2015 (3) TMI 976 - AT - Income Tax

Exemption u/s 10(23C)(iiiad) denied - whether the income of any university or educational institution existing solely for educational purposes being exempt from tax, if its gross receipts does not exceeds ₹ 1 crore, and in such case the institution is not required to file return of income under section 139 - FAA allowed the claim - Held that - The findings of the learned first appellate authority is contrary to law and facts on the file and the same deserves to be cancelled on the ground that the learned first appellate authority is not justified in deleting the addition made by the Assessing Officer in spite of the fact that the gross receipts of the society exceeds ₹ 1 crore as admitted in the aforesaid paragraphs at the time of issuing notice under section 148 of the Act which was not verified by the assessee till date. Secondly, the learned first appellate authority is also not justified under the law that the assessee-society is entitled for exemption under section 10(23C)(iiiad) of the Act only because the assessee is an educational institution ignoring the fact that as and when the gross receipts of the society exceeds ₹ 1 crore, the assessee-society requires approval from the prescribed authority for exemption of its income under section 10(23C)(iv) of the Act which neither the assessee nor his authorised representative has produced before any Revenue authority nor before us till the closing of hearing.Stand of the assessee is not tenable in the eye of law, because the gross receipts of the assessee-society is exceeded ₹ 1 crore which requires approval from the competent authority. Both institutions,namely, Vivekananda College of Education and Vivekananda Institute of Education Training and Research are under the society and its head office is at Kachi Chawni, Jammu, we are of the view that the Assessing Officer has completed the assessment under the law and rightly made the total taxable income of ₹ 69,27,948 and rightly held that the receipts of both institutions should have been clubbed and the society, which is the educational society, was required to file its return by clubbing the receipts of both institutes and to claim exemption of income over expenditure, the society must have obtained exemption certificate under section 10(23C)(iv) of the Act from the prescribed authority under the Income-tax Act. As regards to the documentary evidence filed by learned counsel for the assessee in the shape of paper book, we have thoroughly gone through the same and found that he did not file even a single document or case law supporting the facts of the assessee's case where gross receipts of the assessee is exceeding ₹ 1 crore and no exemption under section 10(23C)(iiiad) of the Act from the prescribed authority are required. Therefore, the case law relied upon by learned counsel for the assessee are not helpful in the case of the assessee. In view of the foregoing discussion, we are of the view that the learned first appellate authority has passed the impugned order contrary to the law and on facts the file which is not sustainable in the eye of law. Accordingly, we cancel the impugned order dated April 26, 2010 passed by the learned Commissioner of Income-tax (Appeals), Bathinda, and upheld the assessment order dated December 31, 2008 passed by the Assessing Officer under section 143(3) of the Act by accepting the appeal filed by the Revenue. - Decided in favour of revenue.

Issues Involved:
1. Whether the assessee-society is considered an educational institution eligible for exemption under section 10(23C)(iiiad) of the Income-tax Act.
2. Whether the gross receipts of the society exceeding Rs. 1 crore necessitate the filing of a return and obtaining an exemption certificate under section 10(23C)(vi).
3. Whether the receipts of both educational institutions run by the society should be clubbed for tax assessment purposes.
4. Whether the penalty under section 271(1)(c) of the Income-tax Act is applicable.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Section 10(23C)(iiiad):
The assessee-society claimed exemption under section 10(23C)(iiiad) of the Income-tax Act, asserting that it is an educational institution. The Assessing Officer (AO) argued that the society's gross receipts exceeded Rs. 1 crore, thus disqualifying it from the exemption and necessitating the filing of a return. The Commissioner of Income-tax (Appeals) held that the assessee was eligible for the exemption, considering it an educational institution. However, the Tribunal found this decision contrary to law and facts, emphasizing that the gross receipts exceeding Rs. 1 crore require approval from the prescribed authority, which the assessee did not obtain.

2. Requirement to File Return and Obtain Exemption Certificate:
The AO issued a notice under section 148 after discovering that the society's gross receipts were Rs. 1,62,04,513, with a surplus of Rs. 69,27,948, and no return was filed. The AO argued that the society needed to file a return and obtain an exemption certificate under section 10(23C)(vi) due to the receipts exceeding Rs. 1 crore. The Tribunal upheld this view, noting that the society did not have the requisite exemption certificate or registration under section 12A(a) by March 31, 2005, and thus, the income was taxable.

3. Clubbing of Receipts:
The AO considered the receipts of both educational institutions run by the society (Vivekananda College of Education and Vivekananda Institute of Education Training and Research) should be clubbed for tax assessment. The Tribunal agreed, stating that the institutions are part of the assessee-society, and their receipts should be combined. The society's argument that each institution should be considered independently was rejected, reinforcing that the total receipts exceeded Rs. 1 crore, requiring a return and exemption certificate.

4. Applicability of Penalty under Section 271(1)(c):
The AO initiated penalty proceedings under section 271(1)(c) for concealing income, as the society did not file a return despite exceeding the gross receipts threshold. The Tribunal supported the AO's decision, noting that the society failed to comply with the legal requirements for exemption and return filing, justifying the penalty.

Conclusion:
The Tribunal concluded that the Commissioner of Income-tax (Appeals) erred in granting exemption under section 10(23C)(iiiad) and deleting the addition made by the AO. The Tribunal canceled the impugned order, upheld the AO's assessment order, and allowed the Revenue's appeal, emphasizing the necessity for the society to file a return and obtain the required exemption certificate due to its gross receipts exceeding Rs. 1 crore.

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