TaxTMI 
TaxTMI 
2020 (11) TMI 309
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 7,27,11,645 claimed as deduction towards application of funds for educational charitable purposes. Owing to loss situation, there was no occasion to claim exemption u/s 10(23C)(iiiab) in the return. Return was processed u/s 143(1) on 16.03.2016 wherein income was computed at Rs. 5,98,24,898 which represents the total gross receipts of the assessee [7,27,11,645 - 1,28,86,747 = 5,98,24,898]. Assessee filed two rectification applications u/s 154 claiming that assessee is governed by provisions of section 10(23C)(iiiab). Exemption under section 10(23C)(iiiab) is available to 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. Both the above mentioned rectification applications were rejected vide order dated 02.06.2016 and 11.12.2016 stating that details of registration u/s 12A/12AA are not mentioned in the return so filed. Fresh claim of addition/reduction of income or other details in the return shall not be made in rectification request. It was also stated that to claim exemption u/s 10, details of approving/registering authority and section unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITR 323 SC [2006]. 4. The revenue reserves the right to add, urge or alter all or any other ground/grounds on or before the date of hearing. 4. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O which in this case is order by Centralized Processing Center (In Short 'CPC') and also submitted that the assessee had not filed the return properly in order to claim the benefit u/s 10(23C)(iiiab) and also pointed out that the grants received during the year were not received wholly from Government but from other sources also. Reliance was placed on the decision of Co-ordinate Bench of Indore in the case of M.P. Rajya Open School Bhopal v/s DCIT (2012) 28 Taxman.com 29 (Indore-Trib). 5. Per contra Ld. Counsel for the assessee referred to the submissions made before the lower authorities and also the findings of Ld. CIT(A). Following written submissions were also placed on record:- 1. Assessee made a lawful claim of exemption available to it under the provisions of section 10(23C)(iiiab) before the Ld. AO and also before the Ld. CIT(A) - 2, Indore. Assessee placed strong reliance on the following decisions for its claim made before the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Respectfully following the judgment of Hon'ble Apex Court in the case of Smifs Securities Ltd. (supra), and the judgment of Hon'ble Bombay High Court in the case of Pruthvi Brokers and Shareholders (supra) we are of the view that ld. CIT(A) has rightly allowed the justifiable & correct claim of depreciation on 'goodwill' made by the assessee through revised computation of income without filing revised return of income during the course of assessment proceedings. Therefore, no interference is called for in the order of ld. CIT(A) on this issue. This ground of Revenue is dismissed." 2. In the first appellate proceedings, it was also submitted that - a. CBDT vide circular no. 14 dated 11.04.1955 specifically states in Para 3 that it is the duty of the Department to assist the taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. It is also stated in this circular that the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him/her. [CLPB 34] Provisions of section 119(1) requires every officer to fol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, where an institute is financed from the government less than 50% of total receipts, would be eligible for exemption subject to fulfilment of other conditions. In the case of the assessee, the grant received from the Government of Madhya Pradesh is 45.30% of the total gross receipts and the relevant year is prior to the date of amendment. This aspect of government financing of less than 50% prior to amendment has been dealt by Hon'ble Madras High Court in the case of Indian Institute of Management [2010] 8 taxmann.com 239 wherein the government financing was to the tune of 37.85% was held to be entitled for exemption u/s 10(23C)(iiiab). Also, in the case of Jat Educatin Society, Rohtak [2015] 64 taxmann.com 312 by Hon'ble Punjab & Haryana High Court. Hon'ble Coordinate Bench of ITAT Chandigarh in the case of CRM Jat Post Graduate College [2019] 109 taxmann.com 425 dealt with this matter and held in favour of the assessee by following the above referred decisions of Hon'ble Madras High Court and Hon'ble Punjab & Haryana High Court, that [CLPB 15-26] - "In view of insertion of Explanation below clause (iiiab) and (iiiac) of sub-section (23C) of section 10....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., while admitting the additional ground raised by the assessee being purely a legal ground which can be decided without requiring investigation into fresh facts, we direct the Assessing Officer to allow assessee's claim of deduction under section 54 of the Act in respect of the second flat. Additional grounds are allowed. Consequently, the ground raised by the assessee claiming deduction under section 54F of the Act having become redundant is dismissed." [emphasis supplied] e. Reliance placed by the Department on the decision in the case M.P. Rajya Open School, Bhopal [2012] 28 taxmann.com 29 (Indore) is distinguishable on the its own peculiar set of facts evidently tabulated in Para 3.4 of its order. In this case, the assessee had received only initial capital from the Government of M.P. i.e. in AY 1996-97 and nothing thereafter until year 2009. In case of the present assessee in the instant appeal, assessee has been receiving grants from the Government of Madhya Pradesh on year to year basis to meet its expenses of salary, allowances and others. Considering the above facts, circumstances of the case, submissions made, documents on record and judicia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ucture and management. The appellant has also submitted that the Ex officer Chairman of the society was the Commissioner, Indore and the ex officer Chairman of governing body was the Collector, Indore. 