INCOME-TAX APPELLATE TRIBUNAL - AMRITSAR BENCH

I. T. A. No. 3051 Asr/2010 (assessment year 2005-06).

H. S. SIDHU (Judicial Member) and B. P. JAIN (Accountant Member)

Mahavir Singh, Senior Departmental representative, for the appellant.
P. N. Arora, Advocate, for the respondent.

ORDER

1 The Revenue has filed the present appeal against the impugned order dated April 26, 2010 passed by learned Commissioner of Income-tax (Appeals), Bathinda, for the assessment year 2005-06.

2 The facts narrated by the Revenue authority in their orders are that the Assessing Officer received the case of the assessee from Income-tax Officer, Kathua. As per the reasons recorded by the Assessing Officer vide order sheet entry dated January 10, 2008,~ gross receipts of the society exceeded Rs. 1 crore in the assessment year 2005-06 on account of running of different educational courses by its two units, namely, Vivekananda College of Education and Vivekananda Institute of Education Training and Research. The total receipt in the relevant period was Rs. 1,62,04,513. The society is an educational institution and it has a surplus of Rs. 69,27,948 during the relevant period. It has not filed its return of income for the assessment year 2005-06. The Assessing Officer obtained the above infor­mation from the records of aforesaid two units of the society and issued notice, dated January 10, 2008, under section 148 of the Income-tax Act, 1961 (in short "the Act") to the assessee-society for the assessment year 2005-06. The society filed its return of income on December 26, 2008 declaring nil income during the last leg of assessment proceedings. Notices under section 143(2)/142(1) of the Act along with a questionnaire were issued and other queries were raised by the Assessing Officer. The authorised representative of the assessee attended the proceedings from time to time and produced books of account. The assessee also filed its written reply.

The Assessing Officer issued summons under section 131 of the Act, dated December 12, 2008 to the member of the assessee-society at his office Kachi Chhawni, Jammu, fixing the case for December 17, 2008. In response to these summons, Dr. Sudarshan Gupta, general secretary of the society along with his counsel appeared. The Assessing Officer recorded the statement of Dr. Sudarshan Gupta, in the presence of his counsel, wherein he has admitted that both institutions at Lakhanpur, Kathua are under the society and its head office is at Kachi Chhawni, Jammu. Counsel for the assessee requested for a copy of the reasons recorded which was supplied to him and he filed his reply stating therein that no particulars of income had escaped assessment, as per section 10(23C)(iiiad) of the Act read with section 139 that income of any university or educational insti­tutionexisting solely for educational purposes being exempt from tax if its gross receipts does not exceeds Rs. 1 crore and in such case the institution not required to file return of income under section 139. The assessee in its reply further stated that both Vivekananda College of Education (termed as B.Ed.) and Vivekananda Institute of Education Training and Research (termed as ETI) are one educational institution and each has to be considered independently to each other, even independent to the trust/ society as these educational institutes have been managed by different authorities and managed according to these authorities. Both the colleges are running different courses and managed by different management committees and approved by the different authorities. The society has no control over the receipts of the colleges and even the individual colleges have no control over their receipts, as they were not allowed to admit the students and collect the fees on their own. In the reply, the assessee­society further stated that the receipts have exceeded Rs. 1 crore in the financial year 2004-05 relevant to the assessment year 2005-06. In support of this he has referred a circular No. 712 dated July 25, 1995 ([1995] 215 ITR (St.) 3).

The Assessing Officer considered the reply of the assessee along with the documentary evidence and was of the view that both institutions are independent of each other and even independent of the trust/society. This view stands further confirmed through various judgments and by the Act itself. The word used in the section 10(23C)(iiiad) is educational institution and not educational institutions. The society itself is not an independent institution. The society termed as an educational institution only if It runs an educational institution. This view stands justified by the orders/ pronouncements of the various courts which are reproduced below :

CIT v. Rai Bahadur Bissweswarlal Motilal Kalwasiya Trust [2001] 252 ITR 84 (Cal).

In the abovereferred case it was observed that the trust and institution referred to in section 13 are not one and the same thing as they are different entities. In the present case it was observed that exemption to the trust is not denied on the grounds that some of the violation of the Act is being done by the institution. In the present case the decision of the Tribunal is upheld by the court that the trust and institution referred to in section 13 is independent of each other.

Katra Education Society v. ITO [1978] 111 ITR 420 (All).

In the abovereferred case it was observed that the word institution within the meaning of section 10(22) is not narrow in its scope and includes society which is running an education institution. The society is termed as an education institution only if runs an educational institution. In view of this the word used in the society 10(23C)(iiiad) is educational institution and not referred to as person in receipt of the receipts exceeding 1 crore. The institution referred there is individual institution and not the society as a whole.

