HYDERABAD Asst. Director of Income Tax, (Exemptions)

Transcription

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “B” : HYDERABAD
BEFORE S/SHRI B. RAMAKOTAIAH, A.M. & SAKTIJIT DEY, J.M.
ITA.No.1645/Hyd/2013
Assessment Year 2007-2008
Asst. Director of Income
Tax, (Exemptions)-I,
Hyderabad.
(Appellant)
vs.
Hyderabad Study Circle
Hyderabad.
PAN AAATT1873G
(Respondent)
Cross Objection No.23/Hyd/2014
Arising out of
ITA.No.1645/Hyd/2013 – Assessment Year 2007-2008
Hyderabad Study Circle
Hyderabad.
PAN AAATT1873G
vs.
(Cross Objector)
For Revenue
For Assessee
Asst. Director of Income
Tax, (Exemptions)-I,
Hyderabad.
(Respondent)
: Mr. Rajat Mitra
: Mr. V. Raghavendra Rao
Date of Hearing
: 09.12.2014
Date of pronouncement : 30.01.2015
ORDER
PER SAKTIJIT DEY, J.M.
This appeal by the department is directed against
the Order of the Ld. CIT(A)-IV, Hyderabad dated 06.09.2013 for
the assessment year 2007-2008. Assessee has also filed cross
objection against the same order of the Ld. CIT(A).
2
ITA.No.1645/Hyd/2013 & C.O.No.23/Hyd/2014
Hyderabad Study Circle, Hyderabad.
ITA.No.1645/Hyd/2013 :
2.
The Department has raised the following grounds :
“1. The order of the Ld.CIT (Appeals) is erroneous both
on facts and in law.
2. On the facts and in circumstances of the case and
when the assessee is conducting only coaching
classes for students for appearing in civil services
examination, the Ld. CIT(Appeals) erred in holding
that the assessee is eligible for exemption
u/s.10(23C)(iiiad) of the LT Act, 1961.
3.
The Ld. CIT(Appeals) ought to have appreciated
that conducting only coaching classes for
students to enable them for the purpose of
appearing in civil services examination does not
come under the purview of education as defined
in Section 2(15) of the LT Act, 1961.
4.
The Ld. CIT(Appeals) ought to have appreciated
that the activity of coaching conducted by the
assessee to enable students for appearing in
competitive examination does not come under the
ambit of education, having regard to the decision
of Hon'ble Patna High Court in Bihar Institute of
Mining & Mine Surveying Vs. CIT (1994) 208 ITR
608, and hence the assessee is not entitled to
exemption u/s.10(23C)(iiiad) of the LT Act, 1961.
5. The Ld. CIT(Appeals) erred in law in holding that
the net income is to be taxed when the gross
receipts from fee collection, in the hands of the
assessee, which constitutes its total income is
taxable, as it is not entitled for exemption for the
grounds of appeal raised above.
6. The Ld. CIT(Appeals) is not justified in deleting the
disallowance of depreciation, when the assessee
has debited a sum of Rs.3,64,941 in the Income &
Expenditure Account and its income is not eligible
for
exemption u/s.10(23C)(iiiad) of the LT Act, 1961.
3
7. Any other ground that may be urged at the time of
hearing”.
3.
Grounds No. 1 and 7 being general grounds need
not require special adjudication. Grounds No. 2, 3 and 4 are
on the common issue of allowance of exemption under section
10(23C) (iiiad) of the Act.
3.1.
Briefly the facts relevant to this issue are assessee
a society registered under the Societies Registration Act was
established in the year 1976. The objects of the society as
noted by the A.O. is to promote literacy, scientific and other
educational activities to undertake research programmes and
to arrange training of local boys and girls appearing at the
competitive examination held by UPSC, APPSC etc., As noted
by the A.O. the main object of the assessee society is to
encourage young men and women especially from Andhra
Pradesh to take-up Civil Services as a career. For the year
under consideration, assessee filed its return of income on
22.10.2007 declaring NIL income after claiming exemption
under section 10(23C)(iiiad). During the scrutiny assessment
proceeding, the A.O. after verification of the books of accounts
and other information available on record observed that during
the relevant financial year the assessee conducting coaching
for students appearing for Civil Services Main, 2006, Civil
Services – Prelims 2007 and Civil Services Crash Course
(Prelims) has received the following amounts :
(i)
Fees of Rs.9,62,785 from 271 students appearing
for C.S. Main 2006.
