2014 (2) TMI 180 - HC - Income Tax

Entitlement for benefit u/s 10(22) of the Act Held that - It may be possible that for one assessment year, an educational institution existed solely for educational purpose and the self-same institution may exist in some other financial years not solely for educational purpose - In the event for a particular assessment year, the institution does not exist solely for educational purpose, then the benefit of section 10(22) of the Act is not available to the institution for that assessment year - There is no contention that, during the relevant assessment years, the appellant-assessee had any other activity apart from the activities associated with educational purposes. Relying upon Aditanar Educational Institution v. Addl. CIT 1997 (2) TMI 3 - SUPREME Court - The Tribunal has not done anything wrong by pronouncing that during the relevant years, the assessee was not entitled to the benefit of section 10(22) of the Act - The case of the assessee under section 11 is applicable in relation to the assessment year 2000-01. The fact remains that the assessee, when went before the Commissioner of Income-tax (Appeals), it had taken a plea that it is entitled to the benefit of section 11 of the Act, if it is held that it is not so entitled under section 10(22) of the Act the matter remitted back to the CIT(A) for consideration of the case of the appellant for benefit under section 11 of the Act for the assessment year 2000-2001 Decided in favour of Assessee.

Summary

Issues:
Assessment of educational institution for the years 1998-1999, 1999-2000, and 2000-01 under section 10(22) of the Income-tax Act, 1961.

Analysis:
The appellant, an educational institution, sought the benefit of section 10(22) of the Income-tax Act, claiming to exist solely for educational purposes and not for profit during the assessment years in question. However, a survey revealed suspicious transactions where repair payments were made to individuals, ultimately reaching the father of the institution's chartered accountant. The Assessing Officer contended that these transactions indicated profit-making motives. The Commissioner of Income-tax (Appeals) ruled in favor of the appellant, emphasizing that the institution's educational nature was not disputed and granted relief under section 10(22) without delving into section 11 benefits.

The Revenue appealed to the Tribunal, which referenced a previous decision for similar payments made in earlier assessment years. The Tribunal, without examining the bills produced by the appellant, upheld the denial of section 10(22) benefits. The Tribunal's decision was based on the presumption that the money had been diverted from the institution due to lack of evidence showing how it reached an unrelated party. The Tribunal's decision was supported by the Supreme Court's stance on evaluating an institution's profit motives annually.

Regarding section 11 benefits, the appellant was registered under section 12A of the Act. The Commissioner of Income-tax (Appeals) did not address the appellant's claim for section 11 benefits as the section 10(22) benefit was granted. The Tribunal did not consider the section 11 claim either. The High Court agreed with the Tribunal's decision on section 10(22) benefits but remitted the case back to the Commissioner of Income-tax (Appeals) to assess the appellant's eligibility for section 11 benefits for the year 2000-01, criticizing the Revenue for not addressing this claim earlier.

In conclusion, the High Court upheld the Tribunal's decision on section 10(22) benefits but directed a reassessment of the appellant's entitlement to section 11 benefits for the assessment year 2000-01, emphasizing the need for a comprehensive evaluation of all applicable tax provisions.