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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
This appeal by the Revenue is directed against the order dated 30.09.2019 of Commissioner of Income Tax(Appeal), for Assessment Year 2016-17. The assessee has raised following grounds of appeal:
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the society benefits of the exemption u/s 10(23C)(vi) of Income Tax Actwhen such claim of exemption u/s 10(23C) (vi) of the Act was neither made in the return of income nor before the assessing officer. Such claim is not allowable as per the decision of the ITANo.990/Ind/2019 Indore Education and Services Society Hon'ble Supreme Court in Goetze (India) Ltd Vs CIT reported in 284 ITR 323 SC [2006]. 2. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the society benefits of the exemption u/s 10(23C)(vi) of Income Tax Act especially when it was found by the Assessing officer that the income of the society was used or applied for the benefit of the interested persons which is contravention of the 13th proviso of section 10(23C) of the Act and hence society cannot be said to be existing solely for educational purposes butexisted for the purposes of profit. 3. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the relief to the society on addition of Rs, 2,45,83,832/- made on account of development fees ignoring the findings of the Assessing Officer that the said amount recovered from students are not routed through Income and Expenditure account of the society." 4."Whether on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting addition of Rs.1,50,00,000/- being the amount of excessive payment made to specified person covered u/s13(3) of the Act, ignoring the findings of the Assessing Officer?" 5."Whether on facts & circumstances of the case and law, the Ld. CIT(A) was justified in deleting the addition of Rs.1,25,00,000/- made on account of educational activities ignoring the fact that the assessee has not explained the detail nature of expense, name of the party to whom payment was made?".
This appeal of the revenue was earlier decided by this tribunal vide order dated 21.11.2022 and thereafter the department filed MA NO.17/Ind/2023 for rectification of the mistake in the said order of the Tribunal. It was pointed out that there was a mistake in the earlier order of the Tribunal dated 21.11.2022 on account of non- adjudication of ground no.1,2,4 & 5. The tribunal after hearing both the parties and careful perusal of the record found that the tribunal at the time of passing order dated 21.11.2022 had adjudicated only ground no.3 of the revenue’s appeal and other grounds being ground no.1,2,4 & 5 remain un-adjudicated. Accordingly the Page 2 of 12
ITANo.990/Ind/2019 Indore Education and Services Society tribunal vide order dated 01.09.2023 recall earlier order to the extent of fresh hearing and adjudication of ground nos.1 ,2,4 & 5 of the revenue’s appeal.
Ground no.1 & 2 are regarding the claim of exemption u/s 10(23)(vi) of the Act allowed by the CIT(A) despite the fact that this claim was neither made in the return of income nor before the AO. Ld.DR has submitted that the assesse did not claim exemption u/s 10(23C)(vi) of the Act in the return of income rather the assessee has claimed exemption u/s 11 & 12 of the Act in the return of income. The AO has denied the claim of exemption u/s 11 & 12 of the Act on the ground that the assessee has violated the provisions of section 13(3) of the Act. Thus, Ld. DR has submitted that when there was no claim made by the assessee before the AO or in the return of income then the said claim cannot be entertained by the CIT(A) for want of necessary compliance of filing the audit report in form 10BB of the Act.
Ld. DR has submitted that the assessee had not filed audit report in form 10BB for claiming exemption u/s 10(23C)(vi) of the Act. Ld. DR has further submitted that even otherwise when there is a violation of provisions of section 13 then 13th proviso to section 10(23C) of the Act is attracted in case of the assesse and society cannot be said to be existing solely for educational purposes a mandatory condition for allowing exemption u/s 10(23C)(vi) of the Act. Ld.DR has relied upon the order of the AO.
ITANo.990/Ind/2019 Indore Education and Services Society 5. On the other hand, ld. AR of the assesse has submitted that the assessee has claimed exemption u/s 11 & 12 and declared nil income in the return of income. Since the assessee has declared nil income therefore, there was no reason for claiming exemption u/s 10(23C)(vi) of the Act. The AO has denied the claim of exemption u/s 11 & 12 and also denied the exemption u/s 10(23C)(vi) of the Act. The assesse had no occasion to submit audit report in form 10BB before the AO as the AO did not issue any show cause notice before denying the claim of exemption u/s 11 & 12 as well as u/s 10(23C)(vi) of the Act. The assessee claimed the exemption u/s 10(23C)(vi) before the CIT(A) which was allowed by the CIT(A) by following the decision of this tribunal in assesee’s own case for A.Y.2011-12. He has filed copy of the order of this tribunal dated 15.03.2019 in ITANo.63 of 2017 and submitted that for A.Y.2011- 12 (wrongly mentioned in the order as 2012-13) has considered and decided an identical issue in favour of the assessee. He has relied upon the earlier order of the Tribunal as well as impugned order of the CIT(A). Ld.AR has also relied upon the circular no. 14 issued by the CBDT dated 11.04.1955 and submitted that it is duty of the AO to apply the correct provision of the Act and allowed the benefit to Page 4 of 12
ITANo.990/Ind/2019 Indore Education and Services Society the assesse irrespective of the fact that the same was claimed by the assessee or not. The AO must not take advantage of ignorance of assessee as to his rights. It is one of the duties of AO to assist the tax payers in every reasonable way. Thus, Ld.AR has submitted that the AO cannot deny the benefit of section 10(23C)(vi) to the assesse in the garb of the judgment of Hon’ble Supreme Court in case of Goetz (India) Ltd. 284 ITR 323.
