Case Law Details
Baba Hira Singh Bhattal Institute of Engineering &Technology Lehragaga Vs DCIT (Exemptions) (ITAT Chandigarh)
During the course of assessment proceedings, the AO observed that as per the assessee’s society audit report right from A.Y. 2008-09 to 2013-14, it has not received any money from the Government except for A.Y. 2006-07 where Rs. 50 lacs has been received and in A.Y 2007-08 where Rs. 1 Crore has been received. It was accordingly observed by the AO that the assessee society is not being wholly or substantially financed by the Government, being one of the essential conditions for claiming exemption under section 10(23C)(iiiab) of the Act and a show cause was issued to the assessee society as to why the exemption so claimed should not be denied to the assessee society for the year under consideration.
Whole case of the AO rest on the consistent factual position right from A.Y. 2008-09 to 2013-14 that the assessee society has not received any money from the Government except for A.Y. 2006-07 and A.Y 2007-08, and it was accordingly observed by the AO that the assessee society is not being wholly or substantially financed by the Government, being one of the essential conditions for claiming exemption under section 10(23C)(iiiab) of the Act. For A.Y 2006- 07 to A.Y 2012-13, the Coordinate Bench has held that the assessee is wholly funded by the Government and is eligible for exemption under section 1 0(23C) (iiiab) of the Act. Nothing has been brought on record in terms of whether the Revenue has challenged the said order of the Coordinate Bench or the order so passed has been upset by the Courts. Therefore, as on date, the order of the Coordinate Bench stands and continues to hold the field.
ITAT find that the ld CIT(A) has referred to the order of the Coordinate Bench and has held that the condition as to whether the assessee is wholly or substantially financed by the Government is a question of fact which has to be ascertained and examined for each year and receipts for A.Y 2013-14 was never a subject matter of adjudication by the Tribunal and for the year under consideration, it has not been specified as to what extent and what amount was considered as Government Finance out of total receipts of Rs 8,29,90,727/-. During the course of hearing, the ld AR has submitted that both the lower authorities have failed to appreciate that the contents of the said letter issued by the Government of Punjab stand as of today as the letter has not been withdrawn and for the year under consideration, the whole of the revenue generated by Institute amounting to Rs 8,29,90,727/- belongs to the Consolidated fund of the Government of Punjab and the same has been permitted to be retained by the institute for achieving the objectives of the Society as yearly grant. On perusal of the letter dated 17.08.2016 issued by the Principal Secretary to Government of Punjab, Department of Technical Education& Industrial Training, we find that it talks about the revenues generated by the Institute which belongs to the Consolidated fund of the Government and which has been permitted to be retained by the institute as yearly grant. In the said letter, we find that there is no limit specified on the quantum of revenues generated by the institute, the period during which such revenues are generated and the period for which the revenues are allowed to be retained by the institute. Therefore, irrespective of quantum of revenues which the institute generate in respective financial years, the revenues so generated belongs to the Consolidated fund of the Government and which continue to remain permitted to be retained by the institute. The Coordinate Bench has therefore taking into consideration the aforesaid contents of the said letter has decided the matter for all the years starting from A.Y 2006-07 to A.Y 2012-13 and for the year under consideration, we therefore do not see any basis to deviate from the decision of the Coordinate Bench as undisputedly, for the year under consideration, there is no change in the facts and circumstances of the case as regard retention of revenues by the assessee society as grant in aid by the Government of Punjab and the assessee society thus continue to remain wholly funded by the Government of Punjab and the assessee is thus held eligible for exemption under section 1 0(23C) (iiiab) of the Act.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee against the order of the Ld. CIT(A), Patiala date 26/12/2019 wherein the assessee has taken the various grounds of appeal whereby it has effectively challenged the action of the Ld. CIT(A) in sustaining the disallowance of exemption claimed under section 1 0(23C) (iiiab) of the Act.
2. Briefly the facts of the case are that the assessee society is registered under the Societies Registration Act and is engaged in imparting education and running an institute by the name of Baba Hira Singh Bhattal Institute of Engineering and Technology, Lehragaga since 2004-05. For the financial year relevant to the impugned Assessment Year, the assessee society filed its return of income claiming exemption under section 10(23C)(iiiab) of the Act.
