TaxTMI 
TaxTMI 
2020 (9) TMI 861
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....008-09/2071 dated 13/10/1981, by invoking the 15th proviso of Sec. 10(23C)(VI) of the Act. The rescinding the approval by the ld.CIT(Exemption), Kota is bad in law and on facts of the case and hence, the approval already granted, please be restored. 3.1 The ld. CIT(Exemption), Jaipur erred in law alleging & confirming that the assessee society has not applied its income in accordance with the provisions contained in clause (a) of the 3rd proviso and has also not invested or deposited its funds in accordance with the provisions contained in the clause (b) of the 3rd proviso of S. 10(23C)(vi), which finding is bad in law and contrary to facts and hence the rescinding the approval invoking 15th proviso to Section 10(23C)(vi) of the Act deserves to be quashed. 3.2 The ld. CIT(Exemptions), Jaipur further erred in law alleging & confirming that the funds of assessee society were invested in modes other than specified in Sec.11(5) of the Act, which is bad in law and on facts of the case and which finding is bad in law and contrary to facts and hence the rescinding the approval invoking 15th proviso to Section 10(23C)(VI) of the Act deserves to be quashed. 4. The....
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.... There apart, the Assessee Society applied more than 85% of its income for the objects of the trust in accordance with the law and also similarly invested or deposited its own fund in accordance with the prescribed manner and up to the prescribed limit. The Assessee Society further submitted that the Assessee Society borrowed funds of Rs. 4,83,53,000/- from various lenders and repaid Rs. 1,05,49,736/- thus, the net unsecured loan was Rs. 3,78,03,264/- during the year, out of which the Assessee Society only advanced Rs. 2,39,82,043/- to RNMCS. Therefore, it is only financial help for time being to RNMCS because of its weak financial position and thus, there was a reasonable cause and the peculiar circumstances behind these financial transactions. Hence, entering in to financial transactions by the Assessee Society cannot by itself be made a valid ground for rescinding of the notification. However, the ld. CIT(Exemptions) did not agree with the assessee's contention and observe that the Assessee Society was demerged from RNMCS on 02.10.14 in order to comply with the provisions of S.10(23C)(vi), which require the Assessee Society to apply its income solely towards educational objec....
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.... by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record, we found that the main object and the purpose of the society was nothing but imparting education. The society exists solely for educational purposes and not for the purposes of profit and not towards any other object. The society was registered under Rajasthan Societies Registration Act 1948 (Rajasthan Act No. 28, 1958). Since its inception, the society has been promoting and establishing institution of excellence with main focus on building capabilities of the students with holistic development of their personality so that the students passing out of the portals of "Modi Group of Educational Institutions" shall contribute in building a strong nation. 7. We had also carefully gone through the audited annual statement of the account of the assessee and found that the major receipts are only from the fees from students and the expenditures are also aimed and meant for Education. There is absolutely no other source of income except the school fees / i.r.t imparting of education. Please refer a chart Pg. 8 of this written submission. After demerger the obje....
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....on made before him. There is no dispute on the fact that whatever surplus was earned was ploughed back for education purposes only and therefore the assessee has to be held existing solely for educational purposes not for profit as repeatedly held in various cases. 8. The ld. CIT(Exemptions) in his order, further alleged that the Assessee Society has not applied its income and has not invested its fund in accordance with the provisions sub-clause (a) and (b) of 3rd proviso of section 10(23C)(vi) r/w S. 11 (5) hence, it attracts 15th Proviso of S. 10(23C)(vi) of the I.T. Act, 1961. In this regard, we observe that 3rd proviso, clauses (a) and (b) along with 13th proviso to S. 10(23C)(vi) which confers a power of rescinding on the competent authority, very specifically and categorically prescribed the requirement of the application of income of the concerned educational institution only (here Educational Society-Assessee) and not of others in as much as the words used are ".....applied its income in accordance with the ....." which clearly indicates that it has got to be essentially the income of the concerned institution alone and not of anyone else. Similar is the position when t....
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....annual statement of accounts as the borrowed funds taken under the head loans & advances. As per CIT (E) borrowed fund has become the Assessee Society's own money which is not at all legally possible and that is the reason admittedly RNMCS paid back the entire amount to the assessee by 15.05.2019. 11. As per our considered view, the legislature intended that they meant own Income and own fund only & of the Institution only and it is manifest from 3rd Proviso (b) & newly inserted Explanation thereto by Finance Act, 2020 w.e.f. 01.04.2020 to the effect that donation received towards the corpus, is not required to be invested in the specified securities, making it clear even though it is Institution's own fund yet such requirement was not pressed. Therefore, in absence of the specific requirement of law of applying/ investing third party's funds, institution's failure on that part cannot authorize the ld. CIT to withdraw the exemption. 12. We place reliance on the decision of the Hon'ble Supreme Court in the case of Aditanar Educational Institution vs. Addl. CIT (1997) 224 ITR 310 (SC), wherein it was held that overall view is to be taken and without being hyper technical in gra....
