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2025 (5) TMI 805
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....ng total income at Rs. Nil. The case of the assessee was selected for limited scrutiny under CASS for the reason "large deduction claimed u/s 57 (Business ITR)". Statutory notices u/s 142(1) and 143(2) of the Income Tax Act, 1961 (the "Act") along with questionnaire were issued and served upon the assessee. In response thereto, the assessee vide its online submission dated 11-12-2021, inter alia stated that the main object of the trust is educational and social welfare and not for the purpose of profit, educational schools are run by the trust in Latur District at Udgir and Ahmedpur in rural areas and that the income from other sources includes salary grant received from Government against salary paid to teaching and non-teaching staff is claimed as deduction from other sources. The Ld. Assessing Officer ("AO") noted that the assessee did not file any documents indicating grant of approval u/s 10(23C)(vi) or section 12AA of the Act and hence not eligible to claim its receipts/income as exempt from taxation. Vide notice u/s 142(1) of the Act dated 25.11.2021, the Ld. AO issued a detailed questionnaire asking the assessee to furnish and explain nature and source of income, computatio....
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.... his appellate order. The assessee, inter alia submitted its point wise rebuttal to the findings of the Ld. AO recorded by him in para 6 of the assessment order. The relevant portion of the submission before the Ld. CIT(A) is reproduced below : "4.00 The learned AO in his assessment order dated 21/09/2022 has made variation/ addition of Rs 6,69,44,047/- by disallowing the claim of assessee u/s 57 of the Income Tax Act, 1961 mainly on following grounds (refer para 6 of assessment order dt. 21/09/2022) and our submission on grounds raised by learned AO for addition of Rs 6,69,44,047/- by disallowing the claim of assessee u/s 57 of the Income Tax Act, 1961 is as under: - 1) Though assessee has stated in his letter many times that the Institution is covered u/s 10(23C)(iiiab) of the IT. Act. 1961 However, no documents to substantiate its claim has been provided. No document showing the grant allowed to the Institution by the government has been produced. Except for enclosing the Paysheet prepared by each School of the Trust. In reply to SCN issued on 26/08/2022 assessee submitted copy of grant dating back to the year 1997 and 2000 and that in respect of 6 schools out ....
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....t of school in which salary grant is credited) to the bank account of respective teaching/non teaching staff. The pay sheet as prepared and signed by respective schools heads are being submitted to Pay and Provident Fund Unit, Zilha Parishad, Latur (not to the EPF Department), After verification of pay sheets submitted by schools the same is signed by Superintendent, Pay and Provident Fund Unit, Zilha Parishad, Latur (and not the Secretary Pay and Employees Provident Fund)). The name of department looking after the salary grants is "Pay and Provident Fund Unit" and not Provident Fund Department. It seems that the word "Pay" is remained to be observed by learned AO and has concluded that the pay sheets are submitted to EPF Department for Provident Fund purpose. 3) If assessee is claiming exemption u/s 10(23Ciabl, it was required to file return of income in ITR-7. However, the ROI for the relevant assessment year has been filed in ITR-5. When assessee was confronted, he has merely submitted a copy of condonation filed u/s 119(2)(b) before CIT(E), Pune. The outcome of the said application in silent. Further, on verification of E filing portal as on date, it ....
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....he assessee was served with three notices under Section 148 of the Income-tax Act, 1961, calling upon him to file returns for the said assessment years. b) Being aggrieved, the assessee initiated proceedings under Article 226 of the Constitution for quashing the said notices. The defense of the Revenue was that the particulars of profits and gains of business had not been submitted with the returns and that, further, one of the returns was not properly verified. Therefore, all the returns were invalid in law. c) On the aforesaid facts, it was held by a Division Bench of this court that the returns could not be held to be invalid and non-existent. It was held further that there was a distinction between non-filing of a return and filing of an incorrect and incomplete return. d) The Income-tax Act did not provide for rejection of an invalid return but under Section 143, a duty was cast on the Income-tax Officer to assess the total income after notice to the assessee and considering the evidence that might be produced. It was observed that there could be cases where the returns were incomplete to such an extent that they could not be regarded as returns in l....
