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Income Tax Appellate Tribunal, DELHI BENCH “SMC- 3”, NEW DELHI
Before: N.K. SAINI
Appellant by : Sh. Akhilesh Kumar, Adv. Respondent by : Sh. S.K. Jain, Sr. DR Date of hearing : 15.11.2017 Date of pronouncement : 13-02-2017 O R D E R PER N.K. SAINI, A.M. : This is an appeal by the assessee against the order dated 01.06.2016 of CIT (A), Ghaziabad. Following grounds have been raised in this appeal:-
1. Because, the order of learned commissioner of Income Tax (A) is bad in law and against the facts and circumstances of the case and hence is unsustainable.
2. Because, learned commissioner of income tax (appeals) grossly erred in upholding denial of exemption u/s 10 (23C) (iiiad) on hostel rent receipts ignoring undisputed facts like hostel is providing to other charitable educational institute for students, establishment of hostel for students is also object, receipt is utilized for charitable purposes etc.
2. The grievance of the assessee in this appeal relates to the denial of exemption u/s 10 (23C) (iiiad) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the hostel rent receipt.
Facts of the case in brief are that the assessee is a society registered with the Registrar of Society Uttar Pradesh under Societies Registration Act. The assessee is running school named Vidhan Public School from nursery to class 10th and filed its return of income on 30.9.2013 declaring nil income after claiming the exemption u/s 10 (23C) (iiiad) of the Act. Later on, the case was selected for scrutiny. The AO, during the course of assessment proceedings noticed that the total receipts of the assessee includes hostel rent of Rs. 25,31,096/- as the hostel building was rented to Krishna Institute of Education and Technology. He, therefore, asked the assessee to explain as to why the hostel receipts should not be taxed. In response, the assessee submitted as under: "With reference to the hostel rent being received by the society, we are submitting that the hostel building is being owned by the society and it's not being currently being used by the society for running the school, so it is completely judgmental to let out the concerned property to others. Owing to the above explanation, the society has let out to Krishna Institute of education and technology, which is again the education society giving education, that is, of similar nature as of our society. Also, the receipts of the hostel rent are completely accounted for in the concerned income & expenditure a/c and completely utilized for the utmost attainment of the society's objectives.” The AO did not find merit in the aforesaid contention of the assessee and considered the rent receipts as income from house property. Accordingly, the exemption u/s 10 (23C) (iiiad) on the rent receipt of Rs. 25,31,096/- was denied.
Being aggrieved the assessee carried the matter to the learned CIT(A) and submitted that as under:
This is to cite the following judgments for your goodself to elaborate the non taxability of postal receipts: According to section 10(23C)(iiiad), any university and other education institution existing solely for educational purposes and not for the purpose of profit if the aggregate annual receipts of such institution do not exceed the amount of annual receipts as 1 crore. Also the pronounced Calcutta High Court judgment citation of 2001 viz Directors of Income Tax (Exemption) versus Sahu Jain Trust held that to enable the trust to carry out its charitable object in effective manner if rental income was received by way of sub lettering for that reason, the exemption could not have been denied by assessing officer. It was further pointed out that in the past, also the assessee get the benefit of exemption in respect of self some rental income, and therefore, there was no just reason for disallowing the relief claimed. Also the below enclosed advance ruling empowers the similar view that if the income is received from one society to one society to other society have same character, it will be entitled for exemption.
The learned CIT(A) after considering the submissions of the assessee confirmed the action of the AO by observing in para 5 and 6 of the impugned order which read as under:
“5. Having considered facts and circumstances and rival contentions, I find that the rent receipt cannot be held to be from charitable activity of education. The appellant has not shown how the cited cases are relevant in the case of appellant. On the other hand I find that the Hon'ble jurisdictional ITAT Delhi in the case of Param Hans Swami Uma Mission vs ACIT in appeal no. 4154/2011 has categorically held that: "From the plain reading of section 10(23C) (iiiad), it emerges that legislature had in its mind annual receipts of school or university as the case may be for consideration of exemption limit and not that of total income of society running that school or university. The present case is of a society running a school. The society besides income from running of a school is having other sources of income also. In the present case, income from interest on FDRs is an additional income of society and it cannot be considered to be part of annual receipts of the school. Therefore, in our considered opinion assessee was eligible for exemption u/s 10(23)(iiiad) as annual school receipts did not exceed One crore"
Respectfully following above judgment, I am of the considered opinion
that rent receipts cannot be held to be the receipts eligible for exemption u/s 10(23C)(iiiad). The action of the AO therefore call for no interference. Ground of appeal nos. 2 & 3 are rejected.”
Now, the assessee is in appeal. The learned counsel for the assessee 6. reiterated the submissions made before the authorities below and further submitted that in the succeeding year and preceding year, the exemption u/s 10 (23C) (iiiad) has been allowed to the assessee and the facts for this year under consideration are identical vis-à-vis, the preceding year and succeeding year, therefore, keeping in view, the principles of consistency, exemption u/s 10 (23C) (iiiad) of the Act ought to have been allowed for the year under consideration also.
Reliance was placed on the following case laws: 7. � DDIT Vs Arya Vysya Maternity Home & Child Welfare Fund 154 ITD 844 (Chennai) � DIT Vs Sahu Jain Trust (2011) 11 Taxmann.com 436 (Calcutta) � DIT Vs Lala Lajpatrai Memorial Trust (2016) 383 ITR 345 � Param Hans Swami Uma Bharti Vs ACIT in (Del) � Jyoti Prabha Society Vs CIT (2003) 87 ITD 126 (Del.) � Queens’s Educational Society Vs CIT (2015) 372 ITR 699 (SC) � CCIT Vs St. Peter’s Educational Society (2016) 385 ITR 66 (SC)
It was further submitted that the rental income for property in question is utilized for charitable purposes, therefore, the assessee was eligible for exemption. The reliance was placed on the following case laws:
� DIT (Exemp.) V APPAREL EXPORT PROMOTION COUNCIL
(2000) 244 ITR 736 (DEL). � RADHASOAMI SATSANG V CIT (1992) 193 ITR 321 (SC) � UNION OF INDIA V SATISH PANALAL SHAH (2001) 249 ITR 221 (SC) 9. In his rival submissions, the learned DR supported the orders of the authorities below and reiterated the observations made in their respective orders.
I have considered the submissions of both the parties and carefully gone through the material available on the record, in the present case, it appears that the learned CIT(A) while denying the exemption to the assessee followed the decision of ITAT in the case of Param Hans Swami Uma Bharti Mission vs. ACIT, Circle Rewari, Rewari (supra). In the said case, it is noted that the income was from other source on account of interest of FDR. However, in the present case, the assessee received the rent from an educational institute namely Krishna Institute of Education and Technology, it also appears that the decisions now relied by the assessee were not available to the authorities below because there is no discussion about those decisions either in the assessment order or in the impugned order of the learned CIT(A). Furthermore, it is not clear as to whether the facts were identical when the exemption u/s 10 (23C) (iiiad) of the Act was allowed to the assessee in the preceding and succeeding years. I, therefore, in the absence of clear facts on record deem it appropriate to set aside the issue back to the file of the learned CIT(A) to be adjudicated afresh, in accordance with law, after considering the various decisions relied by the assessee and also after verifying the facts from the record relevant to the preceding and succeeding year. Needless to mention that a due and reasonable opportunity of being heard be provided to the assessee.
In the result, appeal is allowed for statistical purposes.