BHARTIYA SHIKSHA PRACHAR SAMITI TONK,TONK V. CIRCLE(EXEMP.), JAIPUR, JAIPUR

ITA 1095/JPR/2024

AI Insights

The case involves Bhartiya Shiksha Prachar Samiti, a society running multiple educational institutions, which appealed against the orders of the National Faceless Appeal Centre (NFAC) denying them certain tax exemptions. The primary contention was regarding the interpretation of section 10(23C)(iiiad) of the Income Tax Act, which exempts income of educational institutions if their annual receipts do not exceed Rs. 1 crore. The Tribunal examined whether the receipts of each institution should be considered separately or collectively. The Tribunal ruled in favor of the former, allowing the appeal for the assessment years 2012-13 and 2015-16.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41690 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: Manas sewa samiti vs. Addl. CIT, Dr. Banumaiah's Educational Institution vs. ITO (E), Param Hans Swami Uma Bharti Mission vs. ACIT, PKD Trust vs. ITO, CIT, Central Circle vs. Children's Education Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR; LD
• Assessee Lawyers: P.C. PARWAL; LD
• Keywords: Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 147; 148; 143(3); 250; 11; 205; 12A; 139; 12; 10; 10(23C)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH “A”, JAIPUR BEFORE SHRI GAGAN GOYAL, ACCOUNTANT MEMBER AND SHRI NARINDER KUMAR, JUDICIAL MEMBER ITA Nos. 1094 (A.Y. 2012-13) & 1095 (A.Y. 2015-16)/JPR/2024 Bhartiya Shiksha Prachar Samiti Tonk, Madhav Kunj, Madhyamik Saraswati Vidya Mandir, YAG Ke Balaji, Tonk – 304 001 PAN No. AAAAB7653D ...... Appellant vs. Circle (Exem.), Jaipur …...Respondent Appellant by : Mr. P. C. Parwal, CA, Ld. AR Respondent by : Mr. Manoj Kumar, JCIT, Ld. DR Date of hearing : 10/02/2025 Date of pronouncement : 21/02/2025 O R D E R PER GAGAN GOYAL, A.M: These two appeals by the assessee are directed against the order of NFAC, Delhi dated 31.07.2024 &07.08.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal vide ITA No. 1094/JPR/2024 (A.Y. 2012-13) as under: 1. The Ld. CIT(A), NFAC has erred on facts and in law in denying the assessee's claim of exemption u/s. 10(23C) (iiiad) of the Act by holding that exemption u/s. 10(23C) is not permissible if receipts are more than Rs.1 crore 2 ignoring that receipt is to be considered for each of the educational institution run by the assessee and not the aggregate receipt of all the institution and thereby confirming the addition of Rs.95,41,100/- without distinguishing the case laws relied by the assessee in support of its contention. 2 The Ld. CIT(A), NFAC has erred on facts and in law in upholding the action of AO in denying assessee's claim of exemption u/s. 11 & 12 of the Act on the ground that as on the date of grant of registration u/s. 12AA(1)(b) of the Act the assessment was not pending ignoring that assessee has filed appeal before the Ld. CIT(A) which is in continuation of the assessment proceedings and thus pendency before Ld. CIT(A) is to be considered as pendency before AO since power of Ld. CIT(A) is co-terminus with that of AO and thus first proviso to section 12A(2)of the Act is applicable on assessee as held in various case laws. 3 The appellant craves to alter, amend & modify any ground of appeal. 4 Necessary cost be awarded to the assessee.” In ITA No. 1095/JP/2024 (2015-16), the assessee has raised the following grounds of appeal: 1. The Ld. CIT(A), NFAC has erred on facts and in law in confirming the validity of notice issued u/s. 148 of the Act and the consequent order passed u/s. 147 of the Act ignoring that second proviso to section 12A(2) specifically provides that no action u/s. 147 shall be taken by the AO in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non- registration of such trust or institution for the said assessment year and the AO has not made any addition on the basis of information for which he initiated the proceedings u/s. 148A of the Act. 2 The Ld. CIT(A), NFAC has erred on facts and in law in denying the assessee's claim of exemption u/s. 10(23C) (iiiad) of the Act by holding that exemption u/s. 10(23C) is not permissible if receipts are more than Rs.1 crore ignoring that receipt is to be considered for each of the educational institution run by the assessee and not the aggregate receipt of all the institution and thereby confirming the addition of Rs. 1,66,06,036/- without distinguishing the case laws relied by the assessee in support of its contention. 3 The Ld. CIT(A), NFAC has erred on facts and in law in upholding the action of AO in denying assessee's claim of exemption u/s. 11 & 12 of the Act on the ground that assessee has not filed return of income u/s. 139(4A) and has also not uploaded the audit report in prescribed time ignoring that the same is a 3 procedural requirement and once the return and audit report is filed during course of reassessment proceedings the condition is substantially complied with and without distinguishing the various cases relied by the assessee on this issue. The Ld. CIT (A), NFAC has erred on facts and in law in upholding the order of AO is disallowing the claim of capital expenditure of Rs. 79, 74,355/- and accumulation/set apart of income to the extent of Rs. 86, 31,681/- on the ground that income of assessee is assessed under the status of AOP and at the same time not allowing the deprecation on fixed asset by holding that the same is not claimed by the assessee during assessment proceedings. 5 The appellant craves to alter, amend & modify any ground of appeal. 6 Necessary cost be awarded to the assessee. 