SRI SAI EDUCATIONAL TRUST ,CHITAMANI vs. THE INCOME TAX OFFICER(EXEMPTION) WARD-3 , BANGALORE

The learned Commissioner of Income tax (Appeals) erred in holding that the appellant is engaged in activities for the purposes of profit in its educational institutions and as such not entitle to exemption of its income u/s 10(23C) (iiiad) of the Act.

The learned Commissioner of Income Tax (Appeals) has totally based on the pattern of computation filed in the return of income and the Form l0B signed by the Auditor and without any other material on record. 3. The learned Commissioner of Income Tax (Appeals) having held that the Assessing Authority has correctly proceeded with the appellant's claim u/s 11 of the Act ought

The learned Commissioner of Income Tax (Appeals) has failed to adjudicate the appellant's ground with regard to investments on capital assets and repayments of loans as application of funds towards objects of trust.

The learned Commissioner of Income Tax (Appeals) has failed to adjudicate the appellant's ground with regard to levy of interest charged u/s 234 A and 234 B of the Act.

The order of learned Commissioner of Income Tax (Appeals) is not sustainable either in law or on facts.

During the course of hearing, the learned counsel for the assessee invited my attention to the order of the AO. Though the assessee has got the Registration under section 12A of the Income Tax Act, it claimed exemption under section 10(23C)(IIIad) but the AO has not examined the claim in the light of the provisions of section 10(23C)(IIIad) of the Act. He rather examined the claim of exemption under section 11 of the Act and added back the depreciation claimed on vehicles and other assets after denying the benefit of exemption under section 11 of the Act. The assessee preferred any appeal before the CIT(A) and the CIT(A) did not appreciate the facts and has confirmed the order of the AO having observed that the educational operations were commercial in nature. Now the assessee is before us with the submission that no doubt the assessee was granted registration under section 12A of the Act but in the impugned assessment year it claimed exemption under section 10(23C)(IIIad) of the Act but this aspect was not examined by the AO and he disallowed the claim under section 11 of the Act. Besides, depreciation on assets and vehicles were also disallowed. Even the CIT(A) did not appreciate the fact that assessee has filed the return of income and claimed deduction under section 10(23C)(IIIad) of the Act and he confirmed the disallowance after concluding that the educational operations were commercial in nature.

Having carefully examined the orders of lower authorities in the light of rival submissions, I find that from the assessment order, it is not borne out as to whether the assessee has claimed exemption under section 10(23C)(IIIad) of the Act. In the entire assessment order, the AO has made discussion with regard to Registration under section 12A and claim of deduction under section 11 of the Act. Since certain conditions were not fulfilled, the AO denied the deductions and the depreciation on vehicles and assets following the judgment of the Apex Court in the case of Escorts Ltd., Vs. Union of India (199 ITR 43).

Before the CIT(A), though the assessee has raised the claim, the deductions were claimed under section 10(23C)(IIIad) of the Act, but the CIT(A) has confirmed the disallowance without verifying the facts whether the deduction was claimed under section 10(23C)(IIIad) of the Act or under section 11 of the Act. He summarily confirmed the disallowance having observed that educational operations were commercial in nature. During the course of hearing, the learned counsel for the assessee invited my attention to the balance sheets and the computation of income. He has also filed a copy of receipts and payments account and income and expenditure accounts for the year ended 31.03.2012 in support of his contentions that there was no profit motive of the assessee in running the educational institutions and whatever excess receipt was there, it was applied for the educational purposes.

Having carefully examined the financial statements, copy of the returns and the written submissions, I find that lower authorities have not properly appreciated the claim and contentions of the assessee. Therefore, it requires fresh adjudication by the AO. Accordingly, I set aside the order of the CIT(A) and restore the matter to the AO with the direction to re-examine the claim of exemption under section 10(23C)(IIIad) of the Act. If the requisite conditions are satisfied, the

In the result, appeal of the assessee stands allowed.