TaxTMI 
TaxTMI 
2016 (1) TMI 1247
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....preciating the functioning and the objective of the appellant board that its income is covered by the provisions of section 10(23C)(iiiab). Further, the respondent has treated the appellant as an AOP (association of persons) without any basis and against the provisions of the Act. (b) That the learned Commissioner of Income-tax (Appeals) has misinterpreted the pleadings/arguments of the appellant and travelled beyond the principles applicable to the case as also has committed serious illegality while coming to the conclusion that the appellant was not wholly and substantially financed by the State Government and is not controlled by the State Government and that it is immaterial whether or not the profit motive exists in the appellants objective. The appellant has been financed by the State Government which is evident from the various documents which were brought before the respondent at the time of the framing of the assessment and is not exists for profit motive and is entitled for exemption under section 10(23)(iiiab) of the Income-tax Act. Hence, on this ground also the appeal deserve to be allowed." 3. The learned counsel for the assessee submitted that in all the grounds o....
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....e caste and schedule tribes and whether the board has received any mandate for utilisation of the earmarked funds for other purposes. After considering the assessee's submission and the statement of the secretary of the board, the Assessing Officer concluded that the assessee has failed to apply the earmarked fund to the objects for which the fund was allocated by the Government to the extent of Rs. 21,38,72,876 (Rs. 11,90,38,662 out of the total earmarked fund of Rs. 24,66,13,426 + profit earned by applying the part of the earmarked fund on printing at Rs. 12,21,76,840). Thus, the unutilised earmarked fund of Rs. 11,90,38,662 and the profit earned at Rs. 9,48,34,214 from the activities in the nature of commerce, trade and business totalling Rs. 21,78,72,876 is treated the income of the assessee for the assessment year 2011-12 under the provisions of section 2(24)(iia) of the Income-tax Act, 1961 and added to the income of the assessee. 4(iii) Further, that Assessing Officer noted that the assessee had failed to deduct tax at source on the payments made to the authors on account of royalty and auditor's fee of Rs. 1,57,55,253 and Rs. 12,00,000 respectively. The Assessing O....
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....sessing Officer came to the conclusion that the board has not been adhering to the provisions of the section 10(23C)(iv) of the Act. The appellant submitted that the board is covered by section 10(23C)(iiiab) of the Income-tax Act and the entire income of the board is exempted from Income-tax. The appellant board has been financed by the Himachal Pradesh Government. The appellant board is financially assisted by the State Government and, thus, the requirement of section 10(23C)(iiiab) of the Income-tax Act is fulfilled by the appellant board. (iv) It was submitted that as per sub-section (iiiab) the requirements to qualify for exemption under this section is that the educational institute exists solely for educational institute was wholly or substantially financed by the Government. It was submitted that there is categorically finding by the assessing authority who has after scrutinising the documents came to this conclusion that the institution (appellant board) is not established for any profit motive. The appellant after placing reliance on judicial pronouncements submitted that the appellant educational institute exists solely for educational purpose and not for the purpose o....
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....anced by the Government. As per the assessment record of the appellant, it had never been financed by the Government, during the period assessment year 2004-05 to the assessment year 2010-11. It has been generating its own income from sale of books and on account of registration fees. The aid from the State Government to the appellant is nil. It has been wrongly mentioned by the learned Assessing Officer in the assessment order that "there is no doubt that the assessee board is financed and controlled by the State Government". In fact, in the year under appeal, the appellant board has transferred an amount of Rs. 5 crores to the H.P. Government, from its own income. It is further noted that the appellant board is not directly controlled by the State Government but is governed under a separate Himachal Pradesh Board of School Education Act, 1968. On the given facts of the case, it is also evident that the appellant board does not exist solely for educational purposes. It is, in fact, earning huge profits. Once it is established that the appellant board had generated surplus and profits, it is immaterial whether or not the profit motive existed in the appellant's objectives. The ....
