Ita/118/2008 Of The Commissioner Of Income-Tax, Tvm v. Shree Vidyadhiraja Vidya Samajam

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 WEDNESDAY, THE 29TH OCTOBER 2008 / 7TH KARTHIKA 1930 I.T.A.No.118 of 2008 ----------------------------------- I.T.A.NO.129/COCH/2002 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KOCHI (ORDER DATED 25.02..2004) (ASSESSMENT YEAR 1988-89) .................... APPELLANT/APPELLANT/REVENUE:- ------------------------------------------------------ THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR I.T. SRI.JOSE JOSEPH, SC FOR I.T. RESPONDENT/RESPONDENT/ASSESSEE:- --------------------------------------------------------------- SHREE VIDAYADHIRAJA VIDYA SAMAJAM, CHETTIKULANGARA, THIRUVANANTHAPURAM - 1. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 29/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer, J. ------------------------------------------- I.T.A.No.118 of 2008 -------------------------------------------- Dated, this the 29[th] October, 2008 JUDGMENT H.L.Dattu,C.J. The assessee is a Society, registered under the provisions ofTravancore Cochin Literary Scientific and Charitable Societies Act. Theassessee runs 16 educational institutions in different parts of the State. (2) For the assessment year 1988-89, the assessee had notfiled its return of income before the assessing authority. Therefore, theassessing authority had issued a notice under Section 148 of the Income TaxAct (“Act” for short). After receipt of the notice, the assessee had filed itsreturn of income and also had claimed exemption from payment of tax underSection 10(22) of the Act. (3) The assessing authority has completed the assessmentsunder Section 144 of the Act, denying the exemption claimed by theassessee under Section 10(22) of the Act, on the sole ground that theassessee did not produce enough evidence to prove that the income wasexclusively used by the assessee for the educational purpose. (4) 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 the assessee 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. (5) 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. (6) Revenue, being aggrieved by the orders so passed by theTribunal, is before us in these appeals. (7) The Revenue has framed the following questions of lawfor 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 under section 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? (6) Revenue, being aggrieved by the orders so passed by theTribunal, is before us in these appeals. (7) The Revenue has framed the following questions of lawfor 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 under section 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 circumstancesof the case, is not for the assessee who claims the exemptionto prove the same and is not the very approach of theTribunal wrong and the conclusion vitiated and nonest?” 6.Whether, on the facts and in the circumstancesof the case the Tribunal is right in law and fact in holding that“the assessee's receipts are exempt as the assessee is aninstitution existing solely for educational purposes and not forthe purpose of profit? And is not the above finding perverse? 7. Whether, on the facts and in the circumstancesof the case the Tribunal is right in law and fact in not holdingthat Assessing Officer is right in estimating the income of theassessee as a percentage of the gross receipts and estimatingand excluding a part of the donations from that of buildingfund as no evidence was produced? 8.Whether, on the facts and in the circumstancesof the case the Tribunal is right in law and fact in not holdingthat Assessing Officer is right in estimating the income of theassessee as a percentage of its receipts when the accounts arefound to be defective and reliable? 9.Whether, on the facts and in the circumstancesof the case the Tribunal is right in law and fact in not holdingthat the Commissioner of Income Tax (Appeals) is wrong indirecting to adopt the book results of the assessee, as againstestimating the income as a percentage of the gross receiptswhen the books were found to be defective and not reliable?” (8) 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, hasnot stated that the income of the assessee has been utilised for any purposeother than the educational purpose. In order to deny the claim/benefit underSection 10(22) of the Act, the assessing authority is expected to give a finding 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. finding 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. (9) 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 anyerror, whatsoever, which would call for our interference in this appeal.Therefore, while answering the questions of law framed by the Revenueagainst the Revenue and in favour of the assessee, we reject this appeal. Ordered accordingly. H.L.Dattu Chief Justice vku/- A.K.Basheer Judge