2017 (4) TMI 454 - AT - Income Tax

Tribunal upholds educational institution's tax exemption, dismisses Revenue's appeal.

ACIT, Cir. 12, Ahmedabad Versus Gujarat State Tribal Development Residential Education Institute

The Tribunal upheld the CIT(A)'s decision, allowing the Gujarat State Tribal Development Residential Educational Institutions Society's claim for ... Denying benefit under section 10(23)(iiib) - Held that:- We are concerned with income provided under clause, 10(23)(C)(iiiab) which reads …. Any income received by any person on behalf of …….any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the government…..” In the order for the Asstt.Year 2006-07, the Tribunal has observed that the assessee is a hundred percent government institution imparting education in tribal regions, as per the directions of the Central Government from whom grants are received. In order to substantiate this claim, the assessee has made reference to a large number of documents which has been referred by the Tribunal in its order dated 25.11.2011 (extracted supra). The ld.CIT(A) has examined these aspects in the light of this order and observed that the assessee is entitled to exemption provided in section 10(23C)(iiiab). The question before us is what is the material collected by the AO in this assessment to deny this benefit to the assessee. A perusal of the assessment order would indicate that he has not made reference to any circumstances or documents. Similarly, the department has merely filed appeal for the sake of filing, otherwise it has also not placed any document on record which can suggest that the assessee does not fulfill criterion contemplated in section 10(23C)(iiiab). - Decided in favour of assessee. Issues Involved:1. Denial of benefit under section 10(23)(iiib) of the Income Tax Act, 1961.2. Validity of the addition of Rs. 6,13,78,824/- made by the AO.3. Eligibility for exemption under section 10(23C)(iiiab) of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Denial of Benefit under Section 10(23)(iiib)The primary issue revolves around the denial of the benefit under section 10(23)(iiib) of the Income Tax Act, 1961, which led to the addition of Rs. 6,13,78,824/- by the Assessing Officer (AO). The AO passed the assessment order under section 144 of the Act due to the non-response from the assessee to various notices. The AO calculated interest on the balance in the GSFS liquid deposit scheme and made disallowances out of miscellaneous expenditure, contingent expenditure, and salary expenses, leading to the total disallowance of Rs. 80,14,924/-.Issue 2: Validity of the Addition of Rs. 6,13,78,824/-The AO did not consider the grant of exemption under section 10(23)(iiiab). The CIT(A) found that the assessee, Gujarat State Tribal Development Residential Educational Institutions Society (GSTDREIS), was established by the Government of Gujarat to manage residential schools for children in tribal areas. The GSTDREIS was registered under the Societies Registration Act, 1860, and the Bombay Public Trust Act, 1950, and was granted registration under section 12AA of the Income Tax Act, 1961. The CIT(A) noted that the GSTDREIS was running schools providing free education and facilities to students, financed by grants from the Government of India and the Government of Gujarat. The CIT(A) concluded that the GSTDREIS was an educational institution existing solely for educational purposes and substantially financed by the government, thus eligible for exemption under section 10(23C)(iiiab).Issue 3: Eligibility for Exemption under Section 10(23C)(iiiab)The CIT(A) referred to previous decisions, including orders from ITAT and CIT(A) for earlier assessment years, which confirmed the GSTDREIS's eligibility for exemption under section 10(23C)(iiiab). The Tribunal, in its order for the assessment year 2006-07, observed that the GSTDREIS was a 100% government organization imparting education to tribals as per the directions of the Central Government, which provided the grants. The Tribunal noted that the GSTDREIS was running educational institutions imparting formal education and was duly registered under section 12AA of the IT Act. The Tribunal upheld the CIT(A)'s order, finding no convincing argument or evidence from the Revenue against the documents produced by the assessee.The Tribunal concluded that the AO did not provide any material to deny the exemption under section 10(23C)(iiiab) and that the department did not place any document suggesting that the GSTDREIS did not fulfill the criteria for exemption. Consequently, the Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to allow the exemption under section 10(23C)(iiiab).Conclusion:The Tribunal upheld the CIT(A)'s order, allowing the GSTDREIS's claim for exemption under section 10(23C)(iiiab) and dismissing the Revenue's appeal. The Tribunal found that the GSTDREIS was an educational institution existing solely for educational purposes and substantially financed by the government, thus entitled to the exemption. The addition of Rs. 6,13,78,824/- made by the AO was deemed invalid as the GSTDREIS met the criteria for exemption under the Income Tax Act.