Exemption: Educational institution - Memorandum of objects on plain paper
December, 06th 2008
ACIT vs Guru Harkishan Public School Citation 2008 25 SOT 428
Exemption: Educational institution - Memorandum of objects on plain paper The assessee, a registered society was running a school. The AO found that its Memorandum of objects was on a plain paper and so the objects could be changed. It was registered society under Society Registration Act since 18 June 1987, where under its objects were stated. In fact also there was no change made in its objects since 1987. Its income was exempt under s.10(23C)(iiiad) since it was running a school without profit motive.
ACIT vs Guru Harkishan Public School
IT Appeal No. 2417 (DELHI) of 2006, Assessment Year 2003-04
R.V. Easwar, Vice President and Deepak R. Shah, Accountant Member
11 April 2008
Deepak Sehgal for the Appellant Deepak Aggarwal and G. Singh for the Respondent
Deepak R. Shah, Accountant Member - This appeal by revenue is directed against the orders of learned CIT(A), Karnal dated 15-5-2006. The revenue raised following grounds before us:
"1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in allowing exemption under section 10(23C)(iiiad) to the assessee which was denied by the Assessing Officer in the assessment order.
2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in deleting the addition of Rs. 9,08,720 made by the Assessing Officer on account of unsecured loans not proved to be genuine."
2. The assessee filed return of income declaring nil income. The assessee primarily claimed exemption under section 10(23C)(iiiad) of the Income-tax Act. The Assessing Officer denied the claim of exemption under section 10(23C)(iiiad) by observing as under:
"This is a case of Societyregistered under the Society Act, 1860. The assessee has filed a copy of certificate dated 18-6-1987. The Memorandum of Association and aims and objects of the society have been filed by the assessee who is on a plain paper and a photocopy of the same has been filed. There is no date of incorporation of memorandum of association and aims and objects. No date has been put anywhere to establish the society has been registered on 18-6-1987 and there is also no date on the certified copies which could establish as this is photocopy or original documents. From the above, it is clear that the society is neither registered with any authority nor under any section of the Act which qualify for exemption under sections 10, 11 and 12 of the Income-tax Act, 1961. The aims and objects which were registered earlier with the Registrar of the society on 18-6-1987 might have been changed afterwards and it cannot be said that these are same aims and objects of the society which were registered on 18-6-1987. Therefore, this is a case of a private school which is not entitled to any exemption under sections 10, 11 and 12 of the Income-tax Act. The assessee has claimed the income as exempt under section 10(23C) in the computation of income attached with the return of income. Section 10(23C)(iiiab) or (iiiad) is not applicable in this case as the institution is purely a private institution which is being run not solely for providing education but for the purpose of earning profit."
The Assessing Officer also held that there is increase in total fees received in the last five years. There is also increase in the assets side every year as per two previous years. He, therefore, concluded that the assessee is running school not for the purpose of providing education for the poor and needy children but with the object of earning profit. Therefore, the school cannot be said to be for charitable purpose under definition of section 2(15) of the Act.
3. During the appellate proceedings, certified copies of the registration certificate and memorandum of aims and objects were filed. It was also certified that there is no change in the aims and objects of memorandum of association of the society from the day of its inception. Copy of these submissions was forwarded to the Assessing Officer for his comments. The Assessing Officer in the remand report reiterated the finding given in assessment order. Learned CIT(A), after considering arguments of the assessee and the remand report submitted by Assessing Officer, held as under:
"The matter has been considered. The relevant assessment record has also been looked into. It is seen that a photocopy of Certificate of Registration of Societies issued by the Registrar of Firms and Societies, Haryana on 18-6-1987 is available on the assessment file of the Assessing Officer. A photocopy of the Memorandum of Association is also available on the file of the Assessing Officer. The appellant has however filed certified copies of these documents before me. The copies have been certified by Notary Public. The memorandum of association has also been certified to be true copy by the Distt. Registrar of Firms and Societies, Karnal on 28-12-2005. A fresh certification of the documents already available on the file of the Assessing Officer cannot be said to be additional evidence. Copies of various approvals granted by the Central Board of Secondary Education have also been filed. A perusal of all these documents clearly shows that the institution run by the appellant society exists solely for education. It cannot be said to be existing for the purposes of profit only because it had earned some profit. Since the appellant had claimed exemption under section 10(23C)(iiiad), provisions of sections 11 and 12 are not relevant in the case of the appellant. Keeping in view the above discussion, it is held that the Assessing Officer was not justified in denying exemption under section 10(23C)(iiiad) to the appellant."
4. Whereas learned DR relied upon finding of Assessing Officer in denying exemption under section 10(23C)(iiiad), learned counsel for assessee relied upon appellate order.
5. We have considered rival submissions. The grievance of Assessing Officer while denying exemption under section 10(23C)(iiiad) is that the memorandum of association and aims and objects filed by assessee is on a plain paper and there is no date of incorporation. However, it is seen that the certified copy of certificate of registration dated 18-6-1987 was filed. The society is registered under the Societies Registration Act, 1860. It is not the case of the Assessing Officer that the certificate of registration is bogus. Once the certified copy of certificate of registration of society is filed, the grievance of Assessing Officer no more subsists. The society is in fact registered with Registrar of Firms and Societies, Haryana under Societies Registration Act, 1860 vide Registration No. 864 of 1988 dated 18-6-1987. The Assessing Officer has merely presumed that the aims and objects which were registered earlier on 18-6-1987 might have been changed afterwards. However, it is not the finding but only presumption. When the certified copies filed which shows the objects only for imparting education, exemption could not have been denied and the presumption that aims and objects might have been changed afterwards. Unless there is clear finding that the aims and objects were in fact changed, the exemption could not have been denied merely presuming that such objects might have been changed afterwards. The assessee having been registered under Societies Registration Act, 1860 cannot be considered as private school or private institution. It is also a matter of record that in all earlier years, the assessee was held eligible for exemption under section 10(23C)(iiiad). Though these orders were under section 143(1)(a), these earlier orders were never disturbed. Even for subsequent assessment year, namely, assessment year 2004-05, the Assessing Officer by his order under section 143(3) dated 8-12-2006 have held that the education is being imparted by the assessee without any profit motive and the income is exempt under section 10(23C)(iiiad) of the Act. Thus, the order of CIT(A) needs no interference.
6. Since the assessee is held to be eligible for exemption under section 10(23C)(iiiad), any income received by such educational institution, which is existing solely for education purpose and not for the purpose of profit, is not includible in the total income. Thus, Ground No. 2 do not survive.