TaxTMI 
TaxTMI 
2012 (4) TMI 611
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....edings before the A.O. and filing of the audit report is mandatory and not directory in nature. 2.2] That on the facts and in the circumstances of the case the Ld. CIT(A) erred in stating the fact that audit report in form 10B is dated 10.10.2010 and as such same is not available with the appellant at the time of filing of return. As a matter of fact the audit report is dated 10.12.2010 and ready at the time of assessment proceedings. 2.3] That on the facts and in the circumstances of the case the Ld. CIT(A) and Ld. A.O. erred in not following the direction of Hon'ble I.T.A.T. where in it was directed to consider the assessee's claim for benefit of registration u/s 12AA at the time of completing the setaside/ remand assessment proceedings. 3.1] That on the facts and the circumstances of the case of the Ld. A.O. and Ld.CIT(A) erred in denying the exemption u/s 10(22) without following the direction given by the Hon'ble High Court of Madhya Pradesh while remanding the case. 3.2] That on the facts and the circumstances of the case the Ld. CIT(A) erred in confirming the A.O.'s action of un-authorisedly attempted to find fault with the letter ....
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....es of the case the Ld. CIT(A) and Ld. A.O. erred in not following the direction of Hon'ble I.T.A.T. where in it was directed to consider the assessee's claim for benefit of registration u/s 12AA at the time of completing the setaside/ remand assessment proceedings. 3.1] That on the facts and the circumstances of the case of the Ld. A.O. and Ld.CIT(A) erred in denying the exemption u/s 10(23C)(iiiab)/ 10(23C) (iv) without following the direction given by the Hon'ble High Court of Madhya Pradesh while remanding the case. 3.2] That on the facts and the circumstances of the case the Ld. CIT(A) erred in confirming the A.O.'s action of unauthorisedly attempt to find fault with the letter dated August 19, 1975 in the case of Tamil Nadu Text Book Society which have relied by the Hon'ble Supreme Court in the case of Assam Text Book Production and Publication Corporation Vs. CIT 319 ITR 317. 3.3] On the facts and in the circumstances of the case the Ld. CIT(A) erred in holding that the appellant is not an educational institution within the meaning of section 10(23C)(iiiab/ 10(23C)(iv) by unauthorisedly distinguishing the ratio of following decisions:- ....
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....to print, publish, stock, distribute to sell or enter into any arrangement for printing, publishing, stocking, distribution and sale of text books approved, sanctioned or assigned by the Govt. or other appropriate authority. 5. Further, the assessee society is controlled by the Govt. of Madhya Pradesh and Board of Governors consist of Minister of Education, Madhya Pradesh, Minister of State/Deputy Minister of Education, Madhya Pradesh, Secretary of Education Department, Secretary to Finance Department, Director of Public Instructions, Madhya Pradesh, Chairman of Board of Secondary Education, Madhya Pradesh, Director of S.C.E.R.T., Bhopal, Director of State Institute of Science Education, Controller of Printing and Stationary ,Madhya Pradesh, two experts in the field of School Education, who are interested in school education, nominated by the Government from amongst the members of the corporation, Managing Director who is appointed by the State Government out of Senior IAS Officer. 6. Original assessments under appeal were completed by the Assessing Officer and the claim of deduction u/s 10(22)/10(23C) was rejected by the Assessing Officer. However, in the subsequent appeals ....
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....le of text books approved, sanctioned or assigned by Government or other appropriate authority and any other publications which the corporation may decide to publish with a view to making the same available at a fair and reasonable price ; (5) to undertake research for the improvement in curricula and syllabi for primary and secondary education or any other branch of education; (6) to undertake research in text book production, evaluation techniques, and ancillary aids and educational literature concerning the various methods of education and aids for education and otherwise directed toward securing improvement in the general educational standard; (7) to regulate and fix prices of the publications of the society consistent with its objects; (8) to frame, develop and recommend to the government and other appropriate authorities curricula and syllabi for the purpose of improvement in the general educational standard; (9) to advise Government and other appropriate authorities in all matters concerning syllabi curricula evaluation examination reform and production of text books and ancillary aids and educational literature; (10) to ....
