SRI GOVINDDEO EDUCATIONAL INSTITUTE ,KOLKATA vs. ITO(EXEMPTION) WARD-1(3) , KOLKATA

Per Sonjoy Sarma, Judicial Member:

2. For that on the facts and in the circumstances of the case, the lower authorities failed to correctly appreciate that the Sri Govinddeo Educational Institute appellant was indeed maintaining and aiding education institutions and it existed solely for educational purposes without any motive for profit and since its annual receipts did not exceed the limit of Rs.1 crores, it had rightly claimed exemption u/s 10(23C) (iiiad) of the Act.

3. For that on the facts and in the circumstances of the case, the Ld. CIT(A) acted in complete disregard of the binding precedent in assessee's own case for AY 2011-12 and thereby erred in not allowing the benefit of exemption claimed u/s 10(23C)(iad) of the Act.

4. For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before.

3. In the instant appeal, the assessee has raised as many as five common issues relating to denial of exemption claimed under Section 10(23C)(iiiad) of the Act without appreciating the fact that the assessee was maintaining and aiding educational institution and it existed solely for the purpose of education.

5. The Ld. AO during the assessment proceedings observed that out of two schools situated in Village Bagi and another in Village Sapkhali, though the schools are claimed to be run by the name of Shri Govinddeo Educational Institute, local people know them as Govinddeo School. According to the Ld. AO schools are actually run as coaching centre and classes are held from Class Nursery to Class IV, a nominal school fee of Rs. 20/- is charged from the students. The Ld. AO observed that rented premises from the coaching centre are run do not have any proper infrastructure. The condition of premises are not appropriate for students to attend the school/coaching centres. The students have to sit on the floor, on mat or otherwise. There is no bench or desk for the students. During the course of assessment proceedings, the Ld. AO issued a show cause notice to the assessee seeking explanation and clarification on all these observations and the assessee made a detailed submission explaining its case by submitting a written explanation on 02.03.2016. The relevant extract of the same is reproduced as under: "The Finance (No.-2) Act, 1998 introduced section 10(23C) w.e.f.01.04.1999, which is similar to the erstwhile section 10(22) of the Act. This exemption is available to any University or educational institution existing solely for educational purposes and not for the purpose of profit if the aggregating amount received by the said University or educational institution does not exceed the amount of annual receipt as may be prescribed, i.e. Rs. 1 crore. The sole object of our institution as embodied in clause (3) & (4) of our Memorandum of Association is "education". It is reiterated in Clauses 3 & 4 as under:- "3. The object for which the Society is established is solely education and for this purpose to do and take all acts, deeds, things and steps as are necessary for or incidental to the attainment of the said object. 3 Sri Govinddeo Educational Institute 4. The Society is established for the objects and purposes stated in Clause 3 above solely for educational purposes and not for purposes of profit. No part of the funds or income of the society shall be invested, applied or used in such manner so as to disentitle and /or deprive the society of the benefits and/or advantages and/or exemption under any law including the provisions contained in section 10 of the I.T. Act in force for the time being and/or from time to time". Thus, the sole object of the institution is education and we are carrying on educational activities only. For that, we are running educational institutions at Murshidabad and Bishnupur in state of West Bengal. The geographical area covered by us is only remote and underdeveloped villages. We have no other activities and the expenditure on education is incurred in respect of schools run by us. It is not necessary that an educational institutions claiming exemption under section 10(23C)(itiad) should be affiliated to or recognized by Governments or Educational Boards or Authorities. The schools in question are only primary schools in remote and underdeveloped villages which impart education to the students upto Class IV only. Therefore, we are eminently eligible for exemption under section 10(23C) (iiiad) as an educational institution both in law as well as on facts. Schools being run by us are at the junior basic level and for that no fees are charged from the students except a nominal tuition fee at Bishnupur school. As such, there was no income from the schools run at Murshidabld. There is meager income from the school run at Bishnupur. The entire expenditure of the schools at Murshidabad and the two schools at Bishnupur are being incurred by us. Expenses are met by dividend from investment in shares and interest on fixed deposit with banks. From the above you will find that schools are not even self-supportive. The school at Murshidabad is not charging anything from the students. The salary of the teacher who conduct classes is paid by us and in case of the schools at Bishnupur, nominal fees are collected. There is huge deficit. Therefore, some income is necessary for running the institution. It is a welcome feature that we are earning dividend and interest income which is utilized for running the educational institutions. Further, the organizations have been treated as educational institutions by the AO for the assessment years 1985-86, 1994-95, 1995-96, 1996-97, 1997-98 and 1998-99 and exempt under section 10(22) of the IT Act, 1961. Section 10(23C)(iiiad) is the successor to the Erstwhile section 10(22). The AO in these assessment years have considered our claim that we are educational institutions after elaborate deliberation and have come to the unanimous view that we are educational institutions and it is well settled and provisions of section 10(23C)(iiiad)and (vi) pertaining to educational institutions are equally applicable to provisions of earlier section 10(22) pertaining to educational institutions. The law laid down in respect of section 10(22) is equally applicable to these provisions mutatis mutandis is held, inter alia, in American Hotel and Lodging Association Institute v. CBDT (2008) 301 ITR 86 (SC).”

