M/S CHOUHAN EDUCATION SOCITY ,BHOPAL vs. CIT , BHOPAL

There is a delay of 55 days in filing the present appeal. The assessee has filed an application for condonation of delay, which is supported by the

We have heard the ld. Authorized Representative as well as the ld. DR on condonation of delay.

The ld. Authorized Representative has submitted that initially the assessee challenged the order of Pr.CIT rejecting the approval u/s 10(23C) of the Income-tax Act, 1961, before the Hon'ble High Court in petition No.7692/2008 and thereafter the proceedings for registration u/s 12AA were also pending and decided by this Tribunal. Due to multiplicity of proceedings pending before the Hon'ble High Court as well as before this Tribunal, and , therefore, the tax consultant of the assessee could not decide whether to file the appeal against the impugned order of the CIT(A) or wait till the outcome of the writ petition filed by the assessee. Therefore, the assessee could not take the requisite steps for filing the appeal within the period of limitation. The assessee was taking the steps as per the advice of the legal consultant handling the income tax matters and, therefore, the delay in filing the appeal is neither intentional nor deliberate, but due to multiplicity of the proceedings pending at various levels and the legal adviser was not sure about filing the appeal at the initial stage as the assessee has already challenged the order before the Hon'ble High Court. Accordingly, the ld. Authorized Representative prayed that the Chouhan Education Society, Bhopal I.T.A.No. 192/Ind/2009 A.Y.1999-2000 delay in filing the appeal may be condoned and the appeal of the assessee be adjudicated on merit.

On the other hand, the ld. DR has objected to the condonation of delay and submitted that the filing of writ petition cannot be a reasonable cause for delay in filing the appeal, as the appropriate remedy against the order passed by the ld. CIT(A) is the appeal before the Tribunal.

We have considered the rival submissions as well as the relevant material on record.

At the out-set, we note that the claim of the assessee u/s 10(23C)(iiiad) of the Income tax Act was rejected by the ld.AO on the ground that the assessee does not exist solely for the purpose of education. The assessee has generated enough surplus funds and, therefore, the assessee has not satisfied the conditions provided u/s 10(23C)(iiiad) of the Income-tax Act. The assessee should exist solely for educational purpose and not for earning profit. The AO has also placed reliance on the order dated 7.2.2006 passed by CCIT, Bhopal, rejecting the application for seeking approval u/s 10(23C)(vi) for the assessment year 2003-04. Therefore, the writ petition filed by the assessee against the said order is very much relevant for taking a decision whether a separate appeal to be filed before the Tribunal. The assessee was acting as per the advice of the legal consultant and, therefore, if the delay in filing the appeal is caused by the advice of the consultant to wait for the outcome of the writ

The assessee has raised the following grounds :-

At the time of hearing, the ld. Authorized Representative of the assessee submitted that the effective ground in the present appeal of the assessee is only ground no. (i) and ground no. 2 does not emanate from the impugned orders passed by the ld.AO and CIT(A). Therefore, the ld. Authorized Representative has prayed that the ground no.2 may be dismissed as not arising from the impugned order. The ld. DR e has not disputed the fact that in the present appeal the effective ground is only ground no.(i) and ground no. (ii) does not arise from the impugned order relevant for the year under consideration. Accordingly, the ground no. 2 of the appeal is dismissed being not arising from the impugned order passed by the ld. CIT(A).

Ground no. (i) is regarding denying the claim of exemption u/s 10(23C)(iiiad) of the Act, therefore, claiming the benefit of exemption, the approval u/s 10(23C) is not required.

The ld. Authorized Representative has submitted that the assessee exists solely for educational purpose and not to earn profit as it is clear from the objectives of the assessee society. The assessee has carried out the only activity of imparting the education through its educational institution and no other activity has been carried out by the assessee for the year under consideration.

The ld. Authorized Representative has referred to the gross receipts and submitted that the annual receipts do not exceed the prescribed limit of Rs. 1 crore and, therefore, the assessee is entitled for the exemption u/s 10(23C)(iiiad) of the Income tax Act. The AO as well as CIT(A) has misguided themselves by taking into consideration the subsequent amendments of the Bye-laws of the assessee society which also permits the assessee to carry out some other activities of charitable in nature, but these amendments in the byelaws are not relevant for the year under consideration as the same were w.e.f. 4th May, 2006. Thus, the ld. Authorized Representative has submitted that the denial of the claim of exemption u/s 10(23C)(iiiad) is unjustified and, accordingly, the impugned order is liable to be set-aside and the claim of the assessee be allowed.

On the other hand, the ld. DR has submitted that the CCIT while rejecting the application filed by the assessee for approval u/s 10(23C(vi) has clearly held that the assessee does not exist solely for educational purpose, but for the purpose of profit. Therefore, said order of the CCIT still holds the ground on this issue. He has relied upon the orders of the lower authorities.

We have considered the rival submissions of both the sides as well as relevant material on record. The AO as well as CIT(A) has rejected the claim of Chouhan Education Society, Bhopal I.T.A.No. 192/Ind/2009 A.Y.1999-2000 the assessee u/s 10(23C)(iiiad), solely on the ground that the CCIT Bhopal, while rejecting the application of the assessee seeking approval under section 10(23CV)(vi), vide order dt. 7th February, 2006, held that the assessee does not exist solely for education and the present case is not found for grant of exemption under section 10(23C). It is pertinent to note that the order of the CCIT, Bhopal dt. 7th February, 2006, was regarding the approval u/s 10(23C)(vi) of the Act for the assessment year 2003-04 and, therefore, the observation and the view of CCIT, Bhopal, while passing the said order, shall not have any bearing on the claim of the assessee for assessment year 1999- 2000 and that too u/s 10(23C)(iiiad). The AO ought to have decided the claim of exemption independently and solely on the basis of the facts relevant for the year under consideration without getting influenced by the order of the CCIT for deciding the application for approval for the assessment year 2003-04.

Without going into controversy whether the assessee society has earned

It is evident from the impugned order of the CIT(A) that the two sets of objectives are reproduced and the amendment of the objects on 4th May, 2006, are also taken into account while deciding the issue. In our view, the subsequent amendment in the objects of the assessee society is entirely irrelevant for the year under consideration, even otherwise, while allowing the exemption u/s 10(23C)(iiiad), the existence of the educational institution i.e. (i) school or college run by the assessee society is to be considered and not the existence of the assessee society . The assessee society may have more than one activity and objects including imparting the education through educational institution and, therefore, the exemption u/s 10(23C)(iiiad) is available only in respect of the income received by the assessee society from the educational institution subject to the condition that the said educational institution exists solely for educational purpose and not for purpose of profit. The AO as well as the CIT(A) misguided themselves by taking existence of the society into consideration and not the educational institution run by the society. Neither the AO nor the CIT(A) has disputed the accounts produced by the assessee, which are reflecting the income received by the assessee society from the educational institution and activity of imparting the education. Accordingly, in the facts and circumstances of the case, the impugned order of the Ld. CIT(A) is set-aside and the claim of the assessee u/s 10(23C)(iiiad) of the Act is allowed.

In the result, appeal of assessee is partly allowed.