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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as [‘CIT(A)’] dated 27.06.2019 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as [‘the Act’] for the Assessment Year (AY) 2013-14. The assessee has raised the following grounds of appeal:
2 Mum 2019 Bombay Suburban Art & Craft Education Society “1. Learned CIT A erred in not considering the Salary Grant as Income of the Assessee. 2. The Learned CIT A has denied the benefit of accumulation u/s 11(1) (a) to the extent of 15% of the Income. 3. Learned CIT A erred in not appreciating the grounds for sanction of Salary Grant by Government of Maharashtra to aided institutions. 4. The appellant craves leave to add, amend or delete any of the above Grounds of appeal
.”
2. Brief facts of the case are that the assessee is a trust registered u/s 12A. Assessee is involved in establishing and conducting schools, colleges and institutions. Assessee also conducts lectures, conferences, symposia, seminars and discussions on techniques on art, craft and technical education. Assessee filed its return of income on 27-09-2013 declaring NIL income.
3. Assessee‘s case was selected for scrutiny and an amount of Rs 1,66,19,639/- observed to be received as government grant and the same is rooted through income and expenditure account. Assessing officer was not agreed with the treatment given by the assessee and nullifies the same on the premises that the same is not an income or corpus donation. Hence, same can’t be considered for the purposes of income as well as expense and consequently not eligible for accumulation to the extent of 15% u/s 11(1)(a). Aggrieved with this order of AO assessee approached the office of Ld. CIT (A)-3 but in vain. Ld. CIT (A) also confirmed the order of AO. Against this order of Ld. CIT (A), assessee approached ITAT through this appeal. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee.
4. On the whole issue our observations are as under:
3 Mum 2019 Bombay Suburban Art & Craft Education Society i) Assessee is a public charitable trust registered u/s 12A. ii) Assessee is running institutions to impart educations. iii) There is an instruction from the Government of Maharashtra that assessee will not charge fee from certain sections of the society and Government of Maharashtra restricted the increase in tuition fee in the year 1977 with an assurance that government will reimburse the salary expenditure of the approved staff and following modalities were decided as under: “Tuition fees received in the previous year to be deposited with the government in 12 instalments at the subsequent financial year and in turn government used to transfer the gross salary to the School account for disbursement to the staff following statement will explain the same in detail. Tuition fees received in the Financial Year ending 31.03.1977 15,000 Monthly Salary expenditure for F.Y. 1977-78 1,50,000 (-) 1/12th Salary deposited with Government (1,250) Net salary grant due 1,48,750 Amount disbursed as a grant 1,50,000 In addition to the above, aided schools have to offer Free Education to students from scheduled caste, scheduled tribes. Nomadic tribes and girl students. Schools are supposed to furnish the following details for deciding the tuition fees due from students. Total no. of students 1000 (-) Non fee paying students Scheduled caste xx Scheduled caste xx Nomadic tribes xx (900) Free paying students 100 4 ITA No. 5801 Mum 2019 Bombay Suburban Art & Craft Education Society On account of the restrictions imposed on this increase in the fees schools are unable to pay staff salary as per government schools and therefore shortfall reimbursed by the government in the form of grant. For all practical purposes such as provident fund, gratuity TDS schools management is an employer and has to abide by the respective laws. Staff appointment letters are issued by employer (assessee) and not by government, except for approval of the employee. In view of the above principle (Reimbursement towards fees) the amount as properly shown as income of the assessee. Once we accept that the grant in the nature of reimbursement of fees assessee is eligible for accumulation under section 11(1)(a) of the Income Tax Act, 1961.”
In view of the above observations we found that amount received by the assessee trust is in the nature of deficit financing (arisen because of following state government instruction). In our considered view as observed assessee is not getting any grant in the form of corpus or general. Assessee is duty bound to deposit the fee collected with Government of Maharashtra along with the salary statement of the approved staff and only the difference of both is being paid by the state government.
To adjudicate this matter in right prospective we need to understand the whole transaction and the principle of substance over form is also applicable in this case. Considering the facts in totality we observe that the amount of so called reimbursement/grant received by assessee trust is a revenue receipt in substance. As the trust is following the instructions of Government of Maharashtra in turn, government is basically paying the fee of those students those were not paying any fee or getting subsidised education.
5 Mum 2019 Bombay Suburban Art & Craft Education Society 7. We have considered the case laws relied upon by the department but the same are distinguishable on the facts and are not applicable to the facts of the case. Further, assessment orders for AY 2008-09 to 2012-13 were also considered and found that contention of the assessee were accepted and no objection on this front ever raised by the department. Although the principle of res-judicata is not applicable in the income tax proceedings still as a consistent view department has taken so this fact strengthens the side of assessee for the year under consideration. In AY 2016-17 also department itself followed the orders for AY 2008-09 to 2012-13.
In view of above observations we are of the considered view that stand taken by the authorities below is not sustainable hence, set aside and grounds raised by assessee are allowed.
In the result appeal filed by the assessee is allowed. Order pronounced in the open court on 13th day of January, 2023.