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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 112/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 112/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke M/s Bhagirath Shikshan Sansthan The ITO(E), Vs. 31-B, Laxmi Nagar-II, Ward-1, Niwaru Nagar, Jhotwara, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAB 6922 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri A.S Nehra (Add. CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 29/07/2021 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 30/07/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT-3, Jaipur dated 19.12.2018 for the assessment year 2013-14 wherein the assessee has taken the following grounds of appeal:-
“1. The ld. CIT(A) has erred on facts and in law in upholding the action of AO in denying exemption u/s 10(23C)(iiiad) of IT Act, 1961 by making/giving various incorrect observation/findings and thereby assessing the surplus of Rs. 2,44,689/- under the head Income from other sources.
2 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
2. The ld. CIT(A) has erred on facts & in law in confirming lump sum disallowance of Rs. 3,61,212/- being 30% of total expenditure of Rs. 12,04,039/- claimed by the assessee.
3. The ld. CIT(A) has erred on facts & in law in not considering that even if the income of assessee is held liable for taxation, the tax is to be levied u/s 164(2) as AOP General and not at MMR as directed by the AO.”
Regarding ground No. 1, the ld AR submitted that briefly the facts of the case are that the assessee is registered under the Societies Registration Act, 1958. It is engaged in imparting education among the different sections of the society and currently running three educational institutions, i.e. B.S.S. college of technical education, B.S.S. institute of medical science and B.S.S. college of management & technology. It was submitted that the assessee filed its return of income on 30.09.2015 declaring Nil income after claiming exemption u/s 10(23C)(iiiad) of the IT Act, 1961. The AO denied the exemption u/s 10(23C)(iiiad) of IT Act, 1961 and thereby assessed the surplus of Rs.2,44,689/- under the head “income from other sources” by giving the following findings:- (i) The assessee is running a learning centre on behalf of various universities/ institutions and collects fees from students and gets them enrolled with the institution. The assessee has been enrolled as learning centre of these institutions under the ‘Distance Education Programme’. The ‘Distance Learning Programme’ of any university cannot be regarded either as university or educational institution or other educational institution within the ambit of the provisions of section 10(23C) as well as the provisions of section 2(15) of the IT Act, 1961. 3 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
(ii) The nature of activities carried out by the assessee with its principal as franchisee also indicate the same to be a part and parcel of the business as defined u/s 2(15) of the IT Act, 1961. Therefore, the same has been treated as ‘technical or professional service’ rendered by the assessee to Principal and thus TDS has also been deducted @ 10% u/s 194H treating the same as commission or brokerage. (iii) Complete books of accounts have not been produced and expenses are mainly incurred in cash. (iv) The assessee has paid rent of Rs.1,50,000/- for a small premises to Sh. R.K. Sharma who is having substantial interest. Further, he is in receipt of salary of Rs.1.20 lacs p.a. as Director of Sansthan but his qualification is merely D-Pharma. Further a sum of Rs.72,000/- has been paid to Sh. Ganesh Narayan Sharma who is also a related person. (v) The objects of assessee Sansthan also included the activities related to other social causes. Thus, it cannot be said that institution is solely for the education purpose.
It was submitted by the ld AR that on appeal filed by the assessee, the Ld. CIT(A) upheld the findings of AO by merely reproducing the observation of AO and the submission of assessee and making it as part of his order and holding that the A/R of the appellant in his submission did not file any argument against the observation made by the AO in the assessment order. Against the said order, the assessee has filed the present appeal. 4 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
In the aforesaid factual background, the ld. AR submitted that the main observation of lower authorities is that ‘Distance Learning Programme’ of any university cannot be regarded either as university or educational institution or other educational institution within the ambit of the provisions of section 10(23C). In making such observation, it is ignored that assessee is affiliated and enrolled with Punjab Technical University and Jaipur National University for conducting regular course on different education programmes which includes proper classroom education and practical training, distribution of course book and conducting examination. On completion of respective classroom teaching and successful passing the exams, certificate is issued by the respective universities and educational institutions to the students. Thus, the society imparts systematic instruction classroom teaching and training to the students through Distance Learning Programme of these universities which per se is ‘education’. In support, reliance was placed on the decision of the ITAT Chennai Bench in case of Soorya Educational Trust Vs. ITO 33 CCH 347 wherein the imparting of Distance Education Programme for the university was held as imparting education.
