2023 (5) TMI 208 - AT - Income Tax

Tribunal grants exemption to society for income from non-recognized courses as 'education'

Young Women’s Christian Association of Delhi Versus ITO (Exemption) Ward-2 (3), Civic Centre, New Delhi.

Young Women’s Christian Association of Delhi Versus ITO (Exemption) Ward-2 (3), Civic Centre, New Delhi. - TMI Issues Involved:1. Whether non-recognized courses conducted by Women Training Institute (WTI) constitute 'education' under section 2(15) of the Income Tax Act, 1961.2. Whether the CIT(A) erred in holding that tax paid on income from non-recognized courses shall not be refunded.3. Whether the CIT(A)'s observation that 'tax paid on the returned income will not be refunded' was outside the scope of the subject matter of appeal.Summary of Judgment:Issue 1: Non-Recognized Courses as 'Education'The assessee, a society registered under the Societies Registration Act, 1860, and claiming exemption under sections 11 and 12 of the Income Tax Act, 1961, argued that income from non-recognized courses conducted by WTI constitutes 'education' under section 2(15) of the Act. The Ld. AO had added this income to the assessee's total income, but the Ld. CIT(A) followed the decision of the Hon'ble Delhi High Court and ITAT for AY 2009-10, holding that the primary objective of the assessee is imparting education to poor women, and any surplus generated is allowable for exemption if used for the society's objectives. Thus, the Ld. CIT(A) directed the Ld. AO to grant full exemption under section 11 along with consequential benefits.Issue 2: Refund of Tax PaidThe Ld. CIT(A), however, denied the refund of tax paid on the income declared in the return, citing the Hon'ble Supreme Court's decision in CIT vs. Shelly Products & Another. The assessee contended that the facts of their case were different from Shelly Products, where the assessee had admitted tax liability. In contrast, the assessee in this case had declared the income to avoid penalties while their appeal for AY 2009-10 was sub-judice. The Tribunal found that the Ld. CIT(A) misapplied the decision in Shelly Products, as the assessee never admitted its tax liability and consistently claimed exemption for the income from non-recognized courses.Issue 3: Jurisdiction of CIT(A)The Tribunal noted that the Ld. CIT(A)'s observation that 'tax paid on the returned income will not be refunded' was outside the scope of the subject matter of appeal. The Tribunal emphasized that Article 265 of the Constitution mandates that no tax shall be levied or collected except by authority of law, and any excess tax paid must be refunded.Conclusion:The Tribunal set aside the order of the CIT(A) concerning the denial of refund of tax paid on the returned income and directed the Ld. AO to grant the refund in accordance with the law. The appeal of the assessee was allowed.