2012 (9) TMI 217 - AT - Income Tax

Rejection of exemption claim u/s 10(23C)(iv) - non approval from the prescribed authority - assessee society is registered u/s. 12A - CIT(A) allowed the claim - Held that - If donations are received compulsorily for the admission of students, by whatever name it may be called, i.e. donation, building fund, auditorium fund, etc. over and above the prescribed fee, from the students, the assessee would not be entitled for exemption either under S.10(23C) or under S.11 of the Act As the issue is relating to allowability of exemption under S.11 or under S.10(23C), and while adjudicating on this issue one has to see the eligibility of claiming of deduction under S.11. This aspect has not been properly addressed by the CIT(A)/AO while granting the alternative claim of the assessee for exemption under S.11. Since the Assessing Officer has no occasion to examine the claim of the assessee under S.11 suitable directions to be given to the Assessing Officer for verification and to find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh - in favour of revenue for statistical purposes

Summary

Issues:
Assessee's claim for exemption of income under S.10(23C)(iv) for assessment years 2005-06 and 2007-08; Legality and validity of the order passed under S.154 of the Act for assessment year 2005-06.

Analysis:
The main issue in both appeals pertains to the assessee's claim for income exemption, rejected by the assessing officer for not obtaining approval under S.10(23C)(iv) of the Act. Despite rejection, a rectification order was passed for assessment year 2005-06, bringing surplus income to tax. The CIT(A) allowed the appeals, considering pending registration under S.10(23C)(iv) and limitations of rectification for 2005-06. The Tribunal referred to previous judgments highlighting that donations for student admissions affect exemption eligibility. The matter was remitted to the assessing officer for reevaluation in light of Supreme Court decisions, emphasizing capitation fee implications on exemption eligibility. The Tribunal noted that the issue of exemption under S.11 was not properly addressed, directing the assessing officer to verify the claim. The Tribunal declined to address the inconsistency in the rectification order due to the resolution of the main issue. The appeals of the Revenue were allowed for statistical purposes, with the order pronounced on 22.6.2012. The judgment emphasized the need for thorough examination of capitation fees and exemption eligibility, following legal precedents and ensuring proper assessment procedures.

This detailed analysis of the legal judgment addresses the rejection of the assessee's income exemption claim, the implications of capitation fees on exemption eligibility, and the directive for reevaluation by the assessing officer. The judgment underscores the importance of adhering to legal principles and precedents in tax assessments, ensuring a comprehensive and fair resolution of issues related to income exemption and rectification procedures.