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TMI Blog2020 (11) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... almost 50% of the grants were given by Ministry of Human Resources Department of Madhya Pradesh and for the year under appeal this grant has been received for 20 poly technical colleges and thus the assessee educational institute running society solely for educational purposes and not for the purpose of earning profits and is substantially financed by the Government is therefore eligible for exemption u/s 10(23C)(iiiab) - Ground No.1 2 of revenue s appeal are dismissed. Claim of incidental expenditure u/s 57(iii) - Allowability of the expenses claimed in the return of income - HELD THAT:- Assessee society is a registered under the Madhya Pradesh Society Registration Act 1959 since 26.06.1962 wth the sole purpose of establishing and running institution to impart technical education in Civil, Mechanical and Electrical and such other branches of Engineering. The assessee institute runs solely for educational purposes and not for the purpose of earning profits. Most of the grants are received from Government of Madhya Pradesh. Irrespective of the fact that the assessee is eligible for exemption u/s 10(23C)(iiiab) of the Act or not even if the revenue authorities wanted to tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation u/s 12A/12AA are not mentioned in the return so filed. Fresh claim of addition/reduction of income or other details in the return shall not be made in rectification request. It was also stated that to claim exemption u/s 10, details of approving/registering authority and section under which exemption is claimed has to be furnished properly in the return. Against the order dated 02.06.2016 passed u/s 154 of the Act assessee preferred appeal before Ld. CIT(A) and succeeded as Ld. CIT(A) held that the assessee is eligible for exemption u/s 10(23C)(iiiab) of the Act and also allowed the claim of incidental expenditure of ₹ 7,27,11,645/- being the amount applied by the assessee during the year to meet the objectives of the educational institution. 3. Aggrieved revenue is now in appeal before the Tribunal against the order of Ld. CIT(A) dated 15.02.2018 raising following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the society benefit of exemption u/s10 (23C) (iiiab) of the Income Tax Act when no such exemption u/s 10 was claimed in the return of income, more specifically, it was not claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record:- 1. Assessee made a lawful claim of exemption available to it under the provisions of section 10(23C)(iiiab) before the Ld. AO and also before the Ld. CIT(A) 2, Indore. Assessee placed strong reliance on the following decisions for its claim made before the first appellate authority which was not claimed in the return filed originally owing to a loss situation. a. Hon ble Apex Court in the case of Goetze India Limited [2006] 284 ITR 323 [CLPB 31] Para 4 The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him/her. [CLPB 34] Provisions of section 119(1) requires every officer to follow orders, instructions and directions of CBDT which are binding in nature on the tax authorities, even if the directions given by CBDT are at variance with the provisions of law. b. Article 265 of the Indian Constitution empowers the Government to levy and collect only such tax which can be legitimately collected from the taxpayers and is in accordance to the provisions of law. It is the duty of the income tax authorities to pass on all the benefits as per the provisions of law which are available to the assessee. Department in fact is bound to give all the benefits and not to take advantage of the ignorance of law on the part of the assessee. If the rightful and correct relief or deduction is not allowed to the assessee, the purpose and intention of the law shall be defeated. 3. Appeal filed by the assessee was allowed by Ld. CIT(A) vide order dated 15.02.2018 stating Para 2.6 ..I have carefully gone through the above document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Madras High Court and Hon ble Punjab Haryana High Court, that [CLPB 15-26] In view of insertion of Explanation below clause (iiiab) and (iiiac) of sub-section (23C) of section 10 by Finance Act, 2014, prospectively i.e. with effect from 1-4-2015, prior to said date even institution getting finance less than 50 per cent of total receipts from Government, would be eligible for exemption subject to fulfilment of other conditions b. Hon ble Jurisdictional Bench of Indore ITAT in the case of Indore Education Society ITA No. 468/Ind/2018 dated 19.11.2019 [CLPB 1 -7] Para 6 merely because the assessee could not make claim of exemption should not be a ground to reject the eligible claim of exemption u/s 10(23C) of the Act. It is true that it is a settled position of law that the revenue authority should not deny claim of exemption, if it is available under the facts of a particular case. In such a case, the assessee is required to demonstrate that he is eligible for the benefit available under the law. [emphasis supplied] Your Honours have dealt with the subject matter in the above decision holding in favour of the assessee that revenue aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of salary, allowances and others. Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedents, appeal of the department ought to be dismissed. 6. Ld. Counsel for the assessee referred and relied on following case laws:- 1. Indore Education and Service Society ITA No.468/Ind/ 2018 (Indore Trib.) 2. Gurmeet Singh Vikhu (2019) 104 taxmann.com 207 (M.P) 3. Satish S. Prabhu (2020) 114 taxmann.com 88 (Mumbai Trib.) 4. CRM Jat Post Graduate College (2019) 109 taxmann.com 425 (Chandigarh Trib.) 5. Goetze (India) Ltd (2006) 157 Taxman 1 (SC) 6. CBDT Circular No.14 dated 11.04.95 7. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions and judgments referred and relied by both the parties. Revenue has challenged the finding of Ld. CIT(A) raising following two issues :- (i) Whether the Ld. CIT(A) is justified in allowing the society to claim the benefit of exemption u/s 10(23C)(iiiab) of the Act when no such exemption was claimed in the return of income and also the society has not been substantially financed by the Government du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident Fund 12,34,740 Interest 47,64,151 Repair and maintenance 2,25,947 Rent 2,03,990 Electricity Expenses 11,65,877 Sale of tender form 8,800 Other Expenses 14,56,205 Fee 2,77,47,957 Net deficit for the year 1,28,86,747 Total 7,27,11,645 7,27,11,645 2.4 The appellant has also argued that it had claimed deduction in respect of expenses for running college (salary to teachers and staff and other contingent expenses). The return of income was filed declaring loss of ₹ 1,28,86,747/-. Copy of computation of income was also submitted by the appellant. However, assessment u/s 143(1) had been completed on income of ₹ 5,98,24,900/- which represents the gross receipts of the institution. 2.5 The relevant portion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income is allowable as a deduction. It is open to the income-tax authorities to deny the exemption under Section 11 of the Act in absence of registration under Section 12A and if they do so, then the assessment has to be completed in accordance with the provisions of the Income Tax Act. If the income is assessed under the residual head full play must be allowed to Section 57(iii). The assessee in the present case was created in 1979 with the object of promoting sports; there was no other object and all its constituents were giving grants/ funds only for that purpose. In truth and reality the assessee was merely acting as a custodian or conduit to the constituents for the purpose of promoting sports activity inside and outside the country. The expenditure incurred by the assessee is only for the purpose of promoting the sports events and activities and in this respect there is no challenge to the finding of fact recorded by the Tribunal. If such expenditure is not allowed, it may amount to taxing the gross receipts of the assessee and not the income, which is not permissible under the income tax law. 3. The list of items illustrated in Circular No. 549 dt. 31st Oct., 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue desires to have evidence in support of any claim, a notice can always be issued under section 143(2), a regular assessment made and the excess amount due recovered (Khatau Junkar Ltd. vs. K.S. Pathania, Dy. CIT (1992) 196 ITR 55 (Bom), Bank of America NT. and S.A. vs. Dy. CIT (1993) 200 ITR 739 (Bom) and Indian Rayon Industries Ltd. vs. J.R. Kanekar, Asstt. CIT (1993) 200 ITR 747 (Bom). See also JKs Employees' Welfare Fund vs. ITO (1993) 199 ITR 765 (Raj), Adamas General Industries Ltd. Anr. vs. Smt. Neela Krishnan (1993) 203 ITR 737 (Bom), SRF Charitable Trust vs. Union of India (1992) 193 ITR 95 (Del), Makum Tea Co. (India) Ltd. vs. Dy. CIT Anr.(1999) 235 ITR 484 (Gau), Parikh Engineering Body Building Co. Ltd. Anr. vs. Union of India Ors. (1999) 238 ITR 554 (Pat)). 5. For the purposes of adjustments under cl. (iii) to the first proviso to s. 143(I)(a), a deduction claimed must be inadmissible on the face of the return; documents and accounts accompanying it without any scope for doubt or debate; question of prima facie adjustment under s. 143(I)(a) has to be considered with reference to the position on the date on which the return is filed and not with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the AO cannot change the nature of income or exemption. In CIT vs. McDowell Co. Ltd. (2006) 204 CTR (Kar) 353 in which decision in God Granites vs. CBDT Ors. (1996) 218 ITR 298 (Kar) was followed and decision in Madan Gopal Bagla vs. CIT (1956) 30 ITR 174 (SC) was distinguished, it was held that only a claim which is prima facie admissible or inadmissible can be considered under s. 143(l)(a) and not a matter that requires a detailed consideration; assessee having made out a prima facie case in respect of deduction of 'corporate guarantee obligation' as there was an agreement and also a guarantee obligation, claim for deduction of corporate guarantee obligation could not be disallowed by way of prima facie adjustment under s. 143(l)(a). Following types of disallowances/ additions/ alterations have been held to be not permissible by resort to section 143(l)(a): Corpus donations received by a trust-SRF Charitable Trust vs. Union of India (1991) 100 CTR (Del) 160: (1992) 193 ITR 95 (Del) Amount claimed non-taxable in the relevant year-Bank of America NT. S.A. vs. Dy. CIT (1993) 200 ITR 739 (Bom) Creating tax demand by invoking section 167B-JKs Emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of M.P. Therefore, in light of the above judicial decisions and documents so submitted by the appellant, these ground of appeal is hereby allowed. Thus, its income was exempt u/s 10(23C)(iiiab) of the Act. In its alternative, the AO is directed to allow benefit of the expenses so claimed by the appellant against the receipts. 9. We observe that Ld. CIT(A) has thoroughly analysed the facts of the case and has also referred to the relevant decisions and judgments to arrive at the finding favouring the assessee. 