Commissioner Of Income Tax vs Child Education Society
2010 Latest Caselaw 5696 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          {ITA No. 1966 of 2010}


%                                      Date of order; December 14,2010



COMMISSIONER OF INCOME TAX                                ....APPELLANT

                         Through:           Ms. Prem Lata Bansal,
                                            Sr. Standing Counsel.

                              VERSUS

CHILD EDUCATION SOCIETY                                   ....RESPONDENT

                         Through:           Mr. C.S. Aggarwal, Sr. Advocate with
                                            Mr. Prakash Kumar, Advocate



CORAM :-

      HON'BLE MR. JUSTICE A.K. SIKRI
      HON'BLE MR. JUSTICE SURESH KAIT

      1.     Whether Reporters of Local newspapers may be allowed
             to see the Judgment?
      2.     To be referred to the Reporter or not?
      3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. The respondent School is enjoying exemption under Section 11 of

the Income-Tax Act (hereinafter referred to as 'the Act'). Alongwith this,

exemption under Section 80 G of the Act has also been given to the

respondent assessee from time to time. For the period w.e.f. 1 st April,

2000 to 31st March, 2003, the exemption under Section 80 G of the Act

was granted to the respondent on 30th May, 2000. This exemption was

renewed for a further period starting from 1st April, 2003 to 31st March,

2006 vide orders dated 16th December, 2003. After the expiry of this

period, the assessee made another application for exemption under

Section 80 G (5) of the Act on 30th March, 2006. The respondent,

however, vide its communication dated 17th October, 2006 sought leave

to withdraw the said application with liberty to file it afresh

subsequently. Orders dated 19th October, 2006 were passed allowing

the assessee to withdraw the application and the application was thus

dismissed. Subsequently, the assessee filed fresh application dated 12 th

June, 2007 for the same purpose namely seeking exemption under

Section 80G (5) of the Act. This application was dismissed by the

Director of Income-Tax (Exemption), (DIT for short), on 16th October,

2008. The application was rejected on the ground that the assessee was

forcing the parents of the students in the school to give donation. It was

also alleged that the assessee had indiscriminately issued Certificate

under Section 80 G of the Act. The DIT took note of the facts that same

happened in the earlier assessment years also because of which the

assessee was denied exemption under Section 11 of the Act which order

was confirmed by the CIT (A) and against those orders, appeals were

filed by the assessee which were pending before the ITAT. He, thus, was

of the opinion that when exemption under Section 11 of the Act was not

allowed, there was no question of giving exemption under Section 80G

of the Act.

2. It also appears from the orders dated 16th January, 2008 passed by

the DIT that the DIT treated the said application for exemption filed by

the respondent seeking exemption w.e.f. 1st April, 2007. According to

the assessee, this was apparent mistake, inasmuch as, application was

filed for renewal of exemption w.e.f. 1st April, 2006 and not 1st April,

2007. This application of the assessee under Section 154 of the Act was

dismissed by the DIT vide orders dated 15.7.2009.

3. The assessee preferred appeal against the order dated 16 th

January, 2008. The Tribunal has allowed this appeal and has held that

the assessee is entitled to Exemption Certificate under Section 80 G of

the Act w.e.f. 1st April, 2006. Challenging this order, present appeal is

preferred by the Revenue.

4. It would be necessary to point out at this stage that the appeals

which were filed by the assessee against the orders of the Assessing

Officer and the CIT (A) denying exemption under Section 11 of the Act

were allowed by the ITAT. In respect of assessment years 2005-06, in

fact, the CIT (A) had reversed the order of the Assessing Officer granting

exemption under Section 11 of the Act which order was not challenged

by the Department. The Tribunal while allowing the appeal, returned

the finding that there was no violation or irregularities committed by the

assessee and, therefore, the assessee was entitled to exemption under

Section 11 of the Act.

5. Following these earlier orders and finding therein that the

assessee had not committed any violation either in forcing the parents

to give donation or issuing the certificate under Section 80G of the Act

indiscriminately, the ITAT has held by way of impugned decision that the

assessee would be entitled to exemption certificate under Section 80G

of the Act as well.