It was further submitted that so far as other observations like deduction of TDS on amount paid by Punjab Technical University, payment of rent/ salary to the specified person and expenditure incurred in cash is concerned, same are not relevant for denying exemption u/s 10(23C)(iiiad) particularly when no material is brought on record by the AO as to how the rent/ salary paid to specified person is excessive or unreasonable or the cash expenditure incurred has resulted 5 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
into any benefit to the specified persons. Similarly deduction of TDS by Punjab Technical University on the franchisee fees paid by them which is payment of part of the amount received from the students could not make the activity of the assessee as business as observed in the decision referred supra. Hence, for these reason the exemption u/s 10(23C) cannot be denied.
It was further submitted that another objection of the lower authorities that the objects of the society includes other objects also is also not relevant/ correct in as much as the assessee is engaged solely for imparting the education and even as per the object clause, all objects are related/ incidental to education. In the following cases, it is held that even when a society has number of objects but the only object pursued by it is education, the benefit of section 10(23C)(iiiad) cannot be denied. Reliance was placed on the following decisions:-
• Geetanjali Education Society Vs. ADIT (2014) 101 DTR 337 (Kar) • Saraswati Educational & Welfare Society (Regd.) (2015) 152 ITD 527 (Chd)
Per contra, the ld. DR relied on the finding of the lower authorities and our reference was drawn to the findings of the ld. CIT(A) which read as under:-
“The A/R of the appellant in his submission did not file any argument against the observation made by the Assessing Officer in the assessment order. The A/R of the appellant relied upon 6 M/s Bhagirath Shikshan Sansthan vs. ITO(E) various case laws which are not applicable in this case because the appellant running the distance education programme which cannot be treated either an university or education institute with the ambit of provision of Section 10(23C) as well as the provision of section 2(15) of the I.T. Act. The Sansthan is running a franchise. The object of appellant Sansthan also included the activities related to other Social causes. Therefore considering the above observation I am the view that appellant is not eligible either for the exemption u/s 10(23C)(iiiad) or for the exemption u/s 11 of the Income Tax Act. This ground is not allowed.”
We have heard the rival contentions and perused the material available on record. The ld CIT(A) has returned a finding that the A/R of the appellant in his submission did not file any argument against the observation made by the Assessing Officer in the assessment order. However, we find that the assessee through it’s A/R has filed written submissions which are reproduced at Para 4.2 of the order so passed by the ld CIT(A). Therefore, the findings recorded by the ld CIT(A) are not borne out of the records which deserve to be set-aside. Further, during the course of hearing, the ld AR has contended that the ld CIT(A) has merely reproduced the observations of the AO and not given any independent finding as to why the submissions so filed by the assessee were not found acceptable. Given that the written submissions and explanation so furnished by the assessee has not been considered and examined by the ld CIT(A) and in absence of any independent finding recorded by the ld CIT(A), we are 7 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
constrained to remand the matter back to the file of the ld CIT(A) to pass a speaking order taking into consideration the explanation so furnished by the assessee and after providing reasonable opportunity to the assessee. In the result, the ground of appeal is allowed for statistical purposes.
9. In ground No. 2, the assessee has challenged the action of the ld CIT(A) in confirming the lump sum disallowance of Rs. 3,61,212/- being 30% of total expenditure of Rs. 12,04,039/- claimed by the assessee.
