2016 (11) TMI 1574 - AT - Income Tax

Non-providing of exemption u/s 10(23C) (iiiad) - receipt of tuition fee and other levies - Held that - As per case of the revenue, there is no change of material facts since A.Y. 2000-01 and 2001-02 and the judgment of the Hon ble High Court of Uttarakhand in QUEENS EDUCATIONAL SOCIETY AND ST PAULS SR. SECONDARY SCHOOL 2007 (9) TMI 347 - UTTARAKHAND HIGH COURT has since been set aside by the Hon ble Supreme Court 2015 (3) TMI 619 - SUPREME COURT and the reasoning of the ITAT given in the said case have been upheld, therefore the assessee was entitled to claim exemption U/s 10(23C)(iiiad) of the Act. In view thereof, the orders of the A.O. and the ld. CIT(A) are set aside and the appeal of the assessee is allowed.- decided against revenue

Summary

Issues:
1. Whether the assessee is entitled to exemption under section 10(23C)(iiiad) of the Income Tax Act for tuition fee and other levies.
2. Whether the society's activities are solely for educational purposes or for profit-making.
3. Whether the surplus income invested in fixed assets qualifies for exemption.

Analysis:
1. The appeal involved a dispute regarding the assessee's entitlement to exemption under section 10(23C)(iiiad) of the Income Tax Act for tuition fee and other levies. The assessee argued that its income should be exempt as it is covered under the said provision. However, the Assessing Officer (A.O.) and the CIT(A) held that the society was not formed solely for educational purposes but to earn a profit from educational activities, thereby denying the exemption.

2. The second issue revolved around whether the society's activities were solely for educational purposes or for profit-making. The A.O. observed that the society was increasing its assets year by year by investing its surplus income over expenditure in fixed assets. The A.O. relied on a previous order of the Uttarakhand High Court, which upheld that the institution was not entitled to exemption under section 10(23C)(iiiad) as it was deemed to be profit-oriented.

3. The final issue concerned whether the surplus income invested in fixed assets qualified for exemption. The CIT(A) dismissed the appeal, citing that the facts remained unchanged since previous assessment years and the judgment of the Uttarakhand High Court was against the appellant. However, the assessee pointed out a Supreme Court judgment that emphasized the importance of surplus being ploughed back for educational purposes to qualify for exemption.

4. The ITAT Delhi, after considering the arguments and the Supreme Court judgment presented by the assessee, allowed the appeal. The ITAT noted that there was no change in material facts since previous assessment years and that the Uttarakhand High Court's judgment had been set aside by the Supreme Court. Therefore, the assessee was entitled to claim exemption under section 10(23C)(iiiad) of the Act. Consequently, the orders of the A.O. and the CIT(A) were set aside, and the appeal of the assessee was allowed.