Commissioner Of Income Tax vs Sikhya 'O' Anusandhan
2023 Latest Caselaw 112 Ori

                     IN THE HIGH COURT OF ORISSA AT CUTTACK

                                 ITA Nos.32, 33 & 34 of 2013
                                              And
                            ITA No.17 of 2015 and ITA No.37 of 2018

             Commissioner of Income Tax,              ....          Appellants
             Bhubaneswar
             (In ITA Nos. 32, 33 & 34 of 2013 and
             ITA No.17 of 2015)
             Commissioner of Income Tax
             (Exemptions), Hyderabad
             (In ITA No.37 of 2018)
             Mr. Radheshyam Chimanka, Senior Standing Counsel along with
                 Mr. Avinash Kedia, Junior Standing Counsel for the Revenue
                                                                 Department
                                        -versus-
             Sikhya 'O' Anusandhan                    ....        Respondent
                                         Mr. Siddhartha Ray, Senior Counsel
                                      assisted by Mr. K. K. Sahoo, Advocate

                        CORAM:
                        THE CHIEF JUSTICE
                        JUSTICE M.S. RAMAN

                                         ORDER

03.01.2023 Order No. Dr. S. Muralidhar, CJ.

06. 1. These appeals by the Revenue are directed against individual orders passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) in the corresponding appeals by the Revenue through the DCIT (Exemption) before the ITAT against the Respondent-Assessee for the Assessment Years (AYs) 2007-08 till 2012-13.

2. The common question sought to be urged by the Revenue in these appeals is whether the Commissioner of Income Tax (Appeals) [CIT(A)] as well as the ITAT were justified in allowing the benefit of exemption under Section 11 of the Income Tax Act, 1961 (Act) to the Respondent-Assessee?

3. For the various AYs in question, in the returns filed by the Respondent-Assessee, which were picked up for scrutiny by the Assessing Officer (AO), the Assessee had purportedly shown the excess of income over expenditure which had been transferred to its capital account. The Respondent-Assessee having been granted registration under Section 12 AA of the Act, claimed exemption under Section 11 of the Act on the basis that it was carrying on the charitable activity of imparting education. While denying the said exemption, the AO came to the conclusion that the Assessee had been charging substantial fees from the students with a view to making profit and that the imparting of education was for commercial motive and for making payments to 'interested persons.'

4. The CIT (A) came to the conclusion, following the decision of the Supreme Court of India in S. RM. M. CT. M. Tiruppani Trust v. CIT (1998) 230 ITR 636, that capital expenditure was also considered as an application of the profits of the entity and that expenditure incurred on the creation of infrastructure and building was permissible expenditure under Section 11(1)(a) of the Act. Reference was also made to the decision of the Delhi High Court in St. Lawrenence Educational Society v. CIT (2010) 197 Taxman 504 (Del.) and the judgment of the Punjab and Haryana High Court

in Pinegrove International Charitable Trust v. Union of India (2010) 327 ITR 73 (P & H). Reference was again made to the decision of the Supreme Court of India in Aditanar Educational Institution v. Additional CIT (1997) 224 ITR 310 (SC).

5. In the impugned order, the ITAT has concurred with the CIT(A) and that the conclusion was based on the various decisions of the Supreme Court of India.

6. At this stage, Mr. Radheshyam Chimanka, learned Senior Standing Counsel for the Revenue Department drew the attention of the Court to the recent decision of the Supreme Court of India in New Noble Educational Society v. Chief Commissioner of Income Tax 1, 2022 SCC OnLine SC 1458 where a Larger Bench of three Hon'ble Judges of the Supreme Court has taken a different view from the one expressed in Aditanar Educational Institution (supra), Pinegrove International Charitable Trust (supra) and American Hotel and Lodging Association v. Central Board of Direct Taxes, (2008) 10 SCC 509 and Queen's Education Society v. Commissioner of Income Tax, (2015) 8 SCC 47, all of which have been relied upon by the ITAT in the instant case.

7. However, this Court notes that in New Noble Educational Society (supra), the Supreme Court in para 88 of the said judgment clarified that "since the present judgment has departed from the previous rulings regarding the meaning of the term 'solely', in order to avoid disruption, and to give time to institutions likely to be affected to make appropriate changes and adjustments, it would be in the larger interests of society that the present judgment operates

hereafter. As a result, it is hereby directed that the law declared in the present judgment shall operate prospectively."

8. In view of the above clarification of the Supreme Court, the Revenue cannot take advantage of the changed legal position as a result of the decision in New Noble Educational Society (supra).

9. As a result, this Court is not inclined to frame the question urged by the Revenue in these appeals. The appeals are accordingly dismissed.

(Dr. S. Muralidhar) Chief Justice

(M.S. Raman) Judge M. Panda