Brief of the Case
ITAT Jaipur held In the case of ACIT vs. M/s Public Rose Shiksha Samiti that on verification of the total receipt mentioned by the Assessing Officer , there was a transaction of sale of land for Rs. 47,90,000/-. The Hon’ble Madras High Court has considered the issue of annual receipts as envisaged in Section 10(23C)(iiiad) in the case CIT Vs. Madrasa EBakhiyath- Us-Salihath Arabic College (2015) 120 DTR 238/226 Taxman 372 (Mad.) (HC) wherein the sale proceed of land and Bond held not to be equated to annual receipts as stated U/s 10(23C)(iiiad). If the sale of land to the tune of Rs. 47,90,000/- reduced from the total receipt, it comes within the limit i.e. upto 1 crore prescribed U/s 10(23C)(iiiad). Hence exemption cannot be denied.
Facts of the Case
The assessee is an educational institution, filed its return as the status of AOP on 22/09/2009 at NIL after claiming exemption U/s 10(23C) (iiiad).The assessee had also claimed loss of Rs. 29,756/- under the head “profit and gains of business”. In the computation filed alongwith the return of income, the assessee had claimed to carry forward business loss of Rs. 29,756/-. The case was scrutinized U/s 143(3).The case of the samiti for earlier year i.e. A.Y. 2006-07, 2007-08 and 2008-09 were also scrutinized U/s 143(3) wherein the claim of exemption U/s 10(23C)(iiiad) was denied by the A.O. for the detailed reasons given in the respective assessment orders.
Therefore, the Assessing Officer gave reasonable opportunity of being heard on this issue on the basis of finding given from A.Y. 2006-07 to 2008-09. After considering the assessee’s reply, the Assessing Officer observed that in income and expenditure account for the current assessment year, the assessee had claimed excess of expenditure over income to the tune of Rs. 29,755.70. The assessee had shown gross income of Rs. 90,87,042/- and expenditure of Rs. 91,16,798/- in the income and expenditure account. However, on perusal of the balance sheet, the total receipt of the samiti are more than Rs. one crore. In the schedule annexed with the balance sheet, a profit on sale of land had been shown at Rs. 34,52,940/-. Further, the assessee has shown various receipts in the receipt and payment account but not declared in the income and expenditure account.
AO further observed that if there are several objects of a society, some of which relate to education and others which do not, and the trustees or the managers in their discretion are entitled to apply the income or property to any of those objects, the institution would not be liable to be regarded as one existing solely for educational purposes, and no part of its income would be exempt from tax.
Thus the annual aggregate receipts of the samiti are more than Rs. One crore and simultaneously for not being an institution existing solely for education purposes. Therefore, the assessee claim for exemption U/s 10(23C) (iiiad) is not allowable. The assessee has also not taken approval from the Chief Commissioner of Income Tax as mandated U/s 10(23C)(vi), the exemption U/s 10(23C)(vi) also cannot be allowed.
Contention of the Assessee
The ld counsel of the assessee supported the order of the CIT(A) and further submitted that Merely because assessee has objects other than education but those other objects were never carried out by it would not mean that assessee was not existing ‘solely’ for educational purposes and thus, not entitled to exemption u/s 10(23C) (iiiad). Apart from the cases relied before the CIT (A), reliance is further placed on following cases: — Saraswati Educational & Welfare Society (Regd.) (2015) 152 ITD 527 (Chand.) (Trib), Geetanjali Education Society Vs. ADIT (2014) 101 DTR 337 (Kar.) (HC), Neeraj Janhitkari Gramin Sewa Sansthan Vs. CCIT & Ors. (2014) 360 ITR 168 (All.) (HC) and Digember Jain Society For Child Welfare Vs. DGIT (2010) 329 ITR 0459 (Del.) (HC).
Contention of the Revenue
The ld counsel of the revenue supported the order of AO.
Held by CIT (A)
CIT (A) allowed the appeal of the assessee. It was held that In view of the decision of the Apex Court cited has CIT Vs. Vegetable Products Ltd. 88 ITR 192, i am inclined to agree with the appellant that the aggregate annual receipts should included receipts which are being received on annual basis and not occasionally or on some other counts. The receipts must be related to the activity of the institution like fee receipts received from students. But it should not include (i) other receipts received from Govt. or any such department to repay or distribute to students under any scheme like scholarship etc. (ii) any loan or debt, (iii) any advances received for sale of any land, sale consideration of any assets (iv) interest earned on any investment like FDR which has no nexus with activity of education. Accordingly, it is held that the annual receipts for the appellant would be Rs. 9036200/-, being the admission fee as per income and expenditure account. The A.O. was not correct in holding that the aggregate annual receipts would be more than Rs. 1 crore at Rs. 14681760/- and in denying the exemption U/s 10(23C)(iiiad) to the appellant on this ground.
The CIT (A) also decided the issue that the appellant did not exist solely for the purpose of education & mis-utilization of funds by relying upon the order of the Hon’ble Andhra Pradesh High Court in the case of RRM Educational Society Vs. CCIT 339 ITR 323 wherein Chief Commissioner of Income Tax had rejected the application for granting approval on the ground that the objects included non educational objects cannot be faulted. The appellant samiti had not conducted any other activity other than educational during the year and only object of the education was being pursued during the year.
The appellant does not exist for the purpose of profits and there was no other business or any profit making activity. There is either no surplus or very small amount of surplus in earlier years and the samiti is utilizing its fund exclusively for the purpose of its educational objective.
Held by ITAT
As per the Assessing Officer the total receipt of the samiti was at Rs. 1,46,81,760/-. However, the CIT (A) found that total receipts were less than Rs. One crore. On verification of the total receipt mentioned by the Assessing Officer , there was a transaction of sale of land for Rs. 47,90,000/-. The Hon’ble Madras High Court has considered the issue of annual receipts as envisaged in Section 10(23C)(iiiad) in the case CIT Vs. Madrasa EBakhiyath- Us-Salihath Arabic College (2015) 120 DTR 238/226 Taxman 372 (Mad.) (HC) wherein the annual receipt, the sale proceed of land and Bond held not to be equated to annual receipts as stated U/s 10(23C)(iiiad).If the sale of land to the tune of Rs. 47,90,000/- reduced from the total receipt, it comes within the limit prescribed U/s 10(23C)(iiiad).
Further the Hon’ble Jurisdictional High Court and Hon’ble Supreme Court’s decision referred by the Assessing Officer has been considered by the Hon’ble Gujarat High Court in the case of Gujarat State Co-operative Union Vs. CIT 195 ITR 279 wherein it has been held that word education was not used in a wide or extended sense so as to include addition to the knowledge of a visitor to a zoo or museum, the High Court held that the museum cannot be taken to be an educational institution existing solely for educational purposes. The object of the samiti as mentioned by the Assessing Officer in his assessment order supports the assessee’s claim that it is an educational institution. The Coordinate Bench has allowed the assessee’s registration U/s 12AA in ITA No. 676/JP/2010 order dated 13/5/2011 from financial year 2000-01. Therefore, we uphold the order of the CIT (A).
Accordingly appeal of the revenue dismissed.