GLOBAL INSTITUTE OF TECHNOLOGY,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3, JAIPUR, JAIPUR

ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. CIT(A)-IV, Jaipur dated 01/04/2019 passed U/s 154 of the Income Tax Act, 1961 (in short, the Act) for the A.Y. 2014-15. Following grounds have been taken by the assessee:

2 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT 2. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in giving the findings that the assessee is not entitled for exemption of Section 11 of the Income Tax Act, 1961.

before or at the time of hearing.”

2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

3. Grounds No. 1 to 3 of the appeal are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in passing order U/s 154 of the Act, therefore we thought it fit to dispose off by this consolidated order.

4. As per the facts of the present case, assessment order for the year under consideration was passed on 18/11/2016 thereby making addition on the following counts:

(i) Addition of Rs. 5,22,21,300/- treating the revenue receipts whereas these receipts are development receipts.

(ii) Addition of Rs. 23,16,700/- (Registration Receipts of Rs. 31,92,000/-, Book Bank receipts of Rs. 2,90,000/- and form & Late Receipts Rs.(-) 11,65,300/- as income of the 3 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT assessee when the same was capital receipts and thus transferred to "General Reserves". (iii) Addition of Rs. 1,28,688/- on account of employee's contribution to Employee State Insurance (ESI) u/s 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961. Subsequently, feeling aggrieved by the above order, the assessee preferred appeal before the ld. CIT(A) and the ld. CIT(A) after considering the facts and circumstances of the case, deleted all the additions made by the A.O. by allowing exemption U/s 11 of the Act vide order dated 26/05/2017, copy of which is placed at page No. 1 to 9 of the paper book.

4 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT 7. The ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before us and the same is reproduced below:

“At the outset, it is respectfully submitted that the appellant society is duly registered u/s I2AA of the Act with the Ld. Commissioner, Jaipur w.e.f. 11.05.2000. The Appellant Society is running an education institute in the name of Global Institute of Technology and serving the charitable purpose of imparting education. As the Appellant is duly registered u/s 12AA of the Act, it is entitled to the benefit of exemption under Section 11 of the Act, or the basis of being charitable trust engaged in imparting education and setting up of educational institutes at different places. It is to be further appreciated that the Appellant in its return of income claimed exemption u/s 11 of the Act and not under Section 10(23c) of the Act as alleged by the Ld. AO therefore, the very basis of impugned assessment being claim of exemption u/s 10(23c) of the Act is factually incorrect and therefore, impugned assessment appears to be made on past history and without application of mind.

The various conditions for claiming exemption under Section 11 of the Acts are listed as follows:-

(a) The Trust or institution must be created wholly for charitable or Religious purpose. (b) It must be registered with the Commissioner of Income Tax under Section 12AA of the Act.

5 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT (c) The Property should be held under trust. (d) Separate Books of Account should be maintained if Trust or Institution earns Profit or Gains from Business Undertakings held by trust for attainment of objects of trust/institution. (e) The income of the trust shall be applied in accordance with the Provisions of section 11 & 12 of the Act. (f) The books of accounts should be audited if total income before giving effect of Section 11 or 12 of the Act exceeds maximum amount not chargeable to tax. (g) The funds of the trust should be invested/deposited as per Section 11(5) of the Act. It is clearly established from the return of income of the Appellant that it has claimed exemption u/s 11 of the Act by satisfying all the Conditions mentioned herein above. The Ld. AO has nowhere in the impugned assessment order raised any objection as to why exemption u/s 11 of the Act should not be allowed to the Appellant. Thus the impugned assessment order passed by the Learned Assessing Officer revolving only around denial of exemption under Section 10(23C) of the Act which was never claimed by the Appellant its return of income is bad in law, without jurisdiction and deserves to be quashed.

As far as the finding of the Ld. AO that the issue relating to Section 10(23C) has been decided by the Hon'ble ITAT, Jaipur Bench Jaipur in the favor of revenue vide 2011 dated. 15.03.2012 for AY 2008-09 and the assessee has not challenged the said order in higher courts. Hence it is established that the assessee has admitted.

That it is not eligible for exemption u/s 10(23C) of the IT Act, 1961t is concerned, it is submitted that the order passed by the 6 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT Honorable Tribunal in the case of the Appellant for A.Y. 2008-09 deal with the Exemption under Section 11 of the Act and set off of brought forward losses. The Honorable ITAT never decided in the case of the Appellant Regarding the claim of exemption u/s 10(23C) of the Act. The fact Which was mentioned in the order passed by the Hon'ble Bench was that the application of claiming exemption u/s 10 (23C) of the Act was Rejected by the Ld. Chief Commissioner of Income tax vide its order Dated 22.3.2006 as informed by the counsel for the Assessee. The relevant extract of the order of Hon'ble Bench in the Appellant's own Case (ITA No. 1062/JP/2011 dated 15.03.2012 for the assessment Year 2008-09 is reproduced herein below for the ready reference:-

"6. The Ld. Counsel of the assesses stated that in earlier year the assesses total income was of loss and, therefore, the assesses has not claimed any exemption under section 11 neither it was exemption of its income under section 10(23C) (vi) of the Act. The Id. chief commissioner of Income-tax wide his order dated 22.3.20o6 had rejected the application of the Assesses and this fact has been mentioned in the order passed for the assessment year 2004-05. It was submitted that in earlier year's assessment has been completed and department itself has allowed the loss to be carry forward. Attention of the Bench was drawn on various Assessment orders.

