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TMI Blog2022 (6) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... Nothing contained in section 11 or section 12 shall operate as to . This shows and makes it clear that the provisions contained in section 13 govern section 11 and section 12 of the Act and not section 10. These provisions are contradictory to each other. Section 13(1)(c) applies to application of income and property to specified persons. Sections 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) govern the provisions of lending, property made available for use, any service is made available and if any income is diverted respectively. The AO and the Ld. CIT(A) has not come to any conclusive finding as to what particular clause has been violated and as to how the same has been violated. In the absence of any such findings by the AO, the withdrawing of exemption was not in accordance with law. In the above view, we hold that the Ld. CIT (Appeals), was not justified, in confirming the finding of the AO against law, regarding rejecting the exemption claimed of the Assessee Trust under section u/s 10(23C) (iiiad) - Decided in favour of assessee. - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Sh. P. N. Arora, Adv. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t because the only purpose of the Institution is imparting education and its income is totally exempt from Income-Tax and as such there was no justification in assessing the income. 7. Again, the Ld. CIT (Appeals) has grossly erred in confirming the charging of interest under section 234A, 234B 234C of the Income-Tax Act, 1961. The Ld. CIT (Appeals) did not appreciate that no interest can be charged under section 234A, 234B 234C of the Income-Tax Act, 1961, as no reasonable proper opportunity of being heard was allowed before charging the interest. As such the interest charged under these sections of the Income-Tax Act, 1961, may be deleted. Alternatively, the interest charged under section 234A, 234B 234C of the Income-Tax Act, 1961, is very high excessive. 8. Any other ground of appeal that may be urged at the time of hearing of the appeal. 3. Briefly, facts as per record are that the return of income was filed on 31.03.2006 declaring an income of NIL claiming the entire income of Rs. 19,75,585 as exempt u/s 10(23C) (iiiad) of the I.T. Act. The assessee is a trust and its main income is from tuition fees from the students undergoing B. Ed Course. During the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of the Trust is utilized by the persons referred in section 13(3) and if investment of the trust funds is made in the modes/ other than the modes specified under section 11(5) of the I.T. Act, 1961. 2.9. The argument of assessee is that in respect of exemption claimed u/s.10 (23c) of I.T. Act where the receipts are below one crore, the exemption may be allowed without any restriction and there are no application of provisions of section 11 to 13 of I.T. Act. (This is also not true. The circular No. 712 dated 25.07.1995 cited in support by assessee before the A.O. has been found to be withdrawn w.e.f. 1.4.1999 by the A.O. as per the assessment order. Proviso 3 to section 10(23cJ of the I.T. Act reads as: Provided also that the fund or trust or institution [or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via)]applies its income, or accumulates it for application, wholly, and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of A.O. on this count is also confirmed. 5. The Ld. AR submitted that in all the four appeals, the Ld. CIT (Appeals) has confirmed the additions made by the AO without applying his mind and without appreciating the facts of the case. He has file a brief synopsis to buttress its contentions. The relevant aprt is extracted here under: The Table of the additions made by the AO and confirmed by the Ld. CIT (Appeals) for Astt. Year 2005-2006 to 2008-2009 Details of Additions. Asstt. Year, 2005-2006. Asstt. Year 2006- 2007 Asstt. Year 2007-2008. Asstt. Year, 2008-2009. Disallowance of exemption u/s 10 (23C) (iiiad) by holding that surplus are being regularly diverted to Trustee without any consideration. 19,75,585/- 17,71,990/- 5,97,987/- 9,24,414/- Disallowance of Interest paid by the Trust on term loan by holding that the trust has made interest free advances to its Trustees. 1,96,496/- 6,89,994/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions a Circular was issued explaining the rationale behind the said amendment and the clarification is given vide Circular No. 772, dated 23.12.1998. Even in that Circular it has been clarified that income of the educational institution below rupees one crore I exempted without any conditions. In Circular No. 712 dated 25.7.,1995, the Board has clarified that Section 10(22) does not impose any restrictions to the investment. 3. In Circular No.772 dated 23/12/1998 to clarify Finance (No.2) Act, 1998. Para 8 deals with:- Provisions relating to exempting the income of educational institutions, universities, hospitals and other medical institutions 8.1. Under the provisions of clauses (22) and (22A) of section 10 of the Income-tax Act, before amendment, educational and medical institutions enjoyed a blanket exemption from income-tax if they existed solely for educational purposes and not for the purposes of profit. In the absence of any monitoring mechanism for checking the genuineness of their activities, these provisions have been misused. 