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....ply or books; (iii) Assisting and advising the Government of Madhya Pradesh Board of Secondary Education, the Director of Public Instruction or other appropriate authority in sanctioning school text books for standards I to XII submitted by private authors, or publishers; (iv) and generally to do and execute all such lawful acts, deeds, matters and things as are conducive or incidental to on for the attainment of the above objects or any of them." Thereafter, Assessing Officer commented that the object no. 1 above namely "to aid and promote advancement of education in general and of primary and secondary education in particular" though speaks of aiding & promoting advancement of education, it is very general in nature. It does not specifically speak of imparting of education through opening & running of schools /colleges /Institutions. The Assessing Officer further stated that the objects of the assessee-society have not been classified into main & ancillary objects but from a plain reading it appears that the objects at S.Nos. 1 to 2 & 21 above are the main objects and the objects at S.Nos. (13) to (20) above are ancillary to or incidental to at....
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....ercial or solely for educational purpose. The issue involved in ground 1 to 4 is thus decided in favour of the assessee with the direction to the AO to allow the claimed exemption to the assessee. " Therefore the assessee is an educational institution existing solely for educational purpose and not for profit. The Similar institutions engaged in printing and publishing of prescribed text books approved by respective State Govt. are also in existence in other states like Rajasthan Orissa Delhi etc. The Hon'ble High Court of Rajasthan in C1T vs. Rajasthan State Text Book Board (f2000) 113 Taxman 204), and Hon'ble High Court of Orissa ill Secondary Education Board vs. ITO [1972] 86 ITR 408 ) and the Delhi Bench of the Tribunal in ITO vs Delhi Bureau of Text Books ([1980) 10 TTJ 481)have upheld the institutions as other educational institution eligible for exemption u/s 10(22) of the Act under similar facts and circumstances as of the present case. Also C.B.D.T. has granted exemption to the Tamilnadu Text-books Society which also undertakes a similar activity of printing and publishing of text Lbooks as per the letter dated 19-08- 1975 and file No. 184/26/75. ....
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.... the assessee does not depend upon on Government grants. The Assessing Officer observed that as per annual reports for financial year 2002-03 to, 2005-06, initially the society started its operation by taking a loan of Rs. 10 lakhs from the State Government and Rs. 4.75 lakhs from the M.P. Board of Secondary Education. The Assessing Officer further observed that work of society was carried out from its own financial sources and it did not get any financial aid from the Central or State Government. Therefore, the assessee society is not wholly or substantially financed by the Government and does not qualify for exemption u/s 10(23C)(iiiab ). 12. The assessee's eligibility for claim of deduction u/s 10(23C) (vi) for assessment year 1999-2000 and subsequent year was declined on the plea that application filed by the assessee in form no. 56D for grant of approval u/s 10(23C)(vi) for assessment year 2000-01 to 2007-08 stands rejected by the CCIT, Bhopal, vide order dated 10.3.2008. Thus, the assessee society was held to be not eligible for any exemption u/s 10(23C)(vi) of the Income-tax Act, 1961. 13. The assessee's claim for exemption u/s 11 & 12 was also declined on the plea tha....
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....ad with rule 17B of the I.T.Rules the assessee has not filed audit report in form 10B along with the Return of Income for the assessment years 1988-89 to 2006-07. 1.1(ii) The Ld.CIT (A) confirmed the denial of exemption by holding as under:- Page 10 of the CIT(A) order:- "It may be noticed that section 12A(I)(b) of IT Act stipulated specific condition that provisions of section 11 & 12 shall not apply unless in a case where total income of the trust or institution as computed under this act exceeds the maximum amount which is not chargeable to tax and the trust or the institution gets its accounts audited as defined in explanation below sub-section (2) of the section 88 and such prescribed audit report is also filed with the return of income. Further , as per Rule 17B of IT Rules the prescribed audit report is to be furnished in Form No. 17B. Two essential requirement for claim of benefit u/s 11 & 12 of IT Act are, prescribed audit of books of account and furnishing of prescribed audit report in form no. 10B alongwith return , It has been laid down in various decisions of the Hon'ble Courts that such audit report can be filed even during the assessment pr....
