TaxTMI 
TaxTMI 
2022 (6) TMI 1444
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....ereunder: "1. That the orders of the Assessing Officer as well as of the Commissioner of Income-Tax (Appeals), Jammu," are both against the facts of the case & untenable in law. 2. That the Ld. CIT (Appeals) has not appreciated the facts of this case and has grossly erred in assessing the income at Rs. 21,72,081/-. The Ld. CIT (Appeals), did not appreciate that the Assessing Officer was not justified in rejecting the exemption claimed under section 10(23c) of the Income-Tax Act, 1961. 3. That the Ld. CIT (Appeals) did not appreciate that the Assessing Officer was not justified in invoking the provisions of section 13 of the Income-Tax Act, 1961. 4. That the Ld. CIT(Appeals) did not appreciate that the only object of the Institution is imparting of education and as such the income of the Society/Institution is exempt from Income-Tax and was not subject to Income-Tax. As such exemption under section 10(23cl of the Act, should have been allowed and there was no justification in assessing the income at Rs. 21,72,081/-. 5. That the Ld. CIT (Appeals) has further grossly erred in confirming the disallowance of interest amounting to Rs. 1,96,496....
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....ead with section 13(2) and sec. 13(3) of the I.T. Act, 1961. According to the provisions of section 13(1)(c) (ii) and sec. 13(d)(i) exemption available u/s. 13(3) and sec.11(5) of the I.T. Act, 1961. The income of the trust is deemed to be utilized for the benefit of the specified persons if any part of the income or property of the Trust is or continues to be lent to any specified person for any period during the previous year without adequate security or interest or both. The assessee vide this office show cause notice dated 22.10.2007 was asked to explain and show cause as to why the amount of Rs.19,75,6585/- claimed as exempt may not be added to its income and taxed accordingly." 4. In appeal, the CIT(A) has confirmed the addition by observing as under: "2.8. I have carefully considered the written submissions and the assessment order. The undisputed facts are that the assessee is a 'Trust' running an educational institution and claimed exemption u/s. 10(23c) (iiiad) of I.T. Act. It is also undisputed that during the assessment, year 2005-06 an amount of Rs.24.00 lacs were advanced to two persons who were trustees and settlers at Rs.12 lacs each. It....
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.... any hospital or other medial institution where such assets from part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June 1998;] v (ii) any assets (being debentures issued by or on behalf of any company or corporation) acquired by the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution] before the 1st day of march 1983; (iii) any accretion to the shares forming part of the corpus mentioned in sub clause (i) [and sub-clause (ia) by way of bonus shares allotted to the fund trust or institution [or any university or other educational institution or any hospital or other medical institution] (iv) Voluntary contributions received and maintained in the form of jewellery furniture or any other article as the Board may by notification in the official Gazette, specify, for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub section (5) of section 11:]" 2.10. Further proviso 4 and 5_also are related to the mode of application and investments as pe....
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....AO disallowed the total exemption amounting to Rs. 19,75,585/- which was claimed as exempt u/s 10(23C)(iiiad) of the IT Act, 1961. Besides this, the AO disallowed interest to the tune of Rs. 1,96,496/- which should have been allowed as claimed. The brief history of the case is as under:- 1. The assessee is a unit of Pir Panchal Education Trust. The Trust has established a college for bachelor of education. The said college is duly recognized by the University of Jammu. All admissions are routed through the University and the fees is received by the University and they after deducting their own expenses on account of admission etc., pay the balance amount to the Institute. This goes to show that the University has accepted the assessee unit as an educational institute. In the instant case the educational institution are monitored by the University of Jammu an organization brought into existence by an enactment of the Legislative bodies of the state of J & K. 2. Section 10(23C) (iiiad) was brought in place of Section 10(22) of the Income-Tax Act,. The provisions of section 10(22) and the existing provisions are more or less similar. While bringing in the new provisi....
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....fied in section 11(5). These institutions are given time upto 30th March, 2001 to transfer their investments to specified securities. The Rules and Forms in this regard have since been notified vide Notification No. S.O. 897(E) dated 12th October, 1998 [(1998) 149 CTR (St) 48]. By this notification the Central Board of Direct Taxes have been designated as the Prescribed Authority for the purpose of approval under subclauses (vi) and (via) of section 10(23C). 8.5. These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. In Para 8.2 above it is clearly mentioned that the provisions of Section 10 (23C) for hospitals and educational institutions continues albeit in a different format. 4. The conditions for granting of exemption U/s. 10(23C) for any educational Institution are; (a) Educational institution must exist in the relevant year (b) It need not be affiliated to any University etc., (c) The institution must exist solely for education purposes. 5. As long as the institution fulfills these conditions, it is entitled to exemption. I....
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....nce section 10(22) does not impose any restriction regarding mode of investment of funds, such institutions are not required to invest their funds in the modes specified under section 11(5) of the Income-Tax Act. This clarification will not apply to the institutions see kins exemption under section 11 of the Act. 5. Since the substantial questions of law raised in these appeals are centrifused on the point whether the assessee is entitled for the benefit of section 10(22) of the Act in view of the aliened violation of section 11(5) read with 13(l)(d) of the Act, in view of the above circular of the Central Board of Direct Taxes dated July 25, 1995, we do not see any substantial question of law that arises for our consideration. Accordingly, findins no substantial question of law arises for consideration, the appeals stand dismissed. " 8. Now in the present case the Ld. Assessing Officer while rejecting the exemption claimed by the trust u/s 10(23C) (iiiad) has invoked the provisions of sections 13(1)(c), 13(2)(a), 13(2)(b), 13(2)(d) and 13(2)(g) of the Act. Now in this connection it is pertinent to point out that section 13 starts with the words, 'Nothing....
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....t exemption from income-tax if they existed solely for educational purposes and not for the purposes of profit. In the absence of any monitoring mechanism for checking the genuineness of their activities, these provisions have been misused. 8.2. The Act omits the aforesaid clauses (22) and (22A) from the statute. The exemption would, however, continue in respect of any university or other educational institution, hospital or other medical institution which is wholly or substantially financed by Government, under the new sub-clause (iiiab) and (iiiac) inserted in section 10(23C) of the Income-tax Act, by the Finance (No. 2) Act, 1998. 8.3. Further, under sub-clause (iiiad) and (iiiae) in section 10(23C), the income of other educational and medical institutions would also be exempt if their annual receipts are below a limit to be prescribed. The limit has since been prescribed at Rs. one crore vide Notification No. S.O. 897(E) dated 12th October, 1998 [(1998) 149 CTR (St) 48]. 8.4. The income of the remaining educational and medical institutions would be exempt if they are approved by the prescribed authority on application made by them under sub-clauses (vi) and (via) of se....
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....tion 13(1)(d)-Held that assessee entitled for exemption." "4. That part, the Central Board of Direct Taxes, themselves, issued a circular bearing No. 712 dated July 25, 1995, to the effect that the educational institutions are entitled for exemption under section 10(22) of the Act and consequently, the benefit conferred under section 10(22) cannot be denied on the ground of violation of section 11(5) of the Act. The said circular reads as follows: "Circular No. 712, dated 25th July, 1995 Subject: Investment of funds by educational institution covered under section 10(22) of the Income-Tax Act-Clarification regarding- Under section 10(22) of the Income-Tax act, any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit is exempt from tax, The Board have received representations from various institutions which fulfill the conditions laid down under section 10(22) of the Act, but are denied exemption because their funds are not invested in accordance with the provisions of section 11(5) of the Act. It is hereby clarified that since section 10(22) does not impose any restrictio....