2013 (7) TMI 803 - AT - Income Tax

Tribunal remands Revenue appeal for reassessment of institution's tax exemptions under Income Tax Act

The Tribunal partially allowed the Revenue's appeal, remanding the matter to the Assessing Officer for fresh consideration. The Tribunal directed the AO ... Eligibility for exemption u/s 10(23C) (iiiab) - assessee is a society registered under Societies Registration Act - as per assessee the exemption is available being an educational institution which is solely and substantially financed by the Government - CIT(A) allowed the claim - Held that:- The issue is covered by the decision of Vasavi Academy of Education Hyderabad [2010 (2) TMI 970 - ITAT HYDERABAD] wherein remit was remitted back to the file of AO with a direction to reconsider the entire issue in the light of judgement of M/s Islamic Academy of Education & Another Vs. State of Karnataka and Another (2003 (8) TMI 469 - SUPREME COURT) and T.M.A. Pai Foundation and Others Vs. State of Karnataka and Others (2002 (10) TMI 739 - SUPREME COURT) to find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity of hearing to the assessee . The assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students. Thus set aside the issue to the file of the AO for a fresh decision in accordance with law, after affording a reasonable opportunity of being heard to the assessee. Revenue is partly allowed for statistical purposes. Issues Involved:1. Exemption under Section 10(23C)(iiiab) of the Income Tax Act.2. Exemption under Article 289(1) of the Constitution of India.3. Eligibility of the institution as an educational institution.4. Consideration of alternate pleas by the CIT(A).5. Revenue's grounds of appeal regarding CIT(A)'s decision.Detailed Analysis:1. Exemption under Section 10(23C)(iiiab) of the Income Tax Act:The assessee, a registered society, claimed exemption under Section 10(23C)(iiiab) of the Income Tax Act, asserting it as an educational institution substantially financed by the Government. The CIT(A) reviewed the materials and activities of the assessee and concluded that the institution met the criteria for exemption under Section 10(23C)(iiiad) since its total receipts were below one crore rupees, and it was not established for profit. The CIT(A) also noted that the majority of the receipts were government donations, which are corpus donations and do not form part of taxable receipts.2. Exemption under Article 289(1) of the Constitution of India:The assessee alternatively claimed exemption under Article 289(1) of the Constitution of India. The Assessing Officer (AO) rejected this claim, stating that the society, having its own legal personality, was distinct from the State and thus not eligible for exemption under Article 289(1). The CIT(A) upheld the AO's decision, agreeing that the institution did not qualify for exemption under Article 289(1).3. Eligibility of the institution as an educational institution:The CIT(A) evaluated the institution's activities and confirmed that it was an educational institution, as it conducted training programs for State Government employees in the health sector without profit motive. The CIT(A) referenced various case laws, including decisions from the Gujarat High Court and ITAT Ahmedabad, to support this conclusion.4. Consideration of alternate pleas by the CIT(A):The Revenue argued that the CIT(A) granted relief on an issue not raised in the original appeal. However, the CIT(A) admitted the alternate plea under Section 250(5) of the IT Act, 1961, and decided the issue after calling for a remand report. The Tribunal supported the CIT(A)'s decision to entertain the alternate plea, citing precedents like Addl. CIT Vs. Ghai Lime Stone Co. and Al Farook Educational Centre Vs. ITO.5. Revenue's grounds of appeal regarding CIT(A)'s decision:The Revenue contended that the CIT(A) erred in allowing exemption under Section 10(23C)(iiiad) and (iiiab), arguing that the institution also provided advisory and consultancy services, which might not qualify as educational purposes. The Tribunal noted that the issue was covered by a previous decision in the case of Vasavi Academy of Education Hyderabad, where it was established that the institution should not collect capitation fees over and above the prescribed fees. The Tribunal remanded the matter back to the AO for fresh consideration, directing the AO to verify if the institution collected any additional fees and to decide the exemption eligibility accordingly.Conclusion:The Tribunal partially allowed the Revenue's appeal for statistical purposes, remanding the issue to the AO for a fresh decision. The Tribunal emphasized the need for the AO to reassess the institution's activities and fee collections in light of legal precedents to determine the correct applicability of exemptions under the Income Tax Act.Order Pronounced:The order was pronounced in the open court on 31st May, 2013.