(ii)
Fees of Rs.6,78,785 from 212 students appearing
for C.S. Preliminary 2007.
4
(iii)
3.2.
Fees of Rs.86,500 from 72 students appearing for
C.S.Crash Course 2007.
The A.O. was of the view that coaching students
and preparing them for particular competitive examination
does not partake the nature of imparting education. Hence, the
assessee is not a charitable institution under section 2(15) of
the Act. Accordingly, he issued a show cause notice to the
assessee to explain why the exemption claimed should not be
disallowed. Though, the assessee objected to the inference
drawn by the A.O. by stating that it is eligible for exemption
but the A.O. rejecting the claim of the assessee held that as
assessee is a Coaching Institute giving coaching to students for
various
competitive
examination
and
is
not
meant
for
imparting a systematic education, it cannot be classified as
charitable institution. In this context, A.O. relied upon the
decision of the Hon’ble Supreme Court in the case of Sole
Trustee, Loka Shikshana Trust vs. CIT 101 ITR 234 and some
other decisions of the Supreme Court as well as other High
Courts. Accordingly, the A.O. held that the total fees collected
of Rs.17,28,070 from the students appearing for competitive
examination is required to be brought to tax and treated it as
income of the assessee for the impugned assessment year.
4.
Being aggrieved of the addition made by the A.O.
assessee preferred appeal before the Ld. CIT(A). In course of
hearing of appeal before the First Appellate Authority, it was
submitted by the assessee that the word ‘Education’ had not
been defined in the Act, hence, should not be restricted to
mere conventional or academic education. It was submitted,
‘Education’ includes vocational Education and training also.
Assessee submitted, even as per the ratio laid down by the
5
Hon’ble Supreme Court in the case of Sole Trustee, Loka
Shikshana Trust vs. CIT (supra), the word ‘Education’ cannot
be given a restrictive meaning. In support of such contention,
assessee relied on number of decisions. Further, it was
submitted by the assessee that as assessee’s claim of
exemption under section 10(23C)(iiiad) had been granted for
earlier assessment years, the rule of consistency demanded
that it has to be allowed for the assessment year under
consideration also. It was also submitted by the assessee that
as it is also registered under section 12A of the Act,
alternately, it should be allowed exemption under section 11 as
its activities would also qualify as towards general public
utility. In support of such contention, assessee also relied on
number
of
decisions.
Ld.
CIT(A)
after
considering
the
submissions of the assessee in the context of facts and
materials on record as well as on examining the ratio laid
down by the Hon’ble Supreme Court in the case of Sole
Trustee, Loka Shikshana Trust vs. CIT (supra) observed as
under :
“4.4. While advocating a restrictive usage of the
word 'education', the court excluded the education
said to be provided by the 'great school of life'. It
affirmed that 'the process of training and developing
the knowledge, skill, mind and character of students
by normal schooling' would be included in the term
'education'. The observation of the court that
education connotes the whole course of scholastic
instructions which the person has received indicates
that the Court did not intend to give a narrow and
pedantic sense to the word.
4.5. This view is also expressed in the following
decisions :
(i) DIT (Exemp) vs. National Safety Council
[2008] 305 ITR 257 (Bom.)
6
(ii)
CIT vs. AMM Arunachalam Educational
Society [2000] 243 ITR 229 (Mad.)
(iii) Addl.
CIT
vs.
Aditanar
Educational
Institution [1979] 118 ITR 235 (Mad.)
(iv) Governing Body of Rangaraya Medical
College vs. ITO [1979] 117 ITR 284 (AP)
4.6 Following these decisions, the courses imparted
by the appellant do, therefore, fall within the concept
of education. Education is no more to be understood
as mere imparting the '3 R's i.e. reading, writing and
arithmetic. In the case of CIT Vs. Sri Lal Bahadur
Shastri Educational Society [2001] 252 ITR 837
(Raj), the Gujarat High Court considered the
educational institution, running a stone crushing unit
under the scheme of Central Social Welfare Board
intended to provide employment to poor women
belonging to backward community, as a public
charitable society engaged in imparting education.