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....ason that some of its activities have yielded surpluses; fact that certain advances have been made to chairman and some of his family members who were involved in running the school cannot be construed as diluting the predominant object of the Assessee Society had realigned all its investment in the manner as specified under provisos to s. 10(23C) r/w s. 11(5) prior to 31st march,2001 and had complied with the provisos of s. 10(23c); thus, the assessee would qualify for exemption under s. 10(22)/10(23C)." 16. In DCIT vs. COSMOPOLITAN EDUCATION SOCIETY 244 ITR 0494 (Raj.), affirming the finding of the ld. ITAT, it was held that there is allegation of misutilisation of the funds of the Society or mismanagement or the activities of the Society, the action could be taken against the members of the society as per the provision of various Institutes governing the Society. However, even such misutilisation and mismanagement by the members could not be the basis of rejection of the claim of exemption to the assessee education Society. Further the SLP against the judgement stood dismissed vide 241 ITR 132 (St). This was again relied upon on the case Mahima Sikhsha Samiti in DBIT No. 262/....
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....Vidya Niketan) was not so became known to the outer world/ third parties were still continued carrying the same impression that the Assessee Society who as also the RNMCS, were the part & parcel of one and the same organization (i.e Ram Niwas Modi Vidya Niketan). Therefore, they were used to give cheque in the name of the assessee, even though such payment pertained to/ was intended to be in the name of the RNMCS. There apart, there were various transactions like the payment of ECF & PF which though pertained to RNMCS but had to be made by the assessee because RNMCS was not having online banking facility; and payment of Rs. 1.95 Lacs was made to Sushil Kumar Modi HUF by the assessee but was on behalf of RNMCS and so on and there are many more examples (some of them were given in the show cause notice itself). 21. We also observe that immediately on demerger, all the transactions between the original institution and the demerged institution, as also transactions with the third parties, cannot come to a standstill and the parties continued transacting in the same fashion, more particularly, when there was not a much time gap between the demerger (02.10.2014, FY 2015-16) and the ti....
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....ice, how it is going to make it any difference because the ld. CIT(E) passed the order on 27.01.2020 and a show notice was issued by him only on 03.12.2019 but much prior thereto by 15.05.2019, the accounts between the assessee and RNMCS stood squared up. The standard format of notice u/s 143(2) simply ask the Assessee Society to furnish documents, if Assessee Society wanted so to rely in support of the return of income filed but it does not contain any query at all therefore, the Assessee Society could not have imagined from the scrutiny notice itself that some query on this aspect was going to be asked so as to warn. Thus, such type of allegations is nothing more than a suspicion. But otherwise also even if assuming worst, it was not going to help ld. CIT(E) reaching the conclusion that the assessee violated the proviso 3rd proviso r/w 15th proviso to S. 10(23C)(vi). 24. In the context of various allegations levelled by the ld. CIT(Exemptions), we observe that there is no gain to the revenue for the simple reason that even assuming had the assessee charged interest of Rs. 56.72 Lacs (approx.) from RNMSCS, revenue was not going to get any tax there upon because the assessee had....
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....on the case of CIT Surya Educational & Charitable Trust[2011] 1S taxmann.com 123 (Punjab & Haryana). and CIT vs Red Rose School 120071 163 TAXMAN 19 (ALL.). It may be mentioned that these cases are relating to grant of registration u/s 12AA of the Act and thus, are distinguishable on facts. 26. With regard to above contention of the ld. CIT-DR, we observe that in the case of All India Personality Enhancement & Cultural Centre [2015] 62 taxmann.com 92, the assessee has simply relied upon the discussion made in paras 71 onward and ultimate finding recorded in pr. 75. Moreover, his reliance on pr. 65 & 66 thereof, is irrelevant because assessee's basic contention is that the amount required to be invested should be its own funds and not the borrowed one. 27. The ld. CIT-DR has also contended that the trust deed was not amended as it contains clause relating to hospital or if amended there is no evidence of filling thereof to the Registrar Societies and/or his approval and so on. He relied upon Desales Education Society vs. PCIT (E) [2018] 94 taxmann.com 206 (Vizag- Trib.) We found that even the ld CIT (E) himself did not rescind the notification on this ground. He raised a query....