1 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 IN INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [Before Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM] I.T.A No. 2844/Kol/2013 Assessment Year: 2007-08 Assistant Director of Income-tax (E)-1, Vs. Bhowanipur Gujarati Education Society Kolkata. (PAN: AAATT5940Q) (Appellant) (Respondent) Date of hearing: 21.09.2016 Date of pronouncement: 14.10.2016 For Appellant: Shri Rajat Kr. Kureel, JCIT, Sr. DR For Respondent: Shri Miraj D. Shah, AR ORDER Per Shri M. Balaganesh, AM: This appeal by revenue is arising out of order of CIT(A)-XIV, Kolkata vide appeal No. 175/CIT(A)-XIV/09-10 dated 06.09.2013. Assessment was framed by ITO (Exemp.)-II, Kolkata u/s. 143(3)/11 of Income tax Act, 1961 (hereinafter referred to as Act ) for AY 2007-08 vide his order dated 17.12.2009. 2. only issue to be decided in this appeal is as to whether ld CITA is justified in treating tour expenses of Rs. 29,43,011/- and fashion show expenses of Rs. 36,53,054/- as application of income in facts and circumstances of case. 3. brief facts of this issue is that assessee is charitable society registered u/s 12A of Act with effect from 1.11.1973. main activities of society are imparting education. assessee society runs college in name of Bhawanipur Education Society College , vocational art academy, secondary school and higher secondary school. ld AO observed that assessee society had submitted audited accounts for all units i.e schools, colleges, vocational art academy and society itself. Sl. Name of Section Total Revenue Total revenue Capital Total No. Income (Rs.) expenditures expenditure application of (Rs.) (Rs.) income (Rs.) 1. B.G.E. Society 2,47,73,567/- 1,10,54,455/- 43,11,576/- 1,53,66,031/- 2. B.E.S. College 9,10,28,007/- 8,39,72,251/- 22,50,051/- 8,62,22,302/- 3. B.E.S College 39,79,582/- 48,05,030/- 16,099/- 48,21,129/- (Vocational Art Academy) 2 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 4. B.G.E.S School (ICSE) 43,20,518/- 1,16,94,138/- 21,50,362/- 1,38,44,500/- 5. B.G.E.S School (ISC) 99,74,119/- 64,04,784/- 64,04,784/- TOTAL 13,40,75,794/- 11,79,30,660/- 87,28,088/- 12,66,58,784/- 3.1. income of society includes dividend, interest, voluntary contributions, rent, etc. income of school and colleges include tuition fees, development fees and other fees. From books of accounts produced for each unit which were also subjected to verification on test check basis by ld AO, ld AO observed that assessee had incurred substantial expenditures in different heads under normal academic curriculum of schools and colleges. ld AO observed that following expenses incurred by assessee society shall not be regarded as application of income as according to him same are not relevant for purpose of objects of running educational society :- (a) Tour expenses Foreign tour provided to students of Bhowanipur Gujarati Education Society College (b) Functions and Festivals Annual Fashion Show and Mr. and Mrs University expenses. 3.2. assessee replied before ld AO as below:- management has always felt that seeing is believing and has been first among Educational Institutes to undertake foreign tours for benefits of students. We believe that hands on approach will make students more competent to handle competitive world once they pass out of college. This educational foreign tours are open to all students of Institute and selection is made depending upon their aptitude, educational/academic brilliance and other requirements. 3.3. ld AO concluded that only section of students get opportunity of foreign tour and these tours are not in form of excursion. same logic was also applied to local tours offered to students of ISC and ICSE schools. He further concluded that these opportunities are treated as special offers given to special category of students and not related to conventional educational programmes / of schools / colleges. Accordingly he held that expenditure on tour would not be treated as application of income to tune of Rs. 29,43,011/- for purpose of section 11 of Act. 3.4. ld AO observed that assessee had shown expenses of Rs. 35,04,242/- and Rs. 1,48,812/- under Annual Fashion Show and Mr. & Mrs. University held by college. He 3 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 held that this expenditure is not related to educational programme offered by institution. He concluded that this activity does not fall under definition of education u/s 2(15) of Act. Rather it only adds to advertisement for college and accordingly held that same would not be treated as application of income to tune of Rs. 36,53,054/- for purpose of section 11 of Act. 4. ld CITA observed that these tours were conducted year on year by assessee and held that expenses were incurred on school and college students for education tours in India and Foreign countries. He held that there is no material to suggest that these tours were for special category students. He held that these trips were very much part of education co-curricular activities for students which was aimed to development of students. Accordingly he held that same would amount to application of income for objects of assessee society. 5. With regard to fashion show and Mr. & Mrs. University expenses, ld CITA observed that college is running vocational training department which has several students and has fees earning of close to Rs 40 lacs during year under appeal. He observed that this department of college holds annual fashion show with view to providing platform to their students to display what they have learnt. Such platform helps student in development of skill as well serves as platform for meeting of students and industry which ultimately helps in employment of students. 6. Aggrieved, revenue is in appeal before us on following grounds:- 1. Ld. CIT (A) - XIV, Kolkata has erred in deleting disallowance of Rs.29,43,011/- claimed on account of foreign tours debited under head of Tour Expenses, overlooking fact that 125 students were taken on foreign tour through tour operator 'Club 7' for entertainment, thereby allowing assessee's unacceptable claim that foreign tour was organised in course of imparting education. 2. Ld. CIT (A)-XIV, Kolkata has erred in deleting disallowance of Rs.36,53,054/- claimed on account of fashion show debited under head of Function & Festival A/c, ignoring fact that fashion show was organised in college had participation from students unconnected with vocational course in fashion designing, thereby be lying assessee's claim that fashion show was organised in course of imparting vocational education. 3. Ld. CIT(A) has erred by not considering fact that doctrine of res judicata does not apply to Income Tax Proceedings. 