2022 (8) TMI 293 - AT - Income Tax

Non-granting of exemption u/s 10(23C)(iiiad) - processing return of income u/s 143(1) - HELD THAT - AO is entitled to carry out only prima facie adjustment as provided u/s 143(1). He cannot deal in issues, which are debatable in nature. The issue taken up by the AO while processing u/s 143(1) is debatable on this count also, he cannot disallow the claim of the assessee claimed u/s 10(23C)(iiiad) while processing return of income u/s 143(1) - In view of this, we allow the ground taken up by the assessee in these appeals and accordingly, both the appeals are allowed.

Summary

Issues:
Non-granting of exemption u/s 10(23C)(iiiad) of the Income-tax Act, 1961 during the processing of the return u/s 143(1) for assessment years 2017-18 & 2018-19.

Analysis:
The appeals by the assessee were directed against the orders of CIT(A) for the assessment years in question. The primary issue revolved around the non-granting of exemption u/s 10(23C)(iiiad) of the Income-tax Act, 1961 during the processing of the return u/s 143(1) for the respective assessment years. The assessee, a charitable institution running educational institutions, claimed exemption u/s 10(23C)(iiiad) of the Act, but the claim was disallowed during assessment. The AO merged the receipts of all segments for calculating the exemption, which the assessee challenged. The CIT(A) upheld the AO's decision, leading to the appeal before the ITAT.

The ITAT referred to the judgment of the Hon'ble Karnataka High Court in a similar case, emphasizing the interpretation of "aggregate annual receipts" and the treatment of multiple educational institutions. The judgment highlighted the distinction between educational institutions financed by the Government and those that are not, clarifying the scope of exemption under the relevant provisions. Additionally, the ITAT cited a decision by the Delhi High Court, further supporting the separate consideration of annual gross receipts for each educational institution run by an assessee society under section 10(23C)(iiiad).

Moreover, the ITAT noted that the issue dealt with by the lower authorities under section 143(1) of the Act was debatable in nature. The AO's disallowance of the assessee's claim under section 10(23C)(iiiad) during the processing of the return was beyond the scope of prima facie adjustments allowed under section 143(1). Consequently, the ITAT allowed the grounds taken up by the assessee in the appeals, ultimately allowing both appeals in favor of the assessee.

In conclusion, the ITAT's detailed analysis and reference to relevant legal precedents provided a comprehensive understanding of the issues involved in the judgment. The decision highlighted the importance of correctly interpreting statutory provisions and ensuring that assessments adhere to the legal framework established under the Income-tax Act, 1961.