We have considered the rival submissions as well as relevant material on record. The assesse filed its return of income on 17.10.2016 declaring nil income after claiming the exemption u/s 11 & 12 of the Act. The assessee is registered u/s 12AA vide order dated 13.03.2000 and also approved u/s 10(23C)(vi) of the Act vide order dated 06.11.2007. The AO has denied the claim of exemption u/s 11 & 12 on the ground that the assessee has violated provisions of section 13(3) as various claims of expenses are in respect of the payments made to specified persons covered by section 13(3) of the Act. The AO has given details of the various payments made to the specified persons in para 5 as under:
ITANo.990/Ind/2019 Indore Education and Services Society 6.1 During the course of assessment proceedings the AO has also noted the assesse’s claim that it is approved u/s 10(23C)(vi) of the Act but assessee has claimed exemption u/s 11 in the return income and audit report filed in form 10B only and not in form 10BB. The AO thus did not consider the claim of exemption u/s 10(23C)(vi) on the ground that approval for exemption was given only for assessment years 2002-03 to 2004-05 only vide order dated
ITANo.990/Ind/2019 Indore Education and Services Society 06.11.2007 but thereafter the assesse has not applied for fresh renewal hence same cannot be applied for the year under consideration in view of the 8th proviso of section 10(23C)(vi) and circular no7 of 2010 dated 27.10.2010. The assessee challenged the action of the AO before the CIT(A) who has allowed the claim of the assessee u/s 10(23C)(vi) in para 4.18 to 4.23:
“4.18 First Time Claim Before the CIT(A): Another related issue that arises is whether the assessee can claim the relief before the CIT(A) even though it has not been claimed before the assessing authority. 4.19 Section 251 of the Act empowers CIT(A) to confirm, reduce enhance or annual the assessment. The powers of the CIT(A) being co- terminus with that of the assessing authority, the assessee can claim a relief that is due to him for the first time before the CITYA). 4.20 The view finds support from the decisions in the cases of JCIT vs. Hero Honda Finlease Ltd.: 115 TTJ (Del.) (TM) 752, CIT VR, Rajasthan Fastners (P.) lad. 100 OTR (Mad.) 393, CIT vs. Jal Parabolic Springs Ltd., 172 Taxman 258 (Delhi), Chicago Pneumatics India Ltd., vs. DCIT 15 SOT 252 and ACTT va Bharat Starch Industrial Ltd. (URO). 4.21 Based on the foregoing discussions, a legitimate relief available to the assessee and not claimed in the return of income and the time permitted to revise the return of income under Section 139(5) having elapsed can be claimed by the assessee either before the assessing authorities or before the CIT (A) provided the relevant facts and data with respect to the claim was before the authorities. 4.22 In this particular case, the appellant has been granted certificate in connection with exemption of his income under 10(23C)(vi) vide the CCIT order referred above and a finding have already been given with respect to the same by the undersigned. Thus, it is true that the appellant was enjoying exemption u/s 10(23C)(m) of the I.T. Act, 1961 which was ITANo.990/Ind/2019 Indore Education and Services Society overlooked by the AO. Further, it is also a fact that the undersigned had given relief to the appellant in its own case for the A.Y. 11 - 12 on the similar issue and the findings of the undersigned has already been confirmed by the Hon'ble Bench of ITAT, Ind0re in the appellant case by stating as below: "We do not see any infirmity into the impugned order as the Ld. CITYA) has followed the binding precedents Therefore, we do not see any reason to interfere into the finding of Lal.CIT(A) same is hereby confirmed since the Revenue has not brought to our notice to any contrary binding precedent. The grounds raised are hereby dismissed." 4.23 Thus, I find merit in the submissions of the appellant and respectfully following the decision of Jurisdictional Bench of ITAT, Indore in the appellant's own case for A.Y. 2011-12, this ground of appeal is allowed for the year in question. Thus, the AO is directed to allow the appellant the benefit of the exemption already granted to it u/s 10(230) (vi) of I.T. Act, 1961 by the order of the Hon'ble CCIT, Indore dated 06.11.2017 vide по F.No. CCIT/IND/Tech/10(23C)(vi)/15/07-08.”