10. We will first take up the second issue raised by the revenue regarding the allowability of the expenses claimed in the return of income. We find that the assessee filed its return of income on 14.8.2014 showing gross total income at ₹ 5,98,24,898/- and claiming expenditure of ₹ 7,27,11,645/- as an amount applied to charitable or religious purposes in India during the previous year. The net income for the year is a loss of ₹ 1,28,86,747/-. The return was processed u/s 143(1) of the Act and a communication was sent to the assessee denying the claim of expenses of ₹ 7,27,11,645/- on the ground that the assessee is not registered u/s 12A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anches of Engineering. The assessee institute runs solely for educational purposes and not for the purpose of earning profits. Most of the grants are received from Government of Madhya Pradesh. Irrespective of the fact that the assessee is eligible for exemption u/s 10(23C)(iiiab) of the Act or not even if the revenue authorities wanted to tax receipts during the year as income under the head income from other sources, they were not justified in grossly denying the benefit of genuine claim of incidental expenditure of ₹ 7,27,11,645/- u/s 57(iii) of the Act being the expenditure (not been in the nature of capital expenditure) laid out by the assessee institution wholly or exclusively for the purpose of making or earning such income. We thus confirm the finding of Ld. CIT(A) to this effect and allow the claim of expenses of ₹ 7,27,11,645/- u/s 57(iii) of the Act and dismiss revenue s Ground No.3. 12. Now we take up first issue about the eligibility of the assessee to claim exemption u/s 10(23C)(iiiab) of the Act which was accepted by Ld. CIT(A) but challenged by the revenue before us raising Ground No. 1 2. We find that the assessee filed its return of income claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other charges collected by the institutions and made over to the society (c) All moneys received by the society by way of grant, gifts, donations beneficiations, bequests or transfers; and (d) All moneys received by the society by in any other manner or from any other source. (2) All moneys credited to the Fund shall be deposited in such banks or invested in such manner as the society may, with the approval of the State Government decide. (3) The fund shall be applied towards meeting the expenses of the society, Government Body and the institutions including expenses incurred in the exercise of its powers and performance of its duties by or under these regulations. (4) The institutions shall not spend any amount collected by them by way of fees and other charges and shall make one all such realisation to the government body. (5) The society shall earmark an adequate amount in its annual budget to cover all expenses of every institution and no institution shall incur an expenditure in excess of the amount so earmarked; Provided that in special circumstances, the society may make a special grant to meet any unforeseen expenditure of an institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under appeal is from the Madhya Pradesh Government. 19. We find that similar issue as raised before us also came up before the Co-ordinate Bench of Chandigarh in the case of JCIT (Exemption) v/s CRM Jat Post Graduate College(supra) and the issue of the institution being wholly or substantially funds by the Government was under consideration. The relevant finding of the Tribunal is reproduced below:- 9. Addressing the second issue framed by us where we are called upon to decide whether the assessee educational institution can be considered to be on facts substantially financed by the Government of Haryana and hence the case of the assessee can be said to be covered u/ s. 10(23C)(iiiab) of the Act, the relevant facts on record are that the percentage of government grant is 60 of the total receipts. This finding of fact available on record remains unrebutted. In the absence of any rebuttal on facts, we find no good reason to upset the conclusion drawn. 9.1 No doubt as far as the year under consideration is concerned, percentage of receipts to be considered as crossing the statutory threshold limit by way of insertion of ,Explanation below clause 10(23C) was not availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee constitutes substantial finance by the Government which had entitled the assessee to claim exemption under section 10(23C)(iiiab) of the Act, No infirmity or perversity could be pointed out by the learned counsel for the Revenue in the findings recorded by the Tribunal. The substantial questions of law as claimed by the Revenue are answered accordingly and consequently, finding no merit in the appeals, the same are hereby dismissed. 9.2 However, since today we have the benefit of the insertion of the Explanation to sub-clause (iiiab) and (iiiac) inserted by Finance (N0.2) Act, 2014 w.e.f. 0I.04.20I5, it 'will be appropriate to extract the relevant provisions: Section 1O(23C) any income received by any person on behalf of - (i) (ii)..(iii)* (iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is who/Iv or substantially financed by the Government; or (iiiac) * Explanation.-For the purposes of sub-clauses (iiiab) and (iiiac) (iu(lb) and (iliac). any university or other educational institution, hospital or or other institution referred therein, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Revenue, we find no merit in the departmental appeal. 20. On perusal of the above referred decision of Chandigarh Tribunal in the case of CRM Jat Post Graduate College (supra) we find that the Tribunal has referred to the judgment of Hon ble Karnataka High Court in the case of Indian Institute of Management (supra) wherein the facts were that the government financing was 37.87% of the total contribution received during the year and the Hon ble High Court held the assessee to be eligible for exemption u/s 10(23C)(iiiab) of the Act. 21. We also find that Hon ble Punjab Haryana High Court in the case of CRM Jat Post Graduate College (supra) has also held the assessee to be eligible for exemption u/s 10(23C)(iiiab) of the Act where the governments grants were ranging from 44.52% to 45.15%. We thus are of the considered view that before the insertion of the explanation to Clause 10(23C)(iiiab) of the Act w.e.f. 01.04.2015 setting out minimum threshold of 50% has been fixed for institution which has to be financed by Government for claiming benefit of section 10(23C)(iiiab) of the Act but before this stage as noted by way of judicial standards set by the Hon ble court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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