2.1 During the course of assessment proceedings, the AO observed that as per the assessee’s society audit report right from A.Y. 2008-09 to 2013-14, it has not received any money from the Government except for A.Y. 2006-07 where Rs. 50 lacs has been received and in A.Y 2007-08 where Rs. 1 Crore has been received. It was accordingly observed by the AO that the assessee society is not being wholly or substantially financed by the Government, being one of the essential conditions for claiming exemption under section 10(23C)(iiiab) of the Act and a show cause was issued to the assessee society as to why the exemption so claimed should not be denied to the assessee society for the year under consideration.
2.2 In response the assessee society submitted that it has been established by the Government of Punjab with the objective of imparting technical education both under degree and certificate level courses as literary, scientific and charitable institution without any profit motive. The assessee society works under the control of the Government of Punjab and is 100% financed by the Government of Punjab in terms of providing infrastructure i.e. land and buildings, machinery and equipment’s, furniture and fixtures, library books, vehicles and other assets. Besides, the assessee society has also received grants on various occasions by the Government of Punjab as and when required.
2.3 It was further submitted that being under the control of Punjab Government, the assessee society’s accounts are regularly subject to audit by the controller and Auditor General of Punjab. It was further submitted that though the excess of revenue generated over expenditures by way of fees received from the students etc. belongs to the Consolidated funds of the Government, the same has been permitted to be retained by the assessee society for its maintenance and growth on year to year basis by the Government. The foretasted amount is also grant in aid received by the assessee society.
2.4 The submissions so filed by the assessee were considered but not found acceptable to the AO. As per the AO, the Government Polytechnic College Lehragaga was transferred to the society, M/s Baba Hira Singh Bhattal Institute of Engineering & Technology in 2005 due to financial constraints faced by the Government of Punjab & it was proposed that this college will be run by an independent, self sustainable autonomous society and it shall be deemed as a self sustainable Institution and the Government will pay one time grant of Rs. 1.10 Cores to kick start the project. Thus it is clear that the income of this institute which is self financed cannot fall within in the ambit of section 10(23C)(iiiab) as the institute is not being wholly or substantially financed by the Government.
2.5 It was further observed by the AO that the transfer of infrastructure by the Government of Punjab to the assessee does not substitute the requirement of wholly and substantially financing by the Government and the financing of the institute wholly and substantially by the Government is required every year because every assessment year is an independent year. It was further held by the AO that the Management control of the institute vests in the hands of the society and not in the hands of Government of Punjab and no copy of audited accounts, audited by the A.G. of Punjab has been filed.
2.6 Further, AO referred to the excess of income over expenditure for various years right from A.Y. 2006-07 to 2013-14 and for A.Y. 2013-14, the total receipt of the assessee society were Rs. 8,29,90,727/- and total expenditure was Rs. 6,23,87,823/- resulting in excess of income over expenditure of Rs. 2,06,02,904/-. It was accordingly held by the AO that the assessee society is not eligible for exemption under section 1 0(23C) (iiiab) of the Act and excess of income over expenditure amounting to Rs. 2,06,02,804/- was brought to tax.
3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and reiterated the submissions made before the AO. It was further submitted that the matter is squarely covered by the decision of Coordinate Bench in assessee’s own case for A.Y. 2006-07 to 2012-13 (in ITA Nos 1391 to 1397/Chd/2017 dt. 17/01/2018). The submission so filed by the assessee society were considered but not found acceptable to the Ld. CIT(A) and the relevant findings of the Ld. CIT(A) which are under challenge before us reads as under:
“As per the facts mentioned by the AO in the assessment order, the total receipts of the society for the year under consideration were Rs. 8,29,90,727/-but not a single rupee has been received from the Government during this year. In view of the above, it is held that although the assessee may fulfill the first condition u/s 10(23C)(iiiab) that it is a university or educational institution existing solely for the educational purposes and not purpose of the profit but it has failed to fulfill the second condition as prescribed u/s 10(23C)(iiiab) and did not receive more than 50% of its receipts during the year from the Government as per Rule 2BBB for making it eligible for claiming exemption u/s 10(23C)(iiiab). It is also mentioned by the AO that the assessee received exemption u/s 10(23C)(vi), for assessment year 2014-15 onwards granted by the Chief Commission of Income Tax, Ludhiana vide No. CCIT/Ldh/JB/10(23C)/ll/2015-16/2729 dated 15.09.20 15. No such exemption was available to the assessee for the Assessment Year 2013-14. Therefore, to conclude, it is found that the assessee during the year under consideration was neither eligible for deduction u/s 10(23C)(iiiab) nor u/s 10(23C)(vi). The Hon ble ITAT has given its