6.2 Thus the CIT(A) has allowed this claim by following the decision of this tribunal for A.Y.2011-12 dated 15.03.2019. It is pertinent to notice that for A.Y.2011-12 the issue before the tribunal was only whether the assessee could claim exemption u/s 10(23C)(vi) first time before the CIT(A) or not and the said issue was decided by the Tribunal in para 7 & 8 as under:
“7. We have heard the rival contentions and perused material on record. The ld. CIT(A) has granted the relief by observing as under: Xxxxxxxxxxxxxxxxxxxxxxxxxxx 8. We do not see any infirmity into the impugned order as the Ld. CIT(A) has followed the binding precedents. Therefore, we do not see any reason to interfere into the finding of Ld. CIT(A) same is hereby affirmed since the Revenue has not brought to our notice to any contrary binding precedent. The grounds raised are hereby dismissed.” Page 8 of 12
ITANo.990/Ind/2019 Indore Education and Services Society 6.3 Therefore, to the extent of entertaining and allowing the claim of the assessee first time by the appellate authorities the tribunal has decided the issue in favour of the assesse. We also do not find any quarrel on this issue that the claim of the assessee can be entertained first time by appellate authority and there is no legal impediment for entertaining the claim by the appellate authority. It is pertinent to note that for A.Y.2011-12 the assesse took the plea that the AO has disallowed the claim of exemption u/s 11 & 12 without giving opportunity to the assesse to make the claim u/s 10(23C)(vi) of the Act and the assessment order was passed on 18.03.2014 whereas the return of income for the year under consideration was filed by the assessee on 17.10.2016. Thus the assessee was very much aware about the disallowance made by the AO for A.Y.2011-12 in respect of the claim of exemption u/s 11 & 12 which was not agitated by the assesse in the appeal before the Tribunal and was satisfied with the order of the CIT(A) granted exemption u/s 10(23C)(vi) of the Act for A.Y.2011-12. Despite the fact that for A.Y.2011-12 the assesse did not agitated the claim of exemption u/s 11 of the Act and was satisfied with exemption granted u/s 10(23C)(vi) of the Act it did not claim the exemption u/s 10(23C)(vi) in the return of income nor filed audit report in form 10BB. Therefore, the assessee cannot take this plea that due to the exemption claimed u/s 11 & 12 the assessee could not claim exemption u/s 10(23C)(vi) of the Act for the year under consideration. Even otherwise the entire income of the assessee Page 9 of 12
ITANo.990/Ind/2019 Indore Education and Services Society society may not be allowed for exemption u/s 10(23C)(vi) as only the income received by the assessee on behalf of any University or other Educational Institutions existing solely for educational purpose and not for purpose of profit would be exempt from tax. For ready reference u/s 10(23C)(vi) is quoted as under: “10(23C) Any income received by any person on behalf of – xxxxxxxxxxxxxxxxxxxxxxxxxxx (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the [Principal Commissioner or Commissioner]; or” 6.4 Therefore, the income received by the assessee society on behalf of the educational institutions would be eligible for exemption u/s 10(23C)(vi) subject to conditions as provided under the said sub-section. Neither the AO nor the CIT(A) has verified and considered how much income out of the total receipt/income of the assessee society is the income received on behalf of the educational institution which is eligible for exemption u/s 10(23C)(vi) subject to the other conditions provided therein. It is also pertinent to note that if the AO has denied the exemption u/s 11 & 12 due to violation of the provisions of section 13(3) of the Act then the same shall be have bearing on the allowability of exemption u/s 10(23C)(vi) of the Act reference is made to clause(a) of 3rd proviso. The said issue has neither been considered by the CIT(A) nor even by the Tribunal for A.Y.2011-12 as the assessee did not pursue the claim of exemption u/s 11 & 12 for A.Y.2011-12 as well as for the year under consideration. Therefore, in the facts and circumstances Page 10 of 12 ITANo.990/Ind/2019 Indore Education and Services Society of the case we are of the considered view that this issue requires proper verification of the relevant facts and examination in the light of the relevant provisions of the Act. The assesse is also required to explain as to why the claim of the assesse is allowable despite the fact the assessee has not submitted the audit report in form 10BB of the Act. Accordingly this issue is set aside to the record of the AO for fresh adjudication after verification and examination of the relevant facts/record to ascertain the correct amount of income received by the assesse on behalf of the educational institutions to be taken for exemption u/s 10(23C)(vi) of the Act as well as effect of violation of provisions of section 13(3) if any in the allowability of claim u/s 10(23C)(vi) of the Act as it would amount to application of income not for the objects of the institution. Needless to say the assessee be given an appropriate opportunity of hearing before passing fresh order.
Ground No.4 & 5 are regarding disallowance towards excessive payment covered u/s 13(3) of the Act as well as addition made by the AO on account of certain expenditure not treated as incurred for educational activities of the assessee.
We have heard Ld. DR as well as Ld. AR and considered the relevant material on record. At the outset, Ld.DR as well as Ld.AR has fairly submitted that the issues involved in ground no.4 & 5 are similar to the issue in ground no.3 which has already been remanded by this Tribunal to the record of the AO for fresh adjudication vide order dated 21.11.2022. Thus, both the parties have submitted that ground no. 4 & 5 may also be remanded to the ITANo.990/Ind/2019 Indore Education and Services Society record of the AO for proper verification and adjudication as similar issue was in ground no.3 has already been remanded by this Tribunal to the AO for fresh adjudication. Accordingly the issues raised in ground 4 & 5 are set aside to the record of the AO for fresh adjudication.
In the result, appeal of the revenue in ground no.1,2,4 & 5 are allowed for statistical purposes.
Order pronounced in the open court on 21.12.2023.