M/S CHURCH SCHOOL,JAMSHEDPUR vs. ACIT, JAMSHEPUR

First, we shall take up the appeal in ITA No. 103/Ran/2016 for the A.Y 2011-12- by the assessee.

The brief facts of the case are that the assessee is a charitable trust. It conducts its activities under the name & style as ‘Church School. The assessee filed its return declaring a total income of Rs. Nil. Considering the assessee’s submissions along with details and evidences, the AO, determined the total income at Rs. 78,70,930/- (rounded off) by her order dt. 24-03-2014 passed u/s. 143(3)/147 of the Act by making the following additions and added the same to the total income:- i) Rs. 53,88,461.57 on account of excess of income over expenditure ii) Rs. 21,22,466/- on account of depreciation, and iii) Rs. 3,60,000/- on account of donation

Besides above, the AO charged interest u/s. 234B & 234C of the Act.

Aggrieved by such order of AO, the assessee preferred an appeal before the CIT-A, who deleted the addition made on account of depreciation and sustained the additions made on account of income over expenditure and donation.

Being not satisfied with the order of the CIT-A, now the assessee and the revenue both in appeal before us challenging the impugned order of the CIT-A.

Before us the ld.AR submits that the assessee is a premier institute in the city of Jamshedpur and is known for its charitable activities across the society irrespective of the caste and creed. The Assessee trust runs a school in the name of Beldih Church School and had filed its return of Income for the Asst year 2011-12 at Nil claiming that its income was exempt U/S 10(23)(c)(vi) of the IT Act 1961. During Assessment, the Assessing officer observed that apart from fees, the assessee trust also earn income from sale of sweaters, uniforms, books, interest from Fixed deposits, etc. The assessing officer has considered these receipts outside the object clause of the 2 ITA Nos.103 & 104/Ran/16 M/s. Church School

The entire addition made by assessing officer and confirmed by CIT(A) is based on the hypothetical assumption that the assessee is having receipts from other sources apart from fees charged for educational purposes. The revenue authorities grossly erred in interpreting the main object of the assessee trust i.e imparting education for charitable purpose and it will not lose its character being a charitable purpose merely because some profit arises from other activities. The Honorable Apex Court in the case of Lokashikshana trust reported in 101 ITR 234 and in case of CIT v/s Surat art silk cloth manufacturer association reported in 121 ITR 1, held that what is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit making or carrying out a charitable purpose and in the case of assessee it has never been used for profit motive and all receipts are being used for educational purposes.

The income tax department has accepted the contention of the assessee to have running the school for charitable purposes and have issued order cum certificate U/S 12AA of the act vide order dated 29th January, 2016, A copy of such order is also placed on record. The revenue has accepted the claim of the assessee that it is running the school for charitable purpose and has also given the benefit of exemption for all previous year pending with assessing officer by following the amendment brought by legislation in 2014.

The benefit of exemption in the year involved in this appeal could not be given since the assessment for the same was completed and argued that it is now an undisputed fact that the assessee is a charitable trust which is running an educational institution for the charitable purpose without any motive to earn profit.

Further, it is submitted that the assessee had made an application for grant of exemption U/s 10(23)(c)(vi) on 30.09.2009 ( a copy is placed on record in paper book) and was under the bonafide belief that its application has been accepted and hence surplus arising to it were not taxable. The said claim of the assessee has been rejected in a casual manner by both assessing officer and CIT(A) holding that its application u/s 10(23)(c)(vi) has not succeeded and argued that no such communication was ever made to assessee as to the fate of such application U/S 10(23)(c) made by it on 30th September 2009.

The case laws relied by the revenue authorities while denying exemptions are not relevant to the present case whereas the case of the assessee is identical to the fact of the case in case of M/s. Queens educational society vs. CIT decided by Hon’ble Supreme Court on 16.03.2015. The Hon’ble Supreme Court has elaborately discussed the provisions of section 10(23)( c )(vi) of the IT Act and has held that mere surplus does not mean that institution is existing for

Further, he argued that the revenue has now accepted that the assessee is a genuine and Bonafide charitable trust by issuing certificate U/S 12AA of the Act and no reason exist to deny exemption to the Assessee trust and prayed before this honourable bench to delete the addition made by Assessing Officer and confirmed by CIT(A). The ld. DR relied on the orders of AO & CIT-A.

Heard rival submissions and perused the record including the details as available in the paper book filed by the ld.AR of assessee before us. On perusal of page- 23 of the paper book, we find that the assessee school has been granted registration U/Sec. 12AA of the Act by an order dt. 29-01-2016 by Commissioner of Income Tax (Exemptions), Patna w.e.f 15-07-2015 and impugned order of the CIT-A, which is under challenge before was on 22-01-2016. Admittedly, there was no registration for the assessee as on the date of passing the impugned order. The effect of registration u/s. 12AA of the Act was given from 15-07-2015. The assessment order as well as impugned order of CIT-A confirming the disallowances made by the AO is to be re-considered in terms of the registration U/Sec. 12AA by the CIT-E. Therefore, taking into consideration the facts and circumstances of the case, submissions of the ld.AR and the issue involved in the appeal, we deem it fit and proper to remand the 5 ITA Nos.103 & 104/Ran/16 M/s. Church School

The Appeal of assessee in ITA No. 103/Ran/2016 for the A.Y 2011-12 is allowed for statistical purpose.

Now, we shall take up the appeal-ITA No. 104/Ran/2016 for the A.Y 2011-12 ( by the revenue)

The only issue is to be decided as to whether the CIT-A is right in charging of interest u/s. 234 B and 234C of the Act in the facts and circumstances of the case.

Since we have decided to dispose of the appeal (ITA No. 103/Ran/2016 for the A.Y 2011-12) in remanding the matter to the file of the CIT-A in terms of registration u/s. 12AA of the Act by the CIT-E afresh and charging of interest u/s. 234B & 23C does not arise, since it is consequential in nature. It requires no adjudication. Therefore, the effective ground raised by the revenue in the appeal is dismissed. This appeal of revenue-ITA No. 104/Ran/2016 for the A.Y 2011-12 is dismissed.

In the result, the appeal of assessee being ITA No. 103/Ran/2016 for the A.Y 2011-12 is allowed for statistical purpose and the appeal of revenue being ITA No. 104/Ran/2016 for the A.Y 2011-12 is dismissed.