TaxTMI 
TaxTMI 
2018 (10) TMI 1221
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....society is engaged in imparting education through running a school in the name of Colonel's Central Academy ('CCA' in short). During the course of assessment proceedings, the AO observed that the gross receipts of the assessee-society and CCA were to the tune of Rs. 27,65,642/- and Rs. 3,01,45,505/-, respectively. Against these receipts, the surplus of Rs. 22,63,331/- and Rs. 88,46,999/-, respectively, was declared during the year. As per Form No.10 filed with the return of income, the assesseesociety also set apart/accumulated surplus of Rs. 18,48,455/- till the previous year ending 2012-13. After considering the capital expenditure of Rs. 63,81,941/- in acquisition of fixed assets and after excluding depreciation of Rs. 29,94,661/- from the expenditure, the AO has worked out the total application of funds at Rs. 2,51,88,097/- against the gross receipts of Rs. 3,29,11,147/- shown in both SEAS and CCA. This resulted into surplus of Rs. 77,23,050/- during the year and the application of funds to the extent of 76.53% only for the purpose of education. The AO further observed that the application of the assessee-society for grant of approval under section 10(23C)(vi) for A.Y.2008-09 u....
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....ted Rs. 1,08,39,823/- in SBI, Rs. 1,16,38,485/- in Allahabad Bank and Rs. 1,89,797/- in Indian Overseas Bank as on 31.03.2008 and FDR of Rs. 45,00,000/-. In the instant case, the assessee-society is running the School and is doing the charitable educational activities and has spent over 85% of the receipts during the year. Therefore, assessee-society is entitled for deduction under section 11(5)(iii) of the I.T. Act. The assessee-society met all the objections of the A.O. in the written submissions and it was submitted that assessee-society runs one educational institution and has been granted registration under section 12AA and since it has utilised 85% of its income for charitable purpose i.e. for the purpose of education, therefore, assessee-society qualifies deduction under sections 11 and 12 of the I.T. Act, 1961. The A.O. has wrongly excluded depreciation from the expenditure which is allowable deduction.. The assessee-society vide calculation to show that more than 85% of total receipts have been utilised. Therefore, the objection of the A.O. is totally misplaced on facts and in law. In alternate contention, it was submitted that even if finding of the A.O. are correct, then....
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....he Ld. CIT(A). In the succeeding year, the entire sale proceeds was utilized by the assessee-society for acquiring four pieces of land, details and evidences for the same have been filed. Moreover, out of the four lands purchased, two have been put to use by the assessee-society for the purpose of imparting education in the school run by it in the name of CCA. The land at Sadhrana and Plot No.F-18 and F-20 at Aravalli are being utilized by the school for conducting various activities of the school, which is part of the curriculum of education, being imparted in the school as per the CBSE guidelines. The other two pieces of land have been purchased for the purpose of education only, as resolved by the governing body of the assessee-society in its resolution passed and filed along with Form-10 and the Return of Income of the assessee-society for A.Y 07-08. It is, therefore, clear that net consideration received by the assessee-society from the sale of land, being a capital asset, has been invested in capital assets, being lands and the lands, further purchased, have been either put to use for the charitable purpose for which the assessee-society has been established or are intended t....
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....it was held that "merely because certain surplus arises from the operations of an educational-society or trust or other similar body running an educational institution solely for educational purposes, it cannot be held that the institution is being run for profit so long as no person or individual is entitled to any portion of the profit and the said profit is used for the purposes and for the promotion of the objects of the institution". The Ld. CIT(A) also noted the decision of Honble Uttarakhand High Court in the case of Queen's Educational Society and St. Paul's Senior Secondary School (supra) delivered in the context of Section 10(23C)(vi) of the I.T. Act, 1961. The Ld. CIT(A) referred to decision in the case of Thiagarajar Charities vs. Addl. CIT 225 ITR 1010, the Hon'ble Supreme Court has held that "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 Ld. CIT(A) also noted that on similar reason, appeal of assessee-society for A.Y. 2007-2008 have been allowed. Thus, the land held at Dhorka was accepted for th....
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.... the I.T. Act and directed to enhance the income to Rs. 6,77,16,875/-. 4. Aggrieved by the Order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal and has raised the following ground : "The Ld. CIT(A) has erred on facts & in law in directing the A.O. to accept the status of the assessee as that of a charitable society & allow the exemption claimed u/s 1 l(l)(a) of the Act. The Ld. CIT(A) has overlooked the decision of the Hon'ble Supreme Court in the case of Gangabai Charities vs. CIT (1992) (197 ITR 416) wherein it was held that " The crux of the statutory exemption u/s 11(1 )(a) of the Act is not the income earned from property held under Trust but the actual application of the said income for religious & charitable purposes. The exemption can be lost if application of income is for purpose other than education [Maa Saraswati Education Trust vs. UOI (2010) 194 Taxman 84 (HP)]". 5. The Ld. D.R. relied upon the Order of the A.O. and submitted that though the issue is same as have been considered in A.Y. 2007-2008, but more reason have been given in assessment year under appeal, therefore, A.O. rightly denied exemption under section 11 of the I.T. Act. H....
