ITO, WARD-2(1), BHUBANESWAR, BHUBANESWAR vs. REGIONAL COLLEGE OF MANAGEMENT, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.408 to 412/CTK/2013 Assessment Years :2005-06 to 2009-2010

Vs. ITO, Ward -2(1), Regional College of Bhubaneswar Management, Plot No.GD-2- 12, and 2013, Chandra sekharpur, Bhubaneswar. PAN/GIR No. AAATR 6599 K (Assessee) .. ( Respondent)

C.O. Nos. 58 to 62/CTK/ 2013 (arising out of ITA Nos.408 to 412/CTK/2013 Assessment Years :2005-06 to 2009-2010

Regional College of Vs. ITO, Ward -2(1), Management, Plot No.GD-2- Bhubaneswar 12, and 2013, Chandra sekharpur, Bhubaneswar PAN/GIR No. AAATR 6599 K (Cross objector) .. ( Respondent)

Assessee by : Shri Bhagaban Panda/Pradyumna Kumar Sahoo, ARs Revenue by : Shri Kunal Singh, CIT DR

Date of Hearing : 04/07/ 2017 Date of Pronouncement : /07/ 2017

O R D E R Per N.S.Saini, AM

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These are appeals filed by the Revenue and cross objections filed by

the assessee against a consolidated order of CIT(A)-II, Bhubaneswar,

dated28.3.2013, for the assessment years 2005-06 to 2009-2010,

respectively.

appeal, which read as under:

“ 1. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in allowing benefit of Sec.11 to the assessee which was disallowed by the AO.

that the assessee trust i.e. M/s. Regional College of Management was

registered under the Indian Trust Act vide a trust deed dtd.12.05.2004.

Under the trust, the name of the educational institution was "Regional

College of Management" which runs from its own building constructed on

State Government Plot No.GD-2/12 & 2/13, Chandrasekharpur,

Bhubaneswar. Primarily, the college imparts MBA (Master of Business

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Administration) and MCA (Master of Computer Application) & M.A.

(Tourism) courses duly approved by the AlCTE and other regulating agency

for every year. The Assessing Officer observed that the assessee trust has

claimed exemption u/s.10(23)(c) of the Act. The Assessing Officer further

observed that the assessee was not granted registration under section

12AA of the Act. Hence, the Assessing Officer required the assessee to

furnish the basis of claiming exemption. As there is no reply received from

the assessee, the Assessing Officer did not entertain the claim of

exemption of the generated surplus in any of the five years either

u/s.10(23C)(vi) or under section 11 of the Act. Accordingly,

assessments/reassessments for assessment years 2005-06 to 2009-10

were completed between 30.11.2010 and 20.12.2011 (for first four years,

reassessments were done on the same day i.e. 30.11.2010 and for

assessment year 2009-10, regular assessment was done on 20.12.2011).

Assessments were completed treating the assessee as a normal assessable

entity and disallowances have been made on the basis of accounts

whatever have been made available to the Assessing Officer. Accordingly,

the incomes have been computed for all the 5 years treating the assessee

as an AOP and taxes have been demanded as per law.

Bhubaneswar for grant of registration u/s.12A of the Act on 29.05.2007

w.e.f. 12.05.2004, the date of execution of the trust deed. However, the

CIT did not act on this application of the assessee for a long time which

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eventually resulted in the impugned assessments under appeal. The

assessee trust filed a writ before the Hon’ble High Court of Odisha being

W.P.C. No.23432/2011 which was disposed of by the Hon’ble High Court

on 5.12.2011 with a direction to dispose of the application dated 29.5.2007

filed in Form No.10A of the Act if permissible in law. Pursuant to this

direction of Hon’ble High Court, the CIT dispose of the application vide

order dated 29.3.2012 to grant registration to the trust with retrospective

effect from 12.5.2004, the date of execution of registration of trust deed.

Thus, after 29.3.2012, the trust became eligible for consideration for grant

of benefit u/s.11 for all the five years in appeal subject to its satisfying the

conditions u/s.11 to 13 of the I.T.Act.

of registration u/s.12A on 29.03.2012, it became necessary for the

department to examine as to whether the statement of affairs and the

accounts of the assessee supports grant of benefit u/s.11, and once it is

accepted that the assessee was a charitable trust and did not violate the

provisions from sec. 11 to 13, there would be no meaning in making various

disallowances of expenditure eventually to grant exemption to the finally

computed income. The so called expenditure would become application of

the receipts of the trust. It was stated that the assessment orders have

nothing to suggest any violation of sec. 11 or sec.13. So there is no scope

to deny the benefit of sec. 11 to the assessee for any of the years under

appeal. It was submitted that for the first time the Assessing Officer has

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got the scope to examine the statement of affairs of the assessee trust for

assessment year 2010-11 putting the same under the scanner of sec.11 to

13 of the l.T. Act. Even against the background of the assessments made

for assessment years 2005-06 to 2009-10 and in spite of his own remand

report sent to the CIT(A) on 15.01.2013 for all the five years supporting

the original assessments, the Assessing Officer has eventually concluded

for assessment year 2010-11 that the assessee trust was indeed engaged

in charitable activities and did not violate any provisions of sec.11 to sec.13

for that year. The activities and accounts of the trust for all the five years

were absolutely similar to that of A/Ys.2010-11. Accordingly, on merit, for

all those years, the trust should get the benefit u/s.11. A copy of the

assessment order for A/Y.2010-11 was filed before the CIT(A).

“"I have carefully analysed the facts of the case and the arguments placed before me and have gone through the assessment orders, the written submission of the assessee and the remand report of the AO. Having applied my mind to the facts of the case, I find that the facts of all the five years would fall in the same frame as that of A/Y.2010- 11, if the same are examined for the purpose of grant of benefit u/s.11.

6.1. Although the trust deed was executed on 12.05.2004, financial year 2004-05 was not the very first year of activity of "Regional College of Management". As explained by the AR, under the same name of Regional College of Management there was a society which was functioning at the same place and most of the constructions on the plot had been carried out by that society. The trust had taken over the said society including its assets and liabilities as a going concern w.e.f. financial year 2004-05 i.e. after formation of trust. Therefore, even in the first balance sheet of the trust one finds substantial assets and liabilities which is as per the taken over balance sheet from the society. Admittedly, at the time of completion of original assessments for all the five years, the trust did not have the benefit of registration U/S.12A. This benefit was granted by the CIT, Bhubaneswar only on 29.03.2012 with retrospective effect from 12.05.2004, thereby making the trust eligible to be examined for benefit u/s.ll of the Act. Therefore, the entire exercise during the course of assessment proceedings for the years under appeal were based on making the disallowances under the heads of various expenditure such as consultancy and legal expenses, computer purchase

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expenses, depreciation, placement expenses, donations, EPF/CPF contributions, advertisement expenses, lab expenses, etc.

6.2. Vide my letter dtd.26.10.2012, while sending the written submissions of the assessee to the AO and calling for his remand report, I had specifically mentioned that the main issue in remand would be the claim of the assessee that in view of registration U/S.12A for all the years it should be entitled to the benefit of sec.11. The AO was asked to submit his views on this claim in particular.

6.3 No doubt the AO has taken pains to elaborately examine the written submission of the appellant for all the five years against the background of the respective assessment orders. For each year, the AO has mostly stated that during the course of assessments the assessee had not filed most of the documents and explanations which he included in the voluminous paper books filed during the appellate,£ proceedings. Therefore, this would constitute additional evidence and should not be entertained. He has repeatedly asserted that since the claims were not substantiated with appropriate evidence during the original assessment, the AO had rightly disallowed part/full of the claim.

6.4. The documents filed by the assessee and the statements of affairs have not been examined during the remand proceedings in order to give a finding as to whether the assessee would now be entitled to sec.11 in view of the registration granted U/S.12A or there were some irregularities within the meaning of sec. 11 to 13 so as to disentitle the assessee trust to such benefit.

6.5. It remains uncontroverted that the assessee trust was carrying on organized educational activities duly approved by the All India Council for Technical Education(AICTE) and it had AlCTE's approvals for all the five years under examination. The courses were approved by Govt. Agencies and were affiliated to the concerned universities and other than education, the assessee has not been found to be engaged in any other activities of profit. Neither during the original assessment proceedings nor during the remand there is any finding to. establish any violation u/s.ll(2), 11(5) or sec. 13 of the I.T. Act. In the elaborate remand report, there is not a single word to point out as to why benefit u/s.ll should not be granted to the trust. On the other hand, when the facts remain almost identical for assessment year 2010-11, in the latest order passed , the AO on 21.03.2013 after examining o\\ aspects of the case, he has allowed benefit of section 11 to the assessee trust.

6.6. In the matrix of disallowances for all the five years, I have found that there is an observation for assessment year 2007-08 and 2008-09 that in the premises of Regional College of Management a Jagannath Temple has been constructed using the trust funds. The expenditure in these two years were Rs.82 lakhs and Rs.34 lakhs respectively. In his discussion, the AO had disallowed the depreciation pertaining to the temple stating that the temple was not for the purpose of income earned by the institution (The AO was considering the financial statements of the assessee on commercial consideration). Similarly, depreciation claim was also disallowed in assessment year 2009-10. However, at para-9.1 of the assessment order for that year the AO had noted that the construction of the temple was not at all related to the aims and objectives of the trust and it was also not related to the activities of the trust.

