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Income Tax Appellate Tribunal, DELHI BENCH, ‘B’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHANDRA MOHAN GARG
ORDER PER SHAMIM YAHYA, AM,
This appeal by the assessee is directed against the order of ld. CIT (Appeals)-1, New Delhi, dated 19.03.2020 for the Assessment Year 2015- 16.
The grounds of appeal reads as under:-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition Rs.1,10,00,000/- on account of corpus donation by treating it as revenue receipts instead of capital receipts as claimed and that too by recording incorrect facts and findings and without observing the principles of natural justice and without considering the facts and circumstances of the case and without considering the past history of the assessee.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making aggregate addition Rs.1,10,00,000/- on account of corpus donation, is bad in law, without jurisdiction and against the facts and circumstances of the case and the impugned addition is not sustainable on various legal and factual grounds. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B and 234C of income Tax Act, 1961.” 3. Brief facts of the case are that the assessee is a society registered under the societies Act with Registrar of Society U.P. vide certificate No.347/1988-1989 dated 05.07.1988 which was renewed for a period of five years with effect from 05.07.2013. The assessee society was granted registration u/s 12A of the Act, by the Ld. Commissioner of Income Tax, Meerut vide order dated 06.02.1989. The society is running three schools namely Kangaroo Kids (for class up to KG) & Billabong High (for classes above K.G.) and Sanchetna for handicapped children. In the assessment order, after certain discussion, the AO was of the opinion that the nature of modus operandi of the activities is not charity. Hence, he denied the exemption of claimed by the assessee. Further, an amount of Rs.1,10,00,000/- claimed as donation received by the assessee; the AO treated the same as general receipts.
4. Against this order, the assessee appealed before the Ld. CIT(A).
5. The Ld. CIT(A) elaborately discussed the issue. He noted that the assessee has submitted before him that the assessee is imparting education activity u/s 2(15) and even if there arose any profit, because by virtue of section 2(15) of the Act, the educational activity are treated as charitable activity. The surplus which arose from the activity has been utilized for charitable activity. No surplus has been imparted by the trustees of the assessee to the office bearer. The order of the Ld. CIT(A) may be gainful as reads as under:-
“4.3. The appellant further brought out information on record that Hon’ble ITAT passed an order in the case of appellant vide order dated 30.07.2018. In the aforesaid case the AR of the appellant has argued that "The A0 as well as the CIT(A) ignored the fact that the primary object of the society was to provide education and that object has never been changed. The Ld. AR submitted that the CITYA) has enhanced the assessed income of the assessee at Rs. 1,59,84,559/- for AY 2009-10, Rs. 2,37,66,676/- of AY 2011- 12 and Rs. 3,96,46,53/- for AY 2013-14. The CIT(A) has never given any opportunity to the assessee while enhancing the assessed income. The CIT(A) has totally ignored the benefit of Section 11 & 12 to the assessee which is under operation till date. The CIA) erred in not conversing the action of A0 in computing the income of the assessee in the status of AOP instead of charitable society and further erred in applying the maximum marginal rate of Tax. The Ld. AR relied upon the decision of the Tribunal in case of Rama Devi Memorial Society Vs. JCIT IT NO. 4434/ Del/ 2017 order dated 05/07/2018 wherein it is categorically held that denial of benefit of Section 11 & 12 is not as per the law. Educational activity has been specifically treated as charitable purpose us 2(15) and enhancement of the decision of the Adarsh Public School wherein the Tribunal held that the assessee's income by way of fees cannot be held to be derived from property held under the trust because students cannot be treated as property"
The Hon'ble ITAT relied over the decision of Adarsh Public School of ITAT Delhi and decided as under the case of the appellant as under;
"since the instant case the registration granted under section 12A is still in force and since the object of the assessee society has not under gone any change, therefore, considering the totality of the facts of the case, we deem it proper to restore the issue to file of the AO with the direction to adjudicate the issue a fresh in light of the decision of Adarsh Public School and in accordance with law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. All the three appeals are identical in nature, therefore, all three appeals filed by the assessee are partly allowed for statistical purpose.”
4.4. On direction of Hon'ble ITAT vide order dated 30/07/2018 to grant exemption u/s 11 as per the income & expenditure account and the AO has subsequently passed an order for AYs 2009-10, 2010-11 and 2013-14 on 10.12.2019 and held the activity of the appellant charitable and benefit of exemption has been given. The appellant further submitted the chart showing class wise student strength during the year under consideration and fee received from them and payment details made to Kangaroo Kids Education Ltd in respect of royalty paid for franchise. The appellant argued that during the year also the facts of the case are same.
4.5. Perusal of fact shows that the appellant is imparting education and education activity is covered u/s 2(15) of the IT. Act. Hence the appellant is entitled for the benefit of the exemption. The first ground of appeal is allowed.
In this case the second ground of appeal relates to the issue of making addition of Rs. 1,10,00,000/- on account of treating the donation receipts as general receipts, holding that appellant was engaged in business activity rather than charity.
5.1. Perusal of ground of appeal shows that appellant has raised specific ground number 2 for claiming donation as capital receipt as against general receipt treated by the AO. As regard treating donation of Rs. 1,10,00,000/- as a revenue receipt is concern, appellant has not given any detail as how it is a capital receipt neither list of donor nor their declaration has been filed. It was appellant to submit reasonable details in order to fulfill the condition laid in section 11(1)(d) of the IT Act. Further, the appellant has never argued in respect of nature of donation received rather claiming the exemption of Section 11 & 12 of the Act. Perusal of Hon'ble ITAT order dated 30.07.2018 shows that in the said years the amount of money received by the appellant as donation is primarily from the students and their guardians and is in the wake of those students getting the admissions in the schools run by the appellant society and continuation of such admission and therefore, it was held as contractual in nature. Such payments cannot be considered to be the voluntary contribution. These are reciprocal payments made under the expectations of reciprocal benefits & in contribution which is the precondition for availing the benefit of exemption from the incidence of tax u/s 11(1)(d) & 12 of the I.T. Act, 1961 as the appellant claimed that facts of the case are same as adjudicated by Hon'ble ITAT, hence the aforesaid facts have not been controverted by the appellant.
5.2. It is also seen that Hon'ble ITAT has not given judgment in the case of appellant over the nature of donation. Only the benefit of Section 11 & 13 is directed to be given as the appellant trust was registered u/s 12A. In the said order of AYs 2009-10, 2010-11 and 2013-14 issue of Section 11(1)(d) is not dealt with by the AO. Keeping in view of the fact that the appellant has not submitted any detail over the nature of donation and donations are in nature of fees therefore they are part of revenue. Keeping in view of all these facts the AO is directed to consider the entire amount of corpus donation as a revenue receipts and benefit of working out of surplus as per Section 11 of the Act may be worked out after including the above amount in the receipt accordingly.
We have heard both the parties and perused the records. The ld. Counsel for the assessee prayed that the matter may be remitted back to the file of the AO. The AO has not appreciated the ITAT order in this regard. He further submitted that the Ld. CIT(A) also has given certain direction to the AO and the issue may be remitted back to the file of the AO.
Per Contra, the Ld. DR did not have serious objection in this regard.
We make it clear that we are aware of that the Ld. CIT(A) has no power to remand any matter to the AO but this does not stop the ITAT for exercising the said power. Accordingly, we remit the issue to the file of the AO. The AO is directed to consider the issue afresh and pass a proper order after the assessee be given opportunity of being heard.
In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open court on 02nd March, 2023.