2. The brief facts of the case is that the assessee is a society registered under the Societies Registration Act, 1958 vide letter no. 11/Tonk/1994-95 w.e.f. 28.09.1994. In this case it was observed by the revenue that the assessee was amongst the non-filers of return u/s. 139 of the Act. It came to the notice of the AO that the assessee deposited total cash of Rs. 1, 57, 27,118/- in its saving account during the year under consideration. It was observed that the assessee was not registered under u/s. 12A of the Act. The assessee has shown surplus of Rs. 95,37,162/- in its Income & Expenditure Account, which exceeds the limit which is not chargeable to tax, i.e. Rs. 1,80,000/-. In view of these facts, a notice was issued u/s. 148 of the Act vide dated: 27.03.2019. In compliance to the same the assessee filed its return of income at Rs. NIL on 14.11.2019. As the return of income was filed beyond the time prescribed, the same was treated as invalid. Ultimately, the assessment of the assessee was completed u/s. 147 r.w.s. 143(3) & 144 of the Act at Rs. 95, 41,096/- (being surplus after considering the gross receipt and revenue expenditure incurred). The assessee being aggrieved with the same filed an appeal before the Ld. CIT (A), who in turn confirmed the actions of 4 the AO. The assessee being further aggrieved preferred the present appeal before us. 3. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee alongwith grounds taken before us. Considering the nature of matter and multiplicity of grounds taken and issues involved we deem it fit to decide the issue ground-wise for sake of clarity and proper resolution of the matter. Ground No. 1 pertains to denial of claim of exemption u/s. 10(23C) (iiiad) of the Act by holding that exemption u/s. 10(23C) of the Act is not permissible if receipts are more than Rs.1 crore ignoring that receipt is to be considered for each of the educational institution run by the assessee and not the aggregate receipt of all the institution and thereby confirming the addition of Rs. 95,41,100/- without distinguishing the case laws relied by the assessee in support of its contention. For proper appreciation we are reproducing herein below the relevant provisions of the Act as under: 10(23C) any income received by any person on behalf of— (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of the person from such university or universities or educational institution or educational institutions do not exceed five crore rupees; or(earlier limit was 1 Cr.) Explanation.—For the purposes of sub-clauses (iiiad) and (iiiae), it is hereby clarified that if the person has receipts from university or universities or educational institution or institutions as referred to in sub-clause (iiiad), as well as from hospital or hospitals or institution or institutions as referred to in sub-clause (iiiae), the exemptions under these clauses shall not apply, if the aggregate of annual receipts of the person from such university or universities or educational institution or institutions or hospital or hospitals or institution or institutions, exceed five crore rupees; or] 5 4. As the assessee claims itself to be a society, the sole object of the assessee is to impart education. In pursuance to its objects it is running various educational institutions in the District Tonk, Rajasthan. The receipt of each such educational institution is less than Rs. 1 Crore. To confirm this fact, we have perused and relied on page no. 18 of the paper book, wherein the assessee submitted the list of the educational institutions part of the society with their gross receipts and expenditure respectively. The fact that the society under consideration is solely indulged into imparting of education and receipt of each school under its umbrella has gross receipt below 1 Cr. is not under dispute by the Revenue also. 5. In the light of above facts, it is pertinent to mention here that as per Rule 2BC of the I.T. Rules, 1962 for the year under consideration the prescribed limit was Rs. 1 Cr. and there was an amendment brought into the section by the Finance Act, 2021 w.e.f. A.Y. 2022-23. By virtue of this amendment, position has been changed in terms of eligibility of the assessee, i.e. earlier each institution under the assessee is to be counted for the purposes of this section and each institution has limit of Rs. 1 Cr. in the relevant year, whereas after this amendment the total gross revenue is to be considered for the purposes of this section to claim blanket exemption. 6. To strengthen its claim the assessee relied upon the following 6 judicial pronouncements as under: Manas sewa samiti vs. Addl. CIT 284 Taxman 418 (All.) Dr. Banumaiah’s Educational Institution vs. ITO (E) [2024] 205 ITD Param Hans Swami Uma Bharti Mission vs. ACIT [2013] 140 ITD PKD Trust vs. ITO [2017] 163 ITD 502 [2013] 34 taxmann.com 285 (Kar.) CIT, Central Circle vs. Children’s Education Society “The word 'person' is defined under section 2(31). A reading of the said definition makes it clear that a 'person' includes an association of persons or body of individuals whether incorporated or not and also every artificial juridical person, not falling within any of the preceding sub-clause. Once a body/society is incorporated under a statute, it becomes juridical person. [Para 6] Once the society is formed, it would become a juridical person as opposed to natural persons. Business of the society is carried on in the name of the society and not in the name of the persons who form the said society. The properties of the society would vest in the name of the society managed by the governing body. Therefore, the society would be an artificial juridical person (AJP) other than the association of persons or body of individuals. Therefore, the society while filing return is described the status as AJP. The Assessing Authority could not accept the said status and treated the assessee as AOP and has