2017 (7) TMI 771 - AT - Income Tax

Denial of exemption u/s 10(23C) (iiiad) on hostel rent receipts - whether hostel is providing to other charitable educational institute for students, establishment of hostel for students is also object, receipt is utilized for charitable purposes etc.? - Held that - In the present case, the assessee received the rent from an educational institute namely Krishna Institute of Education and Technology, it also appears that the decisions now relied by the assessee were not available to the authorities below because there is no discussion about those decisions either in the assessment order or in the impugned order of the learned CIT(A). Furthermore, it is not clear as to whether the facts were identical when the exemption u/s 10 (23C)(iiiad) was allowed to the assessee in the preceding and succeeding years. Therefore, in the absence of clear facts on record deem it appropriate to set aside the issue back to the file of the learned CIT(A) to be adjudicated afresh, in accordance with law, after considering the various decisions relied by the assessee and also after verifying the facts from the record relevant to the preceding and succeeding year. Needless to mention that a due and reasonable opportunity of being heard be provided to the assessee. Appeal of assessee allowed for statistical purposes.

Summary

Issues:
Denial of exemption u/s 10 (23C) (iiiad) on hostel rent receipts.

Analysis:
1. The primary issue in this case revolves around the denial of exemption u/s 10 (23C) (iiiad) of the Income Tax Act on the hostel rent receipts received by the assessee. The assessee, a registered society running a school, claimed exemption under this section but faced scrutiny by the Assessing Officer (AO) due to the inclusion of hostel rent receipts in the total income. The AO considered the rent receipts as income from house property and denied the exemption accordingly.

2. The assessee, being dissatisfied with the AO's decision, appealed to the CIT(A) citing relevant judgments to support their claim for exemption. However, the CIT(A) upheld the AO's decision, emphasizing that the rent receipt cannot be considered from a charitable activity of education. The CIT(A) referred to a specific judgment by the ITAT Delhi in a similar case to support the denial of exemption based on the interpretation of section 10(23C) (iiiad).

3. The assessee further appealed the matter, arguing for consistency in granting exemption under section 10 (23C) (iiiad) based on precedents and identical facts from preceding and succeeding years. The appellate tribunal acknowledged the arguments presented by both parties but found discrepancies in the record regarding the application of relevant case laws and the consistency of facts in previous years. Consequently, the tribunal set aside the issue back to the CIT(A) for a fresh adjudication considering the various decisions relied upon by the assessee and verifying the factual consistency across years.

4. The tribunal's decision to remand the issue back to the CIT(A) for reevaluation underscores the importance of a thorough examination of facts and legal precedents in determining the eligibility for exemption under section 10 (23C) (iiiad). The case highlights the significance of consistency in applying tax laws and the need for a detailed analysis of relevant case laws to ensure a fair and just decision in tax matters.