J.K. Educational Society, Jammu vs Department Of Income Tax

Income Tax Officer, vs. M/s. J.K. Educational Society, Ward-1(1), Jammu. Kunjwani, Jammu. (Appellant) (Respondent)

Appellant by:Sh.V.K.Singh, DR Respondent by:Sh.P.N.Arora, Advocate

Date of hearing:19/02/2015 Date of pronouncement:26/02/2015

ORDER

PER B.P.JAIN,AM:

This appeal of the Revenue arises from the order of the CIT(A),

Jammu, dated 18.07.2014 relating to assessment year 2009-10. The Revenue

has raised the following grounds of appeal:

"1. On the facts and circumstances whether the ld. CIT(A) was right in deleting the investment made in construction, acquisition of land & building which are not the application towards the educational purpose.

2. On the facts and circumstances whether the ld. CIT(A) was right in not considering the decision in the case of CIT vbs.

2 ITA No.606Asr)/2014 M/s. Queen Educational Society 233 CTR 395, wherein the Hon'ble High Court of Uttrakhand has held that assets purchased/constructed out of income from imparting the education was with a view to expand the institution and to earn more income is not eligible for exemption.

3. On the facts and circumstances whether the ld. CIT(A) was right in allowing appeal of the assessee because he has totally ignored the fact that the department has not acceptd the decision of the High Court of P & H in the case of Pinegrove International Charitable Trust and SLP has been filed before the Hon'ble Supreme Court of India. Also, trhe appeal has been filed before the Hon'ble High Court of Jammu & Kashmir in the case of M/s. J.K. Educational Society Kunjwani,Jammu for the AY 2010-11.

4. On the facts and circumstances whether the ld. CIT(A) was right in not considering that the appeal has been filed before the Hon'ble High Court of Jammu & Kashmir in the case of M/s. J.K. Educational Society Kunjwani, Jammu for the A.Y. 2010-

11."

2. The brief facts of the case are that the assessee is a registered Society

u/s 12AA of the Act. On perusal of the Income and Expenditure account, the

AO observed that the assessee had made the application of money

amounting to Rs.4,88,58,614/-, including deprecation as per Income &

Expenditure account. The AO computed the application of the money as

under:

Gross Receipts 5,43,06,858

85% Amount required to be applied as per 4,61,60,829 section 11(1) Less: Expenditure as per Income & Expenditure 4,52,28,173 account 3 ITA No.606Asr)/2014

Amount not applied by the assessee for 9,32,656 charitable purposes

3. The exemption to the extent of Rs.9,32,656/- was withdrawn and

added to the income of the assessee.

4. The Ld. CIT(A) deleted the said addition by observing that the capital

expenditure for the purchase of assets for educational institution should be

considered for calculating 85% expenditure, in view of the decision of the

Hon'ble Punjab & Haryana High Court, in the case of Pinegrove

International Charitable Trust vs. Unionof India reported in 370 ITR 73 and

relevant findings of the ld. CIT(A) vide para 4 at pages 10 are reproduced

hereinbelow for the sake of convenience:

"Ground of Appeal No. 1 to 3 relates to withdrawal of exemption claimed u/s 11 of the Act by the appellant on the ground that the appellant trust has not utilized 85% of its receipts for educational & charitable purpose during the year under consideration. The appellant has argued that the AO has not considered the amount utilized in the purchase of fixed assets for the achieving the educational objectives of the trust and relying on the judgment of the Hon'ble High Court of Uttarakhand in the case of Queens Educational Society, denied the legitimate exemption to the appellant trust. The applicant has discussed the provision of section 11 and argued that the capital expenditure for the purchase of assets for the educational institute should be considered for calculating 85% expenditure. The appellant has placed reliance on the decision of High Court of Punjab & Haryana in the case of Pinegrove International Charitable Trust in which the Hon'ble Court has distinguished the judgment in the case of Queens Educational Society (supra). I have considered the submission of the 4 ITA No.606Asr)/2014

appellant and assessment order, it is observed that the Hon'ble High Court of Punjab & Haryana in the case of Pinegrove International /charitable Trust has held that the capital expenditure has to be deducted from the gross income of the educational institution in determining whether 85% of the income has been applied for its objects. Further, the jurisdictional ITAT Amritsar Bench in the case of Modern Educational Society has also relied on the judgment in the case of Pinegrove International Charitable Trust and has held that the amount incurred for the construction of building is the application of money for the object of society. Therefore, respectfully following the decision of Hon'ble jurisdictional ITAT Amritsar Bench and Hon'ble High Court of Punjab & Haryana in the above referred cases, it is directed that the expenditure incurred for the purchase of fixed assets for the purpose of trust be considered as application of money and accordingly exemption u/s 11 be allowed to the appellant trust. These grounds of appeal are therefore allowed and a relief of Rs.9,32,656/- is allowed."