passed the order. Now the Tribunal has held that the assessee is to be treated as AJP. When the return is filed as AJP, the question of treating the assessee as AOP would not arise Coming to issue relating to exemption of income, section 10 groups in one place various incomes which are exempted from tax. The incomes enumerated in the section are not only excluded from the taxable income of the assessee, but also from his total income. They are not to be taken into consideration for the purpose of determining either the taxable income or rate of tax. The onus of showing that a particular item of income falls within any clause of this section is on the assessee. [Para 14] The real test is whether the assessee who claims these exemptions is running educational institutions solely for education purposes and not for purpose of profit. If the said fact is established, he is entitled to exclude the income from such institution 7 under section 10. However, as intention of the deletion of section 10(22) and introduction of provisions of section 10(23C) was to compel such institutions to come under a discipline, the stress now is on the aggregate of the annual receipts received by such institutions. If the intention of the Legislature was to club the annual receipts of all educational institutions run by the assessee-society, they could have said so in clear terms. On contrary what is stated in the section is the aggregate annual receipts of such university or such educational institution referring to other educational institution. Other educational institution is to be understood with the context of the first word, i.e., the university. Both the university and any educational institutions, education is imparted. The university is a statutory body. But there are a number of educational institutions which are not run by a statutory authority which are imparting education; the word 'other educational institution' has to be understood in the context of other than any university. In an educational institution the amount is calculated periodically. It may be calculated under different heads. All such amount received constitutes receipts and those receipts may be received throughout the year. Therefore, the word 'annual' has been inserted. But to be eligible for exemption, aggregate of annual receipts should not exceed Rs. 1 crore, i.e., the total annual receipts of a year if it does not exceed Rs. 1 crore, then the income derived from such educational institution in the hands of the assessee cannot be taken into consideration to compute the income of the assessee. [Para 22] 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. The words 'any person' as mentioned in section 10(23C) refers to the assessee and 'on behalf of' refers to such institutions. It may be a university, it may be an educational institution, and 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 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 institution. It is the aggregate annual receipts of such educational institution that is prescribed at Rs. 1 crore. Especially, if the society is running a medical college or any engineering college or other professional courses, then the annual receipt of each institution would run to 8 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.” 7. In view of the above facts and judicial authorities cited above, we further relied on the decision of the coordinate bench on similar facts in the assessee’s own case for A.Y. 2016-17 vide ITA No. 895/JPR/2024, wherein it was held that each educational institution under the aegis of the assessee society was required to be considered separately for applying threshold limit of annual receipt of Rs. 1 Cr. Resultantly, Ground No. 1 raised by the assessee is allowed and the AO is directed to allow the claim of the assessee u/s. 10(23C) (iiiad) of the Act as per Law. 8. Ground No. 2 not adjudicated by us, as the substantial issue raised by the assessee through ground no. 1 has already been decided in their favour and impact will be the same even if we discus and decide the ground no. 2. This ground left open for the assessee to be raised in future, if required. Resultantly, Ground No. 2 is dismissed for statistical purposes. 9. In the result ITA No. 1094/JPR/2024 (A.Y. 2012-13) is allowed in above terms. ITA No. 1095/JP/2024 (2015-16) 10. Appeal for this year also has same ground (Ground No. 2) as 9 decided (supra) (Ground No. 1). As the facts and law applicable similar, the decision apply here also Mutatis-Mutandis. Rest of the grounds are not touched upon as the substantive ground and issue in these appeals are availability of exemption u/s. 10(23C) (iiiad) of the Act. 11. Ground Nos. 1, 3 and 4 are not adjudicated by us, as the substantial issue raised by the assessee through ground no. 2 has already been decided in their favour and impact will be the same even if we discus and decide the ground no. 2. These grounds left open for the assessee to be raised in future, if required. Resultantly, Ground Nos. 1, 3 and 4are dismissed for statistical purposes. 12. In the result ITA No. 1095/JPR/2024 (A.Y. 2015-16) is also allowed in above terms. Order pronounced in the open court on21stday of February 2025. Sd/- Sd/- (NARINDER KUMAR) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 21/02/2025 Copy of the Order forwarded to: 1. अपीलाथ\r/The Appellant , 2. \u000eितवादी/ The Respondent. 3. आयकर आयु\u0015 CIT 4. िवभागीय \u000eितिनिध, आय.अपी.अिध., Sr.DR., ITAT, 5. गाड\u001e फाइल/Guard file. BY ORDER, //True Copy// 10 (Asstt. Registrar) ITAT, Jaipur Details Date Initials Designation 1 Draft dictated on PC on 21.02.2025 Sr.PS/PS 2 Draft Placed before author 21.02.2025 Sr.PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk 9 Date of Dispatch of order "