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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Nitesh Joshi Department by: Shri B.C.S. Naik (CIT-DR) सुनवाई क" तार"ख / Date of Hearing: 08.03.2016 घोषणा क" तार"ख /Date of Pronouncement: 23.06.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
This is an appeal filed by the assessee against the order dated 01.02.2013 passed by the Commissioner of Income Tax (Appeals)-1, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2009-10. 2. The assessee has raised the following grounds:-
A.Y. 2009-10
1. The grounds of appeal that follow are all independent and without prejudice to each other.
2. Re: Exemption under Section 11: 2.1 That, on the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding the Assessing Officer’s action in rejecting the appellant’s claim for exemption under section 11 on the ground that the appellant’s primary activities were not for the benefit of the public at large and were also not of charitable nature.
3.0 Re: Taxability of Capital Receipts / Corpus Donations: 3.1 That on the facts and in the circumstances of the case and in law, Learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in adding back a sum of Rs.5,18,57,100/- (the correct figure being Rs.4,82,57,100) on account of life membership fees of Rs.4,61,57,100 and the corpus donations of Rs.57,00,000 (the correct figure being Rs.21,00,000) on the ground that since the appellants were not entitled to claim the exemption under section 11, the same were liable to be taxed. 3.2 That on the facts and in the circumstances of the case and in law, Learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in failing to appreciate the fact that even presuming, without admitting, that the appellants were not entitled to claim exemption under section 11, the said capital / corpus receipts, being of capital nature ,could not be taxed even under the general principles of law and that income could only include revenue receipts.
4. Re: Deduction of Expenses: 4.1 That on the facts and in the circumstances of the case and in law, Learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in not reducing the expenses incurred by the appellant by way of amortization of premium on investments, purchase of fixed assets, awarding of prizes and write-off of irrecoverable balances. A.Y. 2009-10
5. Re: Other Statutory Deductions: 5.1 That, on the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in not granting the statutory deductions on account of amount set aside by appellant for future requirements to the extent of Rs.3,86,69,667/- (15% of income)and on account of the balance sum (being the amount accumulated by the appellant for specified purposes in conformity with the provisions of Section 11(2).”
Additional Ground:-
6. Re: Claim for Exemption under Section 10(23C)(vi): That, on the facts and in the circumstances of the case and in law, the appellant ought to be granted exemption under section 10(23C)(vi) of the Income Tax Act, 1961 as an educational institution in respect of surplus of income over expenditure.
The brief facts of the case are that the assessee is an Indian Company incorporated u/s.25 of the Indian Companies Act. Initially, the company was an association called the Indian Institute of Bankers and subsequently the assessee’s name was changed to Indian Institute of Banking and Finance. The principle objects of the assessee as per the Memorandum of Association are as under:- i) To encourage the study of the theory of banking and for that purpose to Institute a scheme of examinations and to give certificates, scholarship and prizes. A.Y. 2009-10 ii) To promote information on banking and kindred subjects by lectures, discussions, books, correspondence with public bodies and individuals or otherwise. iii) To collect and circulate statistics and other information relating to the business of banking in India. iv) To acquire by purchase, donation or otherwise and to maintain extend and improve a library consisting of works on banking, commerce, finance, political economy and kindred subjects.
The Assessing Officer concluded that the assessee firm was not entitled for the exemption u/s.11 of the Income Tax Act, 1961( in short “the Act”). Therefore, declined the life membership accounts and corpus donations and other expenses under challenge which were confirmed by the learned CIT(A) hence the assessee has filed the present appeal before us.
ISSUE NO.1
Issue no.1 is formal in nature which does not require any adjudication at all.