6. The first submission of learned counsel for the Revenue is that

ITAT relied upon its decision which pertains to assessment years 2002-

03 and 2003-04 which was not relevant for deciding the controversy in

the concerned year. Her Submission in this behalf was that the DIT had

taken note of specific irregularities which were committed in the year

2004 and instances of those irregularities were given in para 4 of the

orders dated 16th January, 2008. According to her, the Tribunal failed to

take note of those irregularities and went by its decision pertaining to

earlier assessment years which were of no relevance. The irregularities

which are alleged in para 4 of the order of the DIT are as under:-

"

Receipt no. &       Alleged donor         Amount     Mode    of Purpose
date                                                 payment
101      dated      Welingkarlnst.        40,000/-   Cheque     Not
24.4.04             Of Mgt.                                     mentioned
109      dated      Career Launcher       42,000/-   Cheque     Not
13.7.04             I (P) Ltd.                                  mentioned
110      dated      Career Launcher       42,000/-   Cheque     Not
13.7.04             I (P) Ltd.                                  mentioned
111      dated      Karuna Sharma         56,400/-   Cheque     Canteen
15.10.04                                                        GR & PR
112      dated      Anil Kumar            22,734/-   Cash       Ice Cream
21.10.04
113      dated      Vinof Kumar           43,778/-   Cash           Canteen
23.11.04                                                            for
                                                                    Jice/Amul
                                                                    Milk
115         dated Chhotu         51,500/-            Cash           Towards
27.11.04          Amusement Park                                    display
                                                                    stall.
                                                                                  "

7. The precise submission is that even when certain persons had

supplied the goods or rendered services, the same was treated as

donation and certificate under Section 80G were issued which would

clearly demonstrate that School was issuing these Certificates

indiscriminately. What is ignored by the DIT is the explanation of the

assessee contained in para 6 of the assessee's letter dated 28 th

December, 2007. The assessee had specifically stated that these

receipts pertain to Winter Carnival and had been accounted for in the

books of accounts of the assessee during the year 2004-05. It is a

common knowledge that when such functions or carnivals are organized

by these Institutions, many sponsors come forward and instead of giving

donation in cash, they contribute in kind which is treated as donation.

From the aforesaid Chart it becomes abundantly clear that one person

had supplied Ice Cream and another had supplied Juice/Amul Milk and

third person had made the arrangement of display of stalls. The amount

spent by them in rendering those services was treated as donation and

certificates of equivalent sum were issued under Section 80G of the Act.

We thus fail to understand as to how it can be treated as irregularities.

8. In so far as contention of learned counsel for the appellant that

the application for exemption under Section 80G of the Act was

preferred by the assessee only for the period w.e.f. 1st April, 2007 is

concerned, we do not see any merit therein. The order passed by the

DIT on 15th July, 2009 dismissing application of the assessee under

Section 154 of the Act reveals that DIT was faced by the fact that the

first application moved by the assessee on 30th March, 2006 was

withdrawn and as the second application was moved on 12th June, 2007,

it was inferred that such an application would be for the period from 1 st

April, 2007. We fail to understand the logic behind such reasoning

adopted by the DIT.

9. From the facts narrated above, it is clear that the assessee had

made application for exemption under Section 80G of the Act on 30 th

March, 2006. In this application it was specifically mentioned that the

exemption was expiring on 31st March, 2006 and request was made for

renewal thereon. Merely because the assessee withdrew this

application and it was dismissed as withdrawn and later application was

filed on 12th June, 2007, it could not be inferred that the second

application is w.e.f. 1st April, 2007 and not from 1st April, 2006. Mr. C.S.

Aggarwal, learned Senior Counsel appearing for the assessee has

produced copies of all these application and other documents. In the

application dated 12th June, 2007, it is categorically pointed out that the

earlier exemption has expired on 31st March, 2006 and renewal thereof

is sought. The dates which are mentioned in this application dated 12 th

June, 2007 are identical which were stated in the first application dated

30th march, 2006. We state at the cost of repetition that while

withdrawing first application, the assessee had sought liberty to file

fresh application. In these circumstances, the presumption of the DIT

that the second application was for the period started from 1st April,

2007 is totally fallacious. Mr. Aggarwal has also submitted a chart

showing the period from which the assessee has been given exemption

under Section 80G. It would be of interest to note that even for the

period from 1st April, 2008 to 31st March, 2001 the assessee has already

been granted exemption under Section 80G of the Act vide orders dated

31st December, 2008. This would also demonstrate that application

which was preferred by the assessee seeking exemption was for the

period from 1st April, 2006 to 31st March, 2008 and not for 1sat April,

2007 as the assessee would not like to keep the period from 1st April,

2006 to 31st March, 2007 in vacuum when the assessee has shown its

due diligence in seeking exemption even for subsequent years.

10. We thus find no merit in these appeals preferred by the Revenue

and dismissed the same with costs quantified @ ` 20,000/-.

(A.K. SIKRI) JUDGE

(SURESH KAIT) JUDGE DECEMBER 14 , 2010 skb