Commissioner of Income Tax vs Sarvhitkari Education Society

Adarsh Kumar Goel, J.—The Revenue has preferred this appeal u/s 260A of the Income Tax Act, 1961 (for short, "the Act"), against the order of Income Tax Appellate Tribunal, Chandigarh Bench dated June 30, 2008, passed in I. T. A. No. 360/Chandi/2007 for the assessment year 2003-04, proposing to raise the following substantial question of law:

Whether, on the facts and circumstances of the case and in law, the hon''ble Income Tax Appellate Tribunal was justified in holding that the assessee is entitled for exemption u/s 11(1)(a) of the Act, 1961, and capital expenditure incurred on fixed assets is application of income for charitable purpose, without appreciating the fact that the assessee was registered under the Societies Registration Act, 1860, and not under the Indian Trusts Act, 1882, as such does not qualify for exemption u/s 11(1)(a) of the Income Tax Act on the income which is derived from the property not held under a trust.

The assessee is a charitable trust registered under the Societies Registration Act, 1860, and is also registered u/s 12A of the Act. It is running schools.

The assessee claimed exemption u/s 11/12 and also u/s 10(23C)(iiiad). The Assessing Officer rejected the claim holding that the assessee being an institution was governed by Section 11(1)(d) read with Section 12(1) of the Act. It was held that exemption u/s 11(1)(a) was applicable only to trust. On appeal, the Commissioner of Income Tax (Appeals) upheld the claim of the assessee, which order has been affirmed by the Tribunal.

The Tribunal observed:

In this case, the Assessing Officer held that the assessee was not a trust but only an institution whereas exemption u/s 11/12 was available only in respect of the income of the property held under trust. The Assessing Officer has taken a view that the assessee is a charitable society but not a trust. In this regard a reference has also been made to the decision of the hon''ble Delhi High Court in the case of CIT v. Charat Ram Foundation [2001] 250 ITR 64 (Delhi). A similar issue was dealt with in the case of CIT v. Simla Chandigarh Diocese Catholic Church. The Tribunal after taking into consideration the following judgments:

(i) Commissioner of Income Tax Vs. Market Committee, ; and

(ii) Commr. of Income Tax Vs. Gujarat Maritime Board, .

held that the assessee could not be denied exemption u/s 11 of the Act on the ground that it was not a trust but a society/institution.

It was further observed that the Assessing Officer was required to verify the claim that expenditure had been factually incurred.

We have heard learned Counsel for the Revenue.

The contention raised on behalf of the appellant is that the Assessing Officer was justified in declining the exemption as there was a distinction in a trust and an institution, as pointed out by the hon''ble Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Thanthi Trust, .

We are unable to accept this submission. There may be conceptual difference in the constitution of a trust or any other institution if such difference has relevance having regard to the statutory scheme for exemption. In the present case, the expression used in Section 11(1)(a) is "income derived from property held under trust" irrespective of the fact whether income is derived by a trust or any other institution. The requirement is only of holding the property under trust. The Commissioner, referring to the definition of "person" u/s 2(31) of the Act, observed that neither society was specified as a separate category nor was trust specified as a separate category and both were covered by the expression "association of persons" in Clause (v) or by the residuary Clause (vii). Thus, the question raised cannot be held to be a substantial question of law.

The appeal is dismissed.