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2014 (8) TMI 278 - AT - Income TaxClaim of exemption u/s 10(23)(iiiab) and (iiiad) Educational institution whose income is less than Rupees one crore - Whether the each educational institution has to be taken as independent units or the trust has to be taken as a unit for assessment - Held that - Following the decision in Jat Education Society Versus Dy. CIT 2011 (3) TMI 569 - ITAT DELHI - for the purpose of section 10(23)(iiab) and (iiiad), the annual gross receipt of each educational institution run by the assessee has to be taken separately and it cannot be clubbed together in the hands of the trust for examining the fulfillment of condition of receipt of less than the prescribed limit of the annual gross receipt - if the annual gross receipt of the educational institution is considered separately, the same is below ₹ 1 crore in each year, therefore, it is entitled for exemption u/s 10(23)(iiiad) of the Act - The matter is remitted back to the AO for fresh adjudication - the details of the aids said to have been received from the government and the annual receipts are not available - It is made clear that any opinion in respect of exemption u/s 10(23C) is not expressed, and the AO shall consider it independently and decide Decided in favour of Assessee.
Issues Involved:
1. Entitlement to exemption under Section 11 of the Income Tax Act. 2. Entitlement to exemption under Section 10(23C)(iiiab) and (iiiad) of the Income Tax Act. 3. Requirement of registration under Section 12AA for claiming exemption under Section 11. 4. Consideration of aggregate receipts for exemption under Section 10(23C). 5. Examination of capitation fee collection. Issue-wise Detailed Analysis: 1. Entitlement to Exemption under Section 11 of the Income Tax Act: The assessee trust, running educational institutions, filed a return of income claiming exemption under Section 11. The assessing officer rejected this claim on the grounds that the trust was not registered as a charitable institution under Section 12AA. The Tribunal noted that the trust's application for registration was rejected by the Administrative Commissioner, and the appeal was pending before the High Court. The Tribunal referenced the Apex Court judgment in U.P. Forest Corporation & Anr vs Dy.CIT, which held that without registration under Section 12AA, the assessee is not entitled to claim exemption under Section 11. 2. Entitlement to Exemption under Section 10(23C)(iiiab) and (iiiad) of the Income Tax Act: The assessee argued that it was entitled to exemption under Section 10(23C)(iiiab) and (iiiad) since the receipts of each educational institution were less than Rs. 1 crore. It was contended that the aggregate income of the trust should not be considered for this purpose, and each institution should be assessed individually. The Tribunal referenced the Delhi Bench decision in Jat Education Society vs DCIT and the Karnataka High Court judgment in CIT vs Children's Education Society, which supported the assessee's claim that each educational institution should be considered separately for exemption purposes. 3. Requirement of Registration under Section 12AA for Claiming Exemption under Section 11: The Tribunal confirmed that registration under Section 12AA is mandatory for claiming exemption under Section 11, as supported by the Apex Court judgment in U.P. Forest Corporation & Anr vs Dy.CIT. 4. Consideration of Aggregate Receipts for Exemption under Section 10(23C): The Tribunal examined whether the aggregate receipts of all educational institutions run by the trust should be considered together or separately for exemption under Section 10(23C). The Karnataka High Court in Children's Education Society held that the aggregate annual receipts of each educational institution should be considered separately. The Tribunal found that the lower authorities did not consider this judgment and remitted the issue back to the assessing officer for reconsideration in light of the Karnataka High Court and Apex Court judgments. 5. Examination of Capitation Fee Collection: The Tribunal directed the assessing officer to examine whether the assessee collected any capitation fee over and above the prescribed fee for admission of students. If such fees were collected, the assessee would not be entitled to exemption under Section 10(23C) or Section 11. Conclusion: The Tribunal set aside the orders of the lower authorities and remitted the issue of exemption under Section 10(23C) back to the assessing officer for reconsideration. The assessing officer was instructed to consider the relevant judgments and decide the issue in accordance with the law, without being influenced by any observations made in the Tribunal's order. The appeals filed by the assessee were allowed for statistical purposes, and the stay petitions were dismissed as infructuous. The order was pronounced in open court on July 25, 2014.
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