The engaging of students in manufacturing of furnace
and stone crushing activities, which made them self
reliant, was considered as an educational activity. In
the case of Gujarat State Co-op Union Vs. CIT
[1992] 195 ITR 279 (Guj), an institution conducting
Diploma Certificate and Orientation Courses in Cooperation and Banking was found by the Court to be
eligible for exemption as an educational institution.
Similarly, in the case of CIT Vs. Sri Ram
Educational Foundation [2001] 250 ITR 504
(Del), a vocational training centre was considered as
an educational institution, by placing reliance on the
decision in the case of Addl. CIT Vs. Surat Art Silk
cloth Manufacturers Association [1980] 121 ITR
1 (SC).
4.7. There is no dispute that the appellant is
engaged in providing training and skills focused at
enabling its 'students' to obtain jobs through
cometitive examinations. The appellant is also doing it
in a systematic and structured manner. Award of
formal degrees or certificates at the culmination of the
Training Programme is not a mandatory requirement
for qualifying as 'education'.
7
4.8.
I, therefore,
appellant fall in the
which the appellant
u/s 10(23C)(iiiad).
issue.”
5.
hold that the activities of the
realm of 'education' as a result of
is held to be eligible for exemption
The appeal is allowed on this
Being aggrieved, the department is in appeal
before us. Ld. D.R. supporting the view of the A.O. submitted
that as the assessee is only running a coaching centre, it
cannot be considered to be imparting education so as to
consider its activities to be towards charitable purpose as
defined under section 2(15) of the Act. Therefore, assessee
cannot be granted exemption under section 10(23C) (iiiad).
6.
Learned
A.R.
on
the
other
hand
strongly
supporting the finding of the Ld. CIT(A) on this issue
submitted that as the activity carried on by the assessee
cannot be anything else except imparting of education,
assessee is eligible for exemption under section 10(23C)(iiiad).
It was submitted that education cannot be given a restricted
meaning to mean that only education imparted in schools and
colleges or universities are to be treated as to fulfill the criteria
of charitable purpose as defined under section 2(15). The
learned A.R. submitted that as the activity of the assessee as
per its objects, is also in the nature of imparting education
through process of training for developing the knowledge, skill,
mind and character of the students, it has to be considered as
‘education’ as envisaged under section 2(15) of the Act. In
support of its contention, the learned A.R. relied upon the
following decisions :
1.
ICAI Accounting Research Foundation & another vs.
Director General of Income Tax (Exemptions) and others
(2010) 321 ITR 73 (Del.)
8
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Director of Income Tax (Exemptions) vs. National Safety
Council (2008) 305 ITR 257 (Bom.)
DIT vs. Indo-Soviet Medicare & Research Foundation
(2005) 146 Taxman 384 (Del.)
CIT vs. A.M.M. Arunachalam Educational Society (2000)
243 ITR 229 (Mad.)
Gujarat State Cooperative Union vs. CIT (1992) 195 ITR
279 (Guj.)
CIT vs. Academy of General Education, Manipal (1984)
150 ITR 135 (Kar.)
Addl. CIT vs. Aditanar Educational Institution (1979) 118
ITR 235 (Mad.)
ICAI vs. DGIT (E) (2012) 347 ITR 99 (Del.)
Indo-American Society vs. ADIT (E) (2005) 278 ITR (A.T.)
49 (ITAT) (Mum.)
CIT vs. Shri Ram Education Foundation (2001) 250 ITR
504 (Del.)
Victoria Technical Institute vs. CIT (1991) 188 ITR 57
(SC)
Addl. CIT vs. Surat Art Silk Cloth Manufacturers
Association (1980) 121 ITR 1 (SC)
ITO vs. SRM Foundation of India (1988) 30 TTJ 283
(ITAT) (Del.)
Spectra Shares & Scrips P. Ltd., vs. CIT (2013) 354 ITR
35 (A.P.).
CIT vs. Hindusthan Motors Ltd., (1991) 192 ITR 619
(Cal.)
