1982 (12) TMI 56 - AT - Income Tax

Summary

Issues Involved:
1. Exemption under Section 10(22) of the Income-tax Act, 1961.
2. Jurisdiction and procedural aspects under Section 144B of the Income-tax Act, 1961.
3. Validity of new claims made during assessment proceedings.

Issue-wise Detailed Analysis:

1. Exemption under Section 10(22) of the Income-tax Act, 1961:

The core issue in this appeal is whether the assessee-institution qualifies for exemption under Section 10(22) of the Income-tax Act, 1961. The trust, established by the Academy of General Education, Manipal, aimed to spread education and specifically founded Sri Bhuvanendra College. The trust deed, dated 18-8-1960, confirms that the trust is irrevocable as long as the college exists. The Commissioner (Appeals) concluded that the trust's sole activity is running an educational institution, thus qualifying for the exemption under Section 10(22). The Tribunal upheld this finding, emphasizing that the educational institution must exist solely for educational purposes and not for profit, as clarified by the Calcutta High Court in Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445. The Tribunal noted that the educational institution is not a separate legal entity but a property of the assessee-trust, thus meeting the conditions for exemption under Section 10(22).

2. Jurisdiction and procedural aspects under Section 144B of the Income-tax Act, 1961:

The department raised a preliminary objection regarding the jurisdiction of the Inspecting Assistant Commissioner (IAC) under Section 144B, arguing that the assessee cannot make new claims at the draft assessment stage. The Tribunal referred to several judicial precedents, including Sudhir Sareen v. ITO [1981] 128 ITR 445 (Delhi High Court), Banarsidas Bhanot & Sons v. CIT [1981] 129 ITR 488 (Madhya Pradesh High Court), and Mrs. Meeraben P. Desai v. Union of India [1981] 130 ITR 922 (Gujarat High Court), which clarified that proceedings before the IAC under Section 144B are a continuation of the assessment proceedings. These authorities established that the assessee could introduce new arguments and claims during these proceedings, as they are part and parcel of the assessment process. The Tribunal concluded that the proceedings under Section 144B do not limit the assessee's right to make new claims, thus rejecting the department's preliminary objection.

3. Validity of new claims made during assessment proceedings:

The Tribunal addressed whether the assessee could make a new claim for exemption under Section 10(22) during the assessment proceedings before the IAC. The Tribunal noted that the assessee's initial stand was that no income is taxable, which could be supported by either Section 11 or Section 10(22). The Tribunal emphasized that the assessee has the right to support its stand with any relevant provisions of the Act during the assessment proceedings, whether before the Income-tax Officer (ITO) or the IAC. The Tribunal cited decisions from the Nagpur Bench and the Special Bench of the Tribunal, which supported the view that Section 144B proceedings are procedural and do not curtail the assessee's right to make new claims. Consequently, the Tribunal found that the assessee's claim under Section 10(22) was validly made during the assessment proceedings.

Conclusion:

The Tribunal upheld the Commissioner (Appeals)'s finding that the assessee-institution is exempt under Section 10(22) of the Income-tax Act, 1961. The Tribunal dismissed the departmental appeal, affirming that the proceedings under Section 144B are part of the assessment process, allowing the assessee to make new claims and arguments. The Tribunal's decision is based on a comprehensive analysis of judicial precedents and the procedural framework of the Income-tax Act.