1988 (3) TMI 111 - AT - Income Tax

Summary

Issues:
1. Assessment under section 263 of the Income-tax Act for the assessment year 1982-83.
2. Exemption claim under section 10(22) of the Income-tax Act.
3. Inclusion of certain receipts as income under section 11 of the Income-tax Act.
4. Consideration of basic plea under section 10(22) by the Commissioner.
5. Whether the income of the assessee is exempt under section 10(22).
6. Validity of the Commissioner's directions regarding the inclusion of specific receipts as income under section 11.
7. Modification of the Commissioner's order and directions to the Income-tax Officer.

The judgment involves an appeal by the assessee against the Commissioner of Income-tax's order under section 263 of the Income-tax Act for the assessment year 1982-83. The assessee, a charitable body running a school, claimed exemption under section 10(22) of the Income-tax Act. The Income-tax Officer determined the income under section 11, which the assessee did not appeal due to no tax demand, despite the rejection of the section 10(22) claim. The Commissioner found certain receipts not included in the income, directing their inclusion and re-computation of income. The assessee contended that its income should be exempt under section 10(22) and the Commissioner should have considered this plea before invoking section 263.

The assessee argued that its income should be exempt under section 10(22) as the school fulfilled the conditions, citing the registration by the Delhi Administration. It highlighted that the main society in Bombay was granted exemption under section 10(22) despite similar missions. The Commissioner's failure to consider this contention was challenged, urging the order's reversal.

Regarding the receipts directed to be included as income under section 11, the assessee argued that funds were specifically for building construction, thus corpus donations. The Commissioner's stance was that these receipts were not corpus donations. The Tribunal found the drama proceeds and building fund donations were corpus donations, but student fees were not. The coat funds were deemed non-taxable as they were intended for specific purposes.

The Tribunal emphasized that the Commissioner should have considered the assessee's claim under section 10(22) before invoking section 263. It noted that if the exemption plea was accepted, the section 11 computation would be irrelevant. Referring to a similar Calcutta High Court case, the Tribunal supported the assessee's claim for exemption under section 10(22) and directed the Income-tax Officer to re-evaluate the plea alongside other assessment aspects.

In conclusion, the Tribunal partially allowed the appeal, modifying the Commissioner's order. It directed the Income-tax Officer to reconsider the assessee's section 10(22) claim and other assessment aspects based on the Tribunal's observations.