ISSUE NO.2
At the very outset the learned representative of the assessee has argued that the Hon’ble Income Tax Appellate Tribunal, Mumbai A.Y. 2009-10 Bench in in assessee’s own case for A.Y.2008-09 dated 11.02.2015 has decided this issue in his favour, therefore present issue is liable to be decide in favour of the assessee being there is no change in circumstances at all. However, on the other hand the learned representative has strongly relied upon the order passed by the learned CIT(A). The order dated 11.02.2015 passed by the ITAT in assessee’s own case for A.Y.2008-09 perused. The Hon’ble ITAT on seeing object and activity of the appellant company has decided this issue in the favour of the assessee. The relevant para 9 to 21 are hereby reproduced below for ready reference:-
“9. Before us, the AR fairly submitted that in so far as claim of exemption u/s.10(23C)(vi) is concerned, it has been rejected by the CCIT, Mumbai. But the claim of section 11 is still alive and has been denied because of amortization of premium on investment and purchase of fixed assets and in not allowing statutory deductions for future requirements set apart as per section 11(2). The AR submitted that its claim for exemption under section 11 of the Act has been denied for the following three reasons i.e. the assessee is not pursing an educational activity, it has generated huge surplus and 10. The assessee made its submissions with respect to each o the aforesaid issues. A.Y. 2009-10
With respect to the reasoning given by the AO that the assessee is not pursuing an educational activity, the assessee placed reliance upon the decision of the coordinate bench of the ITAT in its own case in assessment years 1996-97 to 1998-99 (APB 205 to 219). In these decisions the Tribunal after considering the facts pertaining to its objects as per its Memorandum of Association, the courses conducted by it and its manner of functioning, concluded that the assessee was pursuing educational activities. The AR therefore, submitted that, in so far the issue pertaining to conduct of educational activities is concerned, the same is covered and concluded in its favour by the ITAT.
With respect to the above, the AR drew our attention to the detailed submissions filed by It before the CIT(A), wherein specific reference were made in paragraphs (APB 22 to 29). The AR also placed reliance on the following decisions:
City Montessori School vs UOJ, reported in 315 ITR 48 (All); DIT (E) vs Ahmedabad Management Association, Order dated 13.06.2014, by the Hon'bieGujarai High Court, of 2013; DIT us Samudra Institute of Meritime Studies Trust, reported in (2014) 49 Taxman.com 510 (Bom) (Copies enclosed}, : wherein the ration has been laid that the associations had been running educational institutions and having educational activity. A.Y. 2009-10
The primary reason for denial of exemption u/ s 11 are, that the Institute has generated huge surplus and the Institute is not open to public at large.
The Memorandum of Association when read out, we find that the Institute had been brought up only for the purpose of development of baking personnel for/in the banking industry. The institute imparts education to the candidates who are connected with the banking industry. It has library facility, organizes lectures, seminars and undertake examinations for promoting bank officers.
In so far as its investments are concerned it was explained, the surplus, if. any; arising out of the activities of the Institute is not distributed by way of dividend, bonus or by way of profits to the Members of the Institute. This is evident from Clause 4 of the MOA, which is reproduced herein below for your Honor's ready perusal.
16. The income and property of the Institute, whensoever derived, shall be applied solely towards the promotion of the objects of the Institute as set forth in this Memorandum of Association; and no portion thereof shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise A.Y. 2009-10 howsoever by way of profit, to the members of the Institute. Provided that nothing herein shall prevent the payment, in good faith, of remuneration to any officer or servant of the Institute, or to any member of the Institute or' other person, in return for any services actually rendered to the Institute .
17 That the Members are also not entitled to any share in the surplus that may arise on winding up or dissolution of the Institute, Such surplus, if any, has to be handed over to other institutions having similar objects and if this is not feasible appropriated, shall be advanced for some charitable objects. This is evident from Clause 8 of the Memorandum, which is reproduced below:
If upon the winding up or dissolution of the Institute there remains, after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the Institute, but shall be given or transferred to some other institution or institutions having objects similar to the objects of this Institute, and which shall prohibit the distribution of its part of their income and property among its or their members to an extent at least as great as is imposed on the Institute or by virtue of Clause 4 thereof, such institution or institution to be determined by the members A.Y. 2009-10 of the Institute at or before the time of dissolution, and in default thereof by such Judge of the High Court of Judicature at Bombay or other Judge as may have or acquire jurisdiction, the matter, and if and so far as effect cannot be given to the aforesaid provision then to some charitable object.
Held following examination: (a) Associate Examination (CAIIB); (b) Diploma in International Banking; (c) Diploma in Financial Services; (d) Diploma in Bank Management; (e) Certificate in banking Oriented paper in Hindi; (f) Certificate Examination for the employees of Unit Trust of India.
15. A detailed list of the assessee's activities is-found in the records, which was placed before the revenue authorities as we as us.
