2018 (7) TMI 1548 - AT - Income Tax

Eligibility to exemption u/s 11 - charging fees from the students - denial of claim as activities of the society are in the nature of business activity - assessee is a society is primarily an educational institution with the aims and objects relating to education - Held that - AO could not demonstrate by cogent evidence that the assessee society was carrying out activities which were commercial in nature and also after duly considering the fact that the assessee has been continuously enjoying the benefit of exemption u/s 11 of the Act from assessment year 2005-06 to assessment year 2014-15 barring the present year under appeal, we have no hesitation in holding that the CIT (A) has rightly adjudicated the issue in favour of the assessee. Accordingly, we dismiss the grounds raised by the department. - decided against revenue

Issues Involved:
1. Eligibility for exemption under sections 11 to 13 of the Income Tax Act, 1961.
2. Deletion of addition on account of corpus donation.
3. Deletion of addition on account of interest expenses.
4. Validity of additional ground raised by the department regarding fresh registration under section 12AA after amendment of Memorandum of Association.

Detailed Analysis:

1. Eligibility for exemption under sections 11 to 13 of the Income Tax Act, 1961:
The core issue was whether the society was eligible for exemption under sections 11 to 13 of the Income Tax Act, 1961. The Assessing Officer (AO) contended that the society's activities were commercial in nature and not charitable, as it was running an educational institution and charging fees, which indicated a profit motive. The AO also noted that the society had amended its Memorandum of Association but did not apply for fresh registration under section 12AA.

The ITAT upheld the decision of the CIT (Appeals), noting that the society was primarily an educational institution with aims and objects relating to education. The CIT (Appeals) had observed that the AO did not have jurisdiction to review the orders of higher authorities, and the AO's opinion that the society's activities were commercial was unfounded and unsupported by evidence. The ITAT also emphasized the principle of consistency, noting that the society had been granted exemption under section 11 in other assessment years, and there was no material change in facts or law to justify a different view for the year under consideration.

2. Deletion of addition on account of corpus donation:
The AO had disallowed the corpus donation amounting to ?3,46,46,000, treating it as general donation. The CIT (Appeals) deleted this addition, and the ITAT upheld this decision. The ITAT noted that the CIT (Appeals) had considered the facts and judicial precedents, and the department could not point out any factual or legal infirmity in this finding.

3. Deletion of addition on account of interest expenses:
The AO had disallowed interest expenses amounting to ?90,67,879, arguing that the assets had not been put to use. The CIT (Appeals) deleted this addition, and the ITAT upheld this decision. The ITAT found no material difference in the facts pertaining to this year compared to other years where the exemption was allowed, and the department failed to provide evidence to support the AO's disallowance.

4. Validity of additional ground raised by the department regarding fresh registration under section 12AA after amendment of Memorandum of Association:
The department raised an additional ground, arguing that the society should have applied for fresh registration under section 12AA after amending its Memorandum of Association. The ITAT dismissed this additional ground as un-admitted, agreeing with the assessee's contention that it was filed without proper authorization from the competent authority.

Conclusion:
The ITAT dismissed the department's appeal, upholding the CIT (Appeals)'s decision to allow the society's claim for exemption under sections 11 to 13 of the Income Tax Act, 1961, and deleting the additions made by the AO on account of corpus donation and interest expenses. The additional ground raised by the department regarding fresh registration under section 12AA was also dismissed. The ITAT emphasized the principle of consistency and the lack of material change in facts or law to justify a different view for the year under consideration.

← Previous Next →