2017 (11) TMI 1026 - HC - Income Tax

Revision u/s 263 - claim of the respondent assessee under Section 11/12 wrongly allowed to the assessee despite the fact that the assessee society is not registered under Section 12A/12AA - ITAT has concluded that Commissioner has taken a particular view that the gross received is more than ₹ 1 crore therefore, the assessee society is not entitled to get the benefit of the provisions of Section 10(23C)(iiiad) - Held that - In the present case admittedly the assessee society/ college has received an account of tuition fee and other fee less than ₹ 1 crore (which is prescribed limit) i.e. ₹ 95,71,259/- therefore, the Tribunal has rightly held that the proceedings under Section 263(1) initiated by the Commissioner are illegal and the Commissioner is not empowered to invoke the power of Section 263 of the Act as the basic consideration to hold that the order of Assessing Officer is erroneous, is missing upon the facts and circumstances of the present case. We are in full agreement with the finding of the ITAT as we find that the assessee society is running a school and has admittedly received the tuition fee being the annual receipts below the prescribed limit of ₹ 1 crore and according to us the exemption limit clearly provides the cut of figure of ₹ 1 crore being the annual receipt of the educational Institution or the University, as the case may be, and not that of the total income of the society running the educational Institution or University. In the present case, the income of ₹ 6,67,000/- towards the buildings/capital assets and ₹ 4,01,900/- received towards donation cannot be part of the annual receipts of the University/College/School. Therefore, in our considered opinion the assessee is entitled for exemption under Section 10(23C)(iiiad) as annual income of the assessee society did not exceed ₹ 1 crore. - Decided in favour of assessee.

Summary

Issues:
1. Justification of order under Section 263 of the Act by ITAT.
2. Registration status of the respondent under Section 12A/12AA.
3. Applicability of case law before ITAT.

Issue 1: Justification of order under Section 263 of the Act by ITAT

The case involved an Income Tax Appeal arising from a decision of the Income Tax Appellate Tribunal (ITAT) dated 1.5.2013. The Commissioner of Income Tax, Allahabad, filed the appeal questioning the justification of the order passed under Section 263 of the Act by the ITAT. The Revenue contended that the ITAT's failure to consider the order in a prospective manner rendered it unsustainable. The Commissioner argued that the ITAT did not take into account the non-registration of the respondent under Section 12A/12AA of the Act, thus arriving at an incorrect conclusion. The High Court analyzed the facts and legal positions to determine the correctness of the ITAT's decision.

Issue 2: Registration status of the respondent under Section 12A/12AA

The respondent, engaged in educational activities, was found to have been erroneously allowed exemptions under Section 11/12 of the Income Tax Act despite not being registered under Section 12A/12AA. The Commissioner, after due consideration and invoking Section 263, held the assessment order to be erroneous and prejudicial to the revenue's interest. The respondent challenged this decision before the ITAT, arguing that the regular assessment order was not erroneous and that the CIT's order was contrary to facts and principles of natural justice. The ITAT set aside the CIT's order, prompting the High Court to delve into the details of the case.

Issue 3: Applicability of case law before ITAT

The Commissioner proceeded under Section 263 based on the respondent's claim of exemption under Section 12, despite not being registered under Section 12A/12AA in the relevant assessment year. The respondent's argument relied on Section 10(23C)(iiiad) of the Act, which exempts educational institutions from income tax if annual receipts do not exceed a prescribed limit. The Commissioner contended that the respondent's receipts exceeded the limit, thus disqualifying them from the exemption. However, the ITAT disagreed, holding that the respondent's annual receipts were below the prescribed limit, making them eligible for the exemption. The High Court concurred with the ITAT's interpretation, emphasizing that the exemption limit pertained to the annual receipts of the educational institution, not the total income of the society. Consequently, the appeal filed by the Commissioner was dismissed.

This detailed analysis of the judgment from the Allahabad High Court provides insights into the legal intricacies surrounding the issues raised in the case, ultimately leading to the dismissal of the Commissioner's appeal.