PKD TRUST,CHENNAI vs. ITO, POLLACHI

आदेश /O R D E R

PER BENCH:

These are appeals filed by the assessee, of which first one is

directed against the order dated 29.05.2014 of the Commissioner of

Income Tax (Appeals)-II, Coimbatore, second one is directed against

2 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 the order dated 30.03.2015 of the Commissioner of Income Tax

(Appeals)-2, Coimbatore and the third one is directed against the order

dated 06.05.2016 of the Chief Commissioner of Income Tax,

Coimbatore.

Appeal in I.T.A. No.2053/Mds/2014 is taken up first for disposal.

“(1) The order of the Commissioner of Income Tax (Appeals) III, be dated 29.05.2014 in I.T.A. No.101/2012-13 for the above mentioned assessment year is contrary to law, facts, and in the circumstances of the case.

(2) The CIT(Appeals) erred in sustaining the assessment in the status of AOP overlooking the proceedings initiated u/s 12A(a) of the Act as well as the pending proceedings u/s 10(23C) of the Act without assigning proper reasons and justification.

(3) The CIT(Appeals) erred in sustaining the assessment of `1,01,81,782/- in the computation of taxable total income without assigning proper reasons and justification.

(4) The CIT(Appeals) failed to appreciate that there was no proper opportunity given before the passing of the impugned order and any order passed in violation of the principle of natural justice would be nullity in law.”

Trust Deed dated 09.09.1992, is engaged in running educational

institutions. For the impugned assessment year, it had claimed

3 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 exemption under Section 10(23C) of the Income-tax Act, 1961 (in short

'the Act'). Assessee was running the following institutions:-

relevant previous year, were as under:-

Name of the institution Total receipts Income (`) (`) 1. PKD Matric Higher Secondary School 2,59,99,053 75,72,480 2. Krishnasamy Matriculation School 15,53,868 (-) 1,60,219 3. PKD College of Education 40,90,657 2,23,130 4. PKD DT.Ed. Education College 24,64,463 6,33,369 5. PKD School Hostel 57,72,478 19,13,022 Total 3,98,80,519 1,01,81,782

Assessing Officer was of the opinion that a claim under Section

10(23C) of the Act could be allowed only if gross receipts during the

relevant previous year was less than `1 Crore. As per the A.O., if the

gross receipt exceeded that amount, it was required for the assessee

to obtain an approval as prescribed under Section 10(23C)(vi) of the

Act from the Chief Commissioner of Income Tax. Since assessee had

not obtained such approval, as per the A.O., it was not eligible to claim

4 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 exemption under Section 10(23C) of the Act. When this was put to the

notice of the assessee, reply of the assessee was that such exemption

was allowed by the Assessing Officer for assessment year 2007-08.

As per the assessee, it had filed application seeking such approval in

Form 56D on 26.10.2006 with the Commissioner of Income Tax-III,

Coimbatore. Further, as per the assessee, by virtue of CBDT circular

No.7/2010 dated 27.10.2010, once an approval under Section 10(23C)

of the Act was granted, it was to be considered perpetual till it was

withdrawn. However, the Assessing Officer was not impressed by the

above arguments. According to him, mere filing of application in Form

No.56D would not make the assessee ipso facto eligible for claiming

the exemption. Further as per the Ld. A.O., in the scrutiny assessment

for assessment year 2007-08, question whether the assessee had

obtained approval under Section 10(23C) of the Act was never

considered. He held that assessee had failed to satisfy the tests laid

down under Section 10(23C) of the Act in sofar as approval was not obtained from the competent authority despite receipts exceeding `1

Crore. Claim of exemption was denied. Total income was fixed at `1,01,81,782/- and tax levied thereon.

5 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 5. Aggrieved, the assessee moved in appeal before the

CIT(Appeals). Argument of the assessee was that it had filed an

application on 16.11.2005 for assessment year 2005-06 and on

25.10.2006 for assessment year 2006-07 for approval under Section

10(23C) (vi) of the Act. According to the assessee, since the said

applications were still to be processed by the Department, tax

exemption claimed could not be denied. However, the CIT(Appeals)

was not impressed by the above argument. According to him, though

the assessee had filed an application for approval under Section

10(23C)(vi) of the Act on 25.10.2006 for assessment year 2006-07, it

had not followed up on such application. Ld. CIT(Appeals) also noted

that the assessee never sought registration under Section 12A of the

Act for claiming exemption under Section 11 of the Act as well.

Further, as per the Ld. CIT(Appeals), the Chief Commissioner of

Income Tax had vide order dated 24.06.2013, rejected the application

filed by the assessee for approval under Section 10(23C)(vi) of the

Act. He thus confirmed the order of the A.O.

lower authorities, submitted that assessee had obtained registration

under Section 12AA of the Act on 28.07.2015. Copy of the order of

6 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 the Commissioner of Income Tax (Exemptions), Chennai in this regard

was placed on record. According to him, by virtue of first proviso to

Section 12A(2) of the Act, a registration granted would apply for all

assessment years, proceedings of which were pending before the

Assessing Officer. According to him, though there were no proceeding

directly pending before the Assessing Officer for the impugned

assessment year, as on the date on which the assessee was granted

registration under Section 12AA of the Act, appeals for the impugned

assessment year were alive. According to him, processing of appeals

could be considered only as continuation of the proceedings before the

Assessing Officer. Thus, according to him, assessee had to be given

exemption under Section 11 of the Act since it was saved by the first

proviso to Section 12A(2) of the Act. In any case, according to him,

application for approval under Section 10(23C)(vi) of the Act filed for

assessment year 2006-07, was disposed of by the Chief

Commissioner of Income Tax after more than six years and hence, the

application had to be deemed as allowed within a reasonable period.

Reliance was placed on the decision of Calcutta Bench of this Tribunal

in the case of Sree Sree Ramkrishna Samity v. DCIT (2016) 156 ITD

646.

7 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16

assessee had neither got approval under Section 10(23C) of the Act

nor registration under Section 12A of the Act for the impugned

assessment year. As per the Ld. D.R., assessee was therefore, not

eligible for claiming exemption under either Section 10(23C) or under

Sections 11 and 12 of the Act.

During the previous year relevant to impugned assessment year,

assessee was not having approval as required under Section

10(23C)(vi) of the Act. It may be true that the assessee had moved

an application for such approval for assessment year 2006-07 on

25.10.2006 and the application was still to be disposed of. This in our

opinion, would not mean that for the impugned assessment year,

assessee was having a valid approval under the said Section for

claiming exemption. Further the Ld. CIT(Appeals) has specifically

noted that assessee’s application for approval under Section

10(23C)(vi) of the Act stood rejected by the CCIT by his order dated

24.06.2013. As to the claim of the assessee that registration under

Section 12AA of the Act granted to it by Chief Commissioner of

8 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 Income Tax on 28.07.2015 was relevant for the impugned assessment

year also, it is required to have a look at sub-section (2) of Section 12A

of the Act, which has been relied on by the Ld. A.R.:-

“12A. (1) …. …. ….. ….. ….. ….. ….. …. …. …. …. …. …. … …. …. …. …. … … …. …. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. …. … (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year : Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year : Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.”

9 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 First proviso, in our opinion, can be brought into application only for

the years where assessment proceedings are pending before the

Assessing Officer as of the date of grant of registration under Section

12AA of the Act. Admittedly, on 28.07.2015, when the registration

under Section 12AA of the Act was granted to the assessee, no

proceedings were pending before the Assessing Officer for the

impugned assessment year since assessment had reached a

completion. No doubt, assessee’s counsel had placed strong reliance

on the decision of Calcutta Bench of this Tribunal in the case of Sree

Sree Ramkrishna Samity (supra). However, in the said case,

proceeding for reassessment for the relevant assessment year was

still pending before the Assessing Officer and the Bench had relied on

the definition of “assessment” as given under Section 2(8) of the Act

by virtue of which a reassessment was also made a part of

assessment. In our opinion, the said decision would not help the

assessee since admittedly no proceedings were pending before the

Assessing Officer for the impugned assessment, as on the date of

grant of the registration under Section 12AA of the Act. The plain

words used in first proviso “for which assessment proceedings are

pending before the Assessing Officer” does not give any room for the

10 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 type of interpretation canvassed by the Ld. A.R. Appeal proceeding

cannot be equated as proceeding pending before the Assessing

Officer. While interpreting a taxing statute, courts cannot travel

beyond the words therein if its meaning is plain and unambiguous.

Thus we are not inclined to accept the line of argument taken by Ld.

A.R.

10(23C) of the Act has been correctly applied in the case of the

assessee. At this juncture, it is required to have a careful reading of

Section 10(23C) of the Act. The relevant clauses under which the

income of an educational institution can be treated as exempt under

Section 10(23C) of the Act are given in sub-clause (iiiad) and (vi).

Both these sub-clauses are reproduced hereunder:-

10(23C) any income received by any person on behalf of-- (i) ….. ….. ….. …… …… …… …… …… …… …… …… …… …… ….. …… (ii) ….. ….. ….. ….. ….. …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. (iii) ….. ….. ….. ….. ….. ….. …. ….. ….. ….. ….. …. …. ….. …. …. …. (iiia) …. …. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. …… (iiiab) …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. …..

11 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16

(iiiac) ….. ….. ….. ….. …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed ; or (iiiae) …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. …… ….. ….. ….. (iv) ….. ….. ….. ….. ….. …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. … (v) …… ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. …. (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority ;

university or other educational institution. Here, the income has been

received by the assessee on behalf of five different educational

institutions, which have been listed by us at para 4 above. Blanket

exemption is available where receipts of such university or educational

institution do not exceed the amount of annual receipt which has been

prescribed. Admittedly, the prescribed limit was `1 Crore for the

impugned assessment year. If we take each of the educational

institution separately, only in the case of PKD Matric Higher Secondary

School, the receipt has exceeded `1 Crore. Annual receipts of all

12 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 other institutions were less than the threshold amount of `1 Crore. In

our opinion, lower authorities had not applied Section 10(23C) of the

Act in respect of these educational institutions, which has gross receipts less than ` 1 Crore. The question whether each educational

institution could be considered separately for applying the threshold annual receipt of `1 Crore, which was applicable for the impugned

assessment year, has not been considered by any of the lower

authorities in the proper perspective. In our opinion, the matter

therefore, requires a fresh look by the A.O. Though the assessee is

not eligible for exemption under Section 11 of the Act, the question

whether it could claim exemption under Section 10(23C) of the Act in

the case of these institutions which had gross receipts below the

threshold limit requires a fresh look. Therefore, we set aside the

orders of the lower authorities and remit the issue regarding

application of Section 10(23C) of the Act back to the A.O. for

consideration afresh, in accordance with law.

for statistical purposes.

13 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 12. Now, we take up appeal of the assessee in I.T.A.

No.1820/Mds/2016.

similar to what has been taken by it for assessment year 2010-11.

Assessee was denied exemption under Section 10(23C) of the Act as

well as exemption under Section 11 of the Act. The income and

receipts of the assessee from various institutions run by it, for the

relevant previous year, were as under:-

Income Receipts ` ` 1. P.K.D. Matriculation School : 83,78,259 3,64,11,087 2. Hostel division : 32,15,580 86,06,721 3. P.K.D. Pre-School : 3,69,984 9,47,787 4. Krishnasamy Matriculation School : - 1,43,198 1,55,126 5. P.K.D. College of Education : 8,74,255 44,38,485 6. P.K.D.T.Ed. College : 11,31,780 32,02,058 7. Disha School : - 13,59,563 1,51,17,971 1,24,67,097 6,88,79,235

We are of the opinion that directions given by us for assessment year

2010-11 at para 10 above will squarely applicable here also. Similar

directions are given for assessment year 2012-13 also.

statistical purposes.

14 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16

No.1819/Mds/2016.

petition against denial of approval sought under Section 10(23C)(vi) of

the Act.

Form 56D on 28.09.2012 seeking approval under Section 10(23C)(vi)

of the Act. The said application was rejected by the Chief

Commissioner of Income Tax vide his order dated 24.06.2013.

Reason for rejection of application was that the Trust Deed did not

have a clause mentioning the non-profitable status of the assessee.

Thereafter, the assessee moved a review petition on 28.04.2014. The

Ld. CCIT rejected the review petition noting that there was no

provision under the Act for review of an order passed under Section

10(23C)(vi) of the Act.

by the assessee had to be considered as a rectification application

under Section 154 of the Act. As per the Ld. A.R., under Section 154

15 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 of the Act, it was possible to rectify a mistake apparent from record.

The mistake could be in any order passed by any income-tax authority.

As per the Ld. A.R., there was a clear mistake of law committed by the

Ld. CCIT when he rejected the application filed by the assessee under

Section 10(23C)(vi) of the Act. According to him, it was not necessary

to mention specifically that the institution was not running for the

purpose of profit, in the Trust Deed. Thus, according to him, when a

mistake which was apparent on record, was sought to be rectified by

the assessee through a review petition, without citing any reason, the

petition could not have been rejected by the Ld. CCIT.

prescribed authority under sub-section (vi) and (via) of Section

10(23C) of the Act was made appealable only from 01.06.2015.

According to him, clause (f) was introduced to Section 253(1) of the

Act by Finance Act, 2015 with effect from 01.06.2015 and prior to that

date, the order of the prescribed authority under the said clause was

not appealable. As per the Ld. D.R., the assessee was trying to

circumvent the Section by relying on a review petition which was rightly

rejected by the Ld. CCIT.

16 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 20. We have perused the orders and heard the rival contentions.

Clause (f) of Section 253(1) of the Act, whereby order of the

prescribed authority under sub-clause (vi) and (via) of Section 10(23C)

of the Act was made appealable, was introduced by Finance Act, 2015

with effect from 01.06.2015. Prior to that, the list of orders which were

appealable before the Appellate Tribunal, mentioned in Section 253(1)

of the Act did not have in it an order passed under sub-clauses (vi) and

(via) of Section 10(23C) of the Act. Contention of the Ld. A.R. is that

the review petition filed by the assessee before the Ld. CCIT was only

an application for rectification under Section 154 of the Act. Even if we

presume that this is only an application for rectification of mistake,

such mistake which can be rectified under Section 154 of the Act, is

one which is glaring and apparent. Order dated 24.06.2013 passed

under Section 10(23C)(vi) of the Act, on which the review petition was

filed, had specifically stated that the application was being rejected for

non-mentioning of non-profit nature of the institutions run by the

assessee in its Trust deed. We cannot say that no reason was cited

by the Ld. CCIT, or the reason cited was perverse. Thus the order

was not, in our opinion, amenable to a rectification proceeding under

Section 154 of the Act. There was no mistake which was glaring

17 I.T.A. No.2053/Mds/14 I.T.A. Nos.1820 & 1819/Mds/16 enough, which could have been rectified under Section 154 of the Act. Viewed in any manner, we are of the opinion that the appeal of the assessee has no merits. Such appeal stands dismissed.

Order pronounced on 10th February, 2017 at Chennai.

sd/- sd/- (एन.आर.एस. गणेशन) (अ�ाहम पी.जॉज�) (N.R.S. Ganesan) (Abraham P. George) �या�यक सद�य/Judicial Member लेखा सद�य/Accountant Member

चे�नई/Chennai, �दनांक/Dated, the 10th February, 2017.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-II, Coimbatore 4. आयकर आयु�त/CIT-III, Coimbatore 5. CIT, Exemption, Chennai 6. �वभागीय ��त�न�ध/DR 7. गाड� फाईल/GF.