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2014 (9) TMI 41 - AT - Income TaxClaim of benefit u/s 10(23C)(iiiab) - Activity educational or not - Whether the assessee society is earning profit year to year and printing and publishing of prescribed text book and providing to the students at a cheaper rate is not an educational activity Held that - No part of the surplus generated by the assessee was parted by it for the purpose other than aid to Government schools for construction of building, repairing of building, furniture, scholarships to the students etc. - it has not distributed any profit to anybody in any of the assessment years under consideration - all the shares of the society is with the Government of M.P. and Board of Governors of the Society, his ministers and Secretaries of various Departments of M.P. Government and there is no provision for distribution of profit, in the registration of the society itself Relying upon Haryana State Counselling Society Versus Chief Commissioner, Income Tax, Panchkula 2010 (5) TMI 170 - PUNJAB & HARYANA HIGH COURT - merely because an educational institution accumulates income, it does not go out of the purview of Section 10(22)/10(23C)(vi). - there is nothing in the Income Tax Act to support the proposition that educational institution cannot generate any surplus. Entire fund has been invested by the State Government either in the form of initial contribution or through accumulation of surplus, therefore, the assessee was not required to be approved by prescribed authority for the purpose of claim of exemption u/s 10(23-C) - as the object of the assessee society vis- -vis, its constitution remains the same for the AY 1999-2000 and onwards, the claim of deduction on account of assessee being other educational institution is to be allowed u/s 10(23C)(iiiab). The assessee society was established only for the purpose of advancement of education by printing and publishing of text books as prescribed by the Government - all institutions working in all other States of India were held to be eligible for claim of exemption u/s 10(22) - there was no justification on the part of lower authorities for decline of claim of exemption u/s 10(22)/10(23C) also in Commissioner Of Income-Tax, Karnataka I Versus Academy Of General Education, Manipal 1983 (8) TMI 18 - KARNATAKA High Court - the assessee itself need not impart education to the students and it need not be necessarily school or college for the claim of benefit - in its account even though the assessee has not included income of Colleges, established under separate trust - the assessee has given grants to some of those schools, it was held that the assessee was entitled for claim of exemption u/s. 10(22) Decided in favour of Assessee.
Issues Involved:
1. Deletion of the addition of Rs. 15,10,38,400/- by the Assessing Officer rejecting the claimed exemption u/s 11 of the Income Tax Act. 2. Consideration of the benefit of provisions of sec. 10(23C)(iiiab) of the Act. Detailed Analysis: 1. Deletion of the Addition of Rs. 15,10,38,400/- by the Assessing Officer Rejecting the Claimed Exemption u/s 11 of the Income Tax Act: The Revenue challenged the order dated 7th December 2012, which deleted the addition of Rs. 15,10,38,400/- made by the Assessing Officer by rejecting the claimed exemption u/s 11 of the Income Tax Act. The assessee, a society initially registered as M.P. State Corporation of Text Book Production And Education Research, later renamed Madhya Pradesh Pathya Pustak Nigam, declared nil income in its return filed on 30.9.2009. The total income was determined at Rs. 15,10,38,400/- u/s 143(3) of the Act, which included all additions/disallowances deleted by the learned CIT(A). The CIT(A) found that the assessee was granted registration u/s 12A on 23.10.2009, and claimed exemption u/s 11 in the return filed on 30.9.2009. The audit report in form No.10B dated 5.11.2009 was also furnished. The Assessing Officer rejected the claim based on reasons from previous years' assessment proceedings. However, the CIT(A) noted that the facts differed from previous years, as the appellant claimed exemption u/s 11 and furnished the audit report. The Assessing Officer did not point out any mistakes in the computation of utilization of gross receipts for the society's objects. The audit report revealed no unspent surplus in excess of 15% of gross receipts, warranting tax on surplus income. Therefore, the CIT(A) held that the appellant was entitled to exemption u/s 11, and the addition by the Assessing Officer was deleted. The Tribunal found no findings in the assessment order regarding the application of gross receipts as provided in the Act. The CIT(A) concluded without affording an opportunity to the assessee. Thus, the issue was remanded back to the Assessing Officer to examine the assessee's claim. If the assessee applied the gross receipts for its objects within the prescribed limit, the claimed relief might be granted; otherwise, the Assessing Officer could decide per law. The assessee was to be provided an opportunity of being heard. Consequently, the appeal of the Revenue was allowed for statistical purposes only. 2. Consideration of the Benefit of Provisions of sec. 10(23C)(iiiab) of the Act: The cross-objection by the assessee contended that the CIT(A) did not decide the appeal on merit concerning the benefit of provisions of sec. 10(23C)(iiiab) of the Act, determining the total income at Rs. 15,10,38,400/-. The learned Counsel for the assessee pointed out that the grounds raised were covered by the Tribunal's decision dated 25.4.2012. The Revenue did not controvert this factual matrix. The Tribunal, in its order dated 25.4.2012, elaborately discussed the issues and placed reliance on various judicial pronouncements. It held that the lower authorities were not justified in declining the exemption to the assessee society u/s 10(22)/10(23C) of the Income-tax Act, 1961. The Tribunal directed the Assessing Officer to follow its order dated 25.4.2012. The Tribunal noted that the assessee society was controlled by the Government of Madhya Pradesh, and its Board of Governors included high-ranking officials and experts in education. The society's objects included aiding and promoting education, producing and distributing textbooks, and undertaking educational research. The society's activities were aligned with educational purposes, and any surplus was used for educational purposes, not for profit distribution. The Tribunal emphasized that similar institutions in other states had been granted exemptions, and the CBDT had recognized such institutions as educational entities eligible for exemption u/s 10(22). The Tribunal found that the assessee's activities were in line with the objectives of providing affordable education and that the society was substantially financed by the Government. Thus, the Tribunal concluded that the assessee was entitled to exemption u/s 10(22)/10(23C) for the relevant assessment years. The cross-objection of the assessee was allowed, and the appeal of the Revenue was allowed for statistical purposes. Final Orders: - The appeal of the Revenue was allowed for statistical purposes. - The cross-objection of the assessee was allowed. - The order was pronounced in the open Court on 22.10.2013.
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