TaxTMI 
TaxTMI 
2017 (2) TMI 547
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....es of the case, the learned CIT(A) has erred both on facts and in law in assessing the income of the appellant at Rs. 18,93,376/- as against NIL income returned by the appellant. 4. The appellant craves leave to add, amend or alter any of the grounds of appeal." 3. From the above grounds, it is gathered that the only grievance of the assessee in this appeal relates to the confirmation of addition of Rs. 18,93,376/- made by the AO by holding that the assessee was not eligible for exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961 (hereinafter referred to as the Act). 4. Facts of the case in brief are that the assessee filed the return of income on 28.10.2004 declaring taxable income at Nil on the ground that the income derived from the educational institution was exempt u/s 10(23C)(iiiad) of the Act. In the year under consideration, the assessee had declared excess income over expenditure at Rs. 18,93,376/-, against the gross receipt of Rs. 81,11,289/-. The AO framed the assessment u/s 143(3) of the Act vide order dated 27.12.2006 treating the income as exempt u/s 10(23C)(iiiad) of the Act. Later on, the ld. CIT, Karnal vide order dated 24.04.2008 passed u/s 263(1) of....
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....a university or other educational institution existing solely for educational purposes. The assessee is an institution imparting two year diploma course of pharmacy & medical lab technology, it is recognized by All India Council for Technical Education, New Delhi and Pharmacy Council of Haryana. Regular classes is being held and relationship of teacher & taught is present. The institution came into existence since 1986. It is pertinent to mention here that during the assessment proceedings for A.Y. 2003-04 & 2004-05 no other activities other than providing education is not earned out by the assessee, nor it has been held that the assessee had pursued any other objects other than education. Hence the assessee is an institution existing solely for the purpose of education. The word 'Institution' is not defined tinder the Income Tax Act. In the Oxford English Dictionary, Vol. V at P. 354, the word 'Institution' is defined to mean "an establishment, organization, or association, instituted for the promotion of some objects, specially one of public or general utility, religious, charitable, educational, etc". Lord Machaghten in Mayor & Co. of Machester V. Mc Adam (1....
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....n after considering facts of the case, .books of accounts, regular teachings/class room education, affiliation with Central & State Government bodies and final accounts of the assessee. e) Reliance is also placed on the following decision in the matter. i) City Mountessori School Vs. ACIT (1999) 64 TTJ (All) 475 ii) Arvind Bhartiya Vidyalaya Samiti Vs. ITO (2005) 94 TTJ (JP) 614. iii) Ajit Gupta Vs. ITO (2007) 108 TTJ (Del) 301 iv) Triveni Engineering Ltd. Vs. DCIT (2004) 87 TTJ (Del.) 93 v) Aquel Charities (Aquel Sewa Sang) Vs. ITO (1988) 31 TTJ (Del) 160. vi) Birla Vidhya Vihar Trust Vs. CIT (1982) 136 ITR 445 Cal. vii) ACIT Vs. Rajasthan State Text Book Board (2000) 244 ITR 667 (Raj) viii) CIT Vs. Lagan Kala Upvan (2003) 259 ITR 489 (Del) ix) CIT Vs. Vidya Vikas Vihar (2004) 265 ITR 489 (Bom) x) Gujarat State Co.Op. Union Vs. CIT (1992) 195 ITR 279 (Guj.) f) That under the Act, the institution claiming exemption of income under section 10(23C)(iiiad) of the Act was required to file their return mandatorily w.e.f. A.Y. 2006-07. In the case of assessee neither any notice U/S....
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....reproduced herein. He further observed that appeal of the assessee filed against the order dated 24.04.2008 of the ld. CIT, Karnal was dismissed by the ITAT vide order dated 12.06.2009 in ITA No. 2185/Del/2008. The AO also observed that during the course of assessment proceedings for the assessment year 2003-04, the assessee vide its reply dated 22.12.2006 admitted that no trust deed was executed, however, it ran under a management committee which was committed for the cause of education and had basic object of imparting education without any motive to earn profit and that it had not applied for the registration u/s 12A or 80G of the Act since the income was exempt u/s 10(23C)(iiiad) of the Act. The AO further observed that the copy of trust deed filed by the assessee was unsigned, unwitnessed and unregistered which revealed that Mr. Kapur Singh and some of his relatives managed an organization, named, Sh. Satya Sain Farming Matroli and that a sum of Rs. 1.25 lakh was saved from the farming venture between 1972 and 1980 which was distributed as charity, stipend and scholarship. Later on, it was resolved by the trustees, on 03.03.1983 to start an institution for imparting education,....