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....ed subsequently in the correct form could be treated as the only return filed by the assessee. The mistake of the assessee was innocuous and the return filed could not be treated as a mere scrap of paper resulting in penalty to the assessee. The court noted that the Income-tax Officer had accepted the original return for making a provisional assessment under Section 141 and had levied interest on the basis that the return was actually filed earlier. The court answered the reference in favour of the assessee. Sir, considering the aforesaid decision of the Hon. Madras High Court, your assessee trust would like to state that, the correct form of return i.e. ITR-7 may please be accepted. Since the ITR-5 submitted has been processed already u/s 143(1) by the CPC vide intimation, dt.: 29.03.2021 and CPC DIN CPC/2021/A5/159114926. Your honour, your assessee trust would like to state that; a) The correct ITR-7 was required to be submitted, but inadvertently ITR-5 was submitted. It is only a technical or procedural mistake. b) A return of income submitted under ITR-5 is processed and intimation u/s. 143(1) is issued on 29.03.2021 and DIN is CPC/2021/A5/15....
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....tude towards Dated: 11/04/1955 ASSESSMENT SECTIONS 143. The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interest and convenience. It appears that these instructions are not being uniformly followed. 2. Complaints are still being received that while 110's are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under s. 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs. 3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way. particularly in the matter of claiming and securing reliefs and in this regard the Officers ....
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....dingly, our trust has satisfied all the conditions stated here-in- above. Your honour, the trust has 99.66% of its collection is from the Government Grant, which is obvious from the audited statements of accounts i.e. Income and Expenditure Account. We put before you, grant received by each section of the trust is as under: Name Of Unit / School Grant for payment of salary by the Education Department Grant for payment of arrears of salary by the Education Department Total Grant received Dnyaneshwar Vidyalaya Kopra 88,18,568 3,49,173 91,67,741 Abdul Hamid Urdu Prathmik Ahmedpur 62,23,614 5,36,528 67,60,142 Keshavrao Patil Vidyalaya Bothi 98,22,346 1,22,207 99,44,553 Mahatma Phule 32,58,697 28,325 32,87,022 Prathmik Keshavrao Patil Vidyalaya Bothi Andhori Sant Sadghuru Prathmik Ujana 29,11,560 37,321 29,48,881 Sant Sadghuru Vidyalaya Ujana 1,04,13,812 1,55,520 1,05,69,332 Rokdoba Vidyalaya Takalgaon 68,93,372 72,581 69,65,953 Balkjrushna Vidyalaya Ujalamb Chatrapati Shahu Vidyalaya Nitur 60,27,896 3,91,738 64,19,634 Chatrapati Shahu Vidyalaya....
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....ould not be a capital expenditure, b) Expenditure incurred should be wholly and exclusively for its earnings or making profit, c) It should not be a personal expenses of the assessee, d) It must be laid out or expended in the relevant previous year and not in any prior or subsequent years. On examining the provisions of sec. 57(iii) as enumerated above, the assessee trust has fully complied the conditions prescribed u/s. 57(iii) of the Act. Your honour, on examining the financial statements and details submitted herewith, it is obvious that, it is not a capital expenditure, because, the Government Grant, which was received specifically for payment of salary has been used for the same purpose. As a result, it is beyond doubt that, payment of salary, which works out to Rs. 6,44,88,372 Le. 96% of the total expenditure. The remaining expenditures, which are incidental to the object. The brief details of the amounts expended during the Fin. Yr.: 2019-2020. Sr. No. Particulars Amount 1 2 3 01 Payment salaries of the to teaching and non teaching staff of ten institutions. 6,44,88,372 02 Audit Fees 59,800 0....
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.... same day. Your honour, it is obvious that, there is a direct nexus of income and expenditure specifically relatable to salary grant and salary expenditure. In support of this claim, the assessee trust is submitting following documents. a) A copy of the pay sheet submitted to pay unit of Education Department and verified and sanctioned by the said Government Department. (As a sample for the month of April 2019 is enclosed as Annexure "I". b) A copy of sanction of grant by the pay unit (Refer Annexure "J". c) A copy of the passbook, from which the salary grant received is transferred to the teaching and non teaching staff. (Refer Annexure "K") Your honour, the aforesaid documents proves that, there is a direct nexus of income as well as expenditure, without leaving any scope for doubt. Sir, in the above context, we draw your kind attention to the following judicial precedents: • Eastern Investment Ltd., v. CIT (1951) 20 ITR 0001 (SC) Relevant Para No.: 9 and 10 are reproduced below: • On a full review of the facts it is clear that this transaction was voluntarily entered into in order i....
