Ita/107/2008 Of The Commissioner Of Income-Tax, Tvm v. Shree Vidyadhiraja Vidya Samajam, Tvm

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 23RD OCTOBER 2008 / 1ST KARTHIKA 1930 I.T.A.No.107 of 2008 ---------------------------------- ORDER DATED 30.4.2003 IN ITA.477/COCH/1999 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. (ASSESSMENT YEAR 1995-96) .................... APPELLANT/RESPONDENT:- ---------------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX RESPONDENT/APPELLANT: --------------------------------------- SHREE VIDYADHIRAJA VIDYA SAMAJAM, CHETTIKULANGARA, THIRUVANANTHAPURAM - 1. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23/10/2008, ALONG WITH I.T.A.NO.10 OF 2006 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer, J. ------------------------------------------- I.T.A.No.107 of 2008, 10 of 2006, 51 of 2008 & 110 of 2008 -------------------------------------------- Dated, this the 23[rd] October, 2008 H.L.Dattu,C.J. JUDGMENT Since the assessee is common and the legal issues involved arealso identical, these appeals are clubbed, heard and disposed of by thiscommon order. (2) For the purpose of narrating the facts, we refer toI.T.A.No.107 of 2008. (3) The assessee is a Society, registered under the provisionsof Travancore Cochin Literary Scientific and Charitable Societies Act. Theassessee runs 16 educational institutions in different parts of the State. (4) For the assessment year 1995-96, the assessee had not filedits return of income before the assessing authority. Therefore, the assessingauthority had issued a notice under Section 148 of the Income Tax Act(“Act” for short). After receipt of the notice, the assessee had filed its returnof income and also had claimed exemption from payment of tax underSection 10(22) of the Act. (5) The assessing authority has completed the assessmentsunder Section 144 of the Act, denying the exemption claimed by the assessee under Section 10(22) of the Act, on the sole ground that the assessee did notproduce enough evidence to prove that the income was exclusively used bythe assessee for the educational purpose. (6) The findings and conclusions reached by the assessingauthority was called in question by the assessee before the first appellateauthority. The first appellate authority's view is, that, the burden is on theassessee to prove that the income of the assessee is primarily used foreducational purpose and since the assessee had not discharged its burden, thethinking of the first appellate authority is, that, the assessing authority isjustified in passing the assessment order under Section 144 of the Act,denying the exemption claimed by the assessee under Section 10(22) of theAct. (7) The assessee had carried the matter by filing the secondappeal before the Tribunal. The Tribunal is of the view, that, the burden ofproof is on the Department, to prove that the assessee had utilised theincome derived from the educational institutions for any purpose other thanthe educational purpose. Since the assessing authority has not discharged itsburden, the assessee is entitled to the exemption as provided under Section10(22) of the Act. The reasoning of the Tribunal in this regard is as under: “A plain reading of the above (Aims and Objects)makes it clear that whatever income or financial gain (7) The assessee had carried the matter by filing the secondappeal before the Tribunal. The Tribunal is of the view, that, the burden ofproof is on the Department, to prove that the assessee had utilised theincome derived from the educational institutions for any purpose other thanthe educational purpose. Since the assessing authority has not discharged itsburden, the assessee is entitled to the exemption as provided under Section10(22) of the Act. The reasoning of the Tribunal in this regard is as under: “A plain reading of the above (Aims and Objects)makes it clear that whatever income or financial gain acquired from the normal course of activity of the society wasto be utilised only for fulfilling the aims and objects of thesociety which were educational and other related activities. Itis not the case of the Department that the assessee-society wasnot running the educational institutions. They had only adoubt that since some properties were sold during the year1996, a profit motive cannot be ruled out. Since the assessingofficer has not specifically pointed out any instance of thefunds of the society being used for any other activity thaneducational activity, we are not inclined to agree with thefinding of the assessing officer. The CIT(Appeals) was wrongin saying that it was the duty of the assessee to prove that it isnot indulging in any profit making activity. It was theassessing officer who issued notice u/s 148 to the assessee-society to file its return of income on the ground thatexemption u/s 10(22) is available to it only if it is running theeducational institutions without any profit motive, and hence,the onus was on the Department to prove that the assessee isindulging in any profit making activity. This onus has notbeen discharged by the Department. In the circumstances, inthe light of the Board's Circulars and the case laws relied onby the ld. representative of the assessee, we deem it necessaryto set aside the orders of the lower authorities and direct theassessing officer to grant exemption u/s 10(22) of the I.T. Actto the assessee for all these years under appeal. We do so.” (8) Revenue, being aggrieved by the orders so passed by theTribunal, is before us in these appeals. (9) The Revenue has framed the following questions of law for our consideration and decision. They are as under: “1.Whether, on the facts and in the circumstancesof the case and by placing the burden on the Revenue theTribunal is right in law and fact in holding that “unless it isproved that any institution or society was running for profitmaking and not for educational purposes the exemption undersection 10(22) cannot be denied” and is not the finding wrongand to be ignored, the same being one wrongly placing theburden on the Revenue? 2.Whether, on the facts and in the circumstancesof the case did the assessee discharge the burden of proof thatlay on it? 3.Whether, on the facts and in the circumstancesof the case the Tribunal is right in law and fact in finding thatsince the Assessing Officer has not specifically pointed anyinstance of the funds of the society being used for any otheractivity than educational activity” and is not the finding in thelight Parimseth Seetharamamma (57 ITR 532) wrong and tobe ignored in view of the same being formed by putting theburden on the Revenue? 4.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law and fact in holdingthat the onus was on the Department to prove that theassessee is indulging in any profit making activity” and is notthe approach and the conclusion of the Tribunal vitiated? 5.Whether, on the facts and in the circumstances of the case, is not for the assessee who claims the exemptionto prove the same and is not the very approach of the Tribunalwrong and the conclusion vitiated and nonest?” 4.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law and fact in holdingthat the onus was on the Department to prove that theassessee is indulging in any profit making activity” and is notthe approach and the conclusion of the Tribunal vitiated? 5.Whether, on the facts and in the circumstances of the case, is not for the assessee who claims the exemptionto prove the same and is not the very approach of the Tribunalwrong and the conclusion vitiated and nonest?” (10) It is the case of the assessee, that, it is managing sixteeneducational institutions. It is its further case that the entire income derived isprimarily used for the educational purpose and, therefore, entitled forexemption under Section 10(22) of the Act. The assessing authority, whilecompleting the assessment proceedings under Section 144 of the Act, has notstated that the income of the assessee has been utilised for any purpose otherthan the educational purpose. In order to deny the claim/benefit underSection 10(22) of the Act, the assessing authority is expected to give afinding that the income of the assessee has been utilised for a purpose otherthan the educational purpose. In the instant case, the assessing authoritymerely proceeds on an assumption that the assessee has purchased someproperty sometime in the year 1992-93. (11) The Tribunal, in our opinion, having carefully perused theorders of assessment passed by the assessing authority and the orders passedby the first appellate authority, has, rightly, reversed those findings and hascome to the conclusion that the income of the assessee is primarily used forthe educational purpose and, therefore, it is entitled for exemption underSection 10(22) of the Act. In our view, the Tribunal has not committed any error, whatsoever, which would call for our interference in these appeals.Therefore, while answering the questions of law framed by the Revenueagainst the Revenue and in favour of the assessee, we reject these appeals.Ordered accordingly. H.L.Dattu Chief Justice vku/dk A.K.Basheer Judge