SHRI JAGANNATH EDUCATIONAL INSTITUTE ,KOLKATA vs. I.T.O.(EXEMPTION), KOLKATA

Brief facts of the case are that the assessee filed its return of income on 07/06/2016 declaring total income at ‘Nil’. The assessee is a charitable trust engaged in educational activities. The trust is registered u/s 12A of the Act Assessment Year: 2016-17 Shri Jagannath Educational Institute 2

On perusal of the records, the ld. CIT harboured a belief that assessment order is erroneous as well as prejudicial to the interest of the revenue. According to the ld. CIT, the assessee has incurred an amount of Rs. 4,59,787/- on running of schools and claimed as miscellaneous application. On the other hand, it has declared a surplus of Rs. 79,66,087/-. He further found that there is no receipt from any school and it has claimed surplus as exempt u/s 10(23C)(iiiad) of the Act. The ld. CIT was of the view that since there is no receipt from any educational institution, the allowability of the exemption u/s 10(23C) is prima facie erroneous and prejudicial to the interest of the revenue. In his second fold of reasoning, he observed that surplus of income or expenditure is far in excess of 15% of the total receipt. The ld. CIT issued a showcause notice u/s 263 of the Act. According to the finding in the impugned order, the assessee contended that juri iction u/s 263 of the Act on the ground that there is no receipt from any school, ought not to be invoked. It was also submitted that Section 10(23C) of the Act, does not state that only income from educational institution is exempt but allows an entity to invest these funds in certain prescribed investments. Assessment Year: 2016-17 Shri Jagannath Educational Institute 3

While impugning the order of the ld. CIT, the ld. Counsel for the assessee took us through the details i.e., copy of the memorandum of association, audited accounts, details of schools and teachers, photographs evidencing existence of schools, copy of certificate issued by local municipal authorities, copies of attendance reports of the teachers and students and allowances paid to the school teachers i.e., monthly pay sheets. While taking us through the accounts, the ld. Counsel for the assessee submitted that it is a society to whom corporate entities of Birla Group had donated the shares and out of the dividend income from that investment, the society is earning the income. It is purely a charitable organization which has been formed by different business organization. In order to strengthen its financial health for perpetuity, they have given certain investment and this was given long back since 1983-84. The value of those shares have increased manifold, accordingly the dividend income. The schools are being run at the level of very low strata, where income cannot be earned from educational activities. In other words, these are the activities carried out in slum areas. It is not a case of any manipulation or earning of income from donations. He pointed out that the society will build its own building for fulfilling its objects of education but meanwhile it is taking care of educational needs of slum areas. Nothing has been paid to any of the managing members on the management Board or no amount has been utilized for any other parties. Thus, it is purely educational trust. The view point of the ld. CIT that for deciding the admissibility of claim of exemption u/s 10(23C) of the Act, there should be educational receipts or there should be an expenditure on educational activities of more than 15% is an erroneous approach. He Assessment Year: 2016-17 Shri Jagannath Educational Institute 4

We have duly considered the rival contention and gone through the record carefully. The sole issue for our consideration is, whether exemption u/s 10(23C)(iiiad) of the Act can be granted to any trust, educational institution or university, if the source of income in such a trust is out of educational activity. To our mind, the ld. CIT misconstrued the provision. The source of income can have many springs whereas for eligibility of exemption, the institution should be involved in education only. We find that this aspect has been considered by the ITAT in the case of Swasthya Sewa Sanstha (supra) relied upon by the ld. Counsel for the assessee. In this case, the assessee claimed exemption u/s 10(23C)(iiiae) of the Act i.e., for running a hospital and other medical institution. Action u/s 263 of the Act was taken by the ld. Commissioner on the ground that there was no nexus between the income and the expenditure and assessee has not shown receipt from the dispensary. The Tribunal while dealing with this aspect, recorded the following finding:- “4. We have heard the rival contentions of both the parties and gone through the record. Before proceeding further, it will be appropriate to firstly reproduce the relevant provisions of Section 10(23C)(iiiae) of the Act, which reads as under: Assessment Year: 2016-17 Shri Jagannath Educational Institute 5

A perusal of the above relevant provision of the Act would show that there is no requirement under the aforesaid provision that the income/receipt of the Trust/Society should come from the charitable/philanthropic activity itself. The only requirement is that the hospital/institution should exist solely for philanthropic purposes and not for purposes of profit and the aggregate annual receipt of such hospital/institution should not exceed the amount of annual receipt as may be prescribed, which is Rs. 1 crore for the relevant assessment year under consideration. Admittedly, the income of the institution for the assessment year under consideration was less than Rs. 1 crore. There was no allegation that the institution/appellant Trust exist for any other purposes. There is no allegation that the institution/appellant Trust is existing for any purpose of profit, or is doing any activity for the purpose of profit. As per the facts on the file, the appellant Trust is running a dispensary wherein the doctors from both Allopathy and Homoeopathy discipline of medicine visit the dispensary and the treatment is free of charge and even medicines are also given free of cost to patients. There is no denial of the fact that the appellant Trust is running the dispensary purely on philanthropic purposes. Since, the aforesaid medical treatment is given free of charge, hence there is no question of earning of any income from such activity. As observed above, there is no requirement of provision Section 10(23C)(iiiae) of the Act that the income should be earned from such philanthropic activity, rather it is otherwise that the institution/Trust has done such an activity purely for charitable/philanthropic purposes and under such circumstances expectation of income from such activity will be against the spirit of the aforesaid statutory provision. There is no allegation that the institution is doing any activity other than the aforesaid medical dispensary. Assessment Year: 2016-17 Shri Jagannath Educational Institute 6

In our view, all the conditions as prescribed u/s 10(23C)(iiiae) of the Act, have been fulfilled by the appellant Trust and there is no allegation that the appellant Trust is involved in any other activity for profit or does not exist for philanthropic purposes. Even in this case, all the facts are on the file, therefore there was no need for any further investigation by the AO as alleged by the ld. CIT(E).

In view of the above discussion, the action of the ld. CIT in directing the AO to disallow the exemption granted u/s 10(23C)(iiiae) of the Act was not justified. The impugned order of the ld. CIT(E) is, therefore quashed.

In the result, the appeal of the appellant Trust stands allowed. Order is pronounced in the open court on 09.02.2022. [Rajesh Kumar] [Sanjay Garg] Accountant Member Judicial Member

If, in the light of the above, we examine the facts of the present appeal, then it would reveal that the only distinction in the issue involved is that in the case of Swasthya Sewa Sanstha (supra) the assessee had claimed deduction u/s 10(23C)(iiiae) of the Act which is meant for any hospital or Assessment Year: 2016-17 Shri Jagannath Educational Institute 7

In the result, appeal of the assessee is allowed. Order pronounced in the Court on 4th January, 2023 at Kolkata. (RAJESH KUMAR) VICE-PRESIDENT Kolkata, Dated 04/01/2023 *SC SrPs

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील / The CIT(A)- ( ) 5. िवभागीय "ितिनिध अिधकरण अपीलीय आयकर कोलकाता/DR,ITAT, Kolkata, , , 6. गाड" फाईल /Guard file.