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.... in the case of Zenith Processing Mills there is nothing that the audit report in Form No.10B should be obtained by the assessee prior to the filing of return of income. (ii) The Ld.CIT (A) failed to appreciate the fact that the reason for not obtaining and enclosing audit report along with the return of income was that the registration u/s 12AA(1) (b) (i) of the IT Act was granted by the Ld.CIT (A) in compliance to the direction given by the Hon'ble ITAT vide ITA No. 300/Ind/2009 order dated 23/09/2009.with retrospective effect from 07.08.1968 vide order dated 23.10.2009 and after receipt of the order the appellant got audited its Books of Accounts for 20 years i.e. from the assessment years 1988-89 to 2008-09. (iii) It is not easy for a society owned by the State Government to get its accounts audited for last 20 years particularly when the list of the auditors are given by the C & AG. Moreover, in the Government Organization there are various formalities for appointment of Auditor and fix their remuneration, it require approval and sanction of various authorities. (iv) The above reasons are reasonable cause for delay in obtaining the audit report in Fo....
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....o the benefit of deduction under section 80-IA(2) of the Income- Tax Act. (b) CIT Vs. Hardeodas Agarwalla Trust (1992) 198 ITR 511 (Cal) "In the instant case it was held that balance sheet and income and expenditure statement of a trust or institution would necessarily contain the particulars of the application of income and non-user of income or property and the certificate of the auditor only affirms the same. The Assessing Officer can rely on the certificate for allowing the benefit of exemption. This is a procedural matter for the purpose of enabling the Assessing Officer to complete the assessment on the basis of the certificate of the auditor without even asking the assessee to furnish supporting documents in support of the claims and contentions made in the return. It was further observed that, the requirement under section 12A (b) of filing audit report alongwith the return of income, being a procedural nature, is not mandatory so as to disentitle the trust from claiming exemption under section 11 and section 12 in case of omission to furnish such report in the prescribed form alongwith the return. However, if an assessee fails to obtain the audit report i....
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....ITAT, therefore the assessee society could not filed audit report in prescribed Form 10B along with the return of income. This is a reasonable cause for non filing of audit report along with the return of income. (vi) It is also undisputed that during the course of remand assessment proceeding no opportunity to file audit report in Form 10B was allowed to the appellant society which is clear from the remand assessment order itself. When a particular provision of the IT Act is directory in that case the Ld.A.O. should allow an opportunity to cure the defect. If the Ld.A.O. could have bring this fact in the notice of the assessee during the course of remand assessment proceedings same could have filed before him as same was ready to file. (vii) It is further submitted that appellant society during the course of remand assessment proceedings requested the Ld.A.O.that audit report in Form NO. 10B is ready and be accepted, but the Ld.A.O. was heisted to accept the same due the reason that same were not filed along with the return of income of respective years. However the audit report in Form 10B along with application under Rule 46A being additional evidence is filed ....
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....Reliance was placed on the decision of Hon'ble Supreme Court in the case of Sole Trustee Loka Shikshan Trust, 101 ITR 234, wherein education has been defined as process of training and developing the knowledge, skill, mind and the character of the students by normal schooling. He further submitted that in the later decision of the Hon'ble Supreme Court in the case of Assam State Text Book Production and Publicity Corporation Limited, 319 ITR 317, the printing and publication of text books for students by Government Controlling Company was held as educational institution, neither meaning of word "EDUCATION" U/S 2(15) of the Act was examined nor decision of Loka Shikshan Trust, 101 ITR 234 was considered. 19. In view of the above submissions, he contended that since the assessee was not imparting education to the students through normal schooling, therefore, as per decision of Lok Shikshan Trust (supra), exemption is not available to the assessee. He further contended that there was huge profits to the assessee every year, therefore, such educational institution cannot be said to be not for the purpose of profit. 20. He further submitted that the case cited by the asses....
