SHIKSHAN PRASARAK MANDALI Vs. COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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Pramod Kumar, A.M. -
(1.) THE short issue that we are required to adjudicate in this appeal is whether or not the CIT-III, Pune was justified in declining to renew approval under Section 80G of the IT Act, 1961 (hereinafter referred to as 'the Act'), for asst. yr. 2006-07 onwards.
(2.) The assessee is a society registered under the Societies Registration Act, 1860 and Bombay Trusts Act, 1950. The assessee is one of oldest educational institution in the city was established in the year 1888 which was set up 120 years ago, the main objective of the society was stated to impart education in vernacular language and to educate students about their duties to the society, self respect, self reliance and duties towards our nation. As on now, it has established and it runs several educational institutions at different places. When the assessee sought renewal of approval under Section 80G, vide application in Form 10G received by the CITs office on 9th Feb., 2007, the assessee was issued a questionnaire calling upon the assessee to furnish certain documents, information and clarification. This requisition was duly complied with. In the course of ensuing hearing on the renewal application, the CIT noted that, in terms of the findings of the AO for the asst. yrs. 2003-04 and 2004-05, there are certain irregularities as also contravention with rules in three out of 57 institutions of the following nature:
--Action of the applicant society in making collection over and above the prescribed fees;
--Maintaining accounts in respect of such unauthorized collections separately, viz. under miscellaneous account, and taking it directly to the balance sheet without admitting it as income;
--Collecting from the students contribution to development fund which, considering the same are over and above the normal fees are in the nature of capitation fees;
--Taking such development funds directly to the balance sheet without routing the same through P&L a/c;
--Treat donations which have not been specifically given towards corpus donation as 'corpus donation' and thus not showing such donations as income, where the same should have been so shown as per the provisions of Section 12(1).
It was in this backdrop that the CIT required the assessee applicant to show cause as to why, in view of the above findings against the assessee in the assessment orders for the asst. yrs. 2003-04 and 2004-05 and in view of the fact that there has been a denial of complete exemption under Sections 11 and 12, the assessee should not be deemed to be not complying with the provisions of Section 80G(5)(i). It was explained by the assessee that the denial of exemption under Section 11 was in respect of three institutions only; and that, in any event, the assessment orders so passed have been carried in appeal before the CIT(A). It was also submitted that the surplus of these three institutions was used only to make good the shortfall in other institutions, and as such surplus was used for the purposes of attaining objectives of the trust and not for any business purposes. These submissions did not impress the learned CIT, who was of the view that even such part denial of exemption amounts to non-fulfilment of the conditions and that the taxable unit being the assessee applicant, and not the individual institutions functioning under the assessee applicant, it is not really material whether or not the alleged violation is only in respect of three institutions. On the basis of this reasoning and taking note of the findings of the AO in the asst. yrs. 2003-04 and 2004-05, the CIT rejected the renewal application. The assessee applicant is aggrieved and is in appeal before us.
(3.) WE have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.;
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