TaxTMI 
TaxTMI 
2024 (3) TMI 470
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....e for educational (charitable) purposes, as under: (PB pg. 14) (a) Section 11(1)(a & b) toward application to the extent of 85% Rs. 9.51 lakhs (b) Income accumulated to the extent of 15% u/s. 11(1)(a/b) Rs. 1.68 lakhs (c) Corpus donation u/s. 11(1)(d) Rs. 133.20 lakhs Total Rs. 144.39 lakhs The same was denied on processing the said return vide Intimation u/s. 143(1)(a) dated 27.03.2015, raising a demand of Rs. 56.58 lakhs, including interest at Rs. 24.55 lakhs. The assessee moved an application u/s. 154 of the Act on 04.08.2015, stating that it's income for the relevant year was only Rs. 11.19 lakhs, the balance being corpus donation, exigible for exemption u/ss. 10(23C)(iiiad) and 11(1)(d) of the Act respectively. Adverting to the Board Circular No. 320 dated 11.01.1982 (PB pages 23,24) it also claimed that the tax calculation was not correct. Per the said Circular the Board has clarified that where the members or trustees are not entitled to any share in the income of the Association of Persons (AOP), the provisions of s. 167A, imposing tax at the maximum marginal rate, shall not apply, and tax shall be payable in such cases at the rate ordinarily applicable ....
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....er than qua the object/s of education, it was advised to seek registration u/s. 12AA of the Act, as also consider claiming exemption u/s. 10(23C)(iiiab) as it was financed substantially by the Government. The application u/s. 10(23C)(vi) was accordingly withdrawn. 2.2 The ld. CIT(A), after affording opportunity of hearing to the assessee, which was availed, rejected each of the assessee's pleas. As regards the contention that the assessment proceedings were pending on the date of grant of registration, i.e., 20.08.2015, the assessee, he opined, could not be extended the benefit of subsequent registration u/s. 12A(2) of the Act, which could only be if the assessment for an earlier year was pending on that date. Processing u/s. 143(1)(a), which was not an assessment, stood completed prior thereto. Verification of the Intimation u/s. 143(1) by him confirmed that the CPC had disallowed the assessee's claim, as made, i.e., u/ss. 11(1)(a/b) and 11(1)(d) of the Act. Referring to items B(i) & B(ii) of the 'Other Details' section of the return, he clarified that no exemption had been claimed u/s. 10 of the Act. That is, there was no claim u/s. 10 for the AO to have disallowed the claim u/s....
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....of Income Tax (Appeals) failed to appreciate that in computing the gross receipts of Rs. 1 crore for the exemption, corpus donations and interest income should not be considered. 5. Commissioner of Income Tax (Appeals) erred in not considering the alternate claim for exemption under section 10(23C)(iiiab) on the ground that the same was not made in the return of income. Commissioner of Income Tax (Appeals) failed to appreciate that his powers are co-terminus with that of the assessing authority and claim other than by a return of income could be entertained by him. 6. Without prejudice to the above arguments, CPC is not justified in levying tax on the gross receipts 3. We have heard the parties, perused the material on record, and given our careful consideration to the matter. 3.1 Elemental to a rectification u/s. 154 are the attributes of 'mistake' and 'apparent from record', excluding debatable issues, i.e., which do not admit of conceivably two views, and limiting the said view as on the basis of the record and the clear law in the matter. The law in the matter is well-settled, viz. ITO vs. Volkart Bros. [1971] 82 ITR 50 (SC); CIT v. Hero Cycles Pvt. Ltd. [1997] 228 ITR 46....
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....ludes liquid capital (in the form of cash and cash equivalents) at Rs. 36.93 lakhs available at the beginning of the year. In fact, Rs. 13.20 lakhs out of this excess expenditure being by way of depreciation, a non-cash 'expenditure', the excess cash outgo is limited to Rs. 8.62 lakhs. The assessee has, thus, wrongly returned regular income at Rs. 11.19 lacs. Sure, and clearly, the financial statements being adverted to by us (PB pgs. 13-21) were not furnished along with the return of income. The same nevertheless are a part of the return of income. It is only, as explained by the Tribunal in Sunil Kumar Maloo v. ITO (in ITA 78/Jab/2022, dated 20/12/2022), as a record management exercise that their filing along the return is kept in abeyance, to be called for by the Revenue on demand, i.e., as and when required for the purposes of the Act (ss. 139C/139D). As such, where a claim is made, the same being a part of the return, are to be necessarily taken into account, exercising the enabling provision. It is both the right as well as the duty of the AO to do so. The matter shall go back to the AO for verifying the non-existence of regular income and, where so, deletion of the returned ....
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....is regard is if the assessee's claim, admittedly made per sec.154, and not per the return of income, could be admitted in s. 154 proceedings. True, the AO has admitted the claim, but then his order provides no reason as to why he so does, i.e., is sans any finding qua the same. It is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC); Parekh Bros. v. CIT [1984] 150 ITR 105 (Ker)). Also see: Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). Proceedings under the Act, it may be clarified, are not in the nature of a lis (Gadgil (S.S.) v. Lal & Co. [1964] 53 ITR 321 (SC)). An incorrect action by the AO, where so, would not bind the Tribunal. So however, in our view, the AO has rightly considered the assessee's claim u/s. 10(23C)(iiiad) in the rectification proceedings. The assessee had in the past been claiming total exemption thereunder and, two, had referred thereto in the 'Other Details' section of the return. It is apparent that the assessee had not claimed the same for the current year on the basis that it's gross receipt exceeded the qualifying ....
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....in sec.143(1)(a) for making an adjustment there-under. It is only under regular assessment that the said aspects, as indeed the two further aspects noted by the ld. CIT(A) with reference to the assessee's claim u/s. 10(23C)(iiiab) before him, could be examined. It was within the purview of the AO to have taken recourse to either section 143(2) or section 147, which has not been done, so that he has to operate within the confines of sec.143(1). 3.5 The assessee is accordingly entitled to claim it's entire income of Rs. 111.38 lakh (which is not at Rs. 144.39 lakh) as exempt u/s. 2(24)(iia) r/ws. 10(23C)(iiiad), which speaks of exemption of income of an educational institution and not it's annual receipt. There is, further, in this view of the matter, no need for restoration to the file of the AO, which we had earlier directed for examining the exclusion of the income to the extent of Rs. 11.19 lakh (para 3.2). In Sum 4. Section 2(24)(iia) of the Act, defining income, makes no exception for a voluntary contribution received toward corpus, so that it is income by definition, though exempt u/s. 11(1)(d)). It is for this reason that capital expenditure is equally an application of in....