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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 ..... iled on 29.09.2011, excess of income over expenditure has been declared at Rs. 9,41,272/- which has been claimed as exempt u/s 11 of the Income-tax Act, 1961. Alternatively, it has also claimed exemption u/s 10(23C)(iiiad) during assessment proceedings as its gross receipts are less than Rs. 1 crore during the year under consideration . Vide order dated 28.03.2013 passed u/s 143(3) of the Act, its income has been assessed at Rs. 1,30,71,470 by denying its claim of exemption of Rs. 9,41,272/- and making further additions of Rs. 58,63,000/- for STCG on sale of land and of Rs. 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 Rs. 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 memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has placed reliance on the decision of Hon'ble Supreme Court in the case of Surat Art Silk Mfg. Association, 121 ITR 1 ( S.C.) and Federation of Indian Chambers and Commerce Industries, 130 ITR 186 ( S.C.) in which it was held "if the dominant or primary purpose of the association is charitable, the subsidiary object would not mitigate against the charitable character. The ld. Authorized Representative of the assessee further placed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be for educational purposes and not for the purpose of profit. Using the words "not for the purpose of profit" is an important phrase. It was further explained that when any society is created, the bye-laws are always provided in the widest sense. The reason is that the institution wants to assure that all the intended activities are carried on, which may promote the base objective. 8. The Ld. Authorized Representative of the assessee 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 Dharmaposha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n education. The perusal of the assessment order shows that imparting of educational nature of activities carried on by the assessee has not been doubted by the AO. The provisions of Section 10(23C)(iiiad) of the Act reads as under :- "(iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Note) "Exemptions - Incomes of certain trusts of national importance, universities, educational institutions, hospitals, etc. - Allowability - Assessee Society filed its return of income declaring it 'Nil', claiming exemption u/s 10(23C)(iiiad) - AO in reopening proceedings determined total income of Society at Rs. 23,90,710 for assessment year 2006-07 and Rs. 37,72,420/- for assessment year 2007-08 declaring 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 showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of these grounds are that the assessee society is registered u/s 12A of the IT Act vide CIT Bhopal order No. 58/2003-04 dated 31.12.2003 w.e.f. 21.01.2003 and accordingly the society has claimed exemption of income over expenditure during the year under consideration. However, the AO noted that the registration u/s 12AA was granted to the assessee society with the following conditions :- "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. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee through its President Shri Isam Singh Morye since 22.11.2003 and as being sold to M/s. Essarjee Construction (P) Limited through its Managing Director, Shri Sunil Kumar Gupta for Rs. 62,50,000/-. The assessee has paid Rs. 18,50,000/- in cash on 08.07.2009 whereas Rs. 11,00,000/- has been paid through cheque on various dates. Since the assessee 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 Rs. 3,87,000/- and same was sold for Rs. 62.50 lakhs during the year under consideration. Accordingly, the assessee has earned a sum of Rs. 58.63 lakhs as surplus. Since the assessee has been granted exemption u/s 11A and the assessee has having invested a sum of Rs. 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee society. Thus, there has been diversion of assessee society fund for personal benefit of specified person in violation of provisions of Section 13 of the Income-tax Act, 1961. Since the income of the assessee found assessable as per normal provisions of Income-tax Act from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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