7 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT 8. After considering the submissions and perusing the material on record, we find that assesses deserves to succeed in this ground. We have seem various assessment orders for earlier gears, copies of which are placed on record and found. That the respective assessing officers had allotted the net deficit to be carried forward in the respective assessment order. Therefore, there is no reason in not allowing the benefit of quantified carry forward losses/deficit. Accordingly, we direct the AO to allow the benefit of quantified carry forward losses to the assessee against the income of the assessee."

Thus, the finding of the Ld. AO that the issue relating to Section 10(23C) of the Act has been decided in favor of the revenue by the Hon'ble Tribunal of Jaipur and the same was not challenged in higher Courts is incorrect and not as per the true facts of the case. Further, Arriving at a conclusion by the Ld. AO regarding denial of exemption u/s 10(23C) of the Act for the year under consideration is not relevant for the facts of the present case as what was never claimed by the Appellant cannot be denied/disallowed.

Further, the Appellant has its account audited as required under the Act and a copy of the audited books of accounts are produced before the Learned Assessing Officer.

As per section 12Aof the Act, exemption U/s 11 & 12 is allowed if the assessee is registered u/s 12AA and the same is in force for the concerned assessment year. However, such an exemption is not allowed in case there is a violation of section 8 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT 13(1) of the Act. In the year under consideration, there is no violation of conditions mentioned in section 13(1) of the Act. The relevant extracts of the said section are reproduced below:

"13(1) Nothing contained in section i I or section j2 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— (c) in the case of a trust for charitable or religious purposes or a Charitable or religious institution, any income thereof--- (i) If such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of —such income ensures, or (ii) If any part of such income or any property of the trust or the institution (whenever created or established.) is during the previous year used or applied directly or indirectly for the benefit of any person referred to in sub-section (3): Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, weather directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution:

Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or, a trust for charitable purposes or a charitable

9 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) insofar as such use or application relates to any period before the 1st day of June, 1970; (d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year—

(i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in subsection (s) of section 17; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March" 1983 otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11; continue to remain so invested or deposited after the 30th day of November, 1983; or (iii) any shares in a company, other than-

(A) Shares in a public sector company; (B) Shares prescribed as a form or mode of investment under Clause (xii) of sub-section (5) of section 11, are held by the trust or institution after the 30th day of November 1983" Section 13(1)(d) of the Act further states that the exemption u/s 11 & 12 shall not be allowed if the funds of the charitable institution are invested for any period during the year in any form otherwise as 10 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT prescribed u/s 11(5) of the Act. However, in the year under consideration there is no such violation. Now in the present case, the Ld. AO has passed the impugned assessment order solely relying upon the Hon'ble ITAT order fo1 Assessment Year 2008-09 and 2009-10 considering that the facts of the said years were similar to the facts of the current year. The Ld. AO failed to notice that the Appellant has applied the income from property held under trust as per the provisions of section 11 & 12 of the Act and the application of the income is verifiable from the return of income filed before the Learned Assessing Officer. Further, it is pertinent to note that the Appellant in the Assessment Year 2008-09 and AY 2009-10 had extended a loan to Shri Aditya Singhal S/o Shri Anand Singhal and Shri Anmol Singh Sandhu. The Ld. AO alleged that the said loans were in violation of section 13(1) r.w.s. 11(5) of the Act as Shri Anand Singhal was a member of the Society, therefore, Shri Aditya Singhal is a person covered u/s 13(3). Moreover, there was an investment in shares of M/s Rajasthan Assets Management Co. Pvt. Ltd. and M/s Rajasthan Trustee company Pvt. Ltd., which Learned Assessing Officer alleged to be violation of section 13(1Xd) of the Act. Hence during those assessment years the exemption u/s section 11 of the Act was not allowed to the Appellant. In this regard, it is humbly submitted before your honor that in the underlying assessment year there is no such loan to either of the parties and the same were repaid with interest in earlier assessment year. Further, investments in the shares of the private limited companies were divested in the earlier assessment years. Thus, it is requested before 11 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT your honor to delete the impugned additions made by the Ld. AO as the facts of both the AY 2008-09 & AY 2009-10 are differentiating from the facts of Ay 2013-14. Thus, the facts of the years covered by the Hon'ble ITAT orders are not same to the case of the Appellant as far as the exemption u/s 11 is concerned. Further, the allegations raised by the Ld. AO for assessment years 2008-09 & 2009-10, were all resolved by the Appellant and hence, there is no such question regarding allow ability of exemption u/s 11 & 12 of the Act. In view of the above, the Appellant should be allowed exemption u/s 11 of the Act and impugned addition of Rs. 3,64,74,233/- be deleted.

