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Facts
The assessee, a registered charitable trust running 12 educational institutions, filed a return claiming Nil income after exemption of Rs. 38,94,690/- for AY 2016-17. The CPC did not allow the exemption under Section 10(23C)(iiiad). The assessee sought rectification under Section 154, but the AO denied it, stating that the aggregate gross receipts exceeded Rs. 1 crore and Form 10BB was mandatory and not filed.
Held
The Tribunal noted that the assessee's aggregate annual receipts for all institutions were Rs. 2,50,44,219/-. However, referring to the Karnataka High Court judgment in CIT Vs. Children's Education Society, it was held that exemption under Section 10(23C)(iiiad) is available if the annual receipts of *each* institution are less than the prescribed limit. The AO was directed to give effect to the rectification as per the High Court's judgment.
Key Issues
Whether the assessee is eligible for exemption under Section 10(23C)(iiiad) when the aggregate receipts of all institutions exceed Rs. 1 crore, despite individual institutions potentially falling within the limit? Whether the AO was justified in refusing rectification under Section 154 for non-filing of Form 10BB?
Sections Cited
10(23C)(iiiad), 11, 12A, 154, 143(1), 250
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Income Tax Appellate Tribunal, “SMC” “A’’ BENCH: BANGALORE
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “A’’ BENCH: BANGALORE
SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
ITA No.911/Bang/2023 Assessment Year: 2016-17
M/s. D. Banumaiah’s Educational Institutions New Sayyaji Rao Road ITO Vs. Mysuru 570 024 Exemption Ward Mysore PAN NO : AAATD5184E APPELLANT RESPONDENT Assessee by : Shri V. Srinivasan, A.R. Revenue by : Sri Ganesh R. Ghale, Standing Counsel for Department Date of Hearing : 09.01.2024 Date of Pronouncement : 09.01.2024 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in short “The Act’) dated 10.10.2023 for the assessment year 2016-17. The assessee has raised following grounds of appeal:
The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding the refusal of the learned A.O. to rectify the Intimation u/s. 154 of the Act on the ground that the return of income filed by the appellant was not a valid one and hence, the CPC was correct in processing the same and determining taxable income without giving benefit of exemption that was available to the appellant either u/s. 10[23c][iiiad] or for that matter u/s. 1 1 of the Act, under the facts and in the circumstances of the appellant's case. 3. The learned CIT[A] ought to have appreciated that the appellant had filed a valid return of income indicating that it was claiming exemption u/s. 10[23C][iiiad] of the Act and thus, the intimation u/s. 143[1] of the Act
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 2 of 9 ought to have been rectified considering the application of the appellant u/s. 154 of the Act by the learned AO. 4. Without prejudice to the above, the learned CIT[A] ought to have noted that the learned A.O. had refused to rectify the intimation by holding that the 12 educational institutions run by the appellant have to be considered as a single unit for purposes of grant of exemption u/s. 10[23C][iiiad] of the Act, which view taken in the rectification proceedings is contrary to the binding judgement of the Hon'ble High Court of Karnataka in the case of Childrens Educational Society reported in 358 ITR 373 [Kar] and consequently, the order refusing rectification was opposed to law and facts of the appellant's case and thus, the learned A.O. ought to have been directed to allow the benefit of exemption u/s. 10[23C][iiiad] of the Act under the facts and in the circumstances of the appellant's case. 5. Without prejudice to the above, the learned CIT[A] ought to have noted that the appellant had secured registration u/s. 11 of the Act and in any case, the appellant had filed the audit report in Form 10B on 10.01.2019, which is before the order u/s. 154 of the Act, dated 05.02.2019 was passed and hence, the appellant was entitled to exemption u/s. 11 of the Act in the alternate having regard to the provisions of section 12A[i][b] as it stood for the year under appeal. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
Facts of the issue are that the assessee claimed that they are a registered charitable trust running as many as 12 educational institutions and maintaining separate books of accounts for each institution. The assessee is registered u/s 12A of the Act vide Certificate No.GB-17/17/06/2005 issued by the CIT, Mysore. The return of Income for the A.Y. 2016-17 was filed on 30.03.2017 admitting 'Nil' income after claiming exemption to the tune of Rs.38,94,690/-. The return was processed u/s 143(1) of the Act on 02.02.2018 and CPC did not allow the exemption claimed u/s 10(23C)(iiiad) of the Act. Hence, the assessee sought for rectification u/s 154 of the Act vide letter dated 18.01.2019. However, the AO noted that in the relevant assessment year, their gross receipt was more than Rs.1 crore and for claiming exemption u/s 10(23C)(iiiad) of the Act, filing of Audit report along with tax return in
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 3 of 9 Form 10BB is mandatory w.e.f. 01.04.2016. It is also stated by the AO that Audit Report u/s 10(23C) of the Act in case of any fund or trust or institution or any University or other educational institution or any hospital or other medical nstitution referred to in sub-clause sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of Sec.10(23C), Form No.10BB (Rule 16CC), along with the return of income has to be uploaded, if the gross receipt exceeds Rs.1 crore. As per the AO, in the present case, it is noticed that the assessee trust has filed Form 10B electronically after receipt of rectification order dated 10.01.2019. It shows that the assessee already filed a rectification application and that was disposed of by the CPC and later, they filed present rectification application before the AO. The AO noted that total receipts of all 12 institutions is Rs.2,50,44,219/- as per the consolidated statements as furnished by the assessee as there was gross violation of the provisions of Sec.10(23C)(iiiad) of the Act, the AO passed the rectification order u/s 154 of the Act on 05.02.2019 by denying the claim of the assessee on the ground that Form 10BB has not been filed. The NFAC has confirmed the order of the ld. AO. Against this assessee is in appeal before me.