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....rt, in this case, was deciding the case of Society which was engaged in similar activity to that of the assessee i.e. printing and publishing of school text books. It was also engaged in printing and publishing of text book for school students confirming to the norms prescribed by the Education Department of State. The main issue before the Hon'ble Supreme Court was whether the assessee Corporation could be termed as Educational Institution in terms of Section 10(22) of the Income-tax Act, 1961. The Assessing Officer held that since the assessee had income exclusively from publication and selling of text books to the students, exemption u/s 10(22) was not admissible and the Assessing Officer held that the assessee did not exist solely for educational purposes. The Assessing Officer also stated that in view of the clause 21 of the Memorandum of Association, which provides for distribution of dividends, hence, its income was not exempt u/s 10(22) of the Act. This decision of the Assessing Officer was upheld by the ld.CIT(A). In a further appeal, by the assessee, it was held by the Tribunal that the Corporation was an educational institution and consequently entitled to the benefi....
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....he assessee in that case, namely, Rajasthan State Text Book Board, was entitled to claim the benefit of exemption u/s 10(22) of the Act. The Court observed that it is not disputed before us that the aims and objects of the Tamil Nadu Text Books Society and those of the respondent-assessee are almost identical. It is also not shown to us that the surplus amount, if any, of the respondent-assessee, is used for any other purpose or distributed to other members. The CIT(A) as well as the Tribunal have noticed that even if some amount remains surplus, the same was utilized only for the purposes of education. 23. By considering the above judgments and CBDT letter, the Hon'ble Supreme Court set-aside the order of the High Court and matter was remanded to the Assessing Officer to consider it de novo in the light of the judgment of Rajasthan High Court and Orissa High Court, particularly, with reference to the letter of CBDT dated 19th August, 1975, referred to in the judgment of Rajasthan High Court in the case of Rajasthan State Text Book Board reported at 244 ITR 667, as also the letter of Central Government dated July 9, 1973. However, in the assessee's case, after verification o....
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....he society is with the Government of M.P. and Board of Governors of the Society, his ministers and Secretaries of various Departments of M.P. Government and there is no provision for distribution of profit, in the registration of the society itself. Furthermore, as per the judicial pronouncements in the case of Haryana State Counselling Society, 223 CTR 402, Maa Saraswati Education Trust, 234 CTGR 400 and Vanita Vishram Trust, 327 ITR 121, merely because an educational institution accumulates income, it does not go out of the purview of Section 10(22)/10(23C)(vi). Furthermore, there is nothing in the Income Tax Act to support the proposition that educational institution cannot generate any surplus. Generating surplus, which is incidental to the carrying on activity of education and not with the motive to earn profit, will not disqualify an institution from the benefit of Section 10(23C). 26. The operative part of the Rajasthan High Court's judgment reads as under (page 669 of 244 ITR) : "It is not disputed before us that the aims and objects of the Tamil Nadu Text Books Society and those of the respondent-assessee are almost identical. It is also not shown to us that th....
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....State Government either in the form of initial contribution or through accumulation of surplus, therefore, the assessee was not required to be approved by prescribed authority for the purpose of claim of exemption u/s 10(23-C). Assessee's case is falling within sub clause (iiiab), which reads as under :- "any university or educational institution existing solely for educational purposes and not for purposes of profit and which is wholly or substantially financed by the Government/" Thus, from assessment year 1999-2000 to 2008-09, the assessee is entitled for claim of exemption u/s 10(23C)(iiiab). 28. As the object of the assessee society vis-à-vis, its constitution remains the same for the assessment year 1999- 2000 and onwards, the claim of deduction on account of assessee being other educational institution is to be allowed u/s 10(23C)(iiiab) of the Income-tax Act, 1961. 29. As per the audited accounts of the assessee, we found that out of its surplus, the assessee has paid royalty to the Board of Secondary Education, Government of M.P. and many authors of the books. The assessee had contributed for construction of school building and had also distributed....
