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2018 (1) TMI 1110 - HC - Income TaxComputation of deduction u/s 10(23C) - whether the aggregate annual receipts of the said two institutions are to be clubbed for the purposes of Section 10 (23C) (iiiad) or not? - Held that - It is also not disputed that these two institutions exist solely for educational purposes and not for purposes of profit. It is, therefore, clear that there is a distinction between the expression any person and educational institution , and that the two are not the same. Had it been the intention of the legislature to have limited the scope of the provision to the interpretation which has been given by the Tribunal, it could easily have said that, if the aggregate annual receipts of any person from all institution(s) do not exceed ₹ 1.00 crore then the income derived there from would not be included in the total income of that person. But, this is not the case here. The reference here is pointedly to the aggregate annual receipts of the educational institution. The expression, educational institution and any person do not refer to the same entity and are distinct and different insofar as Section 10 (23C) (iiiad) of the said Act is concerned. Therefore, where there are more than one such institutions, which are under a particular society or trust, such as the assessee society in the present case, the aggregate annual receipts of each of the educational institutions would have to be considered separately and not together. As relying on M/S Children Education Society, (2013 (7) TMI 519 - KARNATAKA HIGH COURT) the aggregate annual receipts of other educational institutions means the total annual receipts of each educational institution, taken separately and not clubbed together. - Decided in favour of assessee
Issues Involved:
1. Interpretation of Section 10(23C)(iiiad) of the Income Tax Act, 1961. 2. Whether the aggregate annual receipts of separate educational institutions under a single society should be clubbed for tax exemption purposes. Detailed Analysis: Issue 1: Interpretation of Section 10(23C)(iiiad) of the Income Tax Act, 1961 1. The appeal by the assessee society is against the order dated 13.02.2014 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, in ITA No. 305 (Asr)/2010 for the assessment year 2005-06. 2. The Court framed two questions of law for consideration: A) Whether the Tribunal is correct in law in holding that exemption under Section 10(23C)(iiiad) is not available to educational institutions with annual receipts less than ?1 crore? B) Whether the Tribunal is justified in law in holding that the receipts of both institutions should be clubbed, despite each having separate Managing Committees and no control by the Appellant? 3. Both questions relate to the interpretation of Section 10(23C)(iiiad) of the Income Tax Act, 1961. 4. The assessee society has two institutions with individual annual receipts below ?1 crore. However, if clubbed, the receipts exceed ?1 crore, breaching the limit prescribed under Rule 2BC of the Income Tax Rules, 1962. 5. The Assessing Officer clubbed the receipts of the two institutions, arriving at a total of ?1,62,04,515/-, exceeding ?1 crore, and thus included it in the total income of the society, resulting in a taxable surplus of ?69,27,948/-. 6. The CIT (A) disagreed, stating that the receipts of the two institutions should not be clubbed for Section 10(23C)(iiiad) purposes if individually below ?1 crore. 7. The Tribunal reversed the CIT (A)'s decision, agreeing with the Assessing Officer. The assessee society appealed against this order. 8. The Court considered whether the aggregate annual receipts of the two institutions should be clubbed for Section 10(23C)(iiiad) purposes. 9. Section 10(23C)(iiiad) exempts income received by any person on behalf of educational institutions with aggregate annual receipts not exceeding the prescribed limit of ?1 crore. 10. The Court noted that the terms "any person" and "educational institution" are distinct. The legislature could have specified that the aggregate annual receipts of any person from all institutions should not exceed ?1 crore, but it did not. 11. The Court held that the aggregate annual receipts of each educational institution should be considered separately, not together. If each institution's receipts are below ?1 crore, the income received on their behalf is not included in the total income of the person. 12. The Court agreed with the Karnataka High Court's decision in The Commissioner of Income Tax and Deputy Commissioner of Income Tax v. M/S Children Education Society, which held that the aggregate annual receipts mean the total annual receipts of each educational institution, taken separately. 13. The Court concluded that the aggregate annual receipts of each educational institution should be considered separately for Section 10(23C)(iiiad) purposes. Issue 2: Whether the aggregate annual receipts of separate educational institutions under a single society should be clubbed for tax exemption purposes14. The Court answered the questions in favor of the assessee, setting aside the Tribunal's decision and upholding the CIT (A)'s view that the receipts of the two institutions should not be clubbed. 15. The addition of ?69,27,948/- to the taxable income of the assessee society was deleted. 16. The appeal was allowed with no order as to costs.
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