Dy. Director of Income Tax (E)-I, Hyderabad, Hyderabad V. M/s Vardhaman Engineering College, Mahabubnagar

ITA 1659/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0402 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: RAMAKRISHNA BANDI
• Keywords: Business income; Benefit of exemption
• Section: 40A(3); 12A; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1659/HYD/2014 ASSESSMENT YEAR: 2010-11 DY. DIRECTOR OF INCOME-TAX (E) I, HYDERABAD VS. M/S VARDHAMAN ENGINEERING COLLEGE, MAHABOOB NAGAR, (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAMAKRISHNA BANDI REVENUE BY : SHRI S. RAMA RAO DATE OF HEARING 06-07-2015 DATE OF PRONOUNCEMENT 10-07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER DATED 14/08/2014 OF LD. CIT(A)-IV, HYDERABAD FOR THE AY 2 010-11. 2. THE DEPARTMENT HAS RAISED SIX GROUNDS. GROUND NO S. 1 & 6 ARE GENERAL IN NATURE, HENCE, DO NOT REQUIRE ANY SPECIF IC ADJUDICATION. GROUND NO. 2, IN OUR VIEW, IS TOTALLY MISCONCEIVED AS AO HIMSELF IN THE ASSESSMENT ORDER ACKNOWLEDGED THAT ASSESSEE IS REGISTERED U/S 12A OF THE ACT VIDE CIT-II, HYDERABADS ORDER IN F. NO. HQRS.II/12A&80G/278/2000-01, DT. 31/05/2001. THUS, THIS GROUND IS DISMISSED. 3. IN GROUND NO. 3, DEPARTMENT HAS CHALLENGED THE D ECISION OF LD. CIT(A) IN ALLOWING ASSESSEES CLAIM OF EXEMPTION U/ S 11 OF THE ACT. 4. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, AS SESSEE IS A SOCIETY RUNNING ENGINEERING COLLEGE. FOR THE AY UNDER CONSI DERATION, 2 ITA NO. 1659 /HYD/2014 M/S VARDHAMAN ENGG. COLLEGE, MAHABOOB NAGAR ASSESSEE FILED ITS RETURN OF INCOME ON 08/12/2011 D ECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. AO IN COURSE OF ASSESSMENT PROCEEDING FOUND THAT DURING THE RELEVAN T PY ASSESSEE HAS RECEIVED FEE FROM RUNNING OF ENGINEERING COURSE S AT RS. 10,21,09,262. SINCE ASSESSEE INSTITUTION IS SOLELY EXISTING FOR THE PURPOSE OF EDUCATION, AO WAS OF THE VIEW THAT IT CA N ONLY CLAIM EXEMPTION U/S 10(23C)(VI) AND NOT U/S 11 OF THE ACT . AS ASSESSEE HAS NOT OBTAINED ANY APPROVAL FROM THE COMPETENT AUTHOR ITY, IN SO FAR AS SECTION 10(23C)(VI) IS CONCERNED, AO HELD THAT ASS ESSEE IS NOT ENTITLED FOR EXEMPTION. WHILE DOING SO, AO OBSERVED THAT APPROVAL U/S 10(23C)(VI) IS DISTINCT FROM REGISTRATION U/S 12A O F THE ACT AND FOR AN EDUCATIONAL INSTITUTION, THE SPECIFIC PROVISION FOR CLAIMING EXEMPTION IS SECTION 10(23C)(VI). ACCORDINGLY, AO COMPLETED THE ASSESSMENT BY TREATING THE EXCESS OF INCOME OVER EXPENDITURE AS A SSESSEES TAXABLE INCOME FOR THE YEAR UNDER CONSIDERATION. HE ALSO MA DE VARIOUS OTHER ADDITIONS AND DISALLOWANCES WHICH RESULTED IN DETER MINATION OF TOTAL INCOME AT RS. 5,10,58,910. BEING AGGRIEVED OF THE A SSESSMENT ORDER SO PASSED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT( A). 5. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , PRELIMINARY CONTENTION OF ASSESSEE WAS THAT SINCE IT IS REGISTE RED U/S 12A OF THE ACT AND HAS FULFILLED ALL OTHER CONDITIONS OF SECTI ON 11, IT IS ENTITLED FOR EXEMPTION IN SPITE OF THE FACT THAT IT IS NOT APPR OVED BY THE PRESCRIBED AUTHORITY U/S 10(23C)(VI). IT WAS SUBMIT TED BY ASSESSEE THAT THERE IS NO RESTRICTION IMPOSED IN THE STATUTE THAT EDUCATIONAL INSTITUTION CANNOT CLAIM EXEMPTION U/S 11. IN SUPPO RT OF SUCH CONTENTION, ASSESSEE RELIED UPON A NUMBER OF DECISI ONS. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN TH E LIGHT OF THE DECISIONS RELIED UPON BY IT, ALLOWED ASSESSEES CLA IM OF EXEMPTION BY HOLDING AS UNDER: 4.2 IT WAS HELD IN THESE CASES THAT ONCE ALL THE REQUISITE CONDITIONS FOR EXEMPTION U/S 11 WERE MET, EVEN IF THE CONDITIONS U/S 10(23C)(VI) HAD NOT BEEN COMPLIED WITH, THERE WOULD BE NO BAR TO SEEK EXEMPTION U/S 11. THE APPELLANT IS, TH EREFORE, 3 ITA NO. 1659 /HYD/2014 M/S VARDHAMAN ENGG. COLLEGE, MAHABOOB NAGAR ENTITLED FOR EXEMPTION U/S 11, EVEN IF THE NOTIFIC ATION U/S 10(23C)(VI) OF THE ACT HAD NOT BEEN OBTAINED BY IT . THE APPEAL IS, THEREFORE, ALLOWED ON THIS ISSUE. 