TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 55
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....d assessment in the case of Sree Educational Society for the A.Y 2010-11 u/s 143(3) r.w.s. 153A on 30.12.2011 determining the total income at Rs. 7,04,33,683/-. A search & seizure action u/s 132 of the I.T. Act was conducted at the assessee's premises and at the residences of the main trustees Shri K.T. Mahi and Smt. K.Sarita Mahi. The CIT stated while initiating proceedings u/s 263 as follows: "2. On verification from the records it is observed from the consolidated Balance Sheet as on 31.03.2010, the assessee received Rs. 2,62,45,200/- as grants which were credited to Reserves and Surplus. The AO disallowed the claim of exemption u/s 10(23C)(vi)/11 by doing so the AO should have brought to tax of these receipts. As the AO has not done, t....
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.... filing an appeal before the Hon'ble ITAT of Andhra Pradesh and the Hon'ble ITAT restored the registration. Copy of the said order is enclosed for your record. In view of the appellate order, the denial of exemption u/s 11 for the A.Y 2007-08 by the AO is erroneous. The assessee remains eligible to the exemption of income as a charitable organization. Further it is apparent both from the assessment order and your notice u/s 263 that no irregularities or discrepancies were noticed with respect to any grant received by the Society. In view of this fact, the assessment order neither suffer from any error nor prejudicial to the interest of the Revenue for exercising your powers u/s 263. Grant At this juncture we wish to bring to your....
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..... Thus, on account of this settled legal position and with respect to the grant received by the society, neither the order of the AO suffer from any infirmity nor is the order of the AO prejudicial to the interest of revenue". 4. The CIT held that it is a fact on record that the AO disallowed the claim of exemption u/s 10(23C)(vi) and status of assessee was treated as AOP. The CIT further observed that under the circumstances, the AO ought to have verified the receipts/grants from World Bank so as to bring the same to tax net. Thus, non-exemption of the above issues definitely makes the order passed by the AO as erroneous and prejudicial to the interest of Revenue. 5. The CIT further held that the order passed by the AO u/s 143(3) r.w.s. ....
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....to students. Therefore, the assessee society cannot be deprived off of the benefit of registration granted by the DIT(E) u/s 11 of the Act. Being so, in our opinion, registration granted u/s 12AA of the Act cannot be cancelled. However, the aforesaid findings given by us are nothing to do with the allowability of exemption u/s 11 of the Act. In case any discrepancy or irregularity with regard to the allowability of exemption u/s 11 is noticed by the AO, he can make an independent enquiry/examination at the time of assessment for each assessment year and decide in accordance with law. Therefore, it was submitted that the denial of exemption u/s 11 for the A.Y 2007-08 by the AO is erroneous. 7. The ld Counsel for the assessee also submitted....
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....nd the utilization of the amount of the grant is evident from the accounts statement filed with the return of income and given the assessment proceedings. We also note that the ITAT vide its order dated 31st July, 2013 (Supra) in assessee's own case has held that the assessee is eligible to exemption of income as the charitable organization enjoying the benefit of section 11 of the Act. Further the grant is a capital receipt and not a revenue receipt and hence a non taxable receipt. The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Chitrakalpa, reported in 177 ITR 5640 held that the subsidy given by the govt. to the assessee was not a revenue receipt. We also see from the notes and accounts at page 76 that the capital grant r....