For advancement in banking industry, the number of students enrolling for various courses offered by the Institute increased steadily over the years, thereby reflecting the growing popularity of the Institute's courses in the banking arena. The list of the various courses offered by the Institute is on record.
Reverting our attention to the reasoning given by the revenue authorities, that the assessee was generating huge A.Y. 2009-10 surplus, it was submitted that as per section 11 of the Act the assessee could spend 85% of its income towards charitable objects. It was submitted that if there was a surplus, it could be legally accumulated under section 11 (2) of the Act The AR submitted that the assessee has always complied with the said requirement in each of the years. The accumulation of the corpus, if any, has been spent in accordance with the provisions of section 11(2) of the Act. Accept for this fact, the AR submitted, the revenue authorities, did not have any argument, which could render the benefit of section 11 unavailable to the assessee.
The AR further submitted that looking from the point of view of disposal of its funds, i.e. the entire expenses incurred towards the educational activity has been done out of the educational receipts only, which resulted in a. deficit in financial years 1999-2000t~'2007-08 (APB 72). Any interest and/or write back has been excluded from the gross receipt, meaning that receipts as shown are pure, out of the educational activity .
Since the assessee has also provided details of the courses being run by it, along with the fee structure in respect of each of the courses, this fees, by no stretch of imagination, could be regarded on the higher side. Hence the argument of the A.Y. 2009-10 revenue authorities that the assessee had accumulated huge funds, also stands demolished.
On the issue of "educational institution", we are also benefitted by the decision of Hon’ble Gujarat High Court, besides the decisions referred to by us earlier in the order, to come to a fair conclusion that the assessee was an educational association. The decisions as referred 'earlier were not agitated against by the DR, which are City Montessori School vs UOl (supra), DIT(E) vs Ahmedabad Management Association (supra) and DIT vs Samudra Institute of Meritime Studies Trust (supra). Also placing reliance on the decision of Ahmedabad Rana Caste Association vs CIT, reported in 82 ITR 704, wherein it was held, "It is well-settled that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of the community sought to be benefitted must be sufficiently definite and identifiable by some common quality of a public or impersonal nature". The AR submitted that since the assessee was giving benefit to A.Y. 2009-10 persons perusing banking industry, is not only education but by not making any profit, it was charitable in nature.
Since the Institute does not undertake any other activities other than what is stated above. The activities as seen are educational in nature, which leaves no apprehensions. In our view the activities would squarely be covered by the definition of "charitable purpose", as defined in Section 2(15) of the Act, as these activities are meant for general public utility, i.e. whoever wants to advance his/her qualifications in the banking industry. From the above details and description, we are of the opinion that the assessee is a charitable organization and eligible for deduction u/s 11 of the Act.
5.1 The activities of the institute for the year under consideration are the same which has been shown at page 79 of the paper book. The courses run by the assessee are also the same which have been shown at page 80 to 84 of the paper book. Therefore the order for the A.Y. of 2008-09 has been passed under the similar circumstances hence the same is applicable in this assessment year also. No distinguishable material was produced before us to which it can be assumed that the activity of the institute has now being changed. The object and activity of the institute are quite similar with the assessment year of 2008-09 vide which the above mentioned order has been passed. We found no ground to deviate with the finding of the order of the A.Y. 2009-10 Tribunal mentioned above. Therefore, in the said circumstances we are of the opinion that the assessee is charitable organization and eligible for deduction u/s.11&12 of the Act. Since the matter of controversy has been decided by the Tribunal in the above mentioned case therefore, by honoring the order passed by the Tribunal in the assessee’s own case for the A.Y. 2008-09, we decide this issue in favour of the assessee against the revenue.
ISSUE NO.3, 4 and 5:-
In view of our decision on Ground no.2 above, whereby assessee has been held to be eligible for exemption u/s.11 & 12 of the Act, the other Grounds do not arise for separate consideration. Therefore, the matter is set aside to the file of Assessing Officer to recomputed the total income after allowing the benefits of section 11 and 12 of the Act.
ISSUE NO.6(Additional Ground):-
Issue no.6 has not been pressed at the time of hearing and is accordingly dismissed as not pressed.
Accordingly, appeal of the assessee is hereby partly allowed. A.Y. 2009-10
Order pronounced in the open court on 23rd June, 2016 (AMARJIT SINGH) (G.S.PANNU) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 23rd June, 2016 MP MP MP MP