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Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE
अपीलधथी की ओर से/ Appellant by : Shri G.V.N.Hari, AR प्रत्यधथी की ओर से / Respondent by : Dr.Aparna Villuri, DR सुनवधई की तधरीख / Date of Hearing 15.04.2024 : घोर्णध की तधरीख/Date of Pronouncement : 08.05.2024 आदेश /O R D E R
Per Shri Duvvuru RL Reddy, Judicial Member :
This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], Mumbai vide DIN & Order No. ITBA/APL/S/250/2023-24/1059842510(1) dated 18.01.2024, arising out of order passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 14.12.2019 for the Assessment Year (A.Y.) 2017-18.
Brief facts of the case are that the assessee society, running educational institution, filed it’s return of income for the A.Y.2017-18 on Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam 24.03.2018, admitting Nil income, after claiming exemption u/s 10(21) r.w.s.35 of the Act. The case of the assessee was taken up for scrutiny and accordingly, a notice u/s 143(2) was issued on 10.08.2018. Subsequently, the AO issued notice u/s 142(1), requiring the assessee to submit the details of it’s income. In response, the assessee submitted the relevant information from time to time. During the assessment proceedings, the assessee submitted that it is an educational institution and the turnover has not exceeded the prescribed limit of Rs.1 crore and hence it is eligible for exemption u/s 10(23C) (iiiad) of the Act. But the AO noticed that the total receipts of the assessee were Rs.1,03,48,525/- (Rs.84,81,714/- from Degree College and Rs.18,66,811/- from junior college) and held that since the gross receipts exceeded the threshold limit of Rs.1 crore, the assessee is not eligible for exemption and also the assessee neither has registration u/s 12A nor has approval u/s 10(23C)(vi) of the Act for claiming exemption of the income. The AO completed the assessment, assessing the taxable income of the assessee at Rs.12,54,981/- after deducting Rs.90,93,544 from the gross income of Rs.1,03,48,525/-. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A), relying on the decision of Hon’ble Apex Court in the case of Commr.of Customs (Import) vs M/s Dilip Kumar Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam and Company, Civil Appeal No.3327 of 2007 dated 30.07.2018, dismissed the appeal of the assessee. 4. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal by raising the following grounds of appeal :
1. The order of the learned Addl./JCIT(A)-12, Mumbai is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Addl./JCIT(A) is not justified in rejecting the exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of each institution run by the appellant did not exceed Rs.1 crore.
3. The learned Addl.JCIT(A) is not justified in sustaining the addition of Rs.27,850/- made by the assessing officer towards disallowance of donations.
4. Without prejudice to Ground No.2 and Ground No.3, the learned Addl./JCIT(A) ought to have admitted the additional ground filed by appellant and ought to have held that the assessing officer is not justified in charging the tax on the total income at maximum marginal rate as against normal rates of tax applicable to the appellant society.
5. Any other grounds may be urged at the time of hearing.
5. Ground No.1 and 5 are general in nature, which does not require specific adjudication.
6. Ground No.3 and 4 are not pressed by the assessee, hence, dismissed as not pressed.
7. Ground No.2 is related to exemption claimed u/s 10(23C)(iiiad) of the Act. The Ld.AR argued that the AO is not justified in rejecting the Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of the assessee did not exceed the stipulated limit of Rs.1 crore. He further submitted that some of the fee receipts pertaining to F.Y.2015-16, relevant to A.Y.2016-17 were also included in the receipts for F.Y.2016- 17, pertaining to A.Y.2017-18 and hence, the assessee is eligible for exemption u/s 10(23C)(iiiad) of the Act. The Ld.AR relied on the decision of the coordinate bench of the Tribunal in the case of St.Mary’s English Medium School Society, Guntur Vs. ITO n I.T.A.No.148/Viz/2019 dated 21.12.2019 and pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee.
8. Per contra, the Ld.DR argued that the assessee society is running educational institutions with single PAN, therefore, the gross receipts of the assessee required to be considered for the purpose of section 10(23C)(iiiad) of the Act. The Ld.DR further argued that the assessee neither has registration u/s 12A nor any approval u/s 10(23C)(vi) of the Act to claim exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of the assessee exceeded Rs.1 crore. The Ld.DR, therefore, pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee.
Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam
I have heard both the parties and perused the material available on record. It is an undisputed fact that the assessee society, registered under the Societies Registration Act, 35 of 2001 is running Degree and Junior college at Srikakulam, with an objective of providing education to poor etc. in a non profitable manner. The gross receipts of the society from Degree college was Rs.84,81,714/- and the junior college was Rs.18,66,811/-, which has not exceeded the threshold limit of Rs.1 crore individually or even put together, if the receipts pertaining to F.Y.2015- 16 amounting to Rs.10,82,585/- were excluded from the gross receipts of Rs.1,03,48,525 and the balance comes to Rs.92,65,940/-. In the decision relied on by the Ld.AR, on similar set of facts and circumstances, the coordinate bench of the Tribunal, held in favour of the assessee, relying on the decision of Hon’ble Karnataka High Court. For the sake of clarity and convenience, I extract relevant part of the order of the Tribunal, which held as follows : “6. We have heard both the parties and perused the material placed on record. The assessee is running three educational institutions, one institution is for the classes of LKG to UKG, one institution is for class I to Class V and one more institution for high school from Class VI to X. All the three different educational institutions are recognized by the Government of Andhra Pradesh vide their proceedings which were placed in page No.25 to 27 of the paper book filed by the assessee. The Regional Joint Director has given recognition for Class VI to X for St.Mary’s High School, District Education Officer, Guntur has given recognition for Elementary School and for nursery classes. The receipts of the three institutions are detailed as under :
Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam
(a) St.Mary’s English Medium School - Rs.31,53,550 (b) St.Mary’s English Medium Primary School - Rs.93,22,600 (c) St.Mary’s English Medium High School - Rs.89,64,050 From the above, we observe that receipts of each educational institution did not exceed Rs.1.00 crore as specified in section 10(23C)(iiiad) of the Act. In Section 10(23C)(iiiad) of the Act, the word used is any university or educational institution existing solely for educational purpose, but not the person. The assessee filed the return of income admitting Nil income claiming exemption u/s 11, however, before the AO, the assessee made a claim for 10(23C)(iiiad) vide letter dated nil filed before the AO in response to the notice u/s 142(1) which was placed in page No.14 to 21 of the paper book. Hon’ble Karnataka High Court considered the similar issue and held that if the receipt of each educational institution does not exceed Rs.1 crore, the same required to be not to be included in computing the total income of the assessee. For the sake of clarity and convenience, we extract para No.23 of the decision of Hon’ble Karnataka High Court which reads as under : “23. No doubt, education has become a business, a very profitable business also. But it requires huge investment. It is the duty of the Government to provide education to all its citizens, as the Government is not able to shoulder the responsibility completely. Therefore, the field of education is now thrown open to private organizations. But for throwing open the field to the private operators, probably, the country would not have achieved in the field of education what it has achieved. Therefore, lot of funds are invested in running these educational institutions, either by creating a Society or a Trust. In course of time, they have expanded their activity providing course in various subjects at various levels and for that purpose they have established more than one educational institution. Each educational institution is a separate entity controlled under various statutes for various purposes. May be the Management of these educational institutions would be in the hands of the Societies or the Trust, but for all other purposes they are different, independent entities. That is the reason why Section 10 (23) (c) is worded as under: "Any income received by any person on behalf of.." Here "any person" refers to the assessee and "on behalf of' refers to such institutions. It may be a University, it may be an educational institution, it may be a hospital or other institutions of similar nature. As all such Institutions are independent entity and they generate Income and when that income is received by the assessee, it becomes the income in the hand of the assessee and it is such income Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam which is sought to be excluded while computing the total income of the assessee under Section 10. The test prescribed under the aforesaid provision is not the income of the educational education. It is the aggregate annual receipts of such educational institution that is prescribed at Rs.1 crore. Therefore, irrespective of expenditure incurred by those institutions, the exemption is based on the total receipts. Even if the word “aggregate” has to be understood as suggested by the Revenue as the annual receipts of such educational institutions put together, probably, the said provision regarding exemption would be of no use at all. Especially, if the society is running a medial college or any engineering college or other professional courses, then the annual receipt of each institution would run to few crores and therefore, the very object of granting exemption to such genuine institution would be lost. Therefore, the word "aggregate annual receipt has to be understood with the context in which it is used and the purpose for which the said provision was inserted, keeping in mind, the Scheme of the Act. Therefore, if an assessee is running several educational institutions, if any of them is wholly or substantially financed by the Government, then the income from such educational institution received by the assessee is not included while computing his total income. Similarly, Income from each educational institution if they are not receiving any aid from the Government wholly or substantially in respect of which the aggregate annual receipt do not exceed Rs. 1 crore received by the assessee, is also not included while computing annual total income of the assessee.”
In the instant case, there is no dispute that the assessee is running different educational institutions and the receipts of each educational institution does not exceed more than Rs.1.00 crore as per the details given above. Therefore, we hold that the assessee is entitled for exemption u/s 10(23C)(iiiad) of the Act. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.
In the case on hand also, the gross receipts of the assessee society did not exceed the threshold limit of Rs.1 crore. Hence, respectfully following the decision of the coordinate bench in the case of St.Mary’s English Medium School Society Vs. ITO cited supra, I hold that the assessee is entitled for exemption u/s 10(23C)(iiiad) of the Act.
Muddada Lakshmi Raghupathinaidu Educational Society, Srikakulam Accordingly, I set aside the order of the Ld.CIT(A) and allow the appeal of the assessee. 10. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 8th May, 2024. (दुव्वूरु आर.एल रेड्डी) (DUVVURU RL REDDY) न्याधयक सदस्य/JUDICIAL MEMBER Dated : 08.05.2024 L.Rama, SPS