6.7. In the entire discussion (in the assessment orders and in the remand repots) for all the five years, at best, the aforesaid discussion at para-9.1 could be considered to be relevant for consideration of benefit u/s.11. The AR of the assessee was asked to explain the connection of Jagannath Temple with the aims and objectives of the trust

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and activities of the trust. It was stated that in almost all educational institutions across the country, * there is a place of worship because this is usually constructed on students' demand. In some cases, the temple is that of Lord Ganesh whereas in some cases it can be that of Lord Shiva or even Goddess Saraswati. It has been a psychological requirement for students in their stress period in the educational institutions. The only difference in the case of the present trust is that while building a place of worship, the trustees have built a rather large Jagannath Temple with substantial investments. It has been explained that this has worked wonders for the students and irrespective of their caste, creed Et languages, etc. and their states of origin and gender, students and staff frequently visit the temple and such visits has perceptibly increased the level of discipline and peace in the academic institution. Therefore, the AR pleaded that construction of the temple cannot be totally separated from the goal and activity of the educational institution.

In view of the above, in my opinion, after the trust has been granted registration u/s.l2A on 29.03.2012 and that too with retrospective effect and secondly because in the latest assessment for assessment year 2010-11 completed on 21.03.2013, benefit u/s.11 has been allowed, in absence of any adverse comments regarding sec.11 benefit in the remand report, the trust becomes eligible for the benefit of Sec. 11 for all the five years under appeal. Accordingly, for all the rive years, the appeals are treated as allowed.”

appeal before the CIT(A).

authorities and materials available on record. The undisputed facts of the

case are that the assessee is engaged in running an educational institution

under the name & style of M/s. Regional College of Management. The

assessee in its return of income filed for all the years under consideration

claimed deduction u/s.11 & 12 of the Act. The Assessing Officer observing

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that the assessee trust has not been registered under section 12AA of the

Act, declined to allow exemption u/s.11 & 12 of the Act to the assessee.

granted registration u/s.12AA of the Act by the CIT, Bhubaneswar vide

order dated 29.3.2012 w.e.f. 12.5.2004. Thus, the CIT(A) found that all

the assessment years involved in the present appeals are covered by the

aforesaid registration granted to the assessee u/s.12AA of the Act.

Officer to submit his comments as to why deduction claimed by the

assessee u/s.11 & 12 of the Act should not be allowed for all the years

under appeal in view of the registration granted to the assessee u/s.12AA

of the Act.

reason could be given by the Assessing Officer in the Remand Report which

still requires disallowance of deduction claimed under section 11 and 12 of

the Act. The CIT(A), thereafter considering the facts and circumstances of

the case held that in view of grant of registration u/s.12AA of the Act on

29.3.2012 with retrospective effect and secondly because in the latest

assessment for assessment year 2010-11 completed on 21.03.2013,

benefit u/s.11 has been allowed, in absence of any adverse comments

regarding sec.11 benefit in the remand report, the trust becomes eligible

for the benefit of Sec. 11 for all the five years under appeal.

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u/s.11 & 12 ought to be denied to the assessee when registration u/s.12AA

of the Act has been granted to the assessee for all the assessment years

under appeal and when disallowance was made by the Assessing Officer

only for the reason of absence of said registration. Ld D.R. could not point

out any specific error in the order of the CIT(A). ld D.R. also could not

point out any additional evidence, which was admitted by the CIT(A) for

deciding the impugned appeals which was taken on record after the remand

report of the Assessing Officer.

making investment in temple by the assessee is to be allowed as deduction

u/s.11 & 12 of the Act. During the years under appeal, depreciation on

temple was claimed as deduction by the assessee, which was allowed by

the CIT(A) on its findings that temple was part and parcel of educational

institution and was for the benefit of all the students and staff of the

institution without any discrimination.

was allowed to the assessee by the Assessing Officer in the assessment of

assessment year 2010-2011 passed u/s.143(3) of the Act on 21.3.2013.

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the CIT(A). Therefore, the order of the CIT(A) for all the assessment years

under appeal is confirmed and grounds of appeal of revenue are dismissed.

of the CIT(A). Since, we have upheld the order of the CIT(A) for all the

years under consideration, the cross objections filed by the assessee are

infructuous and hence, dismissed.

by the assessee are dismissed.

Order pronounced in the open court on 06 /07/2017 in the presence of parties. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 06/07/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Assessee : ITO, Ward -2(1), Bhubaneswar 2. The Respondent. Regional College of Management, Plot No.GD-2-12, and 2013, Chandrasekharpur, Bhubaneswar 3. The CIT(A)-II, Bhubaneswar 4. Pr.CITII, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

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BY ORDER, SR.PRIVATE SECRETARY ITAT, Cuttack