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....icer has given a specific finding against the assessee that in the assessment year under appeal, the assessee has not fulfilled the conditions of the above provision. It was also found that in the assessment year under appeal, the assessee has advanced its income to the State Government. The learned Chief Commissioner of Income-tax, Shimla, has granted approval under section 10(23C)(vi) of the Income-tax Act to the assessee association of persons from the assessment year 2009-10 onwards subject to certain conditions, therefore, the same would not apply to the assessment year under appeal, i.e., 2006-07. The learned Commissioner of Income-tax (Appeals) on examination of the assessment record also found that the assessee had never been financed by the Government during the assessment year in appeal and other years. It was also found that the assessee has been generating its own income from sale of books and on account of registration fees. The learned Commissioner of Income-tax (Appeals), therefore, on examination of the records found that the aid from the State Government to the assessee is nil and it was wrongly mentioned by the Assessing Officer in the assessment order that the as....
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....nd that the assessee does not exist solely for educational purposes. It is earning huge profits and has surplus income and profits. The finding of fact recorded by the learned Commissioner of Income-tax (Appeals) clearly suggest that the assessee did not fulfil the terms and conditions of section 10(23C)(iiiab) of the Income-tax Act. It was also found that the assessee board is not directly controlled by the State Government but is governed under the separate Himachal Pradesh Board of School Education Act, 1968. The learned representatives of both the parties submitted during the course of arguments that the above order of the Tribunal dated September 13, 2013, has not been challenged by the assessee in further appeal before High Court. It is also stated that the assessee has filed a miscellaneous application before the Income-tax Appellate Tribunal, Chandigarh Bench against the order of the Tribunal dated September 13, 2013, which is also dismissed. The learned counsel for the assessee stated that the assessee has preferred an appeal against the order passed on the miscellaneous application. Therefore, it stands clear that the finding of fact recorded in the assessment year 2006-0....
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....f printing, publishing and sale of text books which is in the nature of commerce, trade and business to earn profit. 11(i) The Assessing Officer further found that the assessee is engaged in carrying out the activities of conducting of the examination and in fact, not imparting any education in terms of training and schooling directly to the students. The secretary of the board has categorically denied having imparting any education directly or indirectly to the students in terms of training or schooling. The assessee has received income from schools as examination and other fees, etc. The board has not received any financial support wholly or substantially from the Government. Out of the total funds of Rs. 24.66 crores, the board has misappropriated and utilised the funds for other purposes other than funds allotted with specific direction to distribute the text books on free basis to the backward classes, scheduled castes and scheduled tribes. The assessee has shown income from sale of books of Rs. 34.19 crores and debited expenditure at Rs. 17.06 crores. The Assessing Officer, in totality of the facts and circumstances, found that assessee has earned profit on sale of the books....
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.... the same ? Answer Yes, we have utilised Rs. 11,90,38,662 for the examination purposes of all students. The balance amount of Rs. 12,75,74,764 had been utilised for printing of text books out of which we sold the text books through depots amounting to Rs. 9,48,34,214 and then balance books has been distributed on free basis to the students belonging to other backward classes, schedule cast and schedule tribe. The books distributed to these categories of students have already been submit ted. Question No. 4 Please explain whether the board has carried out the activities in the nature of printing of text books and sale of the books which is in the nature of commerce, trade and business ? Answer Yes, the board has carried out the activities of printing and publishing of text books and sold the text books through depots out of total stock printed as per object No. 12 of the bye-laws of the Board, but the activities of printing and sale of text books are not in the nature of commerce and trade. Question No. 5 Please explain whether the board is carrying out any activities of schooling, training or imparting any type of education directly or indirectly to the students other than ....
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....ing the abovesaid earmarked funds for the purposes other than the purpose/object for which the fund was allocated. The funds were utilised for the purpose other than the objects of the assessee. The text books were sold and profit was earned. The secretary denied to have imparted any education directly or indirectly to the students in the nature of schooling or training. The assessee has also stated that the assessee board has not received any type of financial support from the Government wholly or substantially for functioning and fulfilment of the objects of the board other than the earmarked fund of Rs. 24.66 crores received from free distribution of text books to the specified class of students. The Assessing Officer, therefore, added the amount as income of the assessee and after completing the assessee's assessment on other issues, computed the total income at Rs. 23,89,36,053. Section 10(23C)(iiiab) of the Income-tax Act provides as under : "10.(23C)(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government ; or" 13. The condition of th....
