IMC OF ITI,ALIGARH vs. ITO EXMP., ALIGARH

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ITA 749/AGR/2018Status: DisposedITAT Agra02 July 2019AY 2015-165 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the benefit of Section 10(23C)(iiiad) of the Income Tax Act, 1961. The Tribunal reasoned that the provision does not mandate that the assessee must own the educational institution; it is sufficient if the income is received on behalf of an educational institution. The assessee society is engaged in upgrading and improving a government-run ITI and providing on-the-job training, which are integral and essential parts of educational activities. The Tribunal noted that the lower authorities admitted the assessee was managing an educational institution. Furthermore, the memorandum of understanding with the government clearly indicated the objective of imparting education and improving the standard of the ITI. Therefore, the Assessing Officer and CIT(A) erred in rejecting the claim. Consequently, the Tribunal allowed the appeal and directed the Assessing Officer to grant the benefit of Section 10(23C)(iiiad). Regarding the penalty under Section 271(1)(c), the Tribunal held that since the substantive appeal for exemption was allowed, the basis for the penalty ceased to exist. Therefore, the penalty was deleted in the interest of justice. The appeal was allowed.

What were the facts?

The assessee, M/s. IMC of ITI Koil Kasimpur Power House Govt., Govt. ITI, Koil, Aligarh, filed an appeal before the Income-Tax Appellate Tribunal (ITAT) against the order of the CIT(A) dated 30.08.2018. The CIT(A) had sustained a penalty imposed by the Assessing Officer. The dispute arose because the assessee, a society registered under the Societies Registration Act, claimed exemption under Section 10(23C)(iiiad) of the Income Tax Act for its income, which included interest from bank deposits totaling Rs. 34,53,762. The Assessing Officer disallowed this claim, treating the assessee as not solely for educational purposes and not wholly or substantially financed by the government. The Assessing Officer also imposed a penalty under Section 271(1)(c). The assessee also claimed benefit under Section 10(46). The ITAT had previously, by an order dated 19.06.2019, allowed the assessee's substantive appeal regarding the exemption under Section 10(23C)(iiiad).

What were the issues?

1. Whether the assessee, an Institute Management Committee (IMC) managing a Government ITI, is entitled to claim exemption under Section 10(23C)(iiiad) of the Income Tax Act, 1961, as an educational institution existing solely for educational purposes and not for profit, and which is wholly or substantially financed by the Government. - Assessee's contention: The assessee argued that it is a society formed to assist in improving vocational training and skill development, specifically for the upgradation of ITI Koil into a centre of excellence. It receives interest-free loans from the Ministry of Labour & Employment and its income, derived from interest on bank deposits, should be exempt under Section 10(23C)(iiiad) as it is involved in running and managing an educational institution. It also claimed benefit under Section 10(46). - Revenue's contention: The revenue, through the Assessing Officer and CIT(A), contended that the assessee is not a university or educational institution existing solely for educational purposes and not for profit, and therefore, not eligible for the exemption. The revenue relied on the orders of the lower authorities. 2. Whether the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, is sustainable when the substantive claim for exemption has been allowed. - Assessee's contention: The assessee argued that since the substantive appeal regarding the denial of exemption under Section 10(23C)(iiiad) has been allowed, the basis for imposing the penalty has ceased to exist, and therefore, the penalty should be deleted. - Revenue's contention: The learned DR relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 10(46),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Before: Shri Laliet Kumar & Dr. Mitha Lal Meena

For Appellant: Smt. Manish Vishnoi, Advocate
For Respondent: Shri Waseem Arshad, Sr. DR
Hearing: 01.07.2019Pronounced: 02.07.2019

In the Income-Tax Appellate Tribunal, Agra Bench, Agra

Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member

ITA No. 749/Agr/2018 Assessment Year: 2015-16

M/s. IMC of ITI Koil Kasimpur Power vs. Income-tax Officer, House Govt., Govt. ITI, Koil, Aligarh. Ward(Exemption), PAN: AAAAI5120N Ghaziabad. (Appellant) (Respondent)

Appellant by Smt. Manish Vishnoi, Advocate Respondent by Shri Waseem Arshad, Sr. DR

Date of Hearing 01.07.2019 Date of Pronouncement 02.07.2019

ORDER Per Laliet Kumar, J.M.: This appeal was filed by the assessee, being aggrieved by the order passed by the CIT(A) on 30.08.2018, sustaining the penalty as the assessee was not having registration u/s. 10(23) of the Act, on the following grounds : 1. Trust and its activities a) The assesses is society and is duly registered with the Registrar of society, Uttar Pradesh under Society Registration Act vide registration No. 1190 of 2011-2012 dated 29/08/2011.

b) The assessee society is a Institute Management Committee and is formed with the aim (i) the main aim of the society is to assist in improvement of standard of vocational training and skill development in the country as a whole (ii) the society has been formed with a specific aim of up gradation of the industrial training institute (ITI) Koil into a centre of excellence in such a way that the training provided in the ITI is improve and become demand driven leading to better employability of the passing out graduate. For the purpose,

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interest free loan of RS. 2.5 Crore was granted to the society by Ministry of Labor Employment, New Delhi.