2.3 The appellant has argued that the educational institute existed solely for educational purpose and not for the purpose of profit. Further, it was argued that the College was substantially financed by the Government of Madhya Pradesh. Accordingly, income of the institute was exempt u/s 10(23C)(iiiab). The society had filed its return of income showing receipts under various heads (namely fee from students, grant from Government of MP, rent and sale of tender form). The appellant has also submitted a copy of audit report. The details of income and expenditure account is reproduced as under:- Narration Amount Narration Amount Salary and Allowances 6,86,28,876 Grant from Govt. of MP 2,71,00,000 Provident Fund 12,34,740 Interest 47,64,151 Repair and maintenance 2,25,947 Rent 2,03,990 Electricity Expenses 11,65,877 Sale of tender form 8,800 Other Expenses 14,56,205 Fee 2,77,47,957 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed for the very objects for which the assessee was established in 1979 i.e. promotion of sports and, therefore, the AO was not justified in restricting the allowance of expenditure to Rs. 1,20,000/_ only for all the three years. It was this claim that was accepted by the CIT (Appeals). The objection of the revenue that since the grants were assessed under the residual head, there was no scope for allowing the expenditure incurred on the promotion of the sports activities was not acceptable since even under Section 57(iii), any expenditure incurred for the purpose of making or earning the income is allowable as a deduction. It is open to the income-tax authorities to deny the exemption under Section 11 of the Act in absence of registration under Section 12A and if they do so, then the assessment has to be completed in accordance with the provisions of the Income Tax Act. If the income is assessed under the residual head full play must be allowed to Section 57(iii). The assessee in the present case was created in 1979 with the object of promoting sports; there was no other object and all its constituents were giving grants/ funds only for that purpose. In truth and reality the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble" in cl. (iii) to the proviso, also lend support to this interpretation. In its literal sense, 'prima facie' means 'on the face of it'. Hence, on the face of the return and the documents and accounts accompanying it, the deduction claimed must be inadmissible. Only then, can it be disallowed under the proviso to section 143(1){a). If any further enquiry is necessary, or if the Assessing Officer feels that further proof is required in connection with the claim for deduction, he will have to issue a notice under sub-section (2) of section 143. Indeed, in every case where the Revenue desires to have evidence in support of any claim, a notice can always be issued under section 143(2), a regular assessment made and the excess amount due recovered (Khatau Junkar Ltd. vs. K.S. Pathania, Dy. CIT (1992) 196 ITR 55 (Bom), Bank of America NT. and S.A. vs. Dy. CIT (1993) 200 ITR 739 (Bom) and Indian Rayon & Industries Ltd. vs. J.R. Kanekar, Asstt. CIT (1993) 200 ITR 747 (Bom). See also JKs Employees' Welfare Fund vs. ITO (1993) 199 ITR 765 (Raj), Adamas General Industries Ltd. &Anr. vs. Smt. Neela Krishnan (1993) 203 ITR 737 (Bom), SRF Charitable Trust vs. Union of India....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tata Yadogawa Ltd. vs. CIT (2011) 335 ITR 53 (Jharkhand), it was held that as prima facie adjustment is permissible only in respect of claims, the incorrectness of which is apparent from any information in the return and debatable claims are not liable to such prima facie adjustments, AO was not justified in making prima facie adjustments in respect of the deduction claimed under s. 35AB towards income-tax paid by the assessee as part of the lump sum consideration for acquiring the know-how. In Amiruddin vs. ITO & Anr. (2001) 240 ITR 550 (MP) it has been held that while passing an order under s. 143(l)(a) the AO cannot change the nature of income or exemption. In CIT vs. McDowell & Co. Ltd. (2006) 204 CTR (Kar) 353 in which decision in God Granites vs. CBDT &Ors. (1996) 218 ITR 298 (Kar) was followed and decision in Madan Gopal Bagla vs. CIT (1956) 30 ITR 174 (SC) was distinguished, it was held that only a claim which is prima facie admissible or inadmissible can be considered under s. 143(l)(a) and not a matter that requires a detailed consideration; assessee having made out a prima facie case in respect of deduction of 'corporate guarantee obligation' as there was an agr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the above documents and find that the above grants were given by the MP government to the appellant's society and the appellant had also submitted a copy of letter of Ministry of Human Resource Development in which the said ministry had released grant to the polytechnics during F.Y. 2013-14. The appellant society is an educational institute. In the said letter, the grant had been released to the 20 polytechnics colleges of M.P. government and in this list the appellant's college name is clearly mentioned at point no. 35. Thus, this is clear that the appellant society is an educational institute and it was financed by Government of M.P. Therefore, in light of the above judicial decisions and documents so submitted by the appellant, these ground of appeal is hereby allowed. Thus, its income was exempt u/s 10(23C)(iiiab) of the Act. In its alternative, the AO is directed to allow benefit of the expenses so claimed by the appellant against the receipts. 9. We observe that Ld. CIT(A) has thoroughly analysed the facts of the case and has also referred to the relevant decisions and judgments to arrive at the finding favouring the assessee. 