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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
This appeal by the assesse is directed against the order dated 03.11.2023 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centers,(NFAC) Delhi for A.Y.2019-20.
None has appeared on behalf of the assessee when this appeal was called for hearing. It transpires from the record that on the ITANo.561/Ind/2023 Aarti Mahila Kalyan Samiti earlier 4 dates of hearings also there was no representation on behalf of the assessee despite repeated notices issued to the assessee through RPAD as well as through e-mail on the e-mail ID given by the assessee in Form-36. The notices issued through registered post AD has been received back with the postal remarks that on repeated visits the door is found locked. Accordingly, the Bench proposed to hear and dispose off this appeal ex-parte.
The assessee has raised following grounds of appeal:
“1. Under the facts and in law, the learned CIT(A) erred in confirming disallowance of the exemption u/s 10(23C)(ad) and/or 10(23C)(vi) 1.1 Under the facts and in law, the learned CIT(A) erred in disallowing the expenditure Incurred for running the education institute / schools, affiliated with State Govt. Education board against the fee income, received from the students. 1.2 The learned CIT(A) erred in stating that entire income of the society is subject to income tax without allowing legitimate expenditure incurred, even though the fact has been well reported to the Income tax department and before the CIT(A).
1.3 Under the facts and in law, the learned CIT(A) failed to appreciate the submission made by the appellant. The learned CIT(A) failed to appreciate the fact that gross receipt is not subject to Income tax, but net receipts, after deducting all the legitimate and genuine expenditure, even though appreciating the fact that the expenditure has been already reported and same has been substantiated with audited financial statement and audited report.
ITANo.561/Ind/2023 Aarti Mahila Kalyan Samiti 1.4 Without prejudice to the above, the learned CIT(A) has erred in not considering the fact the society is running educational institute, namely, two schools, affiliated with state Govt Board, for the lower and middle lower-class people of the Bhopal, while not allowing the genuine and legitimate expenditure for salary to teacher, student welfare expenses etc. 2. The appellant leaves to add, alter or amend any of the above ground of appeal.”
4. Assessee is a Society and engaged in running, operating and management of educational institutions at Bhopal. The assessee filed its return of income on 31.10.2019 and claimed exemption u/s 10(23C)(via) of the Act which was subsequently sought to be rectified as exemption u/s 10(23C)(iiiad) of the Act. The CPC while processing the return u/s 143(1) of the Act disallowed the claim of exemption u/s 10(23C)(iiiad) of the Act on the ground that the gross receipt of the assessee exceeds Rs.1 crore and consequently the entire gross receipts was assessed to tax. The assessee challenged the order of CPC before CIT(A) but could not succeed.
The Ld. CIT(A) has upheld the assessment made by the CPC by disallowing the claim of exemption u/s 10(23C)(iiiad) of the Act on the ground that the gross receipt of the assessee exceeds Rs.1 crore as prescribed monetary limit u/s 10(23C)(iiiad) of the Act.
ITANo.561/Ind/2023 Aarti Mahila Kalyan Samiti 5. It is pertinent to note that the assessee has specifically raised the point before CIT(A) that it runs two schools and therefore, the gross receipts of each school has to be separately considered while allowing the claim of exemption u/s 10(23C)(iiiad) of the Act while applying the conditions of gross receipts of less than Rs.1 crore as prescribed under provisions of Section 10(23C)(iiiad) read with rule 2BC. Further, the assessee also contended before Ld. CIT(A) that only the net income should be assessed to tax and not the gross income because the expenditure for earning the income should be allowed against gross receipt.
On the other hand Ld. Departmental Representative has relied upon the impugned order of CIT(A).
We have considered the submissions of Ld. Departmental Representative and carefully perused the impugned order of CIT(A).
Before CIT(A) assessee has specifically pointed out that it operates two educational institutions namely Rose Mary High Convent Higher Secondary School and Rose Mary High School and contended that the monetary limit of Rs.1 crore as prescribed u/s 10(23C)(iiiad) read with Rule 2BC of the Act should be applied in respect of the gross receipts of each of the educational institutions Page 4 of 6
ITANo.561/Ind/2023 Aarti Mahila Kalyan Samiti and not on the aggregate receipts of both the educational institutions. Further, the assessee also pointed out that the entire gross receipt cannot be assessed to tax without allowing eligible deduction against said income. We find that the above stated facts have not been properly considered by CIT(A) while passing the impugned order as the claim of the assessee was disallowed on the ground that the assessee is neither registered u/s 12A/12AA nor approved/notified under the provisions of Section 10(23C)(iiiad) of the Act and therefore, the claim of the assessee was denied as the total receipts are more than Rs.1 crore as prescribed under the said provisions of Section 10(23C)(iiiad) read with Rule 2BC of the Act.
However, CIT(A) has not disputed the fact that the assessee is running two separate educational institutions and therefore, in our considered view the gross receipts of each of the educational institutions has to be separately considered for the purpose of allowing the claim of exemption u/s 10(23C)(iiiad) of the Act. In any case the total income of the assessee ought to have been assessed as per commercial principles and the eligible expenditure against the gross receipts should have been allowed while computing the total income. Accordingly, in the facts and Page 5 of 6
ITANo.561/Ind/2023 Aarti Mahila Kalyan Samiti circumstances of the case we set aside the impugned order of CIT(A) and the matter is remanded to the record of the jurisdictional A.O for fresh adjudication after verification and considering the relevant facts as well as in the light of above observation. Needless to say an opportunity of hearing be given to the assessee before passing the fresh order.
In the result appeal of the assessee is allowed for statistical purposes.