6. FAVORABLE DECISION BY THE LEARNED CIT(A) IN ASSESSEE'S OWN CASE IN PRECEDING YEARS: - It is submitted that in the same facts and circumstances the Learned Assessing Officer in the Assessment Year 2013-14 has also not allowed the exemption u/s 10(23C) of the Income Tax Act, 1961. The exemption u/s 11 & 12 was allowed by the Learned CIT(A) vide their order in dated 30.11.2016 for Assessment Year 2013-14. Copy of order is placed on paper book page no. 36 to 47 wherein the learned CIT(A) has specifically allowed exemption u/s 11 and 12 of the Act on internal page 19 of the order page book page no. 45 in last para which reads as under:- "In view of the facts and circumstances of the case as discussed above and duly considering the case laws relied upon by the assessee and remand report and rejoinder filed, I am of the considerate view that as there is no violation of section 13(1) of the Act, exemption u/s 11 & 12 of the Act is allowable to the assessee which is also registered u/s 12AA of the Act." The department has also filed appeal against the above order and the Hon'ble ITAT has dismissed the appeal of the department. Copy of ITAT order is placed on paper book page

12 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT no. 15 to 23 and finding is on internal page no. 8 para 6 and revenue appeal was dismissed. Therefore there is no ground to raise this issue again and again and the learned CIT(A) passed a crept order which has already been attained finality by the ITAT vide order dated 30.10.2017. Therefore the learned CIT(A)'s finding deserves to be quashed. With regard to the development receipts. The development receipts issue was not decided by the CIT(A) in the order but he has allowed the set off of carried forward losses against the development receipts of Rs. 5,22,21,300/-. The issue was not decided on merit, because since there were no taxable surplus after setoff of carried forward losses. But the same was decided in favour of the assessee in subsequent assessment years under the same facts and circumstances. Copy of order is placed on paper book page no. 24 to 35. The finding regarding development receipts are capital receipts is on page no. 35 and back that the development fees is capital in nature and not revenue. So this issue was decided in favour of assessee. Hence there is no question of coping this issue again in rectification order by CIT(A) which deserves to be quashed. It also submitted that power of rectification u/s 154 can be exercised only if there was a mistake apparent from the record. Exemption u/s 11 of the Income Tax Act, 1961 has been allowed to the assessee continuously and the Learned CIT(A) has himself has allowed the same to the assessee in his earlier order, it cannot be carried out u/s 154 of the Income Tax Act, 1961. The Learned Assessing Officer CIT(A) cannot pass rectification order u/s 154 to deny a benefit already held allowable. The following case is quoted in support –

13 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT Venkatachalam M.K. ITO V Bombay Dying & Mfg. Co. Ltd. 1958 34 ITR 143 SC Obvious mistake of law cannot be rectified under section 154, while mistake of fact apparent from record can be rectified.”

14 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT 10. Aggrieved by the order of the ld. CIT(A), the Revenue has filed an appeal before the Coordinate Bench of this Tribunal and the Coordinate Bench had dismissed the appeal of the department. The copy of the order of the ITAT which is at page No. 15 to 23 of the paper book and the relevant findings ae contained in internal page No. 8, para 6 and consequently, the appeal of the Revenue was dismissed. The ld. CIT(A) while passing the order has categorically held that there is no violation of Section 13(1) and exemption U/s 11 and 12 of the Act is allowed to the assessee which is also registered U/s 12AA of the Act. Therefore, when once this issue has already attained finality by passing of the order by the ITAT dismissing the appeal of the Revenue, therefore, in our view, no obvious mistake of law, if any, cannot be rectified U/s 154 of the Act. Whereas the mistake of fact which is apparent from the record can only be rectified U/s 154 of the Act as has already been held by the Hon’ble Supreme Court in the case of Venkatachalam (M.K.) ITO vs Bombay Dying & Mfg Co. Ltd. (1958) 34 ITR 143 (SC) and in the present case, the Revenue has failed to pinpoint the mistake of fact which is apparent from the record which needs invocation of the provisions of Section 154 of the Act. Therefore, in our considered view, under the above circumstances, the ld. CIT(A) has wrongly invoked provisions of 15 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT Section 154 of the Act by passing the impugned order, thus the same is not sustainable in the eyes of law.

16 ITA 531/JP/2019_ M/s Global Institute of Technology Society Vs DCIT facts and circumstances, provisions of Section 154 of the Act cannot be invoked. At the same time, the ld. CIT(A) cannot invoke provisions of Section 154 of the Act merely to deny the benefit to the assessee which otherwise has already been held to be allowable by the Revenue authorities in different years. In view of the above facts and circumstances, we set aside the order passed by the ld. CIT(A) and allow this appeal of the assessee.