4 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 7. We have heard rival submissions and perused materials available on record including paper book of assessee containing various scrutiny assessment orders passed u/s 143(3) of Act for Asst Years 2003-04 , 2004-05 , 2007-08 , 2008-09 and 2010-11 together with its audited financial statements comprising from pages 1 to 38 of Paper Book. It is not in dispute that assessee society is educational institution imparting education and is granted registration u/s 12A of Act with effect from 1.11.1973 and its income is exempt u/s 11 of Act. We find that assessee society is also having registration u/s 10(23C) of Act as educational institution. ld AR argued that society is running degree college affiliated to Calcutta University as well as running school affiliated to ISC Board. He stated that college is also recognized by University Grants Commission (UGC) u/s 2(f) and 12(b) of UGC Act. We find that ld AO had only treated tour expenses and fashion show expenses as not applied for charitable objects of society. Now short question that arises for our consideration is whether same would be construed as application of income in facts and circumstances of case. It is not in dispute that assessee society is also running vocational art academy for imparting training in decorating and designing. We find that assessee has been incurring these two expenses i.e tour expenses and functions and festivals expenses in earlier years also. From paper book filed by assessee containing audited financials for 31.3.2003 , 31.3.2004 , 31.3.2008 and 31.3.2010, these expenses were incurred in those years also and claimed as application of income which were duly accepted by ld AO :- Asst Years Tour Expenses Functions & Festivals (only fashion Show expenses 2003-04 40,08,550 8,87,378 2004-05 53,72,012 9,71,755 2008-09 37,03,218 23,32,705 2010-11 59,08,897 48,58,897 7.1. With regard to tour expenses incurred by assessee , we hold that aforesaid tour expenses incurred on students becomes integral part of learning and enables opportunity for students to gain hands on experience from such trips by imbibing different cultural values , language, literature of different countries, which would be part 5 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 and parcel of vocational art academy course run by assessee society. These tours would also enable students to understand history of different countries which would definitely fall under category of imparting education. Moreover, these type of tours would also provide greater close bonding between students and teachers which in turn would increase confidence of students to interact with teachers thereby improving communication and interactive skills of students. We find that ld CITA observed that 2015 Secondary Curriculum issued by Central Board of Secondary Education , New Delhi oat page 234 had suggested essential activities for students which include things like using of bus, milking of dairy animals, helping organizing picnics, conducting tours and excursions and many other activities. Accordingly he held that view of ld AO that tours do not form part of conventional education as incorrect. We find that education as such is fast changing requiring out of box approach to be imbibed on students which in turn could be gathered from outside class room activities which forms integral part of education . ld AR also stated that tours are highly subsidized and students pay small part of cost and rest of cost is borne by assessee society. He stated that these tours are purely academic in nature and are conducted and open for any student of institution of particular age who want to participate in tour. We find that there is no material brought on record by ld AO to suggest discrimination of students who get selected to participate in tour. In view of these findings, we have no hesitation in holding that incurrence of tour expenses would definitely form part of application of income of assessee society and is part and parcel of activity of imparting education. 7.2. It is not in dispute that vocational training department of assessee society conducts annual fashion shows and Mr & Mrs University competition. ld AR argued that assessee society is running full time diploma program in Fashion and Interior Department under Vocational Art Academy and said department is spread over 11000 sq.ft. He argued that course of fashion designing is about learning on how to design and manufacture clothes and this learning is ultimately showcased to world including fashion designers, recruiting companies etc through fashion shows. We hold that these shows admittedly provides platform for students to display their talents and also to exhibit what they had learnt in classroom. This also creates lot of employment opportunities for students. We hold that these events help in students shedding their 6 ITA No. 2844/Kol/2013 Bhowanipur Gujarati Education Society, AY 2007-08 inhibitions and come out of stage fear which in turn enables students to meet society at large with greater confidence . This is similar to institutes like National Institute of Fashion Technology set up by Government of India who are also holding fashion shows for similar purposes, as rightly pointed out by ld CITA. We hold that this also forms integral part of education, learning and training of students. We find that ld AO treated these expenditures to be in nature of advertisement for institution, which in turn would again have to be construed as application of income in pursuance of objects of assessee society. Hence in any case, this would only fall under ambit of application of income. 7.3. We find from paper book filed by assessee that similar expenses were allowed as application of income by ld AO for Asst Years 2003-04 , 2004-05, 2008-09 and 2010-11 in section 143(3) proceedings. 7.4. In view of aforesaid findings, we hold that both tour expenses and fashion show and Mr & Mrs University expenses incurred by assessee society would have to be construed as application of income in pursuance of objects of assessee society. Accordingly, grounds raised by revenue are dismissed. 8. In result, appeal of revenue is dismissed. Order pronounced in open court on 14.10.2016 Sd/- Sd/- (N. V. Vasudevan) (M. Balaganesh) Judicial Member Accountant Member Dated : 14th October, 2016 Jd.(Sr.P.S.) Copy of order forwarded to: 1. APPELLANT ADIT(E)-1, Kolkata. 2 Respondent Bhowanipur Gujarati Education Society, 5, Lala Lajpatrai Sarani, Kolkata-700 020 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. Assistant Director of Income-tax (E)-1, Kolkata v. Bhowanipur Gujarati Education Society