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TMI Blog2019 (3) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... educational purpose is not commercial activity. Because the assessee is engaged in providing primary and higher education to the poor students and working under the aims and objects of the society. It also engaged in sale and purchase of books and uniform to the students of the assessee school only, at cheaper rate than market prices, which is also a part of educational activity. Also, the assessee buys and sells only those books and uniforms which are related to the students only. It is entirely for the education of the students which is not beyond the aim and objective of the society. There is no need to specifically mentioned about the sale of uniforms and books in the memorandum of association as it is incidental to the educational activities which is object of the assessee. The purchase and sale of text books, stationery items and uniforms exclusively to the students studying in the school are not in the nature of commercialization since all these activities are essential requirements of the students. The sale and purchase of books and uniform to the students are not commercialized activities. It actually benefits the entire student community as it not only provides conveni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the appellant during the year, is not justifiable and illegal. As such addition of ₹ 12,01,906/- may please be deleted. 3. That the Ld. CIT(A) has erred in law and on facts, while denying the exemption u/s. 10(23C)(iiiad) of the Income Tax Act, 1961 without appreciating the facts and submission of the assessee. As such addition of ₹ 12,01,906/- may please be deleted. 4. That the Ld. CIT(A) has erred in law and on facts, while denying the exemption u/s. 10(23C)(iiiad) of the Act merely because buying and selling of uniform and books for educational purpose is not specifically mentioned in the memorandum of association of the appellant. Thus, the order passed by the CIT(A) for not providing the benefits of the section 10(23C)(iiiad) of the Act may please be quashed. 5. That the appellant craves leave to add, alter, delete and modify any of the ground of appeal at the time of hearing. 3. The grounds raised in Assessee s Appeal No. 3551/Del/2018 (AY 2014-15) read as under:- 1. That the Ld. CIT(A) has erred in law and on facts, while levying the penalty under section 271(1)(c) of the Income Tax Act, 1961 without appreciating the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks and uniform should not be taxed vide, questionnaire dated 19.7.2016 and in response to the same, the assessee filed the reply, which was duly considered by the AO, who held that assessee has claimed exemption u/s. 10(23C)(iiiad) of the Act. He held that the purchase and sale of books and uniform is not educational activity. Therefore, the assessee is not entitled for exemption u/s. 10(23C)(iiiad) of the Act on profit of ₹ 4,08,185/- on sale and purchase of books and uniform and the gross sale and purchase shall be deducted from the gross receipts and from the gross expenses and the surplus of ₹ 4,08,185/- is liable for tax at MMR as business income. Thus, the profit arisen on sale of books and uniform worked out at ₹ 4,08,185/-, vide order dated 21.11.2016 passed u/s. 143(3) of the I.T. Act, 1961 and assessed the income of the assessee at ₹ 4,08,190/-. 5. Against the assessment order dated 21.11.2016 the assessee appealed before the Ld. CIT(A), New Delhi, who vide his impugned order dated 29.9.2017 has dismissed the appeal of the assessee by enhancing the income from ₹ 4,08,190/- to ₹ 12,01,906/-. Aggrieved with the impugned order, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2008 dated 19.12.2008 stipulating therein the Definition of Charitable purpose under section 2(15) of the Income Tax Act. In support of her contention she also filed another Paper Book containing pages 1-310 in which she has attached the copy of judicial pronouncements covering the case of the assessee viz. St. Lawrence Educational Society (Regd.) vs. CIT (2013) 353 ITR 320 (Delhi); CIT vs. Surat Art Silk Clothes Manufacturers Association (1980) 121 ITR 1 (SC); IILM Foundation vs. ADIT, ITA No. 1142/Del/2011, dated of pronouncement on 8.11.2017 (ITAT, Delhi). Pinegrove International Charitable Trust vs. UOI 188 taxmann 402 (2010) (P H); Queen s Educational Society vs. CIT (2015) 372 ITR 699 (SC); Hosiarpur Improvement Trust vs. ITO, ITA Nos. 497/Asr/2013 for AY 2009-10 Date of pronouncement 10.9.2015 ITAT Amritsar; Association of school Vendors and Ors. vs. Central Board of Secondary Education and Ors. WP(C) No. 7414/2017 Date of Pronouncement 21.2.2018, Hon ble Delhi High Court and CIT vs. Delhi Kannada Education Society (2000) 246 ITR 731 (Hon ble Delhi High Court.) In view of above, she requested to allow the appeal of the assessee. 