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....s. The trust deed does not mention against non-application of profit or assets for the benefit of founder to trustees. There is also no clause in the trust deed regarding non-distribution of assets in case of dissolution of the trust. In view of these facts it is evident that the trust existed solely for the purposes of profit and is not eligible for exemption u/s 10(23C)(iiiad) of I.T. Act. 7(iii) In para (c) of the reply, the assessee has relied upon the judgement of Hon'ble Supreme Court in the case of Aditanar Educational Institution etc. Vs Add CIT (1997) 224 ITR 310(SC). Firstly this judgement was rendered on the provisions of section 10(22) whereas the case of the assessee falls u/s 10(23C)(iiiad). Secondly, the Hon'ble Apex Court has held that exemption has to be evaluated each- year. In the year under consideration, the assessee trust has declared profits more than 15% of gross receipts and has advanced the funds of the trust to the alleged Trustees; which confirms that the funds can be used at the discretion of the 'trustees and the Trust exist for the purpose of profit. 7(iv) Regarding para (d) of assessee's reply, as already me....
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....A.Y. 2003-04, which was confirmed by the CIT(A). The exemption was, however, allowed by the AO in the A.Y. 2004-05, which was later on cancelled by the CIT u/s 263 of the Act. The order of the CIT(A) in the A.Y. 2003-04 and u/s 263 in the A.Y. 2004-05 was challenged before the ITAT. The ITAT in its combined order rejected the appeal of the appellant for both the years, against which the appellant stated to be in High Court, which is pending. As far as issue involved in the year under consideration of avail-ability of exemption u/s 10(23C)(iiiad) of the Act is as such stand decided in favour of the department by the ITAT." 9. The ld. CIT(A) held that the exemption u/s 10(23C)(iiiad) of the Act was not available to the assessee and accordingly the action of the AO for rejecting the same and taxing the income as per Sections 28 to 43 of the Act was confirmed. 10. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee is running a college of pharmacy which is duly approved by the Pharmacy Council of India as per Notification dated 24.05.2002. A reference was made to page ....
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....of the trust deed because a sum of Rs. 1.25 lakh had been contributed as corpus and Rs. 60,000/- was contributed by the 6 trustees thereby making the capital of the trust at Rs. 1.85 lakh and on the said basis, the registration had been granted later on u/s 12AA of the Act. It was pointed out that for creation of trust there need not be a formal trust deed and even the trust can be oral and that the intention of the author is sufficient to create a trust. A reliance was placed on the decisions of the Hon'ble Allahabad High Court in the case of CIT Vs Sant Baba Mohan Singh reported at 118 ITR 1015 and the Hon'ble Bombay High Court in the case of CIT Vs Trustees of Shri Cutchi Lohana Panchtade Mahajan Trust reported at 98 ITR 448. 11. It was further stated that the assessee is an educational institution existing solely for the educational purposes and running school upto class 12 and a college for imparting education including post graduate education and also providing research facilities in the field of education. Therefore, the exemption u/s 10(23) of the Act was allowable to the assessee, particularly when nothing was brought on record to substantiate that the assessee was doin....
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....owed. It was also pointed out that when the receipts exceeded Rs. 1 Crore, registration u/s 12AA of the Act has been granted to the assessee. The reliance was placed on the following case laws: Queen's Educational Society Vs CIT reported at 275 CTR 449 Visvesvaraya Technological University Vs ACIT (2016) 4 TMI 874 - SC Pinegrove International Charitable Trust & Ors. Vs Union of India & Ors. (2010) 327 ITR 0073 13. In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the assessee did not furnish any trust deed and even it was not registered u/s 12AA of the Act and a trust to be eligible for exemption is required the registration u/s 12AA of the Act, which the assessee did not have, moreover, the assessee charged the fee and during the year under consideration there was increase in the fee charged from students and the assessee was making profit, it was run for the purpose of profit making. Therefore, the exemption u/s 10(23), 11, 12 of the Act was not available to the assessee and the ld. CIT(A) rightly confirmed the action of the AO in denying the exemption to the assessee u/s 10(23C)(iii....
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....ist. Therefore, it is clear that the assessee is running a college of pharmacy and as such engaged in the educational activities. The assessee has received fee of Rs. 74,24,840/- as mentioned in the income and expenditure account for the year ending 31st March, 2004 (copy of which is placed at page no. 4 of the assessee's paper book). From the aforesaid facts, it is clear that the assessee is an educational institution which is duly recognized and registered, it has applied his income for the purposes of education and had not distributed any profit. Therefore, the assessee is eligible for exemption u/s 10(23C)(iiiad) of the Act. And as the gross receipts of the assessee are less than Rs. 1 crore, so it is not required to get the approval from the income tax authority for claiming the exemption u/s 10(23C)(iiiad) of the Act. In our opinion, for getting the exemption under the said section, there is no condition that a registration u/s 12AA of the Act is required. In the instance case, as we have pointed out earlier that the AO while disallowing the claim of the assessee heavily relied on the decision of the Hon'ble Uttarakhand High Court in the case Queens Educational Society Vs CIT....
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....ion has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met." 25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue's appeals from the Punjab and Haryana High Court's judgment dated 29.1.2010 and the judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of ....