10. It was submitted by the ld AR that the AO has disallowed 40% of the total expenditure of Rs.12,04,039/- i.e. Rs.4,81,616/- on the ground that expenses are incurred mainly in cash and not supported with documentary evidences. On appeal, the Ld. CIT(A) restricted the disallowance to 30% of the expenses by assuming that 60% of the disallowance made by the AO is excessive and unreasonable. The details of the expenses are at Page 24 & 25 of the Ld. CIT(A) order. Out of the total expenses of Rs.12,04,039/-, expenditure incurred in cash is Rs.9,46,535/- which includes payment of salary of Rs.5,64,000/- and rent of Rs.1,18,500/-. All other expenditures incurred in cash are of small amount. The nature of these expenditure is such that making cash payment for the same is inevitable. These expenses are reasonable and supported by bills & vouchers as explained at Pg 25-26 of the CIT(A) order. Therefore, the disallowance confirmed by Ld. CIT(A) be directed to be deleted. 8 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
Per contra, the ld. DR relied on the finding of the lower authorities and our reference was drawn to the findings of the ld. CIT(A) which are contained at para 7.3 which reads as under:- “7.3 I have carefully considered the material before me. I find that the Assessing officer allowed only 40% of the expenses of Rs.12,04,039/- making observation that the expenses are not fully vouched. The A/R of the appellant failed to file any evidence or argument against the observation made by the Assessing officer. Therefore I am
the view that the expenses are not fully vouched. The Assessing officer disallowed 60% of the expenses without any reason and any basis. I treat the disallowance made by the Assessing officer of 60% as excessive and unreasonable. Therefore considering the facts of the case and nature of the expenses I treat 30% of expenses as unvouched expenses. Accordingly I confirm the addition of Rs.3,61,212/- and balance amount of Rs.3,61,211/- is deleted. This ground is allowed.”
We have heard the rival contentions and perused the material available on record. The ld CIT(A) has returned a finding that the A/R of the appellant failed to file any evidence or argument against the observation made by the Assessing officer. However, we find that the assessee through it’s A/R has filed written submissions which are reproduced at Para 7.2 of the order so passed by the ld CIT(A). Therefore, the findings recorded by the ld CIT(A) are not borne out of the records which deserve to be set-aside. Given that the written submissions and explanation so furnished by the assessee has not been considered and examined by the ld CIT(A), we are constrained to remand the matter back to the file of the ld CIT(A) to pass a speaking order taking into consideration the explanation so furnished 9 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
by the assessee and after providing reasonable opportunity to the assessee. In the result, the ground of appeal is allowed for statistical purposes.
13. In ground No. 3, the assessee has challenged the action of the AO in not considering that even if the income of assessee is held liable for taxation, the tax is to be levied u/s 164(2) as AOP General and not at MMR as directed by the AO.
It was submitted by the ld AR that the lower authorities have assessed the income by applying MMR. In doing so the provision of section 164(2) is ignored which provides that the relevant income which is derived from property held under trust only for charitable or religious person, tax shall be charged on so much of the relevant income as is not exempt u/s 11 or 12 as if the relevant income not so exempt is the income of AOP. However, where the relevant income is not exempt by virtue of section 13(1)(c) or 13(1)(d), tax shall be charged on that part of the income at MMR. In the present case, AO has not specified that any part of the income of the society is not exempt by virtue of section 13(1)(c) or 13(1)(d). Therefore, even if the tax is to be levied on the assessee, the same should be at the rate applicable to AOP General and not at MMR. For this reliance was placed on the following cases:- • DIT Vs. Working Women’s Forum (2015) 235 Taxman 516 (SC) • CIT Vs. Fr. Mullers Charitable Institutions (2014) 227 Taxman 369 (SC) 10 M/s Bhagirath Shikshan Sansthan vs. ITO(E)
In view of above, even if the income of assessee is held liable for taxation, the tax is to be levied u/s 164(2) as AOP General and not at MMR.
Per contra, the ld. DR relied on the findings of the lower authorities.
We have heard the rival contentions and perused the material available on record. We find that this ground has not been taken before the ld CIT(A) and has been taken for the first time before us. Being a legal ground, the same is admitted by way of additional ground of appeal. As we have remanded the other matters to the file of the ld CIT(A), the same is also remanded back to the file of the ld CIT(A) to examine the same and decide as per law after providing a reasonable opportunity to the assessee. In the result, the ground of appeal is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.