DIT (Exemption) v. A. M. M. Medical Foundation [2002] 257 ITR 292 (Mad). The exemption under section 10(22A) is not denied to the medical foundation running a hospital on the grounds that the medical foundation was itself not running the hospital.
Additional CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) ;

Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445 (Cal). In the abovereferred two cases it was observed as under :

Exemption under section 10(22) cannot be restricted to cover educational institution or university alone but also to be extended to trusts established for charitable and religious purposes which run education institution not for profit whether an educational institution exists or exist­ing solely for one particular purpose or cannot be judged only by the facts of one year. But all cumulative factors will have to be taken into consid­eration.

5 The Assessing Officer discussed the case with the authorised represent-

ative of the assessee and vide order sheet entry dated December 23, 2008, asked the assessee's counsel to show cause as to why the surplus of income over expenditure may not be assessed in the hands of the society, treating the income of the society, by clubbing the receipts of both institutions run by the society and as to why the penalty under section 271 (1) (c) of the Act may not be initiated and further asked to file objections, if any, and the case was adjourned for December 26, 2008. On December 26, 2008, counsel for the assessee appeared and filed written reply repeating his earlier conten­tion and also filed the return of the society on December 26, 2008 declaring income at nil. The Assessing Officer issued notices under section 143(2)/ 142(1) dated December 26, 2008 fixing the case for December 30, 2008. Counsel of the assessee-society attended the proceeding and filed written reply stating therein that the replies med earlier may be considered.

The Assessing Officer considered the reply of the assessee and was of the view that the assessee-society is running two educational institutions and the receipts of both the institutes exceeded Rs. 1 crore and the said society is liable to me its return of income. Neither the society has obtained exemption certificate for exemption under section 10(23C)(vi) nor regis­tered under section 12A(a) till March 31,2005. The institutions are run by the assessee-trust and they are part of assessee-trust/society. In other words the institutions are not different from assessee-society. To put it differently there is a fusion of identity of the colleges which are admittedly institutions and the assessee-trust/society. The Assessing Officer supported his view by various decisions rendered by the hon'ble High Courts, which includes the decision of the hon'ble Gujarat High Court in the case of CIT v. Sindhu Vidya MandaI Trust [1983J 142 ITR 633 (Guj). So the claim of the assessee that receipt of individual institution is to be taken into consideration for applying for exemption under section 10(23C) of the Act is grossly incorrect in view of the case law, namely, Katra Education Society v. ITO [1978J 111 ITR 420 (All) and DIT (Exemption) v. A. M. M. Medical Foundation [2002J 257 ITR 292 (Mad). Lastly, the Assessing Officer has held that the receipts of both the institutes run by the assessee­society should have been clubbed and the society, which is the educational society was required to file its return by clubbing the receipts of both insti­tutes and to claim exemption of income over expenditure, the society must have obtained exemption certificate under section 10(23C)(vi) of the Act from the prescribed authority under the Income-tax Act. Therefore, the receipts of the educational society, namely, M/s. Vivekanand Society of Education and Research (Regd.), Kachi Chhawni, Jammu and surplus of income over expenditure of Rs. 69,27,948 for the assessment year 2005-06 is assessed as income of the society in the status of association of persons. No exemption is allowed as the society has not been got registered under section 12A of the Act and no exemption certificate has been obtained from the prescribed authorities under the Income-tax Act. Penalty proceedings under section 271(1)(c) of the Act has also been initiated in the case of the assessee while completing the assessment for the assessment year in dispute vide order dated December 31, 2008 passed by the Assessing Officer under section 143(3) of the Act and made addition of Rs. 69,27,948.

7 Aggrieved with the assessment order dated December 31, 2008, the assessee filed an appeal before the learned first appellate authority, who vide impugned order dated April 26, 2010, partly allowed the appeal of the assessee and mainly held that the assessee is an educational institution, which is eligible for exemption under section 10(23C)(iiiad) of the Act and deleted the addition made by the Assessing Officer amounting to Rs. 69,27,948. Now, the Revenue being aggrieved with the impugned order, filed the present appeal.