The ld. A.R. submitted that that while filing their return of Income on 30/03/2017, they had claimed exemption under Section 10(23C) of the Act without further mentioning the sub-sections under which the exemption was claimed. While filing the return the column pertaining to the Name of the Institutions run, grant received, aggregate turnover etc. had been left blank due to an inadvertence. Be that as it may, the legitimate claim of the assessee for exemption u/s. 10(23)(c)(iiiab) or (iiiad) of the Act cannot be denied on this count. In view of the above, he submitted that the CPC is not justified in denying the exemption claimed by the assessee by treating the aggregate annual receipts of all educational institutions together. He submitted that the denial of exemption is therefore opposed to law and facts of the assessee's case and the same deserves to be vacated. 3.1 The ld. A.R. further submitted that the learned A.O. in the order passed u/s 154 of the Act dated 05/02/2019, has denied the claim of the
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 4 of 9 assessee on the ground that Form No. 10BB has not been filed. He submitted that the assessee is not required to file Form No. 10BB at all in as much as the audit report in Form No. 10BB has to be filed only when exemption is being claimed u/s 10[23C][iv]/10[23C][v]/10(23C][vi]/ 10[23C][via], which is not being claimed in the assessee’s case. Thus, he submitted that viewed from this angle of the matter as well, the denial of exemption is opposed to law and facts of the assessee’s case and the same deserves to be vacated. 4. On the other hand, ld. D.R. submitted that similar issue came for consideration before this Tribunal in the case of Navodaya Education Trust in ITA No.49/Bang/2021 dated 15.7.2021, wherein held that “when the assessee has not filed appeal against the intimation sent u/s 143(1) of the Act when the exemption u/s 11 is denied for non-filing the Form No.10 along with return of income and rectification proceedings u/s 154 of the Act is not possible.” 5. I heard the rival submissions and perused the materials available on record. In the present case, assessee has filed all the documents along with return of income stating that assessee is having 12 Educational institutions and the gross receipts was Rs.2,50,44,219/- as Annexure – 1 to the Income & Expenditure account. Further, it also made it clear in the return of income ITR – 7 under the head “Details of the Projects/Institutions run by you” as follows:
*Section under which exemption claimed, if any (see instruction para 11c) Section 10(23C)(iiiad)
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 5 of 9
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 6 of 9
*Amount of income exempt under any clause of section 10, to the extent that is included in 12 above – Rs.38,94,685/-
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 7 of 9
*Number of branches – 12
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5.1 Thus, the assessee is having 12 units and gross receipts at Rs.2,50,44,219/- is already on assessment records. Now the assessee counsel’s plea is that the assessee’s case is to be examined in the light of judgement of jurisdictional High Court in the case of
ITA No.911/Bang/2023 M/s. D. Banumaiah’s Educational Institutions, Mysuru
Page 9 of 9 CIT Vs. Children’s Education Society reported in 358 ITR 373 (Karn.) wherein held as follows: “Held….(ii) That the Tribunal was correct in holding that the exemption in terms of the provisions of section 10(23C)(iiiad) was available to the assessee as annual receipts of each of the institutions of the assessee was less than the prescribed limit under the provision.”
5.2 In my opinion, the mistake pointed out by the assessee in its petition filed u/s 154 of the Act on 5.2.2019 cannot be said to be debatable issue as this was covered by the judgement of jurisdictional High Court and the ratio laid down by that judgement to be applied to the facts of the case and ld. AO is directed to give effect to the petition filed by the assessee u/s 154 of the Act on 5.2.2019. Ordered accordingly. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 9th Jan, 2024
Sd/- (Chandra Poojari) Accountant Member
Bangalore, Dated 9th Jan, 2024. VG/SPS
Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.