6. During the assessment proceedings, the assessee admitted that schools are being run at the junior level basis for which no fees were charged from the student except a small tuition fee of Rs. 20/-. The entire expenditure of the schools run by assessee were incurred by it and accounted for in its books of accounts. According 4 Sri Govinddeo Educational Institute to the assessee, the geographical area covered by it is a remote and under developed village, therefore, no other activities except for education on which expenditure was incurred were carried out, it was also argued that due to smallness of the centre and other circumstances that remuneration to the teachers were paid cannot be the basis for denial the claim of exemption made by the assessee. The assessee also submitted that right from the inception the trust has been treated as educational institution by the Ld. AO from the assessment year 1985-86, 1994-95, 1995-96, 1996-97, 1997-98 and 1998-99, exempt under section 10(22) of the Act, Section 10(23C) (iiad) is the successor to erstwhile section 10(22) of the Act. According to the aforesaid assessment year, the Ld. AO has considered the claim of the assessee of its running educational institution and has allowed the claim made by the assessee. However, considering the submission made by the assessee. The Ld. AO concluded adversely and disallowed the claim made under Section 10(23C)(iiiad) of the Act.

5. In our view, all the conditions as prescribed u/s 10(23C)(iiiae) of the Act, have been fulfilled by the appellant Trust and there is no allegation that the appellant Trust is involved in any other activity for profit or does not exist for philanthropic purposes. Even in this case, all the facts are on the file, therefore there was no need for any further investigation by the AO as alleged by the Ld. CIT(E).

6. In view of the above discussion, the action of the Ld. CIT(E) in directing the AO to disallow the exemption granted u/s 10(23C)(iiiae) of the Act was not justified. The impugned order of the Ld. CIT(E) is, therefore quashed.” In the present case also, the assessee has surplus approximately 53.65% of receipts for the purpose of future application which was accumulated in order to set up schools and educational institutions after applying 38% of the gross receipt in running and maintenance of the educational institution. Under these facts and circumstances, we are of the view that the provisions of Section 10(23C)(iiiad) are applicable and consequently the income of the institution is exempt as the assessee trust has satisfied all the conditions as prescribed under the provisions of Section 10(23C)(iiiad) of the Act. Besides there is no allegation by the ld. CIT(E) that the assessee is involved in any other activity for profit and not for educational purposes. Accordingly we set aside the order of Ld. CIT(E) and allow the appeal of the assessee.” 4.2. Ld. Counsel further submitted that the issue in the case of Shri Venkateshwara Educational Institute went before the Hon’ble jurisdictional High Court of Calcutta where the revenue had raised three substantial questions of law for the consideration of the Hon’ble Court. Hon’ble jurisdictional High Court found that the Tribunal rightly granted relief to the assessee. Taking note of the facts and circumstances of the case, the appeal of the revenue was thus dismissed as there was no question of law which arose much less substantial question of law in the said appeal. 4.3. Relevant substantial question of law and observations and finding of the Hon’ble jurisdictional High Court are reproduced as under: i) Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in setting aside the order of the Commissioner of Income Tax (Exemptions), Kolkata and holding that the assessee is eligible for exemption under Section 10(23C)(iiiad) of the Income Tax Act, 1961 in spite of the fact that the assessee does not exist solely for the educational purpose and it has profit motive? ii) Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in holding that the assessee is squarely covered by the provisions of Section 10(23C)(iiiad) of the said Act despite the fact that the assessee's activities are not solely for educational purpose and that there is no receipt from any educational institution and its source of iii) income consists of dividend income, interest income and capital gain with a surplus of 53% of total receipts? iii) Whether the Learned Tribunal has substantially erred in law in allowing the appeal of the assessee and holding that the assessee is eligible for exemption claimed under Section 10(23C)(iiiad) of the said Act despite the fact that the assessee failed to fulfill the conditions for being eligible for exemption under Section 10(23C)(iiiad) of the said Act? 8 Sri Govinddeo Educational Institute We have heard learned Counsel on either side. The respondent/ assessee is a trust registered under Section 12A/12AA of the Act and it claimed exemption under Section 10(23C)(iiiad) by way of dividend, interest income and capital gain on sale of shares of mutual funds. The assessee admittedly is running an educational institution in a very remote and/or backward area and does not charge any fee from the students towards studying in the said school. The learned Advocate after considering the factual aspects found that the covenant in the trust deed clearly show that the assessee is solely formed for the purpose of establishing school and educational institution and this fact has not been disputed by the revenue. Further the Tribunal noted that the assessee has incurred a sum of Rs.41,83,984/- on various expenses connected with the rent and maintenance of the school. Further the Tribunal found that the total receipt by way of dividend, interest and capital gain on sale of shares of mutual fund were accumulated in order to improve the infrastructure of the school and construction of new schools with the aim and object of the assessee trust. The Tribunal also referred to a decision of the Coordinate Bench in the case of Swasthya Sewa Sansthan vs.CIT(E), Kolkata in dated 9.2.2022 wherein the facts were more or less identical and relief was granted to the said trust. Further the learned Tribunal also noted that there is no allegation made by the department that the assessee was involved in any other activity for profit and not for educational purposes. Thus, we find that the Tribunal rightly granted relief to the assessee, taking note of the facts and circumstances of the case and we find that no question of law arises much less substantial questions of law. There is nothing for consideration in this appeal at this stage. Accordingly, the appeal stands dismissed.”

Sri Govinddeo Educational Institute 9. We have heard the rival submission of the parties and perused the material available on record and gone through the order referred by the Ld. Counsel for the assessee passed by the co-ordinate bench in ITA No. 1156/Kol/2023. It is seen that the facts in the order relied upon are similar to those in the case of the assessee which is squarely covered in favour of the assessee and therefore respectfully following the same the appeal of the assessee is allowed for the claim of exemption under Section 10(23C)(iiiad) of the Act. Accordingly, appeal of the assessee is allowed.