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TMI Blog2016 (1) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... er the ITAT is justified in law under the facts and circumstances of the case, as the phrase 'Separate institute' for the purpose of availing exemption u/s 10 is nowhere defined in the Act. The assessee cited judgement in case of CIT Vs. Children Education Society (2013 (7) TMI 519 - KARNATAKA HIGH COURT ) where the assessee society was running as much as 22 educational institutes separately which were miles away from the fact of this case where assessee is running a single school on single location, in single and distinct building with single playground and other facilities claiming to be two Separate educational institute. 2. Whether the ITAT is justified in law and on facts without appreciating the fact that, as the Assessing Officer in his order recorded that 'taking recognition of Junior and Senior Section in normal administrative process it never connotes that there are two schools.' Further at page 3 of the Ld. CIT (Appeals)'s order, the assessee, in support of his claim of being two schools quoted the use of prefix 'COMBINED' on books of account of Society not Junior/Senior School in different books of accounts of the assessee which clearly indicates that these are merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption claimed by the respondent society in respect of receipts for the Assessment Year 2010-2011 and 2011-2012 from the institution established and run by it. The society set up a Junior High School for imparting education from Class 6 to 8 that was continuing in a premise. The society was registered on 7th April, 2010 under the Societies Registration Act 1860. For the Financial Year 2009-2010 i.e. Assessment Year 2010-2011, the respondent assessee indicated receipt of a sum of ₹ 1,0,2,22,229/-. It claimed deduction and exemption as per the provisions of the Income Tax Act 1961 on the ground that it is existing solely for educational purposes. Admittedly, the society was not registered under Section 12AA nor did have any approval of the prescribed authority for exemption under Section 10 (23-C)(vi) of the Income Tax Act, 1961. In this background a show cause notice was issued to the society on 14.12.2012 calling upon it as to why the said income be not assessed as purely business income, and consequently the exemptions be disallowed as sought by it. The society responded by submitting that they had already applied before the competent authority for approval in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the society that was claiming to have set up both the institutions that were in fact one and the same without separate existence. The aggregate income derived from running of the institution in the same premises by the assessee society was a composite aggregate income that could not have been segregated on the premise on two separate sections running in the same institution. He therefore submits that a substantial question of law clearly arises as the judgment of the Karnataka High Court appears to have been wrongly applied where there were separate institutions spread far away even though run by the same society. It is therefore contended that the appeal deserves to be admitted for reversal of the impugned orders. We have considered the aforesaid submissions and we find that much would depend upon the status of the institutions and their legal identities for the purpose of treating their incomes separately. It is evident that the society is one and the same. The society was running the Junior High School and continues to do so. The distinction between the Junior High School section and the recognized Intermediate College has to be considered on the basis of recognitions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er invited the attention of the Court to the decision in the case of Dr. (Smt.) Sushila Gupta Vs. Joint Director of Education, Kanpur Region, Kanpur and others, 2006 (2) AWC 1561 and the decision in the case of Brijesh Tripathi Vs. State of U.P. and others, 2013 (11) ADJ 425 to contend that once an institution is upgraded to an Intermediate College, then the Junior High School loses its identity and it merges with the Intermediate College. This aspect of the law relating to educational institutions including the one presently involved also does not appear to have been examined either by the assessing officer or even by the appellate authorities while reversing the order of the assessing officer. All the aforesaid issues therefore have to be looked into alongwith the definition of the word Assessee [Section 2(7)], the definition of the word Person [Section 2(31)], the definition of the word Income and Section 10 of the Income Tax as contained in Section 2(24) of the Income Tax Act, 1961. It is in this background that the claim of exemption as sought under Section 10(23-C)(iiiad) will also have to be seen. Consequently, for all the reasons given hereinabove, we are of the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existed two schools and merely only two sections which is also evident from the copy of balance sheet and other Annexures thereof which clearly indicated that there existed only two separate sections. 4. Whether Hon'ble ITAT is justified in law and on facts that he has wrongly accepted the breakup of receipt of Junior High School and Senior Secondary School in the impression that it was done by A.O., contrary to the fact that it was mere submission by the assessee Society. Further plain reading of Rule 2BC(1) which is as under:- 2BC(1) for the purpose of sub-clause (iiiad) of clause (23C) of Section 10, the amount of annual receipts on or after the 1st day 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees. 5. Whether the ITAT is justified in law and on facts by allowing segregation of income to the assessee society however it is evident that the rule clearly guides for annual receipts and about aggregate receipts which includes income from all the sources, hence the AO was justified in taxing the surplus of the income over expenditure. Issue notice to the op ..... 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