2024 (8) TMI 1022 - AT - Income Tax

Disallowance of exemption u/s 10(23C)(iiiab) - addition by treating the grant as voluntary contribution - wrong filling of the relevant column in the Income Tax Return - appellant society was formed by the Government of Uttarakhand with the main object to impart technical education to carry on skill development activities in the state of Uttarakhand - HELD THAT - The assessee society received a sum during the year from state Government. After adding opening balance under the head Grant Account and after deducting the amount of expenditure incurred during the year on imparting training and other expenses to attain the objective of the society, net balance amount was shown as liability under the head Grant Account in Schedule B of the Balance Sheet. After going through the entire details, we find that the disallowance has been made by the CPC and confirmed by the CIT(A) owing to wrong filling of the relevant column in the Income Tax Return. We also find that the A.Y. 2018-19, the ld. CIT(A) has duly allowed the exemption. Hence, we hold that the wrong filling of a column in the return cannot take away the benefit which is otherwise statutorily available to the assessee . Hence, the AO is directed to rectify the order of the CPC and nullify the demand. Appeal assessee allowed.

Issues:
1. Disallowance of exemption u/s 10(23C)(iiiab) of the Income Tax Act.
2. Requirement of furnishing audit report in Form No. 10BB for claiming exemption.
3. Alleged erroneous order based on presumptions and conjectures.
4. Disallowance of exemption due to wrong filling of relevant column in the Income Tax Return.

Detailed Analysis:

Issue 1: Disallowance of exemption u/s 10(23C)(iiiab) of the Income Tax Act
The appellant, a society formed by the Government of Uttarakhand for imparting technical education and skill development, received a grant from the government. The dispute arose when the exemption claimed under Section 10(23C)(iiiab) was disallowed by the Assistant Director of Income Tax CPC. The appellant argued that it was eligible for exemption as it was engaged in education and training without profit motive, falling within the definition of education u/s 2(15) of the Act. The Tribunal held that the wrong filling of a column in the return cannot negate the statutory benefit available to the assessee. The order of disallowance was directed to be rectified, and the demand nullified.

Issue 2: Requirement of furnishing audit report in Form No. 10BB for claiming exemption
The appellant contested the requirement to furnish an audit report in Form No. 10BB, arguing that as a society engaged in education and training, it was not obligated to submit the report electronically. The Tribunal noted that the grant received was not considered as income, and the failure to submit the audit report electronically did not disqualify the appellant from claiming exemption u/s 10(23C)(iiiab) of the Act.

Issue 3: Alleged erroneous order based on presumptions and conjectures
The appellant challenged the order passed by the CIT(A) as being based on presumptions and conjectures, without proper appreciation of facts. The Tribunal found that the order of disallowance was unjustified, especially considering that a similar issue had been decided in favor of the appellant in a previous assessment year. The Tribunal emphasized that the conclusion of disallowing the exemption could not be technically drawn under section 143(1)(a) of the Income Tax Act.

Issue 4: Disallowance of exemption due to wrong filling of relevant column in the Income Tax Return
The disallowance of exemption by the CPC and affirmed by the CIT(A) was primarily attributed to the wrong filling of a relevant column in the Income Tax Return. However, the Tribunal held that this procedural error could not override the statutory eligibility of the appellant for the exemption. The Tribunal directed the AO to rectify the order of the CPC and nullify the demand raised against the appellant.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the statutory entitlement to exemption under Section 10(23C)(iiiab) and directing the rectification of the erroneous order disallowing the exemption.

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