2010 (3) TMI 1201 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to exemption u/s 10(23C)(iiiad) of the Income-tax Act, 1961.
2. Allowability of depreciation on school building.
3. Taxability of fees collected as building fund.
4. Validity of proceedings initiated u/s 148 of the I.T. Act, 1961.
5. Levy of interest u/s 234A, 234B, and 234C of the Act.

Summary:

1. Entitlement to Exemption u/s 10(23C)(iiiad):
The primary issue was whether the assessee society was entitled to exemption u/s 10(23C)(iiiad) of the Income-tax Act, 1961. The Tribunal noted that the assessee society was registered under the Societies Registration Act and was running a school. The Assessing Officer denied the exemption on the grounds that the land on which the school was constructed was not owned by the society but taken on an oral lease from the principal's sons, and the principal was paid a salary of Rs. 10,000 per month, which was seen as a pecuniary benefit. The Tribunal found that the land was later gifted to the society through a registered gift deed and that the lease rent paid was reasonable. It held that the salary paid to the principal was not excessive. Therefore, the Tribunal concluded that the assessee society was entitled to exemption u/s 10(23C)(iiiad) as its annual receipts were below Rs. 1 crore.

2. Allowability of Depreciation on School Building:
The Tribunal did not delve into the issue of depreciation on the school building since it had already decided that the assessee was entitled to exemption u/s 10(23C)(iiiad).

3. Taxability of Fees Collected as Building Fund:
The Tribunal addressed the argument that the fees collected as a building fund were taxable. It noted that the CIT(A) had found that the building fund was essentially an admission fee, and this finding was not challenged by the Revenue. The Tribunal held that the amounts collected as building fund were not capitation fees and thus upheld the CIT(A)'s decision.

4. Validity of Proceedings Initiated u/s 148:
The assessee raised issues regarding the validity of proceedings initiated u/s 148, arguing that the proceedings were bad in law due to non-communication of reasons for reopening and the fact that the notice was issued by one officer while the assessment was completed by another. These grounds were not pressed by the assessee's counsel and were thus rejected by the Tribunal.

5. Levy of Interest u/s 234A, 234B, and 234C:
The Tribunal noted that the levy of interest u/s 234A, 234B, and 234C was consequential in nature and directed accordingly.

Conclusion:
The Tribunal partly allowed the appeals, holding that the assessee society was entitled to exemption u/s 10(23C)(iiiad) for the relevant assessment years. Other grounds not pressed by the assessee were rejected. The decisions rendered for the assessment year 2002-03 were applied to the other assessment years under appeal.