judgment dated 17.01.2018 based upon the facts for those assessment years but the fact about receipt for the assessment year 2013-14 were never a subject matter of adjudication at the time of passing the order dated 17.01.2018. As per the AO, out of total receipts of Rs. 8,29,90,727/- for the Financial Year 2012-13 relevant to Assessment Year 2013-14, no amount was received from the Government and the AR has not been able to show the amount of Government Finance received by the assessee during the year under consideration. As per the submissions, the AR has claimed that it is 100% Financed by the Govt, of Punjab by way of providing Infrastructure i.e. land and building, machinery and equipment, furniture and fixtures, library books, vehicles and other assets and it functions under the control of State Government. However, it has not been specified as to what extent and what amount was considered as Government Finance out of total receipts of Rs. 8,29,90,727/- which, include fees received from the students. These receipts cannot be said to be finance by the Government as envisaged under Section 10(23C)(iiiad). The argument about fixation of fee structure and course of institution as prescribed by the Government of Punjab are not relevant because these are regulatory powers exercised by the Government and are applicable even to the private institutions. Similarly the exercise of control over the finance and audit by the C & AG is also not very relevant for the purpose of exemption u/s 10(23C)(iiiab) which prescribes that the institution should be wholly or substantially Financed by the Government which is not the fact in the case at hand where as per the facts mentioned in the assessment order, no finances has been received by the assessee during the year from the Government. Thus, it may be true that the assessee is an institution existing solely for the educational purposes and not for the purpose of profit but it had failed to show that it was wholly or substantially financed by the Government during the year. Out of total receipts, the Government grant were nil and hence the condition of Rule 2BBB are not fulfilled by the assessee during the Financial Year 20 12-13 relevant to Assessment Year 20 13-14. Hence, the AO was right in disallowing the claim of exemption for the year under consideration keeping in view the nature of receipts for the year under consideration.”
4. Against the said order and findings of the Ld. CIT(A) the assessee society is now in appeal before us.
5. During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities and our reference was drawn to the order of the Coordinate Bench (Supra) wherein the relevant findings read as under:
“3. Brief facts of the case are that the assessee is running an institute of Engineering and Technology at Lehra Gaga.
4. The Assessing Officer has disallowed the exemption claimed by the assessee under section 10(23)(c)(iiiab). The Assessing Officer has held that the twin conditions for qualification of exemption under section 10(23)(c)(iiiab) exist only for educational purposes and not for the purpose of profit and the second condition being the assessee should be either wholly or substantially financed by the Government. The Assessing Officer held that since no amount has been received from the Government the institute cannot be held to be eligible for exemption under section 10(23) (c) (iiiab).
5. The matter travelled up to the Tribunal and the coordinate Bench of ITAT Chandigarh vide order dt. 2 1/10/2016 in ITA No. 1110 to 1116 has set aside all the appeals to the file of Ld. CIT(A) for den ovo adjudication.
6. In the second round of adjudication, Ld. CIT(A) has deleted the addition based on the letter of the Principal Secretary Govt. of Punjab to the effect that the institute is fully owned and controlled by the Govt.
7. Before us the Ld. DR relied on the order of the Assessing Officer whereas the Ld. AR relied on the order of the Ld. CIT(A).
8. We have heard Ld. Representatives of both the parties and also perused the material placed before us.
The contents of the letter issued by the Principal Secretary Govt. of Punjab are as under:
It is stated that Government Polytechnic College, Lehragaga was upgraded by the Government of Punjab during the year 2005 and renamed as Baba Hira Singh Bhattai Institute of Engineering & Technology Lehragaga District sangria.
This Institute is established promoted and its management is fully owned and controlled by the Government of Punjab. As the institute is meeting its expenditures from its internal resources, therefore grant in cash is not given regularly to the institute by Government of Punjab.
The ownership of the land and building from where the education is being imparted vats with the comment of Punjab. The annual rent towards the same is made exempted on year to year basis and is in the -nature of grant to the institutional society.
The fees structure and courses of the institution are prescribed by Government of Punjab, reviewed on annual basis as decided by the Committee of the Department of Technical Education and Industrial Training Punjab and Chandigarh.
The revenue generated by Institute belongs to the Consolidated fund of the Government and the same has been permitted to be retained by the institution for achieving the objectives of the Society as yearly grant will stop the annual budget of the institute is passed everyday by the Department of Technical Education and Industrial Training through its meeting of the Finance Committee.
Further, the accounts of the institution are subjected to audit by the office of the Controller and Auditor General, Punjab.
