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TMI Blog2018 (7) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 13 of the Act and thereafter complete the assessment afresh as per law. - Appeals filed by the assessee are allowed for statistical purposes - ITA No. 96/CTK/2018, ITA No.207/CTK/2017 And ITA No. 208/CTK/2078 - - - Dated:- 5-7-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Assessee : Shri P.K.Mishra, AR For The Revenue : Shri Piyush Kolhe, CIT DR ORDER Per N.S.Saini, AM These are appeals filed by the assessee against the separate orders of the CIT(A)- 1,Bhubaneswar dated 19.5.2014 for the assessment year 2010-2011 and dated 27.3.2017 for the assessment years 2011-12 2012-13, respectively. 2. The assessee has raised the following grounds in the respective assessment years as under: ITA No.96/CTK/2018: A.Y. 2010-11. 1. For that, the denial of claim of exemption U/s.11 of the Act and taxation of income over expenditure determined of ₹ 13,62,91,651.00 by the Authorities below is illegal, unjustified, wrong and without any basis, as such the same is liable to be deleted and the income is liable to be declared as exempted from tax. 2. For that, the learned C.I.T (A) should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned disallowance of exemption and consequential additions made therein are liable to be deleted in the interest of justice. 2. For that, the disallowance of claim of exemption U/S.12A of the Act and taxation of income over expenditure of ₹ 13,62,91,651.00 by the Authorities below on the ground of violation of section 11 and 13 is illegal, unjustified and without any basis, as such the levy of tax on the exempted income of ₹ 13,62,91,651.00 is liable to be deleted and the income is liable to be declared as exempted from tax. 3. For that, the learned C.I.T(A) should not have confirmed the illegal action of the learned A.O. in denying the benefit of exemption on the ground that, section 11(4),11(4A) and 13(l)(c) have been violated, particularly when, there is no such violation of any of the provisions and the claim of the Assessee are within the four corners of the Law. 4. For that, when law on this issue is well settled in favour of the Assessee/Appellant, the learned C.I.T(A) should not have ignored the explanation of the Assessee purposefully to confirm the demand raised by the learned A.O., as such the impugned order passed by the learned C.I.T(A) be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom tax. 3. For that, the learned C.I.T(A) should not have confirmed the illegal action of the learned A.O. in denying the benefit of exemption on the ground that, section 11(4),11(4A) and 13(l)(c) have been violated, particularly when, there is no such violation of any of the provisions and the claim of the Assessee are within the four corners of the Law. 4. For that, when law on this issue is well settled in favour of the Assessee/Appellant, the learned C.I.T(A) should not have ignored the explanation of the Assessee purposefully to confirm the demand raised by the learned A.O., as such the impugned order passed by the learned C.I.T(A) being not sustainable in the eye of law, is liable to be quashed in the interest of justice. 5. For that, the learned C.I.T(A) has committed gross error of law in following the findings of his predecessors and in denying the exemption U/S.12A of the Act to the Assessee/Appellant, particularly when, the Assessee/Appellant has fulfilled all the required conditions of the Law and is lawfully entitled to claim exemption. The denial of exemption by the learned C.I.T(A) being unjustified in the eye of law is liable to be quashed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble institution u/s.2(15) as it is a clear case of sale of education and the purpose of organization was to make profit. The Assessing Officer observed that the assessee society can be considered as running with profit motive. He observed that the institutions are running profitably and there is profit motive in view of decision in the case of CIT v. National Institute of Aeronautical Engineering Educational Society, (2009) 226 CTR (Uttarakhand) 582. The Assessing Officer further observed that the provisions of section 13(1)(c) have been violated since substantial amounts have been paid to the founding members as under: Honorarium of ₹ 20,34,004/- paid to founders as under: 1. Dr. Bhabani Charan Rath : Rs.10,57,728/- 2. Smt. Sarmistha RathRs. : ₹ 3,82,456/- 3. Sri Subrat Prasanna Mishra : ₹ 4,34,561/- 4. Smt. Sanghamitra Mishra : Rs. 1,68,259/- 6. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Vodithala Education Society is applicable to the case of the appellant. The decision of the ITAT, Hyderabad in the case of Vodithala Education Society v. ADIT (Exemptions) II, Hyderabad, [2008] 20 SOT 353 (HYD.) relevant to the appellant's case is reproduced as under: 19. Under article 41 of the Constitution of India, it is the responsibility of the State to provide education to all citizens of this country. The State may discharge its obligation through State owned or State recognized educational institutions. When State/Central Government grants recognition to the private educational institutions, it creates an agency to fulfil its obligation under the Constitution. Therefore, the private institutions, are functioning as agents of the State/Central Government. It is the primary responsibility and obligation of the State to provide education to the citizens. Therefore, the educational institutions while acting as agents of the State have to collect the fees as prescribed by the Government. The students are given admission to the private educational institutions in recognition of their 'right to education' under the Constitution. Therefore, charging of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bold enough in collecting the money over and above the fees prescribed by the Government. 20. The Apex Court in the case of T.M.A. Pal Foundation v. State of Karnataka [2002] 8 SCC 481 had an occasion to consider the right of the aided and unaided private educational institutions. The Constitutional Bench of the Supreme Court elaborately considered the right of establishing private educational institutions and found that collection of capitation fees being the worst part of maladministration, can properly be subject-matter of regulatory control of a State. The Apex Court further observed that receiving donations by educational institutions connected with admission of students has to be treated as collection of capitation fees. The Apex Court observed that the right to admit students being an essential facet of the right to administer educational institutions of their choice, the State Government/University may not be entitled to interfere with their right so long as the admission to the unaided educational institution is on a transparent basis and merit is r3*\ adequately taken care of. It was also observed that the unaided institutions cannot be regulated with regard to ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the founder member/Chairman of the Society. The finding of the AO that she has been paid salary without rendering any service is correct, hence violates provisions of section 13(1)(c). In case of a charitable trust, if it is found that provisions of section 13(1)(c)(ii) read with section 13(3) are not followed, trust would lose its exemption in entirety, with result that assessment of its income will be made according to provisions of the Act as held by Hon'ble Delhi High Court in Director of Income-tax (Exemption) v. Charanjiv Charitable Trust [ 2014 ] 43 taxmann.com 300 (Delhi). It was held that; 27. In the aforesaid view of the matter, we hold that the findings of the Tribunal on this aspect cannot be upheld. We uphold the findings of the AO and hold that in advancing the amount of ₹ 8,60,16,000/- to APIL the assessee committed a violation of the provisions of Section 13(1) (c)(ii) read with Section 13(2) and Section 13(3) of the Act. The trust was accordingly not eligible for the exemption under section 11 of the Act for both the years. Accordingly, the excess of income over expenditure is taxable and at the same time the amount paid to Smt. Rath is liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed deduction u/s.11 of the Act to the assessee on the very same set of facts vide order dated 12.10.2017 passed u/s.143(3)of the Act. 12. On the above stated facts, it was the submission of ld A.R. of the assessee that the order of the CIT(A) should be set aside and the appeals of the assessee should be allowed allowing deduction u/s.11 of the Act to the assessee in the years under appeal. 13. On the other hand, ld D.R. could not controvert the above submission of ld A.R. of the assessee. 14. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the undisputed facts of the case are that the assessee is a society duly registered u/s.12AA of the Act. The registration u/s.12AA of the Act stands enforced for all the years under appeal. In the years under appeal, the assessee is engaged in running four educational institutions. The Assessing Officer disallowed the claim of exemption u/s.11 12 of the Act in the years under appeal, which was also confirmed by the CIT(A). 15. We observe that on similar facts, the assessee was held entitled for exemption u/s.11 12 of the Act by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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