Allahabad High Court
The Commissioner Of Income Tax ... vs Wachaspati Madhupati Prani Sewa ... on 30 October, 2017
Bench: Abhinava Upadhya, Ashok Kumar
HIGH COURT OF JUDICATURE AT ALLAHABAD
Court No. - 4 A.F.R.
Case :- INCOME TAX APPEAL No. - 258 of 2013
Appellant :- The Commissioner Of Income Tax Alld.
Respondent :- Wachaspati Madhupati Prani Sewa Sansthan
Counsel for Appellant :- S.S.C. I.T.,Shubham Agrawal
Counsel for Respondent :- Ashish Bansal,S.K. Garg
Hon'ble Abhinava Upadhya, J.
Hon'ble Ashok Kumar,J.
(Per-Ashok Kumar, J.)
This is an Income Tax Appeal arise from the decision of the Income Tax Appellate Tribunal (in short 'ITAT') dated 1.5.2013 passed in I.T.A. No. 485/A/2012 (Assessment Year 2009-10).
The appeal has been filed by the Commissioner of Income Tax, Allahabad and the following questions of law have been framed by the Revenue:
"(A) Whether the order passed under Section 263 of the Act is absolutely justified as fulfills twin conditions laid therein but its non consideration in its prospective manner by the ITAT renders its order against the law which is not sustainable in any manner.
(B) Whether from the material evidence available on record it is clearly established that the respondent was not registered under Section 12A/12AA of the Act for the relevant assessment year and as such not entitle for the exemption claimed to this effect and it has been rightly and legally arrived at conclusion while exercising the jurisdiction conferred under Section 263 of the Act but it appears the attention of the ITAT escape to this effect while observing otherwise vide order impugned which is not permissible in law.
(C) Whether the case law provided before the ITAT on behalf of the appellant fully applicable to the facts and circumstance of the matter has in fact not been taken into account in its prospective manner and arrived at incorrect conclusion vide order impugned by the ITAT."
We have heard Sri Shubham Agrawal, learned counsel for the appellant and Sri Ashish Bansal, learned counsel representing the respondent assessee.
The facts of the case are that the respondent assessee is engaged in activities of imparting education. The Commissioner of Income Tax has got an information and based on the said information the Commissioner of Income Tax found that the assessment order for the assessment year 2009-10 passed by the Assessing Authority was erroneous and prejudicial to the interest of the Revenue.
A notice has been issued in which it has been stated that the claim of the respondent assessee under Section 11/12 of the Income Tax Act, 1961 (hereinafter referred to as 'Act') has been wrongly allowed to the assessee despite the fact that the assessee society is not registered under Section 12A/12AA of the Act. The CIT (Appeal) after considering the submission of the assessee in pursuance of a show cause notice has held as follows :
"3.4) As further laid down by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC), the twin conditions, namely (i) the order of the assessing officer sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue, are both fulfilled in the instant case, based on facts and legal position as discussed above, I therefore, hold that the assessment order passed u/s 143(3) of the I.T. Act, 1961, dated Dec., 29, 2011, in the case of assessee for the Assessment Year 2009-10 is erroneous and prejudicial to the interest of revenue and the same is hereby cancelled and the assessing officer is directed to make a fresh assessment in this case after considering and complying with the issues raised and as elaborately discussed in the present order."
The order of the Commissioner dated 11.10.2012 has been challenged by the assessee/respondent before the ITAT. The grounds taken by the assessee before the Tribunal was that the Commissioner has erred in holding the regular assessment order dated 28.12.2011 was both erroneous as well as prejudicial to the interest of Revenue and directing the Assessing Authority to make fresh assessment after consideration of the decision of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) is erroneous. It is further submitted before the ITAT that the Assessing Authority while passing the regular assessment order has agreed fully with the provisions of Act and has correctly applied the probable view therefore, the view taken by the Assessing Authority cannot to be in erroneous in law. It is further submitted that the order of the CIT passed under Section 263 is contrary to the facts, law and principle of natural justice.