CIT vs. Dalmia Dadri Cement Ltd., (1970) 77 ITR 410 (P
& H).
DDIT (E)-I, Hyderabad vs. Kamineni Educational Society,
Hyderabad ITAT, Hyderabad ‘B’ Bench ITA.No. 807 to
809/Hyd/2010 dated 03.09.2010.
6.1.
is
Learned A.R. submitted, for that matter, assessee
also
conducting
MCA
course.
Learned
A.R.
further
submitted that even otherwise also the objects of the assessee
having been found to be of charitable nature, the assessee has
been granted registration under section 12A of the Act from
the date of its establishment which proves the fact that
assessee is a charitable institution existing for charitable
purpose as defined under section 2(15) of the Act. Therefore,
till such registration continues and assessee carries on
9
activities as per its objects, the A.O. cannot treat the assessee
not to be a charitable institution. Further, the learned A.R.
submitted that from the date of its inception, assessee has
been
granted
exemption
as
a
charitable
institution
in
preceding assessment years and as per rule of consistency, the
same
view
should
have
been
followed
in
the
present
assessment year also. In support of such argument, learned
A.R. relied on the following decisions :
7.
(i)
Spectra Shares & Scrips P. Ltd., vs. CIT (2013)
354 ITR 35 (A.P.)
(ii)
CIT vs. Hindustan Motors Ltd., (1991) 192 ITR 619
(Kol.)
(iii)
CIT vs. Dalmia Dadri Cement Ltd., (1970) 77 ITR
410 (P & H).
We have considered the submissions of the parties
and perused the material on record as well as orders of the
revenue authorities. We have also applied our mind to the
decisions placed before us. Undisputed facts are, assessee was
established as a society as early as in December, 1976 and is
registered under the Societies Act. It is also not in dispute that
assessee has been granted registration under section 12A of
the Act by the Commissioner of Income Tax vide order dated
23.09.1978 which pre-supposes that assessee’s objects being
of charitable nature, assessee was granted registration as a
charitable institution. Keeping in view the aforecited factual
position, let us examine the facts of the case. The objects of the
assessee society as per its bye laws are as under :
“The aims and objectives of the society are as follows:
a. To promote literary, scientific and other educational
activities among local young men and women.
10
b. To be a Centre for Research in Academic, Administrative,
Educational and Management fields with a view to
contributing to improvement in the systems, methods
thereof.
c. To promote, integration and dissemination of knowledge
in various fields of human activity related to academic,
education, management and administrative fields and
other programmes.
d. To
undertake
Research,
Organisational
and
Developmental Programmes on contract with Government,
Public or Private Agencies.
e. To Organise and promote such other related activities as
would help the achievement of its objectives; and
f. To arrange for the training of local boys and girls
appearing at the competitive examination held by the
Union Public Service ·Commission, the Andhra Pradesh
Public
Service
Commission,
the
Public
Service
Commissions of other States, National or Regional Bodies
for appointment to the Banking Institutions and other
Organisations.
g. To make donations, contributions and give subscriptions
to Charitable Institutions promoting educational or literacy
activities.
h. To establish, maintain, run, develop, improve, extend,
grant donate, for and to aid in the establishment,
maintenance, improvement and extension of Schools,
colleges, polytechnics and other educational institutions,
including Vocational training centers, research centers,
foundations and adult education Centers and hostels for
students.
8.
The A.O. while examining the books of accounts
and other information available on record has not found any
material to suggest that assessee has undertaken activities
contrary to its aims and objects. The only reason on which the
A.O. has come to conclusion that it is not eligible for
exemption under section 10(23C)(iiiad) is that since the
assessee is engaged in coaching students for competitive
11
examination, the said activity does not partake the nature of
imparting education. Hence, is not within the meaning of
charitable purpose under section 2(15) of the Act. The A.O. has
also observed that assessee cannot be classified as charitable
institution for that very reason. However, on examination of
the definition ‘charitable purpose’, it is clear that education is
one of the activity coming within the meaning of charitable
purpose. Though it is a fact that the Hon’ble Supreme Court in
the case of Sole Trustee, Loka Shikshana Trust vs. CIT (supra)
has observed that ‘education’ as used in section 2(15) of the
Act cannot be construed to be in a very wide and extended
sense but the said decision cannot be interpreted in a manner
to mean that the expression education envisaged under section
2(15) has to be given a restricted meaning and would only
mean the education as imparted in schools and colleges.