7. On the contrary, Ld. DR relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,190 was rightly enhanced to ₹ 12,01,906/- which does not need any interference. Hence, he requested to uphold the order of the Ld. CIT(A) and dismiss the appeal of the assessee. 8. I have heard both the parties and perused the records, especially the impugned order. I note that the assessee is a society, registered under Society Registration Act and has been claiming exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961. The Assessee is running a school namely New Amazing Children Academy recognized under U.P. state Board and income tax return for A.Y. 2014-15 was filed on 26-12-2014 declaring Nil income. Notice u/s 143(2) of the Act was issued on 18-09-2015 and further Notice u/s 142(1) dated 11-07-2016 was issued. During the concerned year, the assessee has disclosed total receipts of ₹ 99,14,564/- which is less than ₹ 1 crore against which expenditure of ₹ 87,13,000/- is claimed and surplus of ₹ 12,01,906/- is shown and claimed exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961. The total receipts include sale of books of ₹ 14,19,339/- and sale of dress of ₹ 2,13,300/- totaling ₹ 16,32,639/- against which expenses on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any profit. Moreover, the assessee used the surplus generated for educational purpose. Therefore, it cannot be said that the educational institution ceases to exist solely for the educational purposes and becomes an institution only for the purpose of making profit. I further note that section 10(22) explains any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit and whereas new section 10(23C)(iiiad) provides Any income of a 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 ₹ 1 crore. Therefore, the intent of the law while introducing section 10(23C)(iiiad) and section 10(23C)(vi) is same as behind section 10(22), therefore all the judgement passed u/s 10(22) shall be applicable to section 10(23C) subject to similar facts. To support my aforesaid view, I draw support from the judgement in the case of Queen's Educational Society Vs Commissioner of Income-tax 120151 372 ITR 699 of the Hon ble Supreme Court wherein, it has been held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(23C)(iiiad) of the Act. This section reads as under: - Any income received by any person on behalf of 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. 8.2 Thus, from the plain reading of section 10(23C)(iiiad) of the Act, it is apparent that any income of any university or other educational institutional existing solely for educational purposes and not for the purpose of profit is totally exempt if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed. This means that there is no restriction on the generation of surplus u/s 10(23C)(iiiad). It can be said that any university or other educational institution can generate surplus. Therefore, so long as the purpose of the institution does not involve carrying on of educational activity for profit, the requirement of condition given under section 10(23C)(iiiad) could be met if the activity of the educational institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l shops would be available only to the students of the school and not to outsiders and, therefore, I see no element of commercialization in sale of these essential items in the school shops. If the sale of books and uniform in the school shops without any coercion on the students/parents to buy the same from these shops, is treated as commercialization , there is no reason as to why even the sale of food items in canteen facilities would also not be treated as commercialization . Such an interpretation would lead to a wholly absurd situation where on the analogy sought to be propounded by the Respondents, a request for prohibition of sale of food items may also be raised. This, in my opinion, cannot be the intent of the provisions in the bye-laws or the Rules, relied on by Respondents, while prohibiting commercialization in schools. The term commercialization in schools, would thus mean only carrying out of activities wholly unconnected with education. The availability of uniform, non-NCERT reference books or even food items for sale only to the students o f the school, in my opinion, does not fall in the category of and cannot at all be considered as commercialization. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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