The Tribunal while deciding the appeal filed by the assessee has considered the grounds which are taken by the assessee and has allowed the appeal while setting aside the order passed by the CIT.
The Commissioner of Income Tax has proceeded under Section 263 of the Act on the basis that the claim of exemption under Section 12 of the Act has been wrongly allowed by the Assessing Officer despite the fact that the society is not registered under Section 12A/12AA in the relevant assessment year. In the reply submitted by the assessee society has stated that during the relevant assessment year, the society was running an intermediate college and from the said activity the society has collected a sum of Rs.95,71,259/-. The Assessing Authority has allowed the benefit of Section 10(23C)(iiiad). Section 10 of the Act provides certain income not included in the total income. Sub section (23C) of Section 10 provides any income received by any person on behalf of -
(i) ...........
sub clause (iiiad) provides as follows :
"any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed; or"
Clause (iiiad) of Section (23C) of Section 10 clearly provides that any university or any educational institution established for the educational purposes and is not for the purposes of profit do not exceed the amount of annual receipts within the prescribed limit (in the present case it is Rs. 1 crore vide Rule 2-bc). It will be entitled to get the benefit of Section 10.
The CIT in the proceedings initiated under Section 263 has found that the assessee has in receipt from educational activities of more than Rs. 1 crore as such is not exempted from income tax. In the Assessment Year in question the society has collected total sum of Rs.95,71,259/- as an amount of annual receipts which was admitted less than Rs.1 core as such has claimed the exemption as per provisions of Section 10(23C)(iiiad) of the Act. The assessee society is registered under Section 12AA w.e.f. Assessment Aear 2010-11, and has received a sum of Rs.6,67,000/- towards buildings/capital assets and Rs.4,01,900/- towards donation, which the Commissioner has added as part of the corpus fund while treated the sum as the capital receipt/annural receipt.
According to the Commissioner as per balance-sheet for the financial 2008-09 (assessment year 2009-10) which reflects that the expenditure account and receipt and payment account were contradictory. According to the Commissioner since the gross receipt are over and above Rs.1 crore as such the assessee has received a total sum of Rs.1,06,74,432/- which is more than Rs.1 crore, the claim and benefit to the petitioner/assessee is not acceptable.
The ITAT has considered the issue in detail and has also considered the provisions of Section 1 and Section 263 of the Act. Section 263(1) provides as under :
"The [Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee and opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment."
In the aforesaid background the ITAT has concluded, after due consideration of the fact of the present case, that the Commissioner has taken a particular view that the gross received is more than Rs.1 crore therefore, the assessee society is not entitled to get the benefit of the provisions of Section 10(23C)(iiiad) of the Act.
In the present case admittedly the assessee society/ college has received an account of tuition fee and other fee less than Rs.1 crore (which is prescribed limit) i.e. Rs.95,71,259/- therefore, the Tribunal has rightly held that the proceedings under Section 263(1) initiated by the Commissioner are illegal and the Commissioner is not empowered to invoke the power of Section 263 of the Act as the basic consideration to hold that the order of Assessing Officer is erroneous, is missing upon the facts and circumstances of the present case.
We are in full agreement with the finding of the ITAT as we find that the assessee society is running a school and has admittedly received the tuition fee being the annual receipts below the prescribed limit of Rs.1 crore and according to us the exemption limit clearly provides the cut of figure of Rs.1 crore being the annual receipt of the educational Institution or the University, as the case may be, and not that of the total income of the society running the educational Institution or University. In the present case, the income of Rs.6,67,000/- towards the buildings/capital assets and Rs.4,01,900/- received towards donation cannot be part of the annual receipts of the University/College/School. Therefore, in our considered opinion the assessee is entitled for exemption under Section 10(23C)(iiiad) as annual income of the assessee society did not exceed Rs.1 crore.
The appeal filed by the Commissioner is dismissed accordingly.
Order Date :- 30.10.2017
S.S.
.
(Ashok Kumar, J.) (Abhinava Upadhya, J.)