Therefore, if education is considered to mean training and
developing the skill, knowledge, mind and character of
students, then the activity of the assessee can be termed to be
coming within the expression ‘education’ as used in section
2(15) of the Act. Moreover, the provision contained under
section 10(23C)(iiiad) used the words “Any University or other
Educational Institution” solely for educational purpose and not
for the purpose of profit. If we consider the activities of the
assessee as enumerated in the aims and objects then it has to
be considered as other educational institution existing solely
for educational purpose and without profit motive. Therefore,
considered in the aforecited perspective and keeping in view
the ratio laid down in the decisions referred to by the learned
A.R. and relied upon by the learned CIT(A), the assessee would
be eligible for exemption under section 10(23C)(iiiad). Further,
from the facts and materials placed on record, it is very much
12
evident that from its inception assessee has been claiming
exemption and the department has also accepted such claim of
the assessee in successive assessment years. Perusal of the
assessment orders passed under section 143(3) of the Act for
the
assessment
years
establishes this fact.
1997-98
and
1999-2000
clearly
Moreover, even in the succeeding
assessment year also i.e., assessment years 2010-2011 and
2011-2012, A.O. has allowed claim of exemption under section
10(23C)(iiiad) after examining the issue in detail. Therefore,
when the department has over the years accepted assessee’s
claim of exemption under section 10(23C)(iiiad), there is no
reason why a different view should be taken in the impugned
assessment year. Though, principles of res judicata does not
apply to tax proceedings as each assessment year is a
independent unit, but as held by the Hon’ble Supreme Court
in the case of Radhasoami Satsang (193 ITR 321) where a
fundamental
aspect
permeating
through
the
different
assessment years has been found as a fact one way or the
other and parties have allowed that position to be sustained by
not challenging the order it would not at all be appropriate to
allow the position to change in a subsequent year. The Hon’ble
jurisdictional
High
Court
while
following
the
aforecited
principle laid down by the Hon’ble Supreme Court in case of
Spectra Shares and Scrips vs. CIT (supra) held as under :
“In view of the above, we hold that the respondent cannot
under section 263 interfere on an issue which has been
accepted by the Revenue for a number of years
particularly, when the A.O. in the assessment order for
the A.Y. 2006-07 takes the same view by terming it
erroneous”
8.1.
Though the same view has been expressed in other
decisions referred to by the learned A.R. it is not necessary to
13
refer to all of them as the principle in this regard is a well
known. At this juncture, it will be pertinent to mention here
that in A.Y. 2004-05 also while completing the assessment
under section 143(3), the A.O. had accepted assessee’s claim of
exemption. Subsequently, on the basis of audit report, the A.O.
reopened the assessment under section 147 and passed the
assessment order holding that assessee is not eligible for
exemption under section 10(23C)(iiiad). However, when the
assessee carried an appeal to the Tribunal, the Tribunal vide
order
dated
13.05.2011
in
ITA.No.1468/Hyd/2010
held
reopening of assessment to be invalid as the A.O. in original
assessment has examined the issue relating to claim of
exemption and there was no change in circumstances or fresh
material before the A.O. for reopening the assessment. It is
interesting to note that not only the A.O. who reopened the
assessment, is the same who has passed the assessment order
for the impugned assessment year, but the assessment order
passed for the impugned assessment year is almost a replica of
the assessment order passed under section 143(3) read with
section 147 for the assessment year 2004-05 a copy of which
has
been
placed
in
assessee’s
paper
book.
In
these
circumstances, it is not difficult to understand why the A.O. in
the impugned assessment year has taken such a view.
However, when department has accepted assessee’s claim of
exemption not only in the preceding assessment years but also
in subsequent assessment years, latest being assessment
years 2010-2011 and 2011-2012 under similar facts and
circumstances, a contrary view should not be taken. One more
aspect which needs to be looked into is, there is no dispute
that assessee is registered under section 12A of the Act and
the registration granted also continues till date. That being the
14
case, there is no justification on the part of the A.O. to observe
that the assessee cannot be treated as a charitable institution.