8.2. The Act omits the aforesaid clauses (22) and (22A) from the statute. The exemption would, however, continue in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ege for Bachelor in Education and is duly recognized by the Jammu University. All its income is routed through the said University as the students are allotted by the said University. All the expenses have been incurred on the objects of the institution that is education and no part thereof has been expanded on any other object whatsoever. 6. It has been clarified that the surplus has been given to persons who happened to be the trustees but that is an investment which the Trust is allowed as per the provisions of Income-Tax, as long as its Gross receipts does not exceed rupees one crore. 7. Furthermore, In the case of Commissioner of Income-Tax Versus SEETHAKATHI TRUST reported in (2007) 295 ITR 520 (Mad), [Refer page No. 55 to 57 of the paper book and relevant page no. is 56 57] in which it was observed as under:- Exemption-A O denied the assessee claim for exemption u/s 10(22) and the benefits of section 11 and 12 on the ground that assessee has violated the provisions of section 11(5) read with section 13(1)(d)-Held that assessee entitled for exemption. Further, in the body of the judgment the Hon ble High Court has ordered as under in Para No. 4 and 5 of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... govern section 11 and section 12 of the Act and not section 10. These provisions are contradictory to each other. Section 13(1)(c) applies to application of income and property to specified persons. Sections 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) govern the provisions of lending, property made available for use, any service is made available and if any income is diverted respectively. The Id. Assessing Officer has not come to any conclusion as to what particular clause has been violated and as to how the same has been violated. In the absence of any such conclusion by the Assessing Officer, withdrawing of exemption was not called for. Therefore, the conclusion arrived at by the Ld. AO is not in accordance with law. 6. The Ld. DR stands by the orders of the authorities below. 7. We have heard both the sides, perused the material on records, and the CBDT Circular and judgments relied upon. Admittedly, appellant asseee is an educational institute recognized by University of Jammu where the education activities are monitored by the University of Jammu, an organization brought into existence by an enactment of the Legislative bodies of the state of J K. 8. It is clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10(23C) regarding maintenance of accounts, expenditure and accumulation of funds and investment of funds in specified assets. The accumulated income is required to be invested in the modes specified in section 11(5). These institutions are given time upto 30th March, 2001 to transfer their investments to specified securities. The Rules and Forms in this regard have since been notified vide Notification No. S.O. 897(E) dated 12th October, 1998 [(1998) 149 CTR (St) 48]. By this notification the Central Board of Direct Taxes have been designated as the Prescribed Authority for the purpose of approval under sub-clauses (vi) and (via) of section 10(23C). 8.5. These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. 9. Thus. the conditions for granting of exemption U/s. 10(23C) for any educational Institution are; (a) Educational institution must exist in the relevant year (b) It need not be affiliated to any University etc., (c) The institution must exist solely for education purposes. 10. In our view, as long as the institution fulfills these conditions, it is entitled to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply to the institutions see kins exemption under section 11 of the Act. 5. Since the substantial questions of law raised in these appeals are centrifused on the point whether the assessee is entitled for the benefit of section 10(22) of the Act in view of the aliened violation of section 11(5) read with 13(l)(d) of the Act, in view of the above circular of the Central Board of Direct Taxes dated July 25, 1995, we do not see any substantial question of law that arises for our consideration. Accordingly, findins no substantial question of law arises for consideration, the appeals stand dismissed. 13. In the present case, the AO while rejecting the exemption claimed by the trust u/s 10(23C) (iiiad) has invoked the provisions of sections 13(1)(c), 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) of the Act. In this connection it is pertinent mention that section 13 starts with the words, Nothing contained in section 11 or section 12 shall operate as to .. . This shows and makes it clear that the provisions contained in section 13 govern section 11 and section 12 of the Act and not section 10. These provisions are contradictory to each other. Section 13(1)(c) applies to applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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