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....ation and accordingly, the assessee trust has incurred expenditure on imparting of education is Rs. 6,67,55,757 and there was surplus of Rs. 1,49,989. Hence, as per the observations of the Hon. Supreme Court, assessee is entitled to an expenditure u/s. 57(iii) to the extent of Rs. 6,69,44,047. Because there is a direct nexus and expenditure incurred was wholly and exclusively for the purpose of its main moto. CIT v. Rajendra Prasad Moody (1978) 115 ITR 0519 (SC) In this case, company had made investment in the shares by raising the funds on which interest was paid. But investment in the shares did not yield in the form of dividend. The question arose is that, as per section 57(iii) of the Act, such expenditure is allowable, even though investment yields NIL income. The principles laid down by the Hon. Supreme Court are as under: • By virtue of the provisions of sec. 57(iii), there must be a purpose for making investment. • Section 57(iii) does not require this purpose must be fulfilled in order to qualify the expenditure for deduction. • It does not say that, expenditure shall be deductible only, if any income is made or earn....
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.... During appellant proceedings, the appellant contended it is eligible for exemption u/s 10(23)(c)(iiiab) of the IT Act. The appellant submitted that it had wrongly filed the return of income in Form No.5 instead of Form No.7 due to mistake of the consultant and submitted that for filing return of income in Form No.7, petition u/s 119(2)(b) filed before CIT(E), Pune is pending. Further appellant contended that the salary expenses and other related expenses are allowable expenses u/s 57(iii) of the Act, therefore the appellant requested to allow the same. I have considered the facts of the case and submission filed by the appellant. I find that the appellant has failed to file return of income in correct form without any valid reasons. Further I find that the gross receipts of the appellant are exceeding 5 crores, hence the appellant is not eligible for exemption u/s 10(23)(c)(iiiab) of the IT Act. Regarding the claim of expenses u/s 57(ii) of the Act, the reply submitted before the AO during assessment proceedings in response to the show cause notice, the AO had noted that the claim of receipt of income and expenses incurred for earning the said income was not supported ....
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....nd is substantially financed by the Government which fact has not been appreciated by the Ld. AO/CIT(A). Referring to the Income and Expenditure Account of the trust for the year ended 31.03.2020 placed at page 130 of the paper book, the Ld. AR submitted that the gross collection of the trust includes grant from Government for the educational purpose which is 99.68% and the total expenditure includes expenses exclusively incurred for imparting of the education which works out to 99.75% and other expenses incidental to the main object is only 0.25% of the total expenditure incurred by the assessee during the relevant AY. He, therefore, submitted that the assessee trust is squarely covered u/s 10(23C)(iiiab) of the Act for claim of exemption. 6.1 The Ld. AR further submitted that the assessee trust inadvertently submitted the return of income in ITR-5 instead of correct ITR-7 due to mistake of the Tax Consultant of the assessee trust and an affidavit of the said Tax Consultant confessing his mistake was filed before the Ld. CIT(A). He argued that filing of ITR-5 in place of ITR-7 is a procedural technical mistake and as a result of this mistake neither the assessee trust is benefi....
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....that the return filed by the assessee in Form-5 is not a valid return and therefore the assessee is not entitled to claim exemption under such invalid return. 8. We have heard the Ld. Representatives of the parties and perused the material on records and various judicial precedents cited by the Ld. AR. It is an undisputed fact that the assessee is an educational institution carrying on primary and high school at ten locations approved by the Directorate of Education of Maharashtra State in Lature District and is substantially financed by the Government to the extent of 99.68% of its gross receipts for the relevant AY. From the perusal of the paper book filed before us along with the copy of submissions filed before the Ld. CIT(A), it is seen that the assessee has evidently demonstrated that it is eligible for claim of exemption u/s 10(23C) of the Act and all the conditions laid therein has been duly satisfied by the assessee trust (pages 135 and 136 of the paper book refers). The claim of the assessee is also supported by the audited Income and Expenditure Account of the assessee trust. The grant received by the assessee has been substantiated by the sanction letters and certifi....