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2014 (1) TMI 1944 - AT - Income TaxDenial of exemption u/s 10(23C)(iiiab) - assessee has neither sought nor was granted any registration u/s 12AA for which the assessee is claiming the exemption in dispute - HELD THAT - As in a matter of fact and record that the assessee derives income from running an educational institute in the name and style of the Malout Institute of Management and Information Technology at Malout which was established by Government of Punjab as per Memorandum of Association and Rules and under the Societies Registration Act, 1860 as amended by Punjab Amendment Act, 1947, vide No. 643 of 1998-99 dated 11.08.1998. As assessee has claimed its income as applied towards charitable purpose as per Section 11(1)(a) of the Act. At the same time, the assessee has claimed its balance income as exempt under Section 10(23C)(iiiab). It is obvious that a question had arisen in the mind of the AO that how the assessee is claiming under two provisions of the Act i.e. Section 11(1)(a) and Section 10(23C)(iiiab) - AO asked the assessee to justify its claim and in response to the same, the assessee stated that its institute is approved as 100% Govt. Autonomous Body and the Government has not financed any paisa to the institute in last 5 years because the institute is already having a good amount lying in Fixed Deposits with Banks. This very reply of the assessee is against the assessee which is contrary to the provisions of Section 10(23C)(iiiab). According to the provision of Section 10(23C)(iiiab) one can only get exemption, if it fulfills the conditions of this Section. It is very much necessary for the assessee to fulfill all the conditions for exemption u/s 10(23C)(iiiab). In our considered view the assessee did not fulfill the required conditions as mentioned u/s 10(23C)(iiiab) of the Act and the FAA has wrongly deleted the additions in dispute without any basis as well without going through the relevant provisions of law. Assessee itself admitted before the AO in its reply which we have reproduced above that the institute is approved as the 100% Govt. Autonomous Body and the Government has not financed any paisa to the institute in the last 5 years because the institute is already having a good amount lying in Fixed Deposits with Banks. We are of the view that the assessee is also not fulfilling the conditions regarding the Institute must be wholly or substantially financed by the Government. FAA has deleted the addition in dispute contrary to the law and facts and on the file and without going through the provisions of law as well as documentary evidence establishing that the assessee is entitled for the exemption claimed under Section 12(23C)(iiiab) or Section 11 and 12 of the Act. Principle of res-judicata - As regards to the deletion of addition in dispute on the basis that the same exemption has been allowed by the Revenue Authority in the earlier year and the learned First Appellate Authority has granted the same in the year in dispute also, we are of the view that every assessment year is an independent assessment year. In the income tax proceeding, there can be no question of res-judicata. The decision given by one Assessing Officer for one assessment year cannot affect or bind his decision for another year. This view is supported by various judgments rendered by Hon'ble Supreme Court of India, which includes in the case of New Jehangir Vakil Mills Co. Ltd. 1963 (4) TMI 60 - SUPREME COURT . Assessee has not produced any documentary evidence before the Assessing Officer, learned CIT(A) and even before us, proving that the assessee has got approval from the prescribed authority for the exemption under Section 10(23C)(iiiab) of the Act. Exemption claimed u/s 11(1)(a) - as mentioned in the computation of income regarding, its income applied towards charitable purpose and hence deducted 15% of its receipts deeming the same as to have been applied as per Sections 11(1)(a) of the Act. For claiming the exemption, u/s 11(1)(a) of the Act, the assessee required registration u/s 12AA of the Act. The same has also not been produced by the assessee before any authorities below and even not before us. Therefore, the assessee is not entitled for any exemption under Section 11(1)(a) of the Act. Keeping in view the income and expenditure account as well as the fee structure of the assessee, we are of the view that the assessee is not charitable institution and it is doing business for profit and the assessee-institute has been accumulating funds year after year, which are parked with the banks in the form of FDRs, as is evident from its balance sheet as on 31.03.2009, total FDRs with the bank are of Rs. 11,27,93,116/-. Therefore, the assessee has not received any penny from the Government for the last 5 years as admitted by the assessee. Keeping in view the aforesaid discussion, we are of the view that learned First Appellate Authority has wrongly allowed the exemption to the assessee without applying its mind to the relevant provision of law as well as lack of documentary evidence, which are required for granting exemption in dispute. Appeal filed Revenue is allowed.
Issues Involved:
1. Whether the assessee is entitled to exemption under Section 10(23C)(iiiab) of the Income Tax Act. 2. Whether the assessee is entitled to exemption under Section 11(1)(a) of the Income Tax Act. 3. The validity of the additions made by the Assessing Officer regarding Development Fund and other receipts. 4. The disallowance of car expenses by the Assessing Officer. Detailed Analysis: 1. Exemption under Section 10(23C)(iiiab): The primary issue revolves around whether the assessee qualifies for exemption under Section 10(23C)(iiiab) of the Income Tax Act. The assessee, an educational institute, claimed exemption under this section, asserting it is a 100% Government Autonomous Body. However, the Assessing Officer (AO) found that the institute was not wholly or substantially financed by the Government, as required by Section 10(23C)(iiiab). The AO noted that the institute had not received any government funding in the last five years and was instead generating income through student fees, which were parked in Fixed Deposits (FDRs). The AO concluded that the institute did not fulfill the conditions for exemption under Section 10(23C)(iiiab) because it was not substantially financed by the Government. The CIT(A) allowed the exemption based on previous years' assessments and an order under Section 263 by the CIT, Bathinda, which dropped proceedings initiated under Section 263 for a prior year. However, the Tribunal found that the CIT(A) erred in allowing the exemption without considering the specific conditions of Section 10(23C)(iiiab) and the fact that the institute was not financed by the Government. 2. Exemption under Section 11(1)(a): The assessee also claimed exemption under Section 11(1)(a) of the Act, asserting that its income was applied towards charitable purposes. The AO found that the assessee was not registered under Section 12AA, which is a prerequisite for claiming exemption under Section 11. The Tribunal upheld this view, stating that without the necessary registration, the assessee could not claim exemption under Section 11. 3. Additions Regarding Development Fund and Other Receipts: The AO included the Development Fund and accrued interest in the assessee's total receipts, arguing that these funds were not controlled by students and were meant for the institute's development, thereby forming part of its income. The CIT(A) deleted these additions, but the Tribunal found that the CIT(A) did not provide a proper basis for this deletion. The Tribunal upheld the AO's inclusion of these amounts in the assessee's income, noting that the Development Fund and accrued interest should be considered part of the total receipts. 4. Disallowance of Car Expenses: The AO disallowed one-third of the car expenses and depreciation, adding back Rs. 1,08,868 to the assessee's income. This was based on the finding that the car was used for VVIP duties and not exclusively for the institute's purposes. The Tribunal did not specifically address this issue in detail, focusing instead on the broader issues of exemptions and income inclusion. Conclusion: The Tribunal concluded that the CIT(A) had wrongly allowed the exemption under Section 10(23C)(iiiab) without considering the specific conditions of the section and the lack of government financing. Similarly, the exemption under Section 11(1)(a) was unjustified due to the absence of Section 12AA registration. The Tribunal upheld the AO's additions regarding the Development Fund and other receipts and disallowed the car expenses. Consequently, the Tribunal canceled the CIT(A)'s order and upheld the AO's assessment order, allowing the Revenue's appeal.
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