8 At the time of hearing, the learned Departmental representative relied upon the order passed by the Assessing Officer and stated that learned Commissioner of Income-tax (Appeals) has wrongly deleted the addition of Rs. 69,27,948 made by the Assessing Officer in spite of the fact that the gross receipts of the assessee-society has been exceeded Rs. 1 crore. He further stated that the assessee-society has no approval from the pre­scribed authority for the exemption of its income under section 10(23C)(vi) of the Act nor registered under section 12A(a) of the Act till March 31, 2005. Finally, the learned Departmental representative stated that the assessee has shown its nil income in its return in spite of the fact that the gross receipts of the assessee were Rs. 1,62,04,513 in respect of its two units, as mentioned while recording the reasons by the Assessing Officer and on the basis of accounts of these two units, namely, Vivekananda College of Education and Vivekananda Institute of Education, Training and Research.

9 On the contrary, learned counsel for the assessee relied upon the impugned order passed by the learned Commissioner of Income-tax (Appeals) and stated that there are two separate institutions, namely, Vivekananda College of Education and Vivekananda Institute of Education Training and Research. As per section 10(23C)(iiiad) read with section 139., the income of any university or educational institution existing solely for educational purposes being exempt from tax, if its gross receipts does not exceeds Rs. 1 crore, and in such a case the institute is not required to file its return of income for the assessment year 2005-06. In the present case the individual receipts of the educational institutions is less than Rs. 1 crore. The Assessing Officer has misinterpreted the language of section 1O(23.C)(iiiad) and exemption under section 10(23C)(iiiad) is allowable to the income of an educational institution and not allowable to a particular person. He further stated that the learned first appellate authority has given sufficient opportunity to the Assessing Officer and passed the impugned order under the law. He has also filed three small paper books. In the first paper book, containing pages from 5 to 35, he has attached copy of reply illed by the assessee before the Income-tax Officer, Ward 2(3), Jammu on December 23, 2008 ; copy of reply filed by the assessee before the Income-tax Officer, Ward 2(3), Jammu on December 26, 2008; Copy of the assessment order under section 143(3) dated December 31, 2008 passed by the Income-tax Officer, Ward 2(3), Jammu in the case of the assessee relating to the assessment year 2005-06 ; copy of order of the Commissioner of Income-tax (Appeals), Bathinda, dated April 26, 2010 in the case of the assessee in Appeal No. 866/08-09 relating to the assessment year 2005-06 ; and copy of the Chief Commissioner of Income-tax, Amritsar, thereby granting exemption under section 10(23C) to "Tyndale Biscoe and Mallinson Girls School, Sheikh Bagh, Srinagar" vide order dated January 28, 2008 relating to assessment year 2006-07. In the second paper book, containing pages from 40 to 47, he has attached Copy of demand notice under section 156 dated February 8, 2013 along with assessment order under section 143(3) passed by the Income-tax Officer Ward 2(3)-Jammu, in the case of Vivekananda Society of Education and Research, Kachi Cha­wani, Jammu relating to assessment year 2010-11 ; copy of demand notice under section 156 dated January 31, 2013 along with assessment order under section 143(3) passed by the Income-tax Officer, Ward 2(3)-Jammu in the case of Vivekananda College of Education, Kachi Chawani, Jammu relating to assessment year 2010-11 ; and copy of demand notice under section 156 dated January 31, 2013 along with assessment order under section 143(3) passed by Income-tax Officer Ward 2(3)-Jammu in the case of Vivekananda Institution of Education, Training and Research, Kachi Chawani, Jammu relating to assessment year 2010-11. And in the third paper book, containing pages from 1 to 27, he has attached some judg­ments/decisions of the hon'ble Supreme Court, the hon'ble High Court and the Income-tax Appellate Tribunal. The assessee's counsel lastly requested that the appeal illed by the Revenue may be dismissed.

We have heard both parties and perused the relevant records available with us, especially the orders passed by the Revenue authority and the documentary evidence filed by the assessee and we are of the view that the learned first appellate authority has passed the impugned order only by reproducing the grounds of appeal, written submission of the assessee and the comments of the Assessing Officer on the written submission and held that the Assessing Officer was not justified in treating the assessee as asso­ciation of persons and the Assessing Officer has no power to change the status of the assessee. Secondly, the learned first appellate authority has also held that the assessee-society is an educational institution, therefore, it is eligible for exemption under section 10(23C)(iiiad) of the Act. In our considered view, the findings of the learned first appellate authority is con­trary to law and facts on the file and the same deserves to be cancelled on the ground that the learned first appellate authority is not justified in delet­ing the addition made by the Assessing Officer in spite of the fact that the gross receipts of the society exceeds Rs. 1 crore as admitted in the aforesaid paragraphs at the time of issuing notice under section 148 of the Act which was not verified by the assessee till date. Secondly, the learned first appellate authority is also not justified under the law that the assessee-society is entitled for exemption under section 10(23C)(iiiad) of the Act only because the assessee is an educational institution ignoring the fact that as and when the gross receipts of the society exceeds Rs. 1 crore, the assessee-society requires approval from the prescribed authority for exemption of its income under section 10(23C)(iv) of the Act which neither the assessee nor his authorised representative has produced before any Revenue authority nor before us till the closing of hearing. For the sake of convenience, the relevant provision applicable to the present case, i.e., rules 2BC and 2C of the Income-tax Rules, 1962, are reproduced as under:
"2Be. Amount of annual receipts for the purposes of sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10.-(1) For the purposes of sub-clause (iiiad) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees.

