2020 (2) TMI 1139 - AT - Income Tax

Exemption u/s 11 - claim for exemption u/s 10(23C) (iiiad) denied - assessee is a society running three different schools at Ravipadu village - HELD THAT - We observe that receipts of each educational institution did not exceed ₹ 1.00 crore as specified in section 10(23C)(iiiad) of the Act. In Section 10(23C)(iiiad) of the Act, the word used is any university or educational institution existing solely for educational purpose, but not the person. The assessee filed the return of income admitting Nil income claiming exemption u/s 11, however, before the AO, the assessee made a claim for 10(23C)(iiiad) vide letter dated nil filed before the AO in response to the notice u/s 142(1) which was placed in page No.14 to 21 of the paper book. In Children s Education Society 2013 (7) TMI 519 - KARNATAKA HIGH COURT considered the similar issue and held that if the receipt of each educational institution does not exceed ₹ 1 crore, the same required to be not to be included in computing the total income of the assessee. In the instant case, there is no dispute that the assessee is running different educational institutions and the receipts of each educational institution does not exceed more than ₹ 1.00 crore as per the details given above. Therefore, we hold that the assessee is entitled for exemption u/s 10(23C)(iiiad) - Decided in favour of assessee.

Summary

Issues:
- Rejection of assessee's claim for exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961.
- Interpretation of section 10(23C)(iiiad) regarding exemption for educational institutions.
- Consideration of receipts of each educational institution for exemption eligibility.
- Application of precedents in determining exemption eligibility.

Analysis:

1. The appeal was filed against the rejection of the assessee's claim for exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961, for the Assessment Year 2015-16. The Assessing Officer (AO) treated the assessee as an Association of Persons (AOP) and taxed the income over expenditure at the maximum marginal rate due to the absence of registration u/s 12AA of the Act.

2. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, stating that the assessee was not granted registration u/s 12A, hence not entitled to exemption u/s 11 of the Act. The assessee then appealed to the Tribunal.

3. During the appeal hearing, the assessee argued that as it operated three different schools with receipts not exceeding Rs. 1 crore each, it should be eligible for exemption u/s 10(23C)(iiiad). The assessee relied on the decision of the Hon'ble Karnataka High Court to support its claim.

4. The Departmental Representative (DR) contended that since the assessee operated educational institutions under a single PAN, the gross receipts of all institutions should be considered for exemption eligibility. The DR argued against the assessee's claim, labeling it as a colorable device for an ineligible deduction.

5. The Tribunal observed that each educational institution run by the assessee did not exceed Rs. 1 crore in receipts, as required by section 10(23C)(iiiad) of the Act. Referring to the decision of the Hon'ble Karnataka High Court, the Tribunal emphasized that exemption eligibility is based on the total receipts of each educational institution, not the aggregate. Therefore, the Tribunal allowed the appeal, setting aside the order of the CIT(A).

6. The Tribunal concluded that the assessee was entitled to exemption u/s 10(23C)(iiiad) of the Act based on the individual receipts of each educational institution. The order in favor of the assessee was pronounced on 31st December 2019.