Therefore, keeping in view the fact that assessee is registered
as a charitable institution under section 12A of the Act, it can
alternatively also claim exemption under section 11 of the Act.
The A.O. while completing the assessment has totally ignored
this aspect and has failed to examine whether the assessee is
eligible for exemption under section 11 of the Act. For the
aforestated
reasons,
we
cannot
therefore,
accept
the
conclusion drawn by the A.O. while disallowing the claim of
exemption. In the aforesaid view of the matter, we hold that Ld.
CIT(A) was correct in allowing assessee’s claim of of exemption
under section 10(23C)(iiiad). Accordingly, we uphold the order
of Ld. CIT(A). Grounds No. 2, 3, and 4 of the department are
dismissed.
9.
Ground No.5 is with regard to finding of the Ld.
CIT(A) that only the net income is to be taxed. Having heard
the parties though we agree in principle with the observations
made by the Ld. CIT(A) but since it is purely of academic
interest,
there
is
no
need
to
adjudicate
this
ground.
Accordingly, ground No.5 of the department is dismissed.
10.
Ground No.6 is with regard to CIT(A) deleting the
addition made on account of disallowance of depreciation.
While
completing
the
assessment,
the
A.O.
disallowed
depreciation of Rs.3,63,962 by observing that depreciation is
not allowable for a capital asset whose entire cost of
acquisition is either written off in the first year itself or the cost
of acquisition is treated as application of income. Ld. CIT(A)
deleted the addition by observing as under :
15
“7.0 The eighth ground of appeal relates to the
appellant's claim of depreciation. The AR, while
agreeing in principle that depreciation is not allowable
on capital assets the entire cost of acquisition of which
has either been written off or been treated as
application of income, has submitted that the
appellant had not done either but had merely debited
the depreciation to the Income and Expenditure
account. I have verified the appellant's claim and find
it to be factually correct. There is, therefore, no reason
to disallow the appellant's claim of depreciation and
the appeal is allowed on this issue”.
11.
We have heard the parties and perused the
materials on record. As can be seen Ld. CIT(A) has deleted the
addition having found that assessee has neither written off the
cost of acquisition nor has treated it as application of income.
As the learned D.R. has not brought any material to controvert
the aforesaid finding of the Ld. CIT(A), we do not find any
infirmity in the order of the Ld. CIT(A). Accordingly, the same
is upheld.
12.
In
the
result,
appeal
of
the
department
is
dismissed.
C.O.No.23/Hyd/2014
13.
The assessee has filed the cross objection on the
ground that Ld. CIT(A) should also have decided assessee’s
claim of exemption under section 11 of the Act. Though, in
principle, we agree with the assessee that it is eligible to claim
exemption either under section 10(23C)(iiiad) or under section
11 considering the fact that registration has been granted
under section 12A of the Act, however, since we have upheld
the order of the Ld. CIT(A) allowing assessee’s claim of
exemption under section 10(23C)(iiiad), the ground raised in
the cross objection are reduced to mere academic interest.
16
Hence, there is no necessity to adjudicate them. Accordingly,
cross objection of the assessee is dismissed as infructuous.
14.
To sum-up, appeal of the department and cross
objection of the assessee are dismissed.
Order pronounced in the open Court on 30.01.2015.
Sd/(B. RAMAKOTAIAH)
ACOUNTANT MEMBER
Sd/(SAKTIJIT DEY)
JUDICIALMEMBER
Hyderabad, Dated 30th January, 2015
VBP/Copy to :
1.
2.
3.
4.
5.
Asst. Director of Income Tax (Exemptions)-I, 3rd Floor,
Aayakar Bhavan, Basheerbagh, Hyderabad – 04.
Hyderabad Study Circle, 1-2-365/25/1, Domalguda,
Hyderabad.
CIT(A)-IV, Hyderabad
Director of Income Tax (Exemptions), Hyderabad.
D.R. ITAT “B” Bench, Hyderabad.

HYDERABAD Asst. Director of Income Tax, (Exemptions)

Transcription

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