2016 (12) TMI 680 - AT - Income Tax

Benefit of exemption u/s 10(23C) - Whether the assessee was entitled for exemption when the gross receipts of the assessee society exceeded ₹ 1 crore from all the three educational institutions OR of each educational institution run by it? - Held that - In consonance with the ruling of the Hon ble Court the case of Commissioner of Income-tax and another v. Children s Education Society (2013 (7) TMI 519 - KARNATAKA HIGH COURT) we are of the view that the aggregate annual receipts of other educational institution means, the total annual receipts of each educational Institution. To examine the said issue, the case is restored to AO. It is ordered accordingly.

Summary

Issues:
1. Entitlement to exemption u/s 10(23C) of the Act
2. Computation of income in accordance with s. 11 of the Act
3. Exclusion of contributions to the building fund from total income

Entitlement to exemption u/s 10(23C) of the Act:
The appeal was filed by the assessee society against the order of the CIT (A)-14 [LTU], Bangalore, dated 30.06.2016. The primary issue raised was whether the assessee was entitled to the benefit of exemption u/s 10(23C) of the Act. The AO had concluded that since the gross receipts exceeded &8377; 1 crore and the assessee was neither registered u/s 12A nor notified u/s 10(23C), the entire income earned was taxable. The CIT (A) dismissed the appeal due to the assessee's non-compliance with hearing notices. During the hearing, the assessee's counsel argued for registration under s. 12A and exemption u/s 10(23C)(iiiad) based on the purpose of the society and the gross receipts of each educational institution. The ITAT, referring to a ruling of the Hon’ble jurisdictional High Court, held that each educational institution's total annual receipts should be considered for exemption under s. 10(23C). The case was restored to the AO for further examination.

Computation of income in accordance with s. 11 of the Act:
The assessee also contended that the income should be computed by giving effect to the provisions of s. 11. The ITAT did not address this plea explicitly in the judgment, as the focus was on the exemption u/s 10(23C). Therefore, this issue was not adjudicated upon by the ITAT.

Exclusion of contributions to the building fund from total income:
The second ground raised by the assessee was the exclusion of contributions to the building fund from total income. However, the ITAT did not address this issue in the judgment, stating that only the first plea regarding exemption u/s 10(23C) was considered. Therefore, this aspect of the appeal was not taken up for adjudication.

In conclusion, the ITAT allowed the assessee's appeal for statistical purposes, directing the case to be restored to the AO to examine the issue of exemption u/s 10(23C) based on the total annual receipts of each educational institution. The other issues raised by the assessee regarding the computation of income under s. 11 and the exclusion of contributions to the building fund were not addressed in the judgment.