MURUGAMMAI EDUCATIONAL TRUST,CHENNAI vs. ITO, EXEMPTIONS WARD 4,, CHENNAI

5. Even otherwise, the Fund is not directly for Educational activities and therefore, only the fee receipts ought to have been considered for 1 Crore limit.

6. This claim was made based on the following judgments, a. ITO Exemptions Vs. Serum Institute of India Research Foundation; b. Divine Educational Institute and Social Development Society Vs. ITO Exemption, Ghaziabad; c. Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust; In the above judgments, Hon'ble Tribunals and Courts held that the donations received towards corpus/ specific funds, were to be treated as Capital Receipts even though the Trust had not obtained registration under Section 12AA of IT Act, 1961. Further, it was also held that donations to the building fund being termed as Capital receipt cannot be included to find out the gross receipt for claiming exemptions u/s 10(23C)(iiiad).

7. The CIT (A) failed to appreciate the fact that the decision in Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust, decided by Hon'ble ITAT had attained finality as the Hon'ble Supreme Court of India vide its Order dated 20.04.2018 in (Civil) Diary No(s). 10671/2018 rejected the appeal preferred by the Department. Therefore, the decision having attained finality, it ought to have been followed and the Appellant's claim for exemption u/s 10(23C)(iiiad) ought to have been allowed. During the proceeding s relating to stay of collection of tax, CIT(E) had granted as the assessee has a good case on merits: 8. The Appellant had relied on the decision of Commissioner of Income Tax, Exemptions Vs. Shanti Devi Educational Trust, decided by Hon'ble ITAT had attained finality as the Hon'ble Supreme Court of India vide its Order dated 20.04.2018 in (Civil) Diary No(s). 10671/2018. The CIT (Exemptions) after perusing this judgment, agreed that the decision has attained finality and hence can be relied on.

9. Therefore, based on the above, the CIT (Exemptions) granted an order of stay of collection of tax. B. The relief granted u/s 12A, does not benefit the Appellant and hence this Appeal:

10. The appellant though has been given a relief u/s 12A of the Act, this has a catch, where the appellant has to file audit report in Form 108, which if now filed would be belated. The CIT (A) ought to have given the Appellant time to file Form 10B.

11. However, without prejudice, even if the relief was granted u/s 12A, the CIT{A) ought to have allowed the depreciation, which has not been done. The CIT(A) allowed the depreciation as computed by the AO, ignoring the fact that the depreciation was never claimed in the Appellant's return of income. The AO and the CIT(A) erred in reducing the claim of Depreciation for Rs.48,17.214/- to Rs.68,871/-: 12. The AO had issued a show cause notice, the issue of depreciation was never raised in the SCN. However, while passing the order, the AO had suddenly brought this issue and passed order, which is null and void.

The Ld. Sr. DR supported the findings of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3. The assessee being registered trust is running an educational institution by the name MAV Vidhyashram at Sembakkam. The assessee claimed its entire income exempt u/s 10(23C)(iiiad). The assessee was not registered u/s 12AA of the act. The provisions of Sec. 10(23C)(iiiad) provide that income of any university or educational institution existing solely for education and not for purpose of profit would be exempt provided the aggregate annual receipts does not exceed the prescribed limits of Rs.1 Crore. However, the assessee admitted Rs.97.92 Lacs as its income and another amount of Rs.425.65 Lacs was admitted as receipt of building funds. The building funds receipts were claimed to be exempt u/s 11(1)(d). However, the assessee did not obtain approval u/s 10(23C)(vi). Since the aggregate receipts including building fund was more than threshold limit of Rs.1 Crore, Ld. AO held that it would not be eligible to claim exemption u/s 10(23C)(iiiad). The trust was also not registered u/s 12AA and therefore, the assessee was not eligible to claim exemption u/s 11 also. In such a situation, the income was to be computed on commercial principles. The amount received on account of building fund was brought to tax along with surplus. Finally, the total income was determined at Rs.475.62 Lacs. Appellate Proceedings 4. The assessee stated that capital receipt could not be included to compute aggregate annual receipts in terms of Sec.10(23C)(iiiad). It was also brought to the notice that during the pendency of assessment proceedings, the registration was granted to the assessee u/s 12AA on 14-12-2018. The Ld. CIT(A), considering the proviso to Sec.12A as inserted w.e.f. 01-10-2014, noted that the assessee received registration during pendency of assessment proceedings and therefore, the exemption u/s 11 & 12 would be allowable to the assessee. The ground relating to depreciation was dismissed. Aggrieved, the assessee is in further appeal before us. Our findings an Adjudication 5. From the facts, it emerges that Ld. CIT(A) has allowed exemption u/s 11 & 12 but omitted to consider the claim of exemption u/s 10(23C)(iiiad). The Ld. AR has stated that building fund so received by the assessee is not to be included in gross receipts for calculating the prescribed limit of Rs.1 Crores for deciding eligibility u/s 10(23C)(iiiad). For the same, Ld. AR has relied on certain decisions. The Ld. AR has stated that the relief granted u/s 12A do not benefit the assessee at all since the assessee has not file requisite Form No.10B. It is another submission that depreciation has never been claimed in the return of income. Further, Ld. AO did not raise the issue of depreciation in the show cause notices. It has been submitted that depreciation has been allowed only on addition to fixed assets and not on the opening balance whereas the assessee has claimed depreciation as per Income Tax Rules only and not as per Companies Act rates. We are of the opinion that all these aspects require re-examination by Ld. AO. Therefore, keeping all the issues open, we set aside the impugned order and restore the assessment back to the file of Ld. AO for de novo consideration of assessee’s claim u/s 10(23C)(iiiad) and also considering the fact that the assessee has been granted registration u/s 12AA. The assessee is directed to substantiate its stand.