2013 (11) TMI 423 - AT - Income Tax

Tribunal denies tax exemption for educational institution, citing profit motive and insufficient government financing.

Himachal Pradesh Board of School Education Versus Income-tax Officer

The Tribunal upheld the decision of the Ld. CIT(A) to reject the claim of exemption under section 10(23C)(iiiab) of the Income Tax Act for the appellant. ... Deduction u/s 10(23C) – activities of the Board for educational purposes - profit motive - huge profits and surplus income - gross receipts of the assessee for the assessment year under appeal was more than Rs. 1 crores – Held that:- Assessee had never been financed by the Government during the assessment year in appeal and other years. It was also found that assessee has been generating its own income from sale of books and on account of registration fees - Aid from the State Government to the assessee is nil and it was wrongly mentioned by the Assessing Officer in the assessment order that the assessee Board is financed and controlled by the state government - In the assessment year under appeal, the assessee Board has transferred and amount of Rs. 5 crores to the Himachal Pradesh Government from its own income. It was also noted from the record that assessee Board is not directly controlled by the State Govt. but is governed under the Separate Himachal Pradesh Board of School Education Act, 1968 - Assessee does not exist solely for educational purposes. It is in fact earning huge profits and has surplus income and profits - Assessee did not have fulfill the terms and conditions of section 10(23C)(iiiab) of the I.T. Act - No evidence or material has been filed on record to contradict the above finding of fact – Decided against the Assessee. Issues Involved:Assessment of income under section 143(3) for the year 2006-07, claim of deduction/exemption under section 10(23C)(iiiab) of the Income Tax Act, application for exemption under section 10(23C)(vi), rejection of exemption claims, financial assistance received by the educational institution, interpretation of section 10(23C)(iiiab) requirements, existence solely for educational purposes, substantial financing by the government, control and financing of the educational institution, generation of own income, profit motive, relevance of case laws in support of exemption claim.Analysis:The appeal pertains to the assessment of income under section 143(3) for the year 2006-07. The Assessing Officer reopened the assessment as the assessee had shown a profit but had not filed a return of income. The assessee claimed exemption under section 10(23C)(iiiab) for income arising from educational activities. However, during assessment, it was revealed that the assessee had applied for exemption under section 10(23C)(vi) before the Chief Commissioner of Income Tax, which was rejected. The Assessing Officer found that the assessee advanced income to the State Government, making it ineligible for exemption, and taxed the income accordingly.The Ld. CIT(A) dismissed the appeal, noting that the appellant did not fulfill the conditions of section 10(23C)(iiiab). The appellant's claim of exemption under both sections 10(23C)(iiiab) and (vi) was deemed unsustainable. The appellant's income was found to be generated from book sales and registration fees, not substantial government financing. The Ld. CIT(A) concluded that the appellant did not exist solely for educational purposes, as it earned profits and transferred funds to the government.During the appeal, the Ld. Counsel for the assessee referenced financial assistance received and cited case laws in support of the exemption claim. However, the Tribunal found no error in the Ld. CIT(A)'s decision, as the appellant failed to provide evidence contradicting the findings. The Tribunal upheld the dismissal of the appeal, stating that the appellant did not meet the requirements of section 10(23C)(iiiab) for the assessment year under appeal.In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to reject the claim of exemption under section 10(23C)(iiiab) of the Income Tax Act for the appellant. The appeal was dismissed based on the failure to satisfy the conditions specified under the relevant section.This detailed analysis covers the issues related to the assessment, exemption claims, financial aspects, and legal interpretations involved in the judgment delivered by the Appellate Tribunal ITAT CHANDIGARH in 2013.