2018 (11) TMI 633 - AT - Income Tax

Tax Exemption for Educational Institutions: Verification of Gross Receipts & Compliance with Section 10(23C)(iiiad)

Deputy Commissioner of Income Tax-2 (1), Bhopal Versus M/s. Ayushmati Education and Social Society

The Tribunal directed the Assessing Officer to verify the gross receipts of each educational institution individually. If the receipts are below Rs. 1 ... Exemption u/s 10(23C)(iiiad) eligibility - exemption u/s 11 - Disallowance of Excess of income over expenditure - institution existing solely for educational purposes - whether assessee is eligible for exemption u/s 10(23C)(iiiad) because the gross receipt of each institution is less than ₹ 1 crore? - Held that:- The judgment of CIT vs. Children’s Education Society [2013 (7) TMI 519 - KARNATAKA HIGH COURT] clearly holds that the gross receipt of each of the Institute/University/ Educational Institution which solely existing for educational purpose if less than the prescribed limit) which in this case is ₹ 1 crore) there is no need for getting the approval from the competent authority and the Income of such institution is exempt u/s 10(23C)(iiiad). Thus the issue of verification of gross receipts of various institutions run by the assessee society needs to be verified at the end of the A.O and if the contentions of the assessee are found to be correct as submitted before us and the A.O is also satisfied that all the institutions run by the assessee are existing solely for educational purposes and not for the purpose of profit coupled with the fact that the aggregate receipt of such institution is less than ₹ 1 crore then the AO may consider to grant the benefit of exemption u/s 10(23C)(iiiad) of the Act. - Decided in favour of revenue for statistical purposes. Issues Involved:1. Deletion of addition of Rs. 90,31,280/- on account of disallowance of excess of income over expenditure.2. Applicability of Section 10(23C)(vi) of the Income Tax Act, 1961.3. Verification of gross receipts of various educational institutions under Section 10(23C)(iiiad).Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 90,31,280/- on Account of Disallowance of Excess of Income over Expenditure:The Revenue challenged the deletion of Rs. 90,31,280/- by the CIT(A), which was made by the Assessing Officer (A.O) due to the disallowance of excess income over expenditure. The A.O had denied the benefit of exemption under Section 11 and Section 10(23C)(vi) of the Income Tax Act, 1961, on the grounds that the registration under Section 12AA was granted from 01.04.2004, and the assessee did not have the necessary approval from the prescribed authority for the exemption under Section 10(23C)(vi).2. Applicability of Section 10(23C)(vi) of the Income Tax Act, 1961:The CIT(A) had allowed the assessee's appeal on the basis that the application for approval under Section 10(23C)(vi) was neither approved nor declined after a significant lapse of time, thereby deeming the approval to have been granted. The Revenue contended this decision, citing a precedent from the ITAT Amritsar Bench, which required explicit approval for the exemption to be valid.3. Verification of Gross Receipts of Various Educational Institutions under Section 10(23C)(iiiad):The Senior Counsel for the assessee argued that before considering Section 10(23C)(vi), the applicability of Section 10(23C)(iiiad) should be examined. According to the assessee, each educational institution's gross receipts were below Rs. 1 crore, making them eligible for exemption under Section 10(23C)(iiiad). The Karnataka High Court's judgment in CIT vs. Children’s Education Society supported this view, stating that each educational institution's receipts should be considered individually rather than aggregating them.Tribunal's Decision:The Tribunal, after considering the arguments and the judgment of the Karnataka High Court, directed that the issue of the gross receipts of the various institutions run by the assessee should be verified by the A.O. If each institution's receipts are found to be below Rs. 1 crore and they exist solely for educational purposes and not for profit, the A.O is to grant the exemption under Section 10(23C)(iiiad). The appeal was allowed for statistical purposes, and the case was remanded back to the A.O for verification, ensuring a reasonable opportunity for the assessee to be heard.Conclusion:The Tribunal emphasized the need for a detailed verification of the gross receipts of each educational institution individually to determine the applicability of the exemption under Section 10(23C)(iiiad). The decision underscored the importance of adhering to the statutory provisions and judicial precedents while granting tax exemptions to educational institutions.