TaxTMI 
TaxTMI 
2008 (1) TMI 456
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..... 1,90,01,630 which is otherwise exempt under section 10(23)(c) as claimed by the appellant. The income so taxed being totally contrary to the Provisions of law and facts and hence the same may be deleted in full. Alternatively the Assessing Officer may be directed not to assess the subjected income until the decision by the prescribed authority. 6. Briefly the basic facts of the case, as are coming from the orders of the authority below are that the appellant is a samiti, registered with the Registrar of Societies, Jaipur since 19-10-1975 under the Societies Act, 1958 of Rajasthan. The samiti was set up amongst other objects with the main object of imparting Technical & management education and training without any profit motive in. (1) Maharishi Arvind College of Pharmacy, Ambabari Circle Jaipur. (2) Maharishi Arvind Institute of Science & Management, Ambabari Circle Jaipur. (3) Maharishi Arvind Institute of Engineering & Technology, Mansarovar, Jaipur. The return of income for assessment year 2003-04 declaring total income of Rs 1,93,01,630 was filed on 3-11-2003. Though the total income was shown in the return of income at Rs. 1,93,01,630, however tax on the total income w....
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....id reply, but did not find it acceptable. Thereafter, the Assessing Officer as per discussion in para 12 & 13 of the assessment order, came to the conclusion in para 14 of the assessment order that in absence of the exemption, the income of the samiti cannot be treated as exempt under section 10(23C)(vi), the income of the assessee is assessed under the head "Income from Business and Profession" as per the income and expenditure account. 7. In the first appeal, the ld. CIT(A) also confirmed the order of the Assessing Officer upto this extent, after taking note of the above facts and allegations and held that merely because the application filed by the samiti, was pending with the prescribed authority, the appellant does not become entitled to exemption under section 10(23C) of the Income-tax Act. Therefore, the Assessing Officer has rightly denied exemption under section 10(23C) of the Income-tax Act to the appellant. 8. Before us, the ld. Counsel for the appellant Sh. Mahendra Gargieya, Advocate, at the outset submitted that by the time of making the assessment and upto the decision in the first appeal, exemption under section 10(23C)(vi), was not available despite best efforts ....
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....hus, satisfied itself that the appellant samiti existed solely for education and not for the purpose of profit. The ld. AR Sh. Mahendra Gargieya further submitted that the appellant had already been enjoying the exemption under section 10(22) of the act in the past. However for assessment year 1996-97 to 1999-00, when the Assessing Officer granted exemption but the ld. CIT passed a revision order under section 263, the Hon'ble ITAT quashed the said order in ITA No. 294-297/JPR/2003 vide their order dated 14-6-2004 (PB 35-50) whereby the original assessment orders for these four years have been maintained and restored. In these years the Assessing Officer specifically recorded a finding that the appellant was an Educational Institution solely existing for education and not for the purpose of profit and therefore, was entitled to exemption under section 10(22) of the Act. Adverting to the various allegations made by the Assessing Officer in the assessment order, the ld. AR further submitted that the other allegations of the Assessing Officer was that appellant did not file return of income (ROI) till the notices under section 148 were issued for the assessment years 1996-1997 to 199....
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....4.21 lacs as at 31-3-1991 and the fixed assets at Rs. 4.86 lacs. Up to the year ended 1991, it was running primary school, and diploma in pharmacy only. However thereafter the samiti fastly developed and the static's show a sharp increase in the surplus generated and investments in fixed assets from 1991 to 2006, as per graph (PB 32). The Capital fund of the Samiti, which stood in 1991 at 4.09 lacs rose to Rs. 884.54 lacs as on 31-3-2003 and to Rs. 2074.79 lacs as at 31-3-2006. The investment in the fixed assets rose from 5.03 lacs in 1991 to Rs. 1029.28 lacs as on 31-3-2004 and Rs. 1257.32 lacs as at 31-3-2006. The figures themselves show the Samiti has invested entire surplus from year to year in creating the infrastructure for imparting education. This growth and development would not have been possible if the funds generated by the Samiti by running various institutions and colleges were not invested for the object of the Samiti, i.e., imparting of education. If we consider the market value of the land and building alone, the value of the land and building would be 20 times the value appearing in the balance sheets. The entire assets stand in the name of the Samiti and not in t....
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....ion in the best and overall interest of the institution, which solely exists with the object of imparting best education. It was submitted that the facts and figures mentioned by the Assessing Officer are incorrect to be extent that the Assessing Officer has failed to give the ratio of free seats and payments its in the absence of which any conclusion drawn by the Assessing Officer is misleading and biased. The ld Assessing Officer has also not appreciated the background for allotment of such seats by the government to the institutions in general. We may submit that fees from the students of free seats, what appellant has been charging, is much below the break even point. In other words, what appellant charges rather results into a loss on free seats, however with a view to compensate the Institutes, the government has purportedly and intentionally allowed them to charge more fees from the students of payment seats. An educational institution is thus able to recover to some extent, the losses caused due to low charges from the students of free seats. Notably the upper limit of the fees to be charged from the students of both type of seats is again a subject matter of the decision b....