6. LD. DR JUSTIFYING THE REASONING OF AO SUBMITTED BEFORE US, WHEN THERE IS A SPECIFIC PROVISION IN THE STATUTE IN THE FORM OF SECTION 10(23C)(VI) CONFERRING THE BENEFIT OF EXEMPTION ON EDUCATIONAL INSTITUTION, ASSESSEE CANNOT CLAIM EXEMPTION U/S 11 OF THE ACT. 7. LD. AR, ON THE OTHER HAND, STRONGLY RELIED UPON THE ORDER OF LD. CIT(A). HE FURTHER SUBMITTED THAT THE ITAT IN ASSES SEES OWN CASE IN AY 2005-06 IN ITA NO. 741/HYD/2009 DATED 08/04/2011 HAS DECIDED THIS ISSUE HOLDING THAT ASSESSEE CAN CLAIM EXEMPTIO N EITHER U/S 11 OR U/S 10(23C)(VI). 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. THE ONLY DISPUTE BETWEEN THE PARTIES IS, WHETHER AS SESSEE BEING AN EDUCATIONAL INSTITUTION CAN CLAIM EXEMPTION U/S 11 OF THE ACT IN SPITE OF THE FACT THAT THERE IS NO APPROVAL OF THE COMPET ENT AUTHORITY U/S 10(23C)(VI). IN OUR VIEW, THE ISSUE IN DISPUTE IS S QUARELY COVERED BY A NUMBER OF DECISIONS OF THIS TRIBUNAL NOT ONLY IN AS SESSEES OWN CASE BUT ALSO IN CASE OF VARIOUS OTHER EDUCATIONAL INSTI TUTIONS. THIS TRIBUNAL IS CONSISTENT IN ITS VIEW THAT EVEN IF AN EDUCATIONAL INSTITUTION HAS NOT BEEN APPROVED U/S 10(23C)(VI) OF THE ACT, S TILL IT WILL BE ELIGIBLE FOR EXEMPTION IF IT IS REGISTERED U/S 12A OF THE ACT AND FULFILLS ALL OTHER CONDITIONS OF SECTION 11 TO 13 OF THE ACT . IN ASSESSEES OWN CASE IN AY 2005-06, IN THE ORDER REFERRED TO ABOVE, THE COORDINATE BENCH OF THIS TRIBUNAL HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. WE FIND THAT IT IS NOW SETTLED WITH SERIES OF DECISIO NS OF THE HYDERABAD BENCHES OF THE TRIBUNAL THAT AN ASSESSEE CAN MADE ALTERNATIVE CLAIM U/S 11 OF THE ACT AND IT IS NOT MANDATORY FOR THE ASSESSEE TO OBTAIN A NOTIFICATION U/S 10(23C)( VI) OF THE ACT. THE ISSUE BEING COVERED IN FAVOUR OF THE ASSESSEE WITH SERIES OF DECISIONS OF THE TRIBUNAL, WE HOLD THAT THE ASS ESSEE CAN MAKE ALTERNATIVE CLAIM FOR EXEMPTION U/S 11 OF THE ACT AND THERE 4 ITA NO. 1659 /HYD/2014 M/S VARDHAMAN ENGG. COLLEGE, MAHABOOB NAGAR BEING NO MISTAKE IN THE ORDER OF THE CIT(A), ON TH IS ISSUE, WE HOLD THAT NO INTERFERENCE WITH HIS ORDER IS CALLED FOR. 8.1 THE DECISION OF LD. CIT(A) BEING IN CONSONANCE WITH THE VIEW EXPRESSED BY THE COORDINATE BENCH, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LD. CIT(A) AND ACCORDINGLY WE CONFIRM THE SAID ORDER AND DISMISS THE GROUND RAISED. 9. IN VIEW OF OUR DECISION IN GROUND NO. 3, GROUND NO. 4 BECOMES INFRUCTUOUS, HENCE THE SAME IS DISMISSED. 10. IN GROUND NO. 5, THE DEPARTMENT HAS CHALLENGED THE DECISION OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO ON A CCOUNT OF DISALLOWANCE U/S 40A(3) AND 40(A)(IA). AS WE HAVE U PHELD THE DECISION OF LD. CIT(A) IN ACCEPTING ASSESSEES CLAI M OF EXEMPTION U/S 11 OF THE ACT, ASSESSEES INCOME HAS TO BE COMPUTED AS PER THE EXEMPTION PROVISION AND NOT BY APPLYING COMMERCIAL PRINCIPLES FOR COMPUTING BUSINESS INCOME. THEREFORE, THE DISALLOWA NCE U/S 40A(3) AND 40(A)(IA) CANNOT BE MADE. THIS GROUND OF THE DE PARTMENT IS ALSO DISMISSED. 11. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 10 TH JULY, 2015 KV 5 ITA NO. 1659 /HYD/2014 M/S VARDHAMAN ENGG. COLLEGE, MAHABOOB NAGAR COPY TO:- 1) DDIT (E) I, 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 2) M/S VARDHAMAN ENGGG. COLLEGE, BIP COMPLEX, NEAR GOVT. HOSPITAL, MAHABOOB NAGAR, TELENGANA 3 CIT(A)-IV, HYDERABAD 4) DIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.