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....6.02.2007 of CCIT, Panchkula granting exemption under section 10(23C)(vi) of the I.T. Act for A.Ys. 2002-2003 to 2004-2005 which continue till 2005-2006 (PB-243). He has submitted that land purchased at Dhorka in earlier year and no adverse inference has been drawn against the assessee-society. He has, therefore, submitted that Ld. CIT(A) correctly allowed exemption under section 11(1) of the I.T. Act, 1961 and rightly deleted the addition of Rs. 1,11,10,330/- made by the A.O. 7. We have considered the rival submissions and do not find any justification to interfere with the Order of the Ld. CIT(A) in granting exemption under section 11(1) of the I.T. Act. Learned Counsel for the Assessee rightly contended that the decisions referred to in the grounds of appeals do not apply to the facts of the case. The A.O. relied upon decision of Uttarakhand High Court in the case of Queens Educational Society and St. Paul's Senior Secondary School (supra) for denying the exemption under section 11 of the I.T. Act. However, the said decision has been overruled by the Hon'ble Supreme Court in the case of Queens Educational Society vs. CIT (supra). The A.O. after making his own calculation and ....
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....y, if assessee-society violated conditions of Section 11 of the I.T. Act. Considering the totality of the facts and circumstances of the case and history of the assessee-society, in the light of Order of the Tribunal for A.Y. 2007-2008 dated 24.09.2014 (supra), we do not find any justification to interfere with the Order of the Ld. CIT(A) in granting exemption under section 11 of the I.T. Act. The Order of the Ld. CIT(A) is confirmed and Departmental Appeal stands dismissed. 8. In the result, ITA.No.4944/Del./2012 of the Department is dismissed. 9. The assessee-society in its cross-appeal (ITA.No.4430/Del./2012), challenged the Order of Ld. CIT(A) in enhancing the income by Rs. 6,77,16,875/- by denying exemption for investments in properties. 10. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that the Ld. CIT(A) enhanced the taxable income on the ground that investment made by the assessee-society in the capital assets namely Aravalli Farm Houses, Gopalpur lands, Lohari lands were not actually used for educational/ charitable purposes in the year under appeal and thus, such investment is hit by Section 11(1B)....
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.... of the I.T. Act, into action. The assessee-society never exercised option under section 11(1B) of the I.T. Act. The assessee-society exercised option for claiming the benefit under section 11(2)(b) of the I.T. Act on account of accumulation of funds. Form-10 is meant for Section 11(2) of the I.T. Act. Section 11(5)(x) of the I.T. Act permitted the assessee-society to make investment in immovable properties. PB-204 is Order of the Ld. CIT(A) for A.Y. 2007-2008 in which same facts have been mentioned and filing Form-10 by the assessee-society in which Ld. CIT(A) has given a finding that the income to the extent of Rs. 7,22,67,210/- is treated to have been applied for charitable purposes. For applying Section 11(1B), Form-9A is prescribed under Rule 17 of I.T. Rules, which is not a case of the assessee-society. He has relied upon the decision of ITAT, Ahmedabad Bench in the case of Shri Surat Panjarapole Trust vs. ACIT (2011) 44 SOT 104 (Ahd.) in which it was held as under : "If the trust is established for charitable or religious purpose and there is no other object for which the trust is utilized then property of the trust so held and thereafter so transferred can only inc....
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....ing for opening of new school. Land at Gopalpura was lying vacant and land at Lohari has been leased-out for agricultural purposes only. The Ld. D.R. relied upon the following decisions : (1) Gangabai Charities vs. CIT (1992) 197 ITR 416 (SC). (2) DIT vs. Charanjiv Charitable Trust (2014) 267 CTR 305 (Del.) (3) CIT vs. Vijeta Educational Society 2011-TIOL-591- HC-ALL-IT. (4) Dy. DIT vs. India Cements Educational Society 157 ITD 1008. 13. We have heard the Learned Representatives of both the parties and perused the material available on record. The Ld. CIT(A) recorded in the Order that land at Dhokra was purchased by the assessee-society in the years 2001 and 2003. It was sold for a consideration of Rs. 9.11 crores in A.Y. 2007-2008 which resulted into profit/income at Rs. 8.44 crores which was claimed as exempt under section 11(1A) of the I.T. Act, 1961, in A.Y. 2007-2008. The assessee-society also filed Form-10 along with return of income in which income to the extent of Rs. 7,22,67,210/- was set apart for utilization in future pursuant to the resolution dated 31.10.2007 wherein it was resolved that money received after sale of the above prop....
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....n confirmed by the Tribunal. It is also not in dispute that assessee-society purchased lands at Sadhrana, Gopalpura and Lohari aggregating to Rs. 7,20,56,368/-. Therefore, short fall of Rs. 2,10,842/- is the income remaining to be applied to five years period allowed under section 11(2) which has not been expired in assessment year under appeal i.e., A.Y. 2008-2009. Therefore, this amount also cannot be brought to tax. Since the assessee-society purchased the lands for a sum of Rs. 7.20 crores for educational purposes, therefore, there is nothing wrong in the explanation of assessee-society. The Ld. CIT(A) already found that land at Sadharna have been used for educational purposes. The remaining two properties at Gopalpura and Lohari cannot be treated as not for charitable purposes merely for the reasons that these have not been used. Non-user or passiveness of the lands purchased cannot be treated as user for non-charitable purposes. Section 11(5) provides that accumulated amount under section 11(2) has to be kept in specified modes of investment, which include investment in immovable property. It does not provide that such immovable property must be meant for any specific purpose....