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TMI Blog2018 (7) TMI 1613X X X X Extracts X X X X X X X X Extracts X X X X ..... n by CIT(A) is set aside and it is directed that the Ld. A.O. should grant exemption u/s 11 and section 12 to the appellant as per the income & expenditure account submitted by the assessee. CIT(A) passed in this case for the above stated reasons is reversed and thus, enhancement of income made by him at ₹ 2,61,15,153/- is hereby set aside and addition made by him is hereby deleted. Accordingly, all these grounds stand allowed. - ITA No. 4434/Del/2017 - - - Dated:- 5-7-2018 - Shri H. S. Sidhu, Judicial Member Assessee by : Dr. Rakesh Gupta, Adv. Sh. Somil Aggarwal, Adv. Revenue by : Sh. Ravi Kant Gupta, Sr. DR. ORDER The Assessee has filed this Appeal against the Order dated 31.03.2017 of the Ld. CIT(A)-I, Noida relating to assessment year 2010-11 on the following grounds:- 1. Whether on the facts of the case and in law Ld. CIT(A) is correct in holding that the charitable status of the Appellant Society was not relevant for claim of exemption uls 11(1)(a) of the Income Tax Act,1961 but the nature and source of income is material? 2. Whether Ld. CIT(A) is correct In law and on the facts of case to ignore provisions of Sections 11, 12, and 13 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny legal provisions. 12. Whether Ld CIT(A) is justified in law to hold that when provisions Section 10(23C)(iv) (v) provide for exemption of income of educational institutions, the Legislature would not have legislated Section 11 again for exemption of such income. 13. Whether ld CIT(A) is erred in law not to decide the ground of appeal relating to lease charges of ₹ 11,37,029/- paid to NOIDA Authority ignoring written submissions filed by the appellant on last day of hearing i.e. 31.03.2017 in respect of this addition and on enhancement notice. 14. Whether Ld. CIT(A.) is justified in law to treat depreciation of ₹ 15,96,073/-, disallowed by AO and not appealed against by the appellant, as donation and again making addition as income which amounts to double addition. 15. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing. 2. The brief facts of the case are that assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) vide order dated 07.02.2013 by making addition of ₹ 11,37,029/- on account of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Tribunal. Regarding ground no. 13 and 14 it was pleaded that no opportunity was provided to the assessee. In sum and substance Ld. Counsel argued for the reversal of the order of Ld. CIT(A). 4. On the other hand Ld. Sr. DR relied upon the order of Ld. CIT(A) and the assessment order agreed that the present appeal is covered by the Tribunal decision in the case of Adarsh Public School, (supra). 5. Having heard the rival submissions and having gone through the orders passed in the present case and having gone through the paper book, I am of the considered view that the decision of Ld. CIT(A) on all fronts issues are similar to the one which were decided in the case of M/s Aadarsh Public School Supra. So much so the language of the Ld. CIT(A) s order in the case of Aadarsh public School and the language in the appeal order in the present case and the findings arrived at by Ld. CIT(A) in both the cases are identical. We therefore, find that the issues involved in the present appeal covering Grounds No. 1 to Ground No.12 are covered by the decision of the Tribunal in the case of Aadarsh Public School (Supra) in which Tribunal held as under:- 11. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11 to the assessee. Coming to his first objection that assessee is not entitled for benefit/exemption u/s.11, because there is a separate provision under the Act u/s. 10(23C)(iv), (v) and (vi) where it could have or can claim the exemption and since assessee has not availed the exemption u/s.10(23C), therefore, it is debarred from claiming exemption u/s.11. At the outset, such an observation is against the principle laid down by the Hon'ble Supreme Court in the case of CIT vs. Bar Council of Maharashtra (supra), wherein the their Lordships have observed and held as under:- 6. At the outset it may be stated that we were not inclined to permit counsel for the revenue to urge his first contention as in our view the revenue must be deemed to have given up the same. We may point out that precisely this very contention was raised by the revenue before the Tribunal and was negative by it. The Tribunal on a detailed analysis of the concerned provisions took the view that the two provisions were not mutually exclusive but operated under different circumstances, that section 11 was relatively wider in its scope and ambit, that while section 10(23A) granted absolute exemption in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such it was required to obtain exemption from the prescribed authority under Section 10(23C) of the Act, which is mandatory. Since no exemption from the prescribed authority under Section 10(23C) of the Act has been obtained as such the assessee was not entitled to claim benefits under Section 11 of the Act. The submission is wholly misconceived. Admittedly, the assessee is an educational institution and was established for charitable purposes for running educational institutions and imparting education. Section 10 of the Act deals with the income not liable to be included in total income of the assessee while Section 11 deals with the income from property held for charitable or religious purposes. Both Section 10(23C) and Section 11 of the Act are independent sections. The assessee was registered under Section 12A of the Act. As such the assessee was rightly granted benefits under Section 11 of the Act. 14. This judgment of Hon ble jurisdictional High Court clearly negates the theory of ld. CIT (A). Further Hon'ble Punjab and Haryana High Court in the case of CIT vs. Mahasabha Gurukul Vidhyapeeth (2010) 2 Taxmann.com 283 (P H) too have upheld the same proposition tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of actual carrying out its purpose, then the activity for profit must be intertwined or wrapped up with or implied in the purpose of the institution or trust, in other words it must be an integral part of such purpose. What is to be looked into whether the activity is propelled by a dominant profit motive and whether the dominant object of the activity is profit making or carrying out a charitable purpose, if it is former then the purpose would not be charitable, but, if it is latter the charitable character of the purpose would not be lost. Thus, in no way the principle laid down by the Hon'ble Apex Court can be interpreted or understood in the manner that if certain receipt or income is generated out of an activity which is charitable and such a receipt or income is wholly applied for carrying out charitable purpose, then it cannot be reckoned for non charitable purpose. Here in this case, the charging of fees is a part of receipt during the course of carrying out educational activity which has been completely applied for that activity alone, therefore such a receipt by way of fees has to be seen as an application of income for charitable purpose. As regards another con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the fees to be charged must necessarily be left to the private educational institutions that do not seek and which are not dependent upon any funds from the Government. Each institute will be entitled to have its own fee structure. The fee structure for each institute must be fixed keeping in mind the infrastructure and facilities available, the investments made, salaries paid to the teachers and staff, future plans for expansion and/or betterment of the institution etc. Of course there can be no profiteering and capitation fees cannot be charged. It thus needs to be emphasized that as per the majority judgment imparting of education is essentially charitable in nature. Thus the surplus/profit that can be generated must be only for the benefit/use of that educational institution. Profits/surplus cannot be diverted for any other use or purpose and cannot be used for personal gain or for any other business or enterprisers. [Emphasis added is ours] 17. The aforesaid judgment clearly clinches the issue and completely negates the view of the Ld. CIT (A). Thus, none of the judgments as referred to by the ld. CIT(A) have been analysed in proper prospective rather his in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 600 12 70 5,04,000 1,000 3,600 15 54,000 70,000 6 700 12 76 6,38,400 1,000 3,600 17 61,200 76,000 700 12 77 6,46,800 1,000 3,600 15 54,000 77,000 8 700 12 79 6,63,600 1,000 3,600 19 68,400 79,000 9 900 12 60 6,48,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s income by way of fees cannot be held to be derived from property held under the trust, because students cannot be treated as property. If such a proposition or view of ld. CIT (A) is upheld, then probably no education institution in the country would ever be eligible/entitled for exemption u/s.11 and perhaps will defeat the entire purpose of legislature and the definition of charitable purpose of education as defined in Section 2(15). Section 12 of the Act clearly provides that any voluntary contribution received by a trust wholly for charitable or religious purpose, then for the purpose of Section 11 it is deemed to be income derived from the property held under the trust. Such a deeming provision of revenue contribution is held as income derived from the trust which is subject to computation and conditions laid down in Section 11 to 13. If the assessee is carrying out any obligation for educational activity, then it has to be treated as the trust under the provision of Section 11; and this proposition has been clearly held by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Maritime Board (Supra), that if the assessee is under legal obligation to apply the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from benefit to an individual or a group of individuals would be a charitable purpose-CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry- CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity- Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC). 15. The present case in our view is squarely covered by the judgment of this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) are sustainable and the grounds taken and the reasoning given by him to deny the benefit/exemption u/s.11 to the assessee cannot be upheld either in law or on facts. 21. Accordingly, in view of our finding given above, the entire receipts which has been taxed under the head income from other sources is set aside and we direct the Assessing Officer to grant exemption u/s.11 as per the income and expenditure account submitted by the assessee. 6. Therefore respectfully following the decision of the Division Bench of the Tribunal in the case of Aadarsh Public School (Supra), it is held that the findings of Ld. CIT(A) are not in accordance with law and his action of denial of benefit of section 11 and 12 is reversed and it is further held that educational activity has been specifically treated as charitable purpose u/s 2(15) and I do not uphold the finding of Ld. CIT(A) that charging of fee would amount to uncharitable activity. It is further held that judgments referred by Ld. CIT(A) have not been interpreted correctly and have been interpreted out of context. Fee charged from the students has been applied for the purpose of carrying out charitable activity. I also reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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