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....ren of the age of 6 to, 14 years in such manner as the state may by law determine. Article 41 : "The State shall within the limits of its economic capacity and development make effective provision for security the right to work, to education and to public assistance in case of unemployment, old age sickness disabilities and in other cases of undeserved want." Providing of school text books and incidental publication at cheaper rates is definitely to aid kind promote advancement of education to the children." 32. To comply with the statutory requirement on article 21A and 41, the assessee society is following syllabus prescribed by the M. P. Government and printing and publishing books for the use of students of Class I to XII of the State of M. P. The assessee society is doing this job under the policy of the Government in the absence of which, an institution of that type cannot be run. Thus, the assessee is directly and indirectly fulfilling the objective laid down under article 21A and 41 of the Constitution of India, which provides that it is the primary duty of State to secure the right to education and to establish educational institution, admissi....
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...., similar type of institution is also working in other states like Tamil Nadu, Rajasthan, Delhi, Orissa, Bihar. In case of similar institutions exemptions have been allowed by the Tribunal and High Court. Hon'ble Rajasthan High Court has dealt with in detail the activity of Rajasthan State Text Book Code, 224 ITR 668 and allowed exemption u/s 10(22) of Income-tax Act, 1961. Hon'ble High Court has observed at page 668 that the facts in the case of Tamil Nadu Text Book Society are similar. In the case of Tamil Nadu Text Book Society, the C.B.D.T. itself has taken the view vide its letter dated 19.8.1975 that Tamil Nadu Text Book Society is entitled for exemption u/s 10(22) of the Income-tax Act. The said letter reads as under :- "On careful consideration of facts involved the Board is of opinion that the Tamilnadu Text Book Society would be an educational institution existing solely for the purpose of education within the meaning of Section 10(22) of the Income-tax Act. " 34. It is clear from the above letter that CBDT itself has recognized the right of exemption u/s 10(22), to such institution engaged in printing and publishing of books for students. 35. Now c....
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....in the instant case before us, undisputedly, the assessee society was established only for the purpose of advancement of education by printing and publishing of text books as prescribed by the Government. As discussed above, all such institutions working in all other States of India were held to be eligible for claim of exemption u/s 10(22). Thus, there was no justification on the part of lower authorities for decline of claim of exemption u/s 10(22)/10(23C). Even in the case of Academy of General Education, 150 ITR 135, it was observed that the assessee itself need not impart education to the students and it need not be necessarily school or college for the claim of benefit. It was found that in its account even though the assessee has not included income of Colleges, established under separate trust. However, it was found that the assessee has given grants to some of those schools, it was held that the assessee was entitled for claim of exemption u/s. 10(22). 37. In letter F.No.184/26/75-Income-tax Act, 1961,-1 dated the 19th August, 1975, of the CBDT, it was observed by the CBDT that "On careful consideration of facts involved, the Board is of the opinion that the Tamil Nadu ....
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....rving that the assessee has not claimed any benefit u/s 11 & 13 in the return filed u/s 139 nor by filing a revised return u/s 139(5). As per AO, the assessee should have filed the audited report in form 10B alongwith the return of income for the A.Ys. 1988-89 to 2006- 07, which the assessee failed, accordingly, exemption u/s 11 cannot be considered even though the assessee has obtained registration u/s 12AA w.e.f. 7.8.1968. The CIT(A) further confirmed the order of AO by observing that the prescribed audit report in Form 10B as per Rule 17B is dated 10.10.2010, which, prima facie, shows that original returns for the relevant assessment years were filed without the prescribed audit report in form no.10-B which was not available with the assessee. 41. Thus, it is clear from the order of the lower authorities that assessee's claim u/s 11 was not considered on merits merely for the reason that audit report in Form 10B were not available at the time of filing of returns for the respective assessment years as the same was dated 10.10.2010. 42. We have considered the rival contentions and found from the record that in the original returns, the assessee has only claimed only u/s 10(....