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....Rs. 34.19 crores including the interest income. The income and expenditure account also shows the assessee has income from other heads as well. In this income and expenditure account, the assessee has not shown any amount received or financed by the Government. The funds of Rs. 24.66 crores have been received by the assessee from the Directorate of Education for the purpose of free distribution of text books to the backward class students, therefore, the same could not be construed to be wholly and substantially financed by the Government. When the Assessing Officer examined the Secretary of the assessee board Smt. Rakhi Kahlon under section 131 of the Income-tax Act, she has admitted in answer to question No. 8, as reproduced above, that the assessee board has not received any financial support from the Government of Himachal Pradesh for functioning/fulfilment of the objects of the Board other than funds mentioned above for distribution of free text books for specific objective to the students belonging to backward class, etc. She has also admitted in answer to question No. 2 above that the assessee board has not received any mandate from the Directorate of Education for utilisati....
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....n implied by conduct is strong evidence against the maker but he is at liberty to prove that such admission was mistaken or untrue." 17. The hon'ble Rajasthan High Court in the case of Hukum Chand Jain v. ITO [2011] 334 ITR 197 (Raj) held as under (headnote) : "Held, dismissing the appeal, that admission despite being an important piece of evidence was not conclusive and it was open to the assessee to show that it was not correct. But in this case, no such effort was made by the assessee and no such material was produced by him. The assessee could not produce any other evidence to the contrary to show that investments were actually made in different years than this. The assessment was valid." 18. The finding of fact recorded in the earlier assessment year 2006-07 have not been rebutted through any material on record in which the learned Commissioner of Income-tax (Appeals) found that the assessee does not exist solely for educational purposes and it is a fact that the assessee earning huge profits and has surplus income and profits. These findings of fact have been confirmed by the Tribunal, vide order dated September 13, 2013. The learned counsel for the assessee sought se....
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....ed that from the record maintained along with the application under section 10(23C)(vi), it was seen that the assessee is not wholly or substantially financed by the Government hence, the board does not appear to satisfy the conditions of section 10(23C)(iiiab) of the Income-tax Act. It is not clarified by the learned counsel for the assessee whether the assessee challenged the aforesaid order of the Chief Commissioner of Income-tax, Shimla, intimated through letter dated March 11, 2010, before any appropriate forum. This is also incriminating finding against the assessee. 19(i). The learned counsel for the assessee contended that since the assessee received Rs. 24.66 crores from the State Government, therefore, conditions of section 10(23C)(iiiab) have been satisfied. The contention of learned counsel for the assessee is not tenable. The secretary of the board in her statement recorded under section 131 of the Income-tax Act in answer to question No. 1 has categorically admitted that the board has received Rs. 24.66 crores for distribution of free text books to the students belonging to the reserved categories. The total book income on this issue was of Rs. 34.19 crores which wou....
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....under appeal as well in the preceding assessment year 2006-07 decided earlier. Though the principle of res judicata does not apply to the Income-tax proceedings but the rule of consistence does apply to the Income-tax proceedings. The hon'ble Delhi High Court in the case of CIT v. A. R. J. Security Printers [2003] 264 ITR 276 (Delhi) held that "For the sake of consistency and finality of litigation, the earlier decision on the same question should not be reopened unless the new facts came to the knowledge". The hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) and the hon'ble Madhya Pradesh High Court in the case of CIT v. Godavari Corporation Ltd. [1985] 156 ITR 835 (MP) held that, "rule of consistency shall have to be maintained in Income-tax proceedings". In the present case, despite giving several opportunities to the learned counsel for the assessee, no evidence or material is produced before us to distinguish the case of the assessee from that of the assessment year 2006-07 in which the identical issues have been decided against the assessee board. Therefore, the learned Departmental representative is justified in contending th....