(2) For the purposes of sub-clause (iiiae) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any hospital or other institution for the reception and treat­ment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be one crore rupees.

2e. Application under section 10(23) and under sub-clauses (iv) and (v) of section lO(23C).-(1) The prescribed authority under clause (23) and sub-clauses (iv) and (v) of clauses (23C) of section 10 shall be the Director General (Income-tax Exemptions), to whom the appli­cations shall be made as provided in sub-rules (2) and (3).

(2) The form in which an application is to be furnished under clause (23) of section 10 by a sports association or institution shall be in Form No. 55.

(3) The form of application to be furnished under sub-clauses (iv) and (v) of clause (23C) of section 10 by a fund, trust or institution shall be in Form No. 56."

We have thoroughly gone through the orders passed by the Revenue authority and we are of the view that the assessee-society, namely, Mis. Vivekananda Society of Education and Research, Kachi Chawni, Jammu, running its two units, namely, Vivekananda College of Education and Vivekananda Institute of Education Training and Research and the total receipt in the relevant period were Rs. 1,62,04,513, having surplus of Rs. 69,27,948 during relevant period. In spite of these facts, the assessee­society has not filed any return of income for the assessment year 2005-06. The Assessing Officer has obtained these information from the records of the above two units of the assessee-society and after recording the reasons, he issued notice to the assessee under section 148 of the Act, dated January 10, 2008, declaring nil income during the last leg of assessment proceedings.

As a matter of record, the Assessing Officer issued summons under section 131 of the Act, dated December 12, 2008 to the member of the assessee-society and in response to same, Dr. Sudarshan Gupta, general secretary of the society appeared along with his counsel. The Assessing Officer recorded the statement of Dr. Sudarshan Gupta in the presence of his counsel, in which he has admitted that both the institutions at Lakhanpur, Kathua are under the society and its head office is at Kachi Chawni, Jammu. The assessee only pleaded before the Revenue authority that the income of any university or educational institution existing solely for educational purposes being exempt from tax, if its gross receipts does not exceeds Rs. 1 crore, and in such case the institution is not required to file return of income under section 139. In our considered view, the stand of the assessee is not tenable in the eye of law, as discussed above, because the gross receipts of the assessee-society is exceeded Rs. 1 crore which requires approval from the competent authority.

Keeping in view the admitted position as well as the statement of Dr. Sudarshan Gupta, general secretary of the assessee-society, who appeared before the Assessing Officer along with his counsel, that both institutions are under the society and its head office is at Kachi Chawni, Jammu, we are of the view that the Assessing Officer has completed the assessment under the law and rightly made the total taxable income of Rs. 69,27,948 and rightly held that the receipts of both institutions should have been clubbed and the society, which is the educational society, was required to file its return by clubbing the receipts of both institutes and to claim exemption of income over expenditure, the society must have obtained exemption certificate under section 10(23C)(iv) of the Act from the prescribed authority under the Income-tax Act.

14 As regards to the documentary evidence filed by learned counsel for the assessee in the shape of paper book, we have thoroughly gone through the same and found that he did not file even a single document or case law supporting the facts of the assessee's case where gross receipts of the assessee is exceeding Rs. 1 crore and no exemption under section 10(23C)(iiiad) of the Act from the prescribed authority are required. There­fore, the case law relied upon by learned counsel for the assessee are not helpful in the case of the assessee.

15 In view of the foregoing discussion, we are of the view that the learned first appellate authority has passed the impugned order contrary to the law and on facts the file which is not sustainable in the eye of law. Accordingly, we cancel the impugned order dated April 26, 2010 passed by the learned Commissioner of Income-tax (Appeals), Bathinda, and upheld the assess­ment order dated December 31, 2008 passed by the Assessing Officer under section 143(3) of the Act by accepting the appeal filed by the Revenue.

16 In the result, the appeal filed by the Revenue is allowed.

17 The order pronounced in the open court on the 13th February, 2014