2012 (11) TMI 1243 - HC - Income Tax

Educational Institution Entitled to Exemption Under Section 11

Commissioner of Income-tax Versus Indian Institute of Engineering Society

The High Court upheld the decisions of the lower authorities, confirming the entitlement of the educational institution to claim exemption under Section ... Benefits under Section 11 - Held that:- The assessee claimed exemption, being an educational institution as such it was required to obtain exemption from the prescribed authority under Section 10(23C) of the Act, which is mandatory. Since no exemption from the prescribed authority under Section 10(23C) of the Act has been obtained as such the assessee was not entitled to claim benefits under Section 11 of the Act. The submission is wholly misconceived. Admittedly, the assessee is an educational institution and was established for charitable purposes for running educational institutions and imparting education. Section 10 of the Act deals with the income not liable to be included in total income of the assessee while Section 11 deals with the income from property held for charitable or religious purposes. Both Section 10(23C) and Section 11 of the Act are independent sections. The assessee was registered under Section 12A of the Act. As such the assessee was rightly granted benefits under Section 11 of the Act. Issues:1. Whether the Tribunal was justified in confirming the decision regarding unexplained investment under Section 69 of the Income Tax Act.2. Whether the Tribunal was justified in confirming the decision regarding exemption under Section 11 despite not being granted under Section 10(23C).Analysis:Issue 1:The case involved an educational institution registered under Section 12A of the Income Tax Act, claiming exemption under Section 11. The Assessing Officer made an addition of Rs. 16,56,285 based on a valuation report by the District Valuation Officer (DVO) regarding the cost of construction of a building. The Commissioner of Income-tax (Appeal) held that the Assessing Officer had ignored the books of account without pointing out any discrepancy and allowed the appeal, setting aside the order. The Income Tax Appellate Tribunal upheld this decision, leading to the appeal. The High Court found that the assessee, being a charitable society, was entitled to exemption under Section 11, as it was registered under Section 12A of the Act. The Court dismissed the appeal, stating that the submission that exemption under Section 10(23C) was mandatory for claiming benefits under Section 11 was misconceived.Issue 2:The second issue revolved around the claim of exemption under Section 11 despite not being granted under Section 10(23C) due to exceeding gross receipts. The Revenue argued that since no exemption under Section 10(23C) was obtained, the assessee was not entitled to benefits under Section 11. However, the High Court clarified that Sections 10(23C) and 11 of the Act are independent, and being registered under Section 12A, the assessee was rightfully granted benefits under Section 11. The Court upheld the decisions of the CIT (A) and the Income Tax Appellate Tribunal, dismissing the appeal.In conclusion, the High Court upheld the decisions of the lower authorities, confirming the entitlement of the educational institution to claim exemption under Section 11 despite not obtaining exemption under Section 10(23C) and dismissing the appeal filed by the Revenue.