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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM]
ORDER Per Shri M. Balaganesh, AM:
This appeal by revenue is arising out of order of CIT(A)-XIV, Kolkata vide appeal No. 175/CIT(A)-XIV/09-10 dated 06.09.2013. Assessment was framed by ITO (Exemp.)-II, Kolkata u/s. 143(3)/11 of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2007-08 vide his order dated 17.12.2009.
The only issue to be decided in this appeal is as to whether the ld CITA is justified in treating the tour expenses of Rs. 29,43,011/- and fashion show expenses of Rs. 36,53,054/- as application of income in the facts and circumstances of the case.
The brief facts of this issue is that the assessee is a charitable society registered u/s 12A of the Act with effect from 1.11.1973. The main activities of the society are imparting education. The assessee society runs a college in the name of ‘Bhawanipur Education Society College’, a vocational art academy, a secondary school and a higher secondary school. The ld AO observed that the assessee society had submitted audited accounts for all the units i.e schools, colleges, vocational art academy and the society itself. Sl. Name of the Section Total Revenue Total revenue Capital Total No. Income (Rs.) expenditures expenditure application of (Rs.) (Rs.) income (Rs.) 1. The B.G.E. Society 2,47,73,567/- 1,10,54,455/- 43,11,576/- 1,53,66,031/- 2. The B.E.S. College 9,10,28,007/- 8,39,72,251/- 22,50,051/- 8,62,22,302/- 3. The B.E.S College 39,79,582/- 48,05,030/- 16,099/- 48,21,129/- (Vocational Art Academy)
4. The B.G.E.S School (ICSE) 43,20,518/- 1,16,94,138/- 21,50,362/- 1,38,44,500/- 5. The B.G.E.S School (ISC) 99,74,119/- 64,04,784/- 64,04,784/- TOTAL 13,40,75,794/- 11,79,30,660/- 87,28,088/- 12,66,58,784/- 3.1. The income of the society includes dividend, interest, voluntary contributions, rent, etc. The income of the school and colleges include tuition fees, development fees and other fees. From the books of accounts produced for each unit which were also subjected to verification on test check basis by the ld AO, the ld AO observed that assessee had incurred substantial expenditures in different heads under the normal academic curriculum of the schools and colleges. The ld AO observed that the following expenses incurred by the assessee society shall not be regarded as application of income as according to him the same are not relevant for the purpose of objects of running an educational society :-
(a) Tour expenses – Foreign tour provided to students of Bhowanipur Gujarati Education Society College (b) Functions and Festivals – Annual Fashion Show and Mr. and Mrs University expenses.
3.2. The assessee replied before the ld AO as below:- “The management has always felt that ‘seeing is believing’ and has been the first among the Educational Institutes to undertake foreign tours for the benefits of the students. We believe that hands on approach will make the students more competent to handle the competitive world once they pass out of the college. This educational foreign tours are open to all students of the Institute and the selection is made depending upon their aptitude, educational/academic brilliance and other requirements.”
3.3. The ld AO concluded that only a section of the students get the opportunity of foreign tour and these tours are not in the form of excursion. The same logic was also applied to local tours offered to students of ISC and ICSE schools. He further concluded that these opportunities are treated as special offers given to special category of students and not related to conventional educational programmes / of the schools / colleges. Accordingly he held that the expenditure on tour would not be treated as application of income to the tune of Rs. 29,43,011/- for the purpose of section 11 of the Act.
3.4. The ld AO observed that the assessee had shown expenses of Rs. 35,04,242/- and Rs. 1,48,812/- under Annual Fashion Show and Mr. & Mrs. University held by the college. He
3 Bhowanipur Gujarati Education Society, AY 2007-08 held that this expenditure is not related to educational programme offered by the institution. He concluded that this activity does not fall under the definition of ‘education’ u/s 2(15) of the Act. Rather it only adds to the advertisement for the college and accordingly held that the same would not be treated as application of income to the tune of Rs. 36,53,054/- for the purpose of section 11 of the Act.
The ld CITA observed that these tours were conducted year on year by the assessee and held that the expenses were incurred on school and college students for education tours in India and Foreign countries. He held that there is no material to suggest that these tours were for special category students. He held that these trips were very much part of education co-curricular activities for the students which was aimed to development of the students. Accordingly he held that the same would amount to application of income for the objects of the assessee society.
With regard to fashion show and Mr. & Mrs. University expenses, the ld CITA observed that the college is running a vocational training department which has several students and has fees earning of close to Rs 40 lacs during the year under appeal. He observed that this department of the college holds annual fashion show with a view to providing a platform to their students to display what they have learnt. Such platform helps the student in development of skill as well serves as a platform for meeting of students and the industry which ultimately helps in employment of the students.
Aggrieved, the revenue is in appeal before us on the following grounds:- “
1. The Ld. CIT (A) - XIV, Kolkata has erred in deleting the disallowance of Rs.29,43,011/- claimed on account of foreign tours debited under the head of Tour Expenses, overlooking the fact that 125 students were taken on foreign tour through a tour operator 'Club 7' for entertainment, thereby allowing assessee's unacceptable claim that the foreign tour was organised in course of imparting education.
2. The Ld. CIT (A)-XIV, Kolkata has erred in deleting the disallowance of Rs.36,53,054/- claimed on account of a fashion show debited under the head of Function & Festival A/c, ignoring the fact that the fashion show was organised in college had participation from students unconnected with the vocational course in fashion designing, thereby be lying the assessee's claim that the fashion show was organised in course of imparting vocational education.