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....ards these allegations were that Smt Bharti Parashar was the chair person, devoting most of her time without charging any thing and therefore she deserved a Chauffer driven car and telephone. The car was registered in the name of samiti. As regards payment of rent, Smt. Parashar and Sanjay Parashar provided their building for running the school and other activities and no rent was charged in the initial period. It was only later on when there arose a need for hostel for students of management courses, some rent was charged in accordance with a valid agreement. The rent so charged was less than the market rates prevailing in the area and to support the contention even report of the registered valuer was filed as per which, the rent charged was even lesser then the rates prescribed by the state govt. The Assessing Officer though cited examples of six other properties, but did not confront the appellant and only a general query was raised. The advance given to Smt. Parashar and other family members was also in accordance with the prevailing market practice while putting a property and the amount was lesser than the market rate. As regard the payment made to Sanjay Parashar and Bharat ....
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.... and on the other hand, was not making requisite payment of the salary to the teaching staff and this way, it was making huge profits and it existed for the purposes of profits, it was argued by the ld. AR Sh. Gargieya that firstly that the Assessing Officer never confronted the appellant on these issues and made allegations without such discussion with the appellant. Secondly the entire matter is to be seen in the light of factual submission made here in above and it will be observed that all these allegations of the Assessing Officer were totally beyond his jurisdiction and competence. He has not at all established that something wrong was found by any of the regulatory authorities against appellant in absence of which no adverse inference can be drawn. He again drew our attention towards the detailed written submission placed before the ld. CIT(A) and the charts/details mentioned therein at paper book pages 19-34. Even assuming that there was some misutilisation of funds/mismanagement by the trustees, even this can not disentitle the assessee from the exemption under section 10(22) of the Act as has been held by Hon'ble Rajasthan High Court very categorically in the case of Dy. ....
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....t private sector can do this job very well. Once the very intention of the Government, is to promote education in the private sector such an action on the part of the Income-tax Department, if permitted, would seriously discourage and the avowed object of the Government can never be achieved. He further submitted that the quantum and hugeness of the profit is not at all a relevant material, hence the interpretation put by the Assessing Officer that there has to be a reasonable profit only and then only an institution can be said to be not existing solely for the purposes of profit, is totally a misconception of law on his part. The amount of surplus is not at all material for the purposes of granting approval of exemption under section 10(23C)(vi) of the Act, as held in many judicial pronouncement. He placed strong reliance upon the decisions in the cases of Aditnar Educational Institution, Cosmopolitan Education Society by ITAT Jaipur which was affirmed by Hon'ble Raj. High Court in Cosmopolitan Education Society case, Asstt. CIT v. Rajasthan State Text Book Board [2000] 244 ITR 667 (Raj.), CIT v. Lagan Kala Upavan [2003] 259 ITR 489 (Delhi), Governing Body of Rangaray Medical Col....
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....under these provisions. Also the decisive or acid test is whether on an over all view of the matter, the object is to make profit or otherwise should be seen as decked in many judicial pronouncements. The Hon'ble SC in Aditnar Educational Institution case. "The language of section 10(22) of the Act is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purpose of profit. After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for educational purposes, since the object is not one to make profit. The decisive or acid test is whether, on an overall view of the matter, the object is to make profit. In evaluating or appreciating the above, one should also bear in mind the distinction/difference between the corpus, the object and the powers of the concerned entity." 16. A bare perusal of the objects stated in the byelaws, as mentioned at pg 3 of the assessment order, the Appellant samiti was established for the advancem....
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....------ 6. Fixed Deposits as 2,000,000 per AICTE norms -------------------------------------------------------------- 7. Total Application 33,488,636 u/s 10(23) -------------------------------------------------------------- Table Continues... ---------------------------------------------- 2002-03 2003-04 2004-05 2005-06 ---------------------------------------------- 52,105,093 50,264,125 69,963,040 88,414,190 ---------------------------------------------- - 11,667,639 1,766,087 - ---------------------------------------------- 52,105,093&nbs....
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....o generate funds for betterment and growth of the institutions and for which there should be continuous surpluses for furtherance of education, therefore, it is not only permissible but an important requirement to put oxygen to run the institutions of such a strength. Further, in Aditinar Education Institutions and other cases, the Hon'ble Courts have observed that when surplus is utilised for educational purpose, i.e., the infrastructure development, it cannot be said that the institution was having the object to make profit and to be more specific, the Hon'ble Apex court has observed time and again that surpluses used for management and betterment of institutions cannot be termed as profit. Detailed arguments were made by the ld. AR to meet with the allegation of the Assessing Officer of charging of high school fees to the effect that there was a direct control by the various government agencies including Tiwari Committee nominated by the state Government. Otherwise also the fees were charged strictly in accordance with the guidelines provided by them. We find that the ld. Assessing Officer failed to establish that the fees charged by appellant were beyond the limits and guidelin....
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.... find any substance therein, once we find that the basic fact is that the appellant samiti solely existed for education. 19. We have carefully considered the allegations of the Assessing Officer of misutlisation of the fund by making payments towards rent, salary etc to the members of the Parashar family, however found sufficient force in the contention of the ld. AR that such allegations are mere suspicion for the reasons discussed hereunder. The salary paid to various members of Parashar family were less than pay scale of Government employees. The claim that the provision for car and telephone facility to Mrs. Parashar is not undesirable as she is the chair person of the samiti, devotes full time to the samiti and does not charge any remuneration for the work done for the samiti. Moreover, these payments have not to be looked in isolation but in conjunction with total receipts of the appellant. On gross receipt Rs. 2196.47 lacs in all the four years as against which the total such payments to the members of Parashar family were of Rs. 41.95 lacs as salary and Rs. 10.62 lacs towards rent which were only 1.91 per cent and 0,48 per cent and this year it amounted to a meagre 1.60 pe....