2017 (5) TMI 966 - AT - Income Tax

Deduction u/s 10(23C) (iiiad) disallowed - assessee has not been granted registration u/s 12AA nor registered u/s 10(23C)(vi) - Held that - Corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of educational institution, even if no registration u/s 12AA have been granted. If the corpus fund is excluded, the balance aggregate annual receipt of the assessee s educational institution would be less than ₹ 1 crore. Therefore assessee would be entitled for exemption u/s 10(23C)(iiid). In this view of the matter I set aside the orders of authorities below and direct the Assessing Officer to grant exemption to assessee u/s 10(23C)(iiid) of I.T. Act. - Decided in favour of assessee

Summary

Issues:
1. Addition of corpus donation to total receipts
2. Disallowance of deduction under section 10(23C)(iiiad)
3. Eligibility for exemption under section 10(23C)(iiiad)

Analysis:

Issue 1: Addition of Corpus Donation to Total Receipts
The case involved an appeal against the order of the Ld. CIT(A) regarding the addition of a corpus donation to the total receipts of the assessee. The Assessing Officer noted that the assessee had received a corpus fund along with revenue receipts, leading to gross receipts exceeding ?1 crore. As the assessee was not registered under section 12AA or section 10(23C)(vi) of the Income Tax Act, the provision of section 10(23C)(iiiad) was deemed inapplicable. Consequently, the corpus fund amount was added to the income of the assessee.

Issue 2: Disallowance of Deduction under Section 10(23C)(iiiad)
The assessee contended that the corpus fund was received for specific purposes and should not be considered part of the total receipts. Referring to relevant case law, the assessee argued that corpus donations are capital receipts and not taxable even without exemption under section 12A of the Income Tax Act. However, the Ld. CIT(A) upheld the addition of the corpus fund to the total receipts, resulting in the disallowance of the deduction under section 10(23C)(iiiad).

Issue 3: Eligibility for Exemption under Section 10(23C)(iiiad)
The counsel for the assessee cited precedents where similar corpus donations were not considered taxable income. Relying on decisions from various ITAT benches, including Delhi, Agra, and Calcutta, it was argued that corpus donations meant for capital expenditure should not be included in the annual receipts of an educational institution. The ITAT, following previous rulings, concluded that the corpus fund, intended for specific capital expenses, should not be part of the educational institution's annual receipts. Consequently, the assessee was granted exemption under section 10(23C)(iiiad) of the Income Tax Act.

In conclusion, the ITAT allowed the appeal of the assessee, setting aside the orders of the authorities below and directing the Assessing Officer to grant exemption to the assessee under section 10(23C)(iiiad) of the Income Tax Act.