5. The Ld. DR, relied upon the order of the Assessing Officer.

6. The Ld. counsel for the assessee, Mr. P.N.Arora, Advocate, on the

other hand, relied upon the submissions made before the ld. CIT(A) and the

order of the ld. CIT(A). He further argued that in assessee's own case for the

assessment year 2010-11, on identical issue, the ITAT, Amritsar Bench vide

order dated 17.01.2014 in ITA No.556(Asr)/2013 has dismissed the appeal

of the Revenue. Accordingly, the ld. counsel for the assessee, Mr.

P.N.Arora, prayed to confirm the order of the ld. CIT(A) and dismiss the

appeal of the Revenue.

5 ITA No.606Asr)/2014

7. We have heard the rival contentions and perused the facts of the case.

The main issue in the present appeal is with regard to withdrawal of

exemption claimed u/s 11 of the Act, since according to the AO, the assessee

has not utilized 85% of his receipt for educational and charitable purpose

during the impugned year. In fact, the assessee has claimed to have incurred

the expenditure for the educational and charitable purpose including

purchase of fixed assets for achieving educational objectives of the trust.

The assessee claimed the capital expenditure for fixed assets of the assessee-

trust for consideration of exemption u/s 11 of the Act, in view of the

decision of the Hon'ble Punjab & Haryana High Court, in the case of

Pinegrove International Charitable trust (supra). Similar issue arose before

the ITAT, Amritsar Bench in the case of the assessee itself for the

assessment year 2010-11, where the ld. CIT(A) has allowed the exemption

u/s 11 of the Act and have considered the capital expenditure incurred for

the purchase of fixed assets towards application of money for charitable

purpose, which was deducted from gross receipts in determining whether

85% of income has been applied for the objects of the trust. The ITAT,

Amritsar Bench has dismissed the appeal of the Revenue for the said

assessment year i.e. 2010-2011. The relevant findings of the ITAT, Amritsar

Bench of the assessee trust for the A.Y.2010-11 in ITA No.556(Asr)/2013 6 ITA No.606Asr)/2014

vide our order dated 17.01.2014 are reproduced hereinbelow for the sake of

convenience:

"7. We have heard the rival contentions and perused the facts of the case. We concur with the view of the ld. CIT(A) who has followed the decision of Hon'ble Punjab & Haryana High Court in the case of Pinegrove International Charitable Trust v. Union of India (supra), where it has been held the capital expenditure has to be deducted from the gross income of the educational institution in determining whether 85% of the income has been applied for its objects. Further, the ITAT Bench in the case of Modern Society has also relied on the judgment in the case of Pinegrove International Charitable Trust and has held that the amount incurred for the construction of building is the application of money for the object of society. The ITAT, Amritsar Bench in the case of ITO vs. K.C. Educational Society in ITA No.405(Asr)/2012 AY 2009-10 has held in its order dated 28.12.2012 that the capital expenditure in repair and maintenance of building is an application of income for charitable purposes in furtherance of objects and purposes of society.

Accordingly, in the facts and circumstances of the present case, we find no infirmity in the order of the ld. CIT(A) and the same is upheld. Hence, all the grounds of the Revenue are dismissed.

8. In the result, the appeal filed by the Revenue in ITA No.556(Asr)/2013 is dismissed."

8. Therefore, in the facts and circumstances of the present case and our

decision in assessee's own case for the assessment year 2010-11 referred to

hereinabove, we are of the view that the capital expenditure incurred on

the purchase of fixed assets is the application of income for charitable

purposes in furtherance of the objects and purposes of assessee trust and

therefore, we find no infirmity in the order of the ld. CIT(A), who has rightly 7 ITA No.606Asr)/2014

allowed exemption u/s 11 of the Act. Thus, all the grounds of the Revenue

are dismissed.

9. In the result, the appeal of the Revenue in ITA No.606(Asr)/2014 is

dismissed.

Order pronounced in the open court on 26th February, 2015.

Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26th February, 2015 /SKR/ Copy of the order forwarded to:

1. The Assessee:M/s. J.K. Educational Society, Kunjwani, Jammu

2. The ITO Ward 1(1), Jammu.

3. The CIT(A), Jammu

4. The CIT, Jammu

5. The SR DR, ITAT, Amritsar.

True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.

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