10. We will first take up the secon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e judgment of Hon'ble High Court of Delhi in the case of Petroleum Sports Promotion Board (supra) if the income is assessed under the residual head as the A.O denied exemption u/s 11 of the Act full play must be allowed to Section 57(iii) of the Act towards any expenditure incurred for the purpose of making or earning income. 11. In the instant case also the assessee society is a registered under the Madhya Pradesh Society Registration Act 1959 since 26.06.1962 wth the sole purpose of establishing and running institution to impart technical education in Civil, Mechanical and Electrical and such other branches of Engineering. The assessee institute runs solely for educational purposes and not for the purpose of earning profits. Most of the grants are received from Government of Madhya Pradesh. Irrespective of the fact that the assessee is eligible for exemption u/s 10(23C)(iiiab) of the Act or not even if the revenue authorities wanted to tax receipts during the year as income under the head income from other sources, they were not justified in grossly denying the benefit of genuine claim of incidental expenditure of Rs. 7,27,11,645/- u/s 57(iii) of the Act being the expendit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation, Indore (f) A person representing the rural local - Member authority or Authorities in the area of the society, chosen by the Member of such local body or authorities in such a manner as may be decided by the Chairman. (g) Four persons nominated by the Vaishnav Sahayak Kapada Market Committee, Cloth Market, Indore 14. The funds of the society are to be managed as per the conditions provided in the Memorandum of Association and Bye Laws. The relevant extract is mentioned below:- (1) The Society shall maintain a fund to which shall be credited :- (a) All moneys received from the Central Government or (b) All fees and other charges collected by the institutions and made over to the society (c) All moneys received by the society by way of grant, gifts, donations beneficiations, bequests or transfers; and (d) All moneys received by the society by in any other manner or from any other source. (2) All moneys credited to the Fund shall be deposited in such banks or invested in such manner as the society may, with the approval of the State Government decide. (3) The fund shall be applied towards meetin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e same is effective from 01.04.2015 which is not applicable on the assessee since we are dealing with the assessment year 2014-15. So before this amendment the issue was decided on the basis of relevant facts. 18. Before us Ld. Departmental Representative referred and relied on the decision of Co-ordinate Bench, Indore in the case of M.P. Rajya Open School, Bhopal (supra). However this decision will not be relevant in the instant case because in this case the assessee was financed by Government only in the initial year and there was no grant subsequently including the year under appeal before the Tribunal whereas in the case of assessee substantial portion of the grant received during the year under appeal is from the Madhya Pradesh Government. 19. We find that similar issue as raised before us also came up before the Co-ordinate Bench of Chandigarh in the case of JCIT (Exemption) v/s CRM Jat Post Graduate College(supra) and the issue of the institution being wholly or substantially funds by the Government was under consideration. The relevant finding of the Tribunal is reproduced below:- 9. Addressing the second issue framed by us where we are called upon to decide ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ced by the Government is entitled to claim exemption from income-tax under the Act." In the facts of the said case, it is seen that even though the benefit of the legislative intent was not available to the Hon'ble High Court, the Court considering the fact that the total receipts were ranging between 41% to 82% on individual institution basis and when the percentage for the Society was considered as a whole, it was found to be ranging between 44.52% and 45.15% for the two years being considered by the jurisdictional High Court. the departmental appeal, accordingly was dismissed holding as under: "In view of the above, the Tribunal was right in holding that the aid given by the Government to the assessee constitutes substantial finance by the Government which had entitled the assessee to claim exemption under section 10(23C)(iiiab) of the Act, No infirmity or perversity could be pointed out by the learned counsel for the Revenue in the findings recorded by the Tribunal. The substantial questions of law as claimed by the Revenue are answered accordingly and consequently, finding no merit in the appeals, the same are hereby dismissed." 9.2 However, sinc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing finance less than 50% of the total receipts from the government would be eligible for exemption subject to fulfilment of other conditions. However, after 01.04.2.015, it is only an instin.uon government grants were beyond the threshold limit of 50% of the total receipts which would be eligible for benefit u/s 10(23C)(iiiab). In the facts of the present case, the position on facts as considered and available on record is that about 60 of the institution's total receipts have been received from the Government. This finding of fact as noted has not been upset by the Revenue. Thus, where on facts the finding of fact arrived at by the CIT (A) that the assessee has received government aid to the tune of 60 of its receipts remains unrebutted by the Revenue, we find no merit in the departmental appeal." 20. On perusal of the above referred decision of Chandigarh Tribunal in the case of CRM Jat Post Graduate College (supra) we find that the Tribunal has referred to the judgment of Hon'ble Karnataka High Court in the case of Indian Institute of Management (supra) wherein the facts were that the government financing was 37.87% of the total contribution received during the year and ....