TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 588
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....T Vs. Queens Educational Society reported in 319 ITR 160, the learned Income Tax Appellate Tribunal is correct in law in holding that the assessee Trust is not running with profit motive and is eligible for exemption under Section 11 of the I.T. Act, 1961? (ii) Whether in the facts and circumstances of the case and when the assessee Trust is not eligible for exemption under Section 11 of the Act, the learned ITAT is correct in law in holding that capital expenditure incurred by the assessee Trust shall be allowed as application of income? 3. The facts leading to filing of the present appeal are that the assessee is a Trust registered under Section 12A of the IT Act with effect from 02.09.2002. It filed its return of income on 31.10.2007 for the assessment year 2007-08 disclosing its total loss at Rs. 3,96,54,653/-. On 03.12.2009, the Assessing Officer completed the assessment under Section 143(3) of the IT Act determining the total income at Rs. 03,06,53,610/-. In the assessment order, the Assessing Officer did not allow the benefit of exemption under Section 11 of the IT Act to the Trust on the ground that the assessee-Trust is making systematic profit year after year; incurred ....
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....d that the Educational Institutions are set up for charitable purpose and banned the collection of capitation fees and such decision of the Hon'ble Supreme Court is binding on all authorities. The order of the ITAT is not based either on facts or correct application of law. Placing reliance on the judgment of Jharkhand High Court in the case of Queens Education Society (supra), Mr. Mohapatra submitted that the reasons given by the Tribunal for granting exemption to respondent Educational Institution is not sustainable in law. Therefore, Mr. Mohapatra prayed to admit the Tax Appeal for adjudication on the substantial questions of law as stated hereinabove. 7. Mr.J. Sahoo, learned Senior Advocate appearing for the respondent-Educational Institution submitted that no substantial question of law is involved in the case. The Tribunal is fully justified in granting exemption under Section 11 of the IT Act, 1961 for the assessment year 2007-08 for the reasons stated therein. The learned Assessing Officer is not correct in applying the ratio of Queens Education Society (supra), as that case is not in the context of the Organizations registered under Section 11 of the IT Act. The said judg....
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....e present case are substantial questions of law or not, it would be appropriate to know as to what is "substantial question of law". 9. The Hon'ble Supreme Court in the case of Sir Chunilal V. Mehta and Sons Ltd. v. Century Spinning & Manufacturing Co. Ltd., AIR 1962 SC 1314, held as under: "6. .....The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether if directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law." 10. The Hon'ble Supreme Court in the case of Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and others, (1999) 3 SCC 722, held as under: ....
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....(SC) 378, dealt with the question of interpretation of clause (15) of Section 2 of the Act. In the said case it has been held as follows: ".... The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for a person in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. We, therefore, agree with B....
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....e of Queens Educational Society (supra). There are variety of reasons to support our opinion. Firstly, the scope of the third proviso was not under consideration, in as much as, the case before the Uttarakhand High Court pertained to section 10(23C)(iii ad) of the Act. The third proviso to section 10(23C)(vi) is not applicable to the cases falling within the purview of section 10(23C) (iii ad). Secondly, the judgment rendered by the Uttarakhand High Court runs contrary to the provisions of section 10(23C)(vi) of the Act including the provisos thereunder. Section 10(23C)(vi) of the Act is equivalent to the provisions of section 10(22) existing earlier, which were introduced w.e.f. 1-4- 1999 and it ignores the speech of the Finance Minister made before the introduction of the said provisions, namely, section 10(23C) of the Act [See observations in American Hotel & Lodging Association, Educational Institute's case (supra)]. Thirdly, the Uttarakhand High Court has not appreciated correctly the ratio of the judgment rendered by Hon'ble the Supreme Court in the case of Aditanar Educational Institution (supra) and while applying the said judgment including the judgment which had been ren....
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....lopment, Government of India, New Delhi and the fees collected by the assessee from the students for imparting such education having been approved by the AICTE. The assessee is spending the amount received by it by way of collection of tuition fees or collection of hostel fees is being spent for building necessary infrastructure for imparting the education in various fields which is the charitable purpose for which the trust was established. The assessee has also spent the said amount for raising the infrastructure necessary for carrying out the object of imparting education and thereby the assessee was found to be entitled for exemption under Section 11 of the I.T. Act and the view of the Assessing Officer that there is contravention of Section 13 of the I.T. Act is found to be baseless by the CIT(A) after thread bare considering all the relevant facts. On the overall consideration of the impugned orders, we found that the order of the leaned CIT(A) is in accordance of the majority views of judicial pronouncements that were rendered by various judicial forums stated in the impugned order. Hence, we find no infirmity in the order of the learned CIT(A) requiring no interference." 1....