From the perusal of the above it is not in dispute that the assessee fulfils the twin conditions of
a) university or other educational institution existing solely for the educational purposes and not for purposes of profit, and
b) which is wholly or substantially financed by the government.
as stipulated under section 10(23) (c) (iiiab).
9. Since the assessee is wholly funded and owned by the Govt., the finance are being audit by the CAG, Punjab and the receipts are paid into consolidated fund of the Govt. the assessee is eligible for exemption under section 10(23)(c)(iiiab). Hence we decline to interfere with the order of the Ld. CIT(A).
10. The appeals of the Revenue are dismissed.
6. It was further submitted that in the aforesaid Tribunal order, while reproducing the contents of the letter issued by the Government of Punjab, there is a small typographical error in one of the paragraphs and our reference was drawn to the contents of the letter dated 17.08.2016 available at APB Page 50 which reads as under:
“The revenue generated by Institute belongs to the Consolidated fund of the Government and the same has been permitted to be retained by the institution for achieving the objectives of the Society as yearly grant. The annual budget of the institute is passed everyday by the Department of Technical Education and Industrial Training through its meeting of the Finance Committee.”
7. It was submitted that there is no change in the facts and circumstances of the case, the contents of the said letter issued by the Government of Punjab stand as of today as the letter has not been withdrawn and for the year under consideration, the revenue generated by Institute belongs to the Consolidated fund of the Government of Punjab and the same has been permitted to be retained by the institute for achieving the objectives of the Society as yearly grant. It was accordingly submitted that the decision of the Coordinate Bench for earlier assessment years squarely applies for the year under consideration and the same may be followed and relief be provided to the assessee society.
8. Per Contra, the Ld. Sr DR relied on the findings of the lower authorities.
9. We have heard the rival contentions and pursued the material available on As we have noted above, the whole case of the AO rest on the consistent factual position right from A.Y. 2008-09 to 2013-14 that the assessee society has not received any money from the Government except for A.Y. 2006-07 and A.Y 2007-08, and it was accordingly observed by the AO that the assessee society is not being wholly or substantially financed by the Government, being one of the essential conditions for claiming exemption under section 10(23C)(iiiab) of the Act. For A.Y 2006- 07 to A.Y 2012-13, the Coordinate Bench has held that the assessee is wholly funded by the Government and is eligible for exemption under section 1 0(23C) (iiiab) of the Act. Nothing has been brought on record in terms of whether the Revenue has challenged the said order of the Coordinate Bench or the order so passed has been upset by the Courts. Therefore, as on date, the order of the Coordinate Bench stands and continues to hold the field.
10. We find that the ld CIT(A) has referred to the order of the Coordinate Bench and has held that the condition as to whether the assessee is wholly or substantially financed by the Government is a question of fact which has to be ascertained and examined for each year and receipts for A.Y 2013-14 was never a subject matter of adjudication by the Tribunal and for the year under consideration, it has not been specified as to what extent and what amount was considered as Government Finance out of total receipts of Rs 8,29,90,727/-. During the course of hearing, the ld AR has submitted that both the lower authorities have failed to appreciate that the contents of the said letter issued by the Government of Punjab stand as of today as the letter has not been withdrawn and for the year under consideration, the whole of the revenue generated by Institute amounting to Rs 8,29,90,727/- belongs to the Consolidated fund of the Government of Punjab and the same has been permitted to be retained by the institute for achieving the objectives of the Society as yearly grant. On perusal of the letter dated 17.08.2016 issued by the Principal Secretary to Government of Punjab, Department of Technical Education& Industrial Training, we find that it talks about the revenues generated by the Institute which belongs to the Consolidated fund of the Government and which has been permitted to be retained by the institute as yearly grant. In the said letter, we find that there is no limit specified on the quantum of revenues generated by the institute, the period during which such revenues are generated and the period for which the revenues are allowed to be retained by the institute. Therefore, irrespective of quantum of revenues which the institute generate in respective financial years, the revenues so generated belongs to the Consolidated fund of the Government and which continue to remain permitted to be retained by the institute. The Coordinate Bench has therefore taking into consideration the aforesaid contents of the said letter has decided the matter for all the years starting from A.Y 2006-07 to A.Y 2012-13 and for the year under consideration, we therefore do not see any basis to deviate from the decision of the Coordinate Bench as undisputedly, for the year under consideration, there is no change in the facts and circumstances of the case as regard retention of revenues by the assessee society as grant in aid by the Government of Punjab and the assessee society thus continue to remain wholly funded by the Government of Punjab and the assessee is thus held eligible for exemption under section 1 0(23C) (iiiab) of the Act.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 21/09/2022.
