Jt Commissioner of Income-Tax (OSD) (Exemptions) Circle, Pune V. Deccan Education Society, Pune

ITA 81/PUN/2021

AI Insights

The case involves the Deccan Education Society, an educational institution registered as a Public Charitable Trust, which appealed against the assessment order by the Deputy Commissioner of Income Tax, denying them exemption under section 10(23C)(iiiab) of the Income Tax Act, 1961. The Assessing Officer had concluded that the society received capitation fees and was not wholly or substantially financed by the Government of India, thus denying the exemption. The CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal. The Tribunal found that the CIT(A) had not adequately addressed the factual matrix concerning the financing of the institutions and the nature of the donations received, necessitating a remand for a detailed examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137172 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 11-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2021
• Other Referred Cases: P.S. Govindasamy Naidu & