2016 (12) TMI 680 - AT - Income Tax

ITAT directs AO to re-examine exemption issue under s. 10(23C) for educational institutions

The ITAT allowed the assessee's appeal for statistical purposes, directing the case to be restored to the AO to examine the issue of exemption u/s 10(23C) ... Exemption under section 10(23C)(iiiad) - aggregate annual receipts - per educational institution test - registration under section 12A and computation under section 11 - remand to assessing officer for verificationExemption under section 10(23C)(iiiad) - aggregate annual receipts - per educational institution test - remand to assessing officer for verification - Interpretation of the meaning of 'aggregate annual receipts' for the purpose of exemption under section 10(23C)(iiiad) and consequent treatment of the assessee's income. - HELD THAT: - The Tribunal accepted the view of the jurisdictional High Court in CIT v. Children's Education Society that the phrase 'aggregate annual receipts' in section 10(23C) is to be understood with reference to each educational institution run by the assessee, and not as a single consolidated receipt figure for all institutions run by the assessee. Applying that ratio, the Bench held that the question whether the exemption applies could not be decided on the basis of the AO's conclusion that the assessee's combined gross receipts exceeded the monetary threshold. Instead, the matter required examination of the receipts of each individual educational institution. In consequence, the Tribunal restored the matter to the Assessing Officer for verification and determination of whether each institution's aggregate annual receipts fell within the limit prescribed by section 10(23C)(iiiad) (read with the relevant Rules), so as to attract the exemption. The Tribunal allowed the appeal for statistical purposes but did not adjudicate the alternate plea regarding registration under section 12A or the separate claim on building fund corpus. [Paras 6]Appeal allowed; question whether exemption under section 10(23C)(iiiad) applies is remanded to the Assessing Officer to examine receipts of each educational institution separately and decide in accordance with the law.Final Conclusion: The Tribunal allowed the appeal for statistical purposes, holding that 'aggregate annual receipts' for section 10(23C)(iiiad) must be assessed for each educational institution separately; the matter is restored to the Assessing Officer for verification and decision accordingly (alternate/other pleas were not adjudicated). Issues:1. Entitlement to exemption u/s 10(23C) of the Act2. Computation of income in accordance with s. 11 of the Act3. Exclusion of contributions to the building fund from total incomeEntitlement to exemption u/s 10(23C) of the Act:The appeal was filed by the assessee society against the order of the CIT (A)-14 [LTU], Bangalore, dated 30.06.2016. The primary issue raised was whether the assessee was entitled to the benefit of exemption u/s 10(23C) of the Act. The AO had concluded that since the gross receipts exceeded &8377; 1 crore and the assessee was neither registered u/s 12A nor notified u/s 10(23C), the entire income earned was taxable. The CIT (A) dismissed the appeal due to the assessee's non-compliance with hearing notices. During the hearing, the assessee's counsel argued for registration under s. 12A and exemption u/s 10(23C)(iiiad) based on the purpose of the society and the gross receipts of each educational institution. The ITAT, referring to a ruling of the Hon’ble jurisdictional High Court, held that each educational institution's total annual receipts should be considered for exemption under s. 10(23C). The case was restored to the AO for further examination.Computation of income in accordance with s. 11 of the Act:The assessee also contended that the income should be computed by giving effect to the provisions of s. 11. The ITAT did not address this plea explicitly in the judgment, as the focus was on the exemption u/s 10(23C). Therefore, this issue was not adjudicated upon by the ITAT.Exclusion of contributions to the building fund from total income:The second ground raised by the assessee was the exclusion of contributions to the building fund from total income. However, the ITAT did not address this issue in the judgment, stating that only the first plea regarding exemption u/s 10(23C) was considered. Therefore, this aspect of the appeal was not taken up for adjudication.In conclusion, the ITAT allowed the assessee's appeal for statistical purposes, directing the case to be restored to the AO to examine the issue of exemption u/s 10(23C) based on the total annual receipts of each educational institution. The other issues raised by the assessee regarding the computation of income under s. 11 and the exclusion of contributions to the building fund were not addressed in the judgment.