D.D..I.T(E) - I,KOLKATA, KOLKATA vs. ST JOHN'S DIOCESAN GIRLS HIGHER SECONDARY SCHOOL, KOLKATA

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-Jalpaiguri dated 07.03.2013. Assessment was framed by DCIT(Ex) Kolkata u/s 143(3)/11 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 14.11.2011 for assessment year 2009-10. Shri Rajat Kumar Kureel, Ld. Departmental Representative represented on behalf of Revenue and Shri S.M. Surana, Ld. advocate appeared on behalf of assessee.

ITA No.1079/Kol/2013 A.Y. 2009-10 DDIT(E)-I Kol. Vs. Sst. John’s Diocesan Girl’s Higher Secondary School Page 2 2. Only issue raised by Revenue in this appeal is that Ld. CIT(A) erred in admitting the revised Form10/Form10B and allowing accumulation u/s. 11(2) of the Act. 3. Briefly stated facts are that assessee is a charitable organization and running educational activities. The assessee-trust is duly registered u/s 12A vide No.DIT(E)/7-76 dated 09.12.1999. The assessee has received following fees during the year under consideration from its students as detailed under:- Sl.No Particulars Amount (Rs) of fees 1 Development fees 84,49,380/- 2 Building fees 17,72,900/- 3 Construction of education fund 16,61,950/- Total 1,17,84,230/-

The aforesaid fees received by assessee were capitalized in its books of account. Accordingly, assessee has not shown the above receipts in its income and expenditure account. The assessee claimed to utilize the above fees for up-gradation and development of educational facilities. Thus the assessee claimed before the AO that the aforesaid fees represent corpus contribution and thus not taxable. However, the AO observed that the aforesaid fees are being received by the assessee on regular basis and its accrual is certain on year to year basis. The AO further observed that the aforesaid fees in the AYs 2008-09 and 2010-11 were shown as on revenue account by the assessee. Accordingly, AO treated the aforesaid sum of ₹1,17,84,230/- as revenue in nature. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) conceded the fact that impugned fees received by it is revenue in nature and further requested to allow to accumulate the aforesaid fees u/s. 11(2) of the Act. The assessee in support of its claimed filed revised Form-10 with resolution passed by the Board of Governors for the accumulation of the aforesaid amount. Accordingly the Ld. CIT(A) after

ITA No.1079/Kol/2013 A.Y. 2009-10 DDIT(E)-I Kol. Vs. Sst. John’s Diocesan Girl’s Higher Secondary School Page 3 considering the submission of assessee has allowed its appeal by observing as under:- “6.1 It is seen that the AO did not issue the show-cause notice to assessee before proceeding to tax the corpus receipts of rs.1,17,84,230 as undisclosed income. It is further seen that in the immediately earlier and late5r AYs, the assessee himself had treated these receipts as income and claimed as accumulation u/s. 11(2) which has been allowed by the AO. the assessee could have claimed this receipt as income for this year also and claimed accumulation u/s. 11(2). It appears that the assessee treated this receipt as corpus receipt because of wrong advice of Auditors. Because of wrong advice of Auditors, the assessee cannot be penalized. It is the duty of revenue authority to correct the mistake which has occurred due to wrong advice of Auditors and allow correct exemption as per law. The AO is directed to compute the income after admitting the revised Form Number 1, revised Audit Report in Form 10B and the copy of resolution passed by the Board of Governors with regard to accumulation of Rs.1,43,61,134 u/s. 11(2), filed before the undersigned during the course of appellate proceedings. Before re- computing the income, the AO is directed to verify that the amount accumulated as per revised form 10 has been invested in the modes prescribed u/s. 11(5).”

The Revenue, being aggrieved, is in appeal before us on the following ground:- “1. That on the facts and the circumstances of the case, the Ld. CIT(A)/Jalpaiguri erred in holding that the assessee treated the Revenue receipt of Rs.11784280 as Corpus receipt because of wrong advice of Auditors for which the assessee cannot be penalized and allowing accumulation u/s. 11(2) of the IT Act without appreciating the fact that the assessee was given two clear opportunities to explain and/or to revise the Form 10/Form 10B before completion of assessment.”

ITA No.1079/Kol/2013 A.Y. 2009-10 DDIT(E)-I Kol. Vs. Sst. John’s Diocesan Girl’s Higher Secondary School Page 4 the assessee before the learned CIT(A) conceded the fact that the aforesaid sum of fees is revenue receipts and therefore liable to be applied in the year of receipt to the extent of 85% as per the provisions of section 11(1)(a) of the Act. But the assessee before the learned CIT(A) claimed the benefit under section 11(2) of the Act. Thus the assessee filed requisite documents for claiming the benefit under section 11(2) of the Act before the learned CIT(A). Accordingly the learned CIT-A directed the AO to allow the relief to the assessee after verifying the amount collected as per revised form 10 and whether the sum has been invested in the modes as prescribed under section 11(5) of the Act. Here we find important to reproduce the provisions of section 11(2) of the Act which reads as under:- “Income from property held for charitable or religious purposes. 11(1)… …. [(2) [Where [eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is a accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:-] A plain look at the above statutory provision makes it clear that where 85% of the income is not applied for charitable purposes, the assessee is entitled to accumulate or set apart such income for future application. The incomes so accumulated will not be included in the total income of the assessee if the following conditions are applied :

i) The assessee has to given a notice to the assessing officer in Form No. 10, along with a certified copy of resolution passed by the governing body. This resolution should specify the purpose and the period for which the income is so accumulated. The period of accumulation cannot exceed five years under any circumstances. Earlier this period used to be ten years but has been reduced to five years with effect from 01.04.2002.

ITA No.1079/Kol/2013 A.Y. 2009-10 DDIT(E)-I Kol. Vs. Sst. John’s Diocesan Girl’s Higher Secondary School Page 5 ii) The assessee has to enclose copies of annual accounts along with the details of investments of the money so accumulated before the expiry of six months from the end of each relevant previous year.

iii) The amount so accumulated should be invested in any one or more forms specified in section 11(5) within six months from the end of the each of the previous year.

It is important to note that accumulation under the provisions of section 11(2), is specifically made only under those circumstances where 85% of the income of the Trust could not be applied. Section 11(2), only becomes operative beyond the 15% of the accumulation of income which is otherwise allowed under section 11(1) of the Act.

On perusal of the above, we find that the assessee has made all the requisites compliance before the ld. CIT(A) which the assessee was supposed to make well in advance as discussed above. Thus, we observe that there was delay on the part of the assessee in the compliances as mandated under the provisions of section 11(2) read with rules 17 of Income Tax Rules. However we find that Hon’ble Gujarat High Court has decided the identical issue in favour of assessee in the case of CIT Vs. Mayur Foundation reported in 274 ITR 562. The relevant extract is reproduced as under:-

“When the matter is pending before the Tribunal by way of an appeal, the assessment proceeding is pending. The assessing authority is empowered and is duty-bound, to pass order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of an assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it cannot be contended on behalf of the Revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the Revenue to equate the assessment order with assessment proceeding is based on a fallacious premise. The proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee. If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In

ITA No.1079/Kol/2013 A.Y. 2009-10 DDIT(E)-I Kol. Vs. Sst. John’s Diocesan Girl’s Higher Secondary School Page 6 other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal. In these circumstances, the Tribunal was well within its jurisdiction to entertain the new ground by which the assessee claimed the benefit under s. 11(2) and adjudicate the tax liability of the assessee. The Tribunal has categorically found that the additional ground involves the question relating to interpretation of s. 11(2) and the facts on the basis of which such a decision is to be given regarding interpretation of s. 11(2) are not at all in dispute. In the circumstances, there is no infirmity in the order of the Tribunal, holding that the assessee is entitled to benefits allowable under s. 11(2).” Respectfully following the judgment of Hon'ble Gujarat High Court in the case of Mayur Foundation (supra) and in the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. This ground of Revenue’s appeal is dismissed. 7. In the result, Revenue’s appeal stands dismissed. Order pronounced in the open court 02/06/2017

Sd/- Sd/- (�या�यक सद�य) (लेखा सद�य) (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata,

*Dkp, Sr.P.S �दनांकः- 02/06/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DDIT(E), 5th Floor, 10B, Middleton Row, Kolkata-71 2. ��यथ�/Respondent-St. John’s Diocesan Girl’s Higher Secondary School, AE-467, Salt Lake City, Kolkata-64 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ�धकरण, कोलकाता ।