2016 (5) TMI 1231 - AT - Income Tax

Exemption u/s. 10(23C)(iiiab) - Held that - Assessee society has not fulfilled both the requisite conditions for claiming exemption u/s. 10(23C)(iiiab) of the Act. It neither exists solely for educational purpose, nor was it substantially or wholly financed by the Government. Therefore, the CIT(Appeals) was not correct in holding that the assessee is entitled for exemption u/s. 10(23C)(iiiab) of the act. We accordingly set aside the order of CIT(Appeals) and restore the order of Assessing Officer in this regard. - Decided against assessee. Status of assessee trust - whether society registered under a statute is to be assessed as an Artificial Juridical Person (AJP)? - Held that - From the records available for the AY 2005-06, we find that the status of assessee was shown to be co-operative society. The AO has shown the same status of the assessee in the assessment order on the basis of status shown in the return of income, therefore the AO cannot be held responsible for assessing the assessee under different status. It is also an admitted fact that there would neither be any change in the computation of income nor tax effect, even if the status of the assessee is to be changed from AOP to AJP, because the assessee has already been assessed at the rates applicable to the co-operative societies. It is also noticed from the record that during the AY 2005-06 in the tax computation form, the status of the assessee was shown to be AJP, meaning thereby in the income tax computation form, the AO has assessed the assessee in the status of AJP. Therefore, no grievance of the assessee is left out in the AY 2005-06. For the remaining assessment years, the assessee has not filed the income tax computation form issued by the AO. Therefore, in the absence of this information, we cannot hold conclusively that assessee was not finally assessed in the status of AJP in the income tax computation form.

Summary

Issues Involved:
1. Exemption under Section 10(23C)(iiiab) of the Income-tax Act, 1961.
2. Status of the assessee as a "Co-operative Society" or "Artificial Juridical Person (AJP)".
3. Nature of receipt of co-operative education fund under Section 57(2A) of Karnataka Co-operative Societies Act, 1959.
4. Claim of exemption under Section 80P(2)(d) of the Income-tax Act.

Detailed Analysis:

1. Exemption under Section 10(23C)(iiiab) of the Income-tax Act, 1961:
The Revenue challenged the CIT(Appeals) decision to grant exemption under Section 10(23C)(iiiab), arguing that the assessee was neither a university nor an educational institution existing solely for educational purposes and not for profit, and was not substantially financed by the Government. The Tribunal reviewed the judgment of the Hon’ble Apex Court in the case of Visvesvaraya Technological University v. ACIT, which established that both conditions must be met for exemption under Section 10(23C)(iiiab). The Tribunal found that the assessee society's main objects were not solely educational and that the funding from the Government was less than 4% of gross receipts, thus failing to meet the criteria for exemption. Consequently, the Tribunal set aside the order of CIT(Appeals) and restored the order of the Assessing Officer, denying the exemption.

2. Status of the Assessee as a "Co-operative Society" or "Artificial Juridical Person (AJP)":
The assessee filed appeals late, arguing that it should be assessed as an AJP based on the judgment of the Hon’ble jurisdictional High Court in CIT v. Children’s Education Society. The Tribunal found that the assessee had not raised this issue before the lower authorities and had been assessed in the status shown in its return of income. Since there would be no change in tax liability or computation of income even if the status was changed, the Tribunal found no merit in the request for admission of the additional ground and rejected it. The appeals filed late were dismissed as barred by limitation.

3. Nature of Receipt of Co-operative Education Fund under Section 57(2A) of Karnataka Co-operative Societies Act, 1959:
The Tribunal noted that the issue regarding the nature of the co-operative education fund received under Section 57(2A) was raised before the CIT(Appeals) but remained unadjudicated. The Tribunal restored this issue to the CIT(Appeals) with directions to adjudicate the ground by passing a reasoned order after affording an opportunity of being heard to the assessee.

4. Claim of Exemption under Section 80P(2)(d) of the Income-tax Act:
The assessee raised an additional ground regarding the non-adjudication of its claim under Section 80P(2)(d) for interest received from co-operative banks. The Tribunal restored this issue to the CIT(Appeals) for adjudication, directing the CIT(Appeals) to pass a reasoned order after providing an opportunity of being heard to the assessee.

Conclusion:
The Tribunal allowed the appeals of the Revenue, denied the exemption under Section 10(23C)(iiiab) to the assessee, and dismissed the late appeals of the assessee. The issues regarding the nature of the co-operative education fund and the claim under Section 80P(2)(d) were restored to the CIT(Appeals) for adjudication. The request to change the status of the assessee from "Co-operative Society" to "Artificial Juridical Person" was rejected. The appeals of the assessee were partly allowed for statistical purposes.