2015 (3) TMI 976 - AT - Income Tax

Tax Tribunal: Exemption denial for society with high receipts. Clubbed educational institution receipts. Penalties imposed.

The Income Tax Officer Ward- 2(3), Jammu Versus M/s Vivekanand Society of Education and Research

The Income Tax Officer Ward- 2(3), Jammu Versus M/s Vivekanand Society of Education and Research - [2014] 31 ITR (Trib) 177 (ITAT [Amrit]) Issues Involved:1. Whether the assessee-society is considered an educational institution eligible for exemption under section 10(23C)(iiiad) of the Income-tax Act.2. Whether the gross receipts of the society exceeding Rs. 1 crore necessitate the filing of a return and obtaining an exemption certificate under section 10(23C)(vi).3. Whether the receipts of both educational institutions run by the society should be clubbed for tax assessment purposes.4. Whether the penalty under section 271(1)(c) of the Income-tax Act is applicable.Issue-wise Detailed Analysis:1. Eligibility for Exemption under Section 10(23C)(iiiad):The assessee-society claimed exemption under section 10(23C)(iiiad) of the Income-tax Act, asserting that it is an educational institution. The Assessing Officer (AO) argued that the society's gross receipts exceeded Rs. 1 crore, thus disqualifying it from the exemption and necessitating the filing of a return. The Commissioner of Income-tax (Appeals) held that the assessee was eligible for the exemption, considering it an educational institution. However, the Tribunal found this decision contrary to law and facts, emphasizing that the gross receipts exceeding Rs. 1 crore require approval from the prescribed authority, which the assessee did not obtain.2. Requirement to File Return and Obtain Exemption Certificate:The AO issued a notice under section 148 after discovering that the society's gross receipts were Rs. 1,62,04,513, with a surplus of Rs. 69,27,948, and no return was filed. The AO argued that the society needed to file a return and obtain an exemption certificate under section 10(23C)(vi) due to the receipts exceeding Rs. 1 crore. The Tribunal upheld this view, noting that the society did not have the requisite exemption certificate or registration under section 12A(a) by March 31, 2005, and thus, the income was taxable.3. Clubbing of Receipts:The AO considered the receipts of both educational institutions run by the society (Vivekananda College of Education and Vivekananda Institute of Education Training and Research) should be clubbed for tax assessment. The Tribunal agreed, stating that the institutions are part of the assessee-society, and their receipts should be combined. The society's argument that each institution should be considered independently was rejected, reinforcing that the total receipts exceeded Rs. 1 crore, requiring a return and exemption certificate.4. Applicability of Penalty under Section 271(1)(c):The AO initiated penalty proceedings under section 271(1)(c) for concealing income, as the society did not file a return despite exceeding the gross receipts threshold. The Tribunal supported the AO's decision, noting that the society failed to comply with the legal requirements for exemption and return filing, justifying the penalty.Conclusion:The Tribunal concluded that the Commissioner of Income-tax (Appeals) erred in granting exemption under section 10(23C)(iiiad) and deleting the addition made by the AO. The Tribunal canceled the impugned order, upheld the AO's assessment order, and allowed the Revenue's appeal, emphasizing the necessity for the society to file a return and obtain the required exemption certificate due to its gross receipts exceeding Rs. 1 crore.