3. The Ld. CIT(A) has erred by not considering the fact that the doctrine of res judicata does not apply to Income Tax Proceedings.”
4 Bhowanipur Gujarati Education Society, AY 2007-08 7. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee containing the various scrutiny assessment orders passed u/s 143(3) of the Act for the Asst Years 2003-04 , 2004-05 , 2007-08 , 2008-09 and 2010-11 together with its audited financial statements comprising from pages 1 to 38 of Paper Book. It is not in dispute that the assessee society is an educational institution imparting education and is granted registration u/s 12A of the Act with effect from 1.11.1973 and its income is exempt u/s 11 of the Act. We find that the assessee society is also having registration u/s 10(23C) of the Act as an educational institution. The ld AR argued that the society is running a degree college affiliated to Calcutta University as well as running a school affiliated to ISC Board. He stated that the college is also recognized by the University Grants Commission (UGC) u/s 2(f) and 12(b) of the UGC Act. We find that the ld AO had only treated the tour expenses and fashion show expenses as not applied for the charitable objects of the society. Now the short question that arises for our consideration is whether the same would be construed as application of income in the facts and circumstances of the case. It is not in dispute that the assessee society is also running a vocational art academy for imparting training in decorating and designing. We find that the assessee has been incurring these two expenses i.e tour expenses and functions and festivals expenses in the earlier years also. From the paper book filed by the assessee containing the audited financials for 31.3.2003 , 31.3.2004 , 31.3.2008 and 31.3.2010, these expenses were incurred in those years also and claimed as application of income which were duly accepted by the ld AO :-
Asst Years Tour Expenses Functions & Festivals (only fashion Show expenses 2003-04 40,08,550 8,87,378 2004-05 53,72,012 9,71,755 2008-09 37,03,218 23,32,705 2010-11 59,08,897 48,58,897 7.1. With regard to the tour expenses incurred by the assessee , we hold that the aforesaid tour expenses incurred on students becomes an integral part of learning and enables an opportunity for the students to gain hands on experience from such trips by imbibing different cultural values , language, literature of different countries, which would be part
5 Bhowanipur Gujarati Education Society, AY 2007-08 and parcel of the vocational art academy course run by the assessee society. These tours would also enable the students to understand the history of different countries which would definitely fall under the category of imparting education. Moreover, these type of tours would also provide greater close bonding between the students and the teachers which in turn would increase the confidence of the students to interact with the teachers thereby improving the communication and interactive skills of the students. We find that the ld CITA observed that the 2015 Secondary Curriculum issued by the Central Board of Secondary Education , New Delhi oat page 234 had suggested essential activities for students which include things like using of bus, milking of dairy animals, helping organizing picnics, conducting tours and excursions and many other activities. Accordingly he held that the view of the ld AO that tours do not form part of conventional education as incorrect. We find that the education as such is fast changing requiring out of the box approach to be imbibed on the students which in turn could be gathered from outside class room activities which forms an integral part of education . The ld AR also stated that the tours are highly subsidized and the students pay a small part of the cost and the rest of the cost is borne by the assessee society. He stated that these tours are purely academic in nature and are conducted and open for any student of the institution of a particular age who want to participate in the tour. We find that there is no material brought on record by the ld AO to suggest discrimination of the students who get selected to participate in the tour. In view of these findings, we have no hesitation in holding that the incurrence of tour expenses would definitely form part of the application of income of the assessee society and is part and parcel of the activity of imparting education.
7.2. It is not in dispute that the vocational training department of the assessee society conducts annual fashion shows and Mr & Mrs University competition. The ld AR argued that assessee society is running a full time diploma program in Fashion and Interior Department under the Vocational Art Academy and the said department is spread over 11000 sq.ft. He argued that the course of fashion designing is about learning on how to design and manufacture clothes and this learning is ultimately showcased to the world including fashion designers, recruiting companies etc through the fashion shows. We hold that these shows admittedly provides a platform for the students to display their talents and also to exhibit what they had learnt in the classroom. This also creates lot of employment opportunities for the students. We hold that these events help in students shedding their
6 Bhowanipur Gujarati Education Society, AY 2007-08 inhibitions and come out of stage fear which in turn enables the students to meet the society at large with greater confidence . This is similar to institutes like National Institute of Fashion Technology set up by Government of India who are also holding fashion shows for similar purposes, as rightly pointed out by the ld CITA. We hold that this also forms an integral part of education, learning and training of students. We find that the ld AO treated these expenditures to be in the nature of advertisement for the institution, which in turn would again have to be construed as application of income in pursuance of the objects of the assessee society. Hence in any case, this would only fall under the ambit of application of income.
7.3. We find from the paper book filed by the assessee that similar expenses were allowed as application of income by the ld AO for the Asst Years 2003-04 , 2004-05, 2008-09 and 2010-11 in section 143(3) proceedings.
7.4. In view of the aforesaid findings, we hold that both the tour expenses and fashion show and Mr & Mrs University expenses incurred by the assessee society would have to be construed as application of income in pursuance of objects of the assessee society. Accordingly, the grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 14.10.2016
Sd/- Sd/- (N. V. Vasudevan) (M. Balaganesh) Judicial Member Accountant Member Dated : 14th October, 2016 Jd.(Sr.P.S.) Copy of the order forwarded to: APPELLANT – ADIT(E)-1, Kolkata. 1. Respondent –The Bhowanipur Gujarati Education Society, 5, Lala 2 Lajpatrai Sarani, Kolkata-700 020 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,