c) On perusal of the income & Expenditure a/c, it is noticed that total receipts of Rs. 34,53,762/-, being interest from bank saving, flexi deposits, and FD, has been disclosed and surplus has also been disclosed at RS, 18,42,117/-, which is claimed by the assessee as exempt u/s 10(23c) (iiiad) of the income tax. The assessee is not a university or other educational institution existing solely for education purpose for imparting education, but the assessee is a institute of management committee (IMC) to assist financially in improvement and up gradation of the Industrial training institute Koil into a centre of excellence in such a way that training provided in the ITI is improved and become driven leading to better employability of the passing out graduates. However the assessee is running a educational institutions existing solely for educational purpose and not for purpose of profit, shall be exempt from under section 10(23C)(iv). Such approval is not required in case of university or educational institute wholly or substantially financed by the government or if their aggregate annual receipts do not exceed Rs One Crore.

d) Under Section 10(46) (Specifies Income Arising to Notifies Board Or Trust or Commission):- The institution is owned by the state government and it has controlling interest in the appellant society .The appellant Society is a notified body u/s 10(46) and hence can claim the benefit of this section.( List of ITIs along with Industry Partners for the Scheme of Upgradation of govt. are attached.)

e) Assessing Officer disallowed out status of a charitable Trust and imposed an income Tax at maximum marginal rate Rs. 617524/-

f) The assessing officers also wrongly disallow the provision of section 10(23C).

g) The assessing officer also wrongly disallow exemption u/s 10(46). h) The assessing officer also impose penalty u/s 271(1)(c) wrongly.

2.

At the outset, the ld. AR submitted that the Tribunal vide order dated 19.06.2019 has allowed the substantive appeal of the assessee thereby holding that the assessee is entitled to benefit of sec. 10(23)(iiiad) of the Act to the following effect :

ITA No. 749/Agr/2018 3

10.

“We have heard the rival contentions of the parties and perused the material available on record and also gone through the decisions relied upon by Ld.AR for the assessee as well as by the Ld. DR for the revenue.

11.

Section 10(23C) provides as under :

“10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included Section 10(23C) (iiiad) provides as under: (23C) any income received by any person on behalf of—

i) the Prime Minister’s National Relief Fund; or ii) ……………………… iii) ……………………. [(iiiab) 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; or

12.

from the perusal of the above noted provision it is abundantly clear that the income arising out of the activities carrying out by the assessee if falls under, the above noted clause, than it shall not be included for the purpose of computing the total income of the previous year. This Section further provides that income may be received by the assessee on behalf of the University or any other educational institution. Meaning thereby it is not necessary to run University or run educational institution, by the Assessee itself, for claiming the benefit of section 10 (23 C) (iiiad). In our view, in law, it is sufficient if the income is received by assessee on behalf of educational institution for claiming the benefit under section 10(23), subject to the fulfillment of conditions of disbursements of grant and subject to utilization of the revenue for the purposes of education alone.

13.

We are of the opinion that there is no requirement in law to own the educational institution for the purposes of claiming the benefit of section 10(23C)(iiad), as it can be received by the assessee on behalf of the society or institution running the educational institution . What is required and

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sine qua non for claiming benefit of 10(23C)(iiad), is to run the education institution and receive the income for that purposes eith itself or on behalf of institution running the educational institution.

14.

In the present case assessee society is engaged in providing upgradation/improvement to the government run ITI and is also providing on the job-training to the students of the government run ITI, after entering into memorandum of understanding with the Central and state Government , further the assessee is bound by the instructions issued by both the governments. Both the lower authorities have admitted that the assessee is managing the ITI ( ref para 5.6 of CIT(A) :” Though the appellant society’s managing an educational institution namely ITI Kasganj,………….”. ) an educational institute.

15.

In our considered opinion the upgradation/improvement of the government run ITI and providing job-training to the students for the purpose of skill development is an integral and essential part of education activities and is education. In view thereof we are of the opinion that that the assessee society is involved in running and managing of the education institutions. 16. There is one more reason for allowing the appeal for the assessee as the assessee had entered into the memorandum of understanding with the government of India for the purposes stated above and also mentioned in memorandum of understanding. The objects of the understanding clearly suggest that this partnership was conceived with a view to impart education/upgrade and improve the standard of the government ITI and also provide on-the-job training/skill development to the student studying in ITI.

17.

In view the above we are of the opinion that the assessing officer and the Commissioner both erred in rejecting the claim of the assessee and accordingly we allow the appeal of the assessee and direct the assessing officer to grant the benefit of10(23C)(iiad) to the assessee in accordance with law.”

3.

Per contra, the ld. DR relied on the orders of the lower authorities.

ITA No. 749/Agr/2018 5

4.

As the Tribunal vide order dated 19.06.2019 had allowed the appeal of the assessee for refusing to grant benefit of section 10(23)(iiiad) and the present order under challenge is consequence of denial of benefit of 10(23)(iiiad), on account of which the penalty is imposed by the Assessing Officer and confirmed by the CIT(A). Since the basis of imposition of penalty ceased to exist, therefore, the interest of justice require that the penalty imposed by the Revenue is required to be deleted. Accordingly, we delete the penalty.

5.

In the result, the appeal is allowed. Order pronounced in the open court. Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member

Dated: 02/07/2019 *aks* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra

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