Commissioner Of Income Tax-Ii, Chandigarh v. M/S Sarvhitkari Education Society

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 939 of 2008 DATE OF DECISION: 19.8.2009 Commissioner of Income Tax-II, Chandigarh ..........Appellant Versus M/s Sarvhitkari Education Society..........Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Urvashi Dhugga, Advocatefor the appellant. **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section 260-A ofthe Income Tax Act, 1961 (for short, “the Act”) against the order of IncomeTax Appellate Tribunal, Chandigarh Bench dated 30.06.2008 passed in ITANo. 360/Chandi/2007 for the assessment year 2003-04, proposing to raisefollowing substantial question of law:- “Whether on the facts and circumstances of the caseand in law, the Hon'ble ITAT was justified in holding, thatthe assessee is entitled for exemption u/s 11(1)(a) of theAct, 1961 and capital expenditure incurred on fixedassets is application of income for charitable purpose,without appreciating the fact that the assessee wasregistered under Societies Act, 1860 and not underIndian Trust Act, 1882 as such does not qualify forexemption u/s 11 (1)(a) of the Income Tax Act, on theincome which is derived from the property not held under a trust.” 2.The assessee is a charitable trust registered under the SocietyRegistration Act, 1860 and is also registered under Section 12A of the Act.It is running schools. 3.The assessee claimed exemption under Section 11/12 andalso under Section 10 (23C) (iiiad). The Assessing Officer rejected theclaim holding that the assessee being an Institution was governed bySection 11 (1) (d) read with Section 12 (1) of the Act. It was held thatexemption under Section 11 (1)(a) was applicable only to Trust. Onappeal, the CIT(A) upheld the claim of the assessee, which order has beenaffirmed by the Tribunal. 4.The Tribunal observed:- “In this case the Assessing Officer held that theassessee was not trust but only an institution whereaseexemption under section 11/12 was available only inrespect of the income of the property held under trust.The Assessing Officer has taken a view that theassessee is a charitable society but not a Trust. In thisregard a reference has also been made to the decisionof the Hon'ble Delhi High Court in the case of CharatRam Foundation 250 ITR 64 Del). A similar issue wasdealt with in the case of Shimla Chandigarh DioceseCatholic Church (supra). The Tribunal after taking intoconsideration the following judgments:- (i) CIT Vs. Market Committee (2007) 294 ITR 563 (P&H); (ii)CIT Vs. Gujarat Maritime Board (2007) 295 ITR 561 (SC) held that the assessee could not be denied exemptionunder section 11 of the Act on the ground that it was not a Trust but a society/institution.” 5.It was further observed that the Assessing Officer was requiredto verify the claim that expenditure had been factually incurred. 6.We have heard learned counsel for the revenue. 7.Contention raised on behalf of the appellant is that theAssessing Officer was justified in declining exemption as there wasdistinction in a Trust and an Institution, as pointed out by the Hon'bleSupreme Court in the case of Asst. CIT Vs. Thanthi Trust (2001) 247 ITR 785. (i) CIT Vs. Market Committee (2007) 294 ITR 563 (P&H); (ii)CIT Vs. Gujarat Maritime Board (2007) 295 ITR 561 (SC) held that the assessee could not be denied exemptionunder section 11 of the Act on the ground that it was not a Trust but a society/institution.” 5.It was further observed that the Assessing Officer was requiredto verify the claim that expenditure had been factually incurred. 6.We have heard learned counsel for the revenue. 7.Contention raised on behalf of the appellant is that theAssessing Officer was justified in declining exemption as there wasdistinction in a Trust and an Institution, as pointed out by the Hon'bleSupreme Court in the case of Asst. CIT Vs. Thanthi Trust (2001) 247 ITR 785. 8.We are unable to accept this submission. There may beconceptual difference in the constitution of a Trust or any other Institution ifsuch difference has relevance having regard to statutory scheme forexemption. In the present case, expression used in Section 11 (1) (a) is“income derived from property held under Trust” irrespective of the factwhether income is derived by a Trust or any other Institution. Requirementis only of holding the property under Trust. The Commissioner, referring tothe definition of 'person' under Section 2 (31) of the Act, observed thatneither society was specified as a separate category nor trust wasspecified as a separate category and both were covered by the expression'association of persons' in clause (v) or by residue clause (vii). Thus,question raised cannot be held to be a substantial question of law.9.The appeal is dismissed (ADARSH KUMAR GOEL) JUDGE August 19, 2009pooja (DAYA CHAUDHARY)JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No