GRAMA VIDYODAYA SANGHA (REGD),NARASIPURA vs. INCOME TAX OFFICER, EXEMPTIONS WARD, MYSORE

The brief facts of the case are that the assessee is a trust and not filed their return of income. Based on the details available with the department’s INSIGHT Portal, it was found that the assessee had effected financial transactions but not filed their return of income and therefore it was concluded that the transactions have been escaped from the assessment. Therefore, an order u/s. 148A(d) was passed and also simultaneously notice u/s. 148 was also issued to the assessee. In response to the notice issued u/s. 148, the assessee filed a return of income declaring a Nil income. Thereafter, notices u/s. 143(2) as well as u/s. 142(1) were issued. The assessee also responded to the notices and explained that the assessee is providing quality education by establishing several educational institutions in rural areas and also provides free meals to all the students since from the date of inception in 1946. The assessee also submitted that the cash deposits are nothing but the tuition fees directly deposited by the students which was also duly accounted by the assessee. The assessee also submitted that they have maintained separate cash books manually for all the ten institutions which was periodically verified by the department. The assessee had also furnished the copy of the balance sheet, P&L account, computation of income, sample copy of fee receipts, cash books and bank account statements. After considering the said details, the AO had accepted that the cash deposits were properly explained and therefore not making any addition on that score.

While filing the return u/s. 148 of the Act, the assessee had claimed the exemption u/s. 10(23C)(iiiad) of the Act and therefore the AO had sought for the various details about the trust. The assessee also furnished all the details and submitted that the income of each institute could not exceed Rs. 1 crore and therefore they are eligible for deduction u/s. 10(23C)(iiiad) of the Act. The AO had not accepted the said submission since the assessee’s receipts and payments for the whole year is about Rs. 2,66,41,753/- and therefore they are not entitled for deduction u/s. 10(23C)(iiiad) of the Act. The AO further alleged that the assessee had claimed the deduction u/s. 10(23C)(iiiad) of the Act in response to the notice issued u/s. 148 of the Act and therefore without filing any return u/s. 139(5), the deduction could not be claimed u/s. 10(23C)(iiiad) of the Act and relied on the judgment of the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze India Ltd. vs. CIT. The assessee objected to the said proposition and also relied on the order of the Coordinate Bench of this Tribunal as well as the Indore Bench of the ITAT. The AO has not accepted the said claim since the total receipts received by the assessee exceeds Rs. 1 crore and therefore the assessee is not entitled for deduction on the income earned by it.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) also on the wrong assumption, had confirmed the addition made by the AO on the ground that the gross receipts of the assessee for the A.Y. exceeds the threshold limit of Rs. 1 crore. The Ld.CIT(A) also not accepted the case of the assessee since in the original return of income, there was no such claim made by the assessee and therefore without filing any revised return within the time prescribed u/s. 139(5) of the Act, the deduction claimed in the return of income filed pursuant to the notice issued u/s. 148 of the Act is not in accordance with the principles laid down by the Hon’ble Supreme Court reported in 284 ITR 323 in the case of Goetze India Ltd. vs. CIT.

As against the said order, the present appeal has been filed by the assessee before this Tribunal.

At the time of hearing, the Ld.AR submitted that the dispute involved in this appeal is already covered by the judgment of the Hon’ble Jurisdictional High Court reported in (2013) 34 taxmann.com 285 in the case of CIT vs. Children’s Education Society and also furnished a copy of the said judgment and prayed to allow the appeal. The Ld.AR also submitted that the assessee had not filed their return of income since each of the institution has not crossed the threshold limit of Rs. 1 crore and therefore the assessee had claimed the said deduction in response to the return filed to the notice issued u/s. 148 of the Act and therefore the judgment of the Hon’ble Supreme Court could not be applicable to the facts of the present case and prayed to allow the appeal. The Ld.AR also filed a paper book and also enclosed the judgments and orders of the Hon’ble Supreme Court, Hon’ble Jurisdictional High Court, Hon’ble Jharkhand High Court and the order of the Jaipur as well as the Coordinate Bench of this Tribunal. The Ld.AR also enclosed the copy of the assessment order for the A.Y. 2015- 16 in which similar disallowance was made and also the subsequent rectification order in which the deduction has been granted u/s. 10(23C)(iiiad) of the Act.

The Ld.DR submitted that the total receipts of the assessee exceeds Rs. 1 crore and therefore the AO had rightly not granted the deduction u/s. 10(23C)(iiiad) of the Act and relied on the order of the lower authorities.

We have heard the arguments of both sides and perused the materials available on record.

The assessee is a trust and running ten educational institutions in the rural areas and the receipts in respect of the each institution does not exceed Rs. 1 crore as prescribed u/s. 10(23C)(iiiad) of the Act and on that basis, the assessee had claimed the deduction under the above said provision. The authorities are of the view that, in order to be eligible to get the benefit of section 10(23C)(iiiad) of the Act, the total receipts of the assessee should not exceed the threshold limit of Rs. 1 crore but in the present case, the total receipts of all the institutions exceeds Rs. 1 crore and therefore the assessee is not entitled for deduction u/s. 10(23C)(iiiad) of the Act. Even though the assessee had relied on the Coordinate Bench order of this Tribunal, the authorities had not accepted the same. The authorities had also relied on the judgment of the Hon’ble Supreme Court for the proposition that the assessee could not claim deduction in the return of income filed pursuant to the notice issued u/s. 148 of the Act. In the paper book, we also noticed that the order of the Coordinate Bench of this Tribunal which was relied on by the assessee before the lower authorities, was affirmed by the Hon’ble Jurisdictional High Court in the judgment reported in (2013) 34 taxmann.com 285 (Karnataka). In the said judgment, the Hon’ble Jurisdictional High Court had held that if an assessee is running several educational institutions, if any of them is wholly or substantially financed by the Government, then the income from such educational institution received by the assessee is not included while computing his total income. Similarly, income from each educational institution if they are not receiving any aid from the Government wholly or substantially in respect of which the aggregate annual receipt do not exceed Rs.1 crore received by the assessee, is also not included while computing annual total income of the assessee.

The above said judgment of the Hon’ble Karnataka High Court was also relied on by the Jaipur Bench of this Tribunal and held that the benefit u/s. 10(23C)(iiiad) of the Act could not be denied solely on ground of delayed filing of return u/s. 139(1) of the Act particularly, when aggregate receipts were below the specified limit.

There is no dispute in the facts of the present case except the allegation that the aggregate income of the assessee exceeds the threshold limit of Rs. 1 crore which are now settled by the judgment of the Hon’ble Jurisdictional High Court reported in (2013) 34 taxmann.com 285 (Karnataka).

Respectfully following the above said judgment of the Hon’ble Jurisdictional High Court, we also hold that the assessee is eligible for deduction u/s. 10(23C)(iiiad) of the Act since the receipts of each institute has not exceeded the threshold limit of Rs. 1 crore.

In the result, the appeal filed by the assessee is allowed.