transaction. 25. Being aggrieved, the assessee has filed this appeal before us. 26. The Ld. Counsel for the assessee argued that the assessee has purchased the land for ₹ 3,87,000/- and same was sold for ₹ 62.50 lakhs during the year under consideration. Accordingly, the assessee has earned a sum of ₹ 58.63 lakhs as surplus. Since the assessee has been granted exemption u/s 11A and the assessee has having invested a sum of ₹ 2,76,33,075/- on account of purchase/construction of land and building for school. Thus, the assessee has spent much more than the sale value of the property sold and eligible for exemption u/s 10(23C)(iiiad)/11(1A) of the Act. Hence, no addition on this account is required to be made. 27. The ld. Departmental Representative relied on the orders of the lower authorities. 28. We have considered the facts and find that the assessee is found to be eligible for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m business income, provisions of Section 68 are found applicable, hence, the ld. CIT(A) upheld the action of the AO. 32. Aggrieved with the order, the assessee has filed appeal before us. 33. The Ld. Counsel for the assessee submitted that the assessee has filed confirmation of the creditors, who were the office bearer and have brought the money as loan to the society for the purchase of the building of the society. The Bank statements have been furnished and the source of source is also established for the purpose of registration within the stipulated period, the office bearers raised the loans and have given the loan to the society. The Court cases are going on for the recovery of this amount from the respective creditors. The Ld. Authorized Representative of the assessee also filed the copies of the same as a corroborative evidence. Therefore, it was submitted that all the creditors are income tax assessees and have confirmed the transactions and have also explained the source of source. Therefore, under no circumstances, the addition can be made in view of the judgement of Hon'ble M.P. High Court in the case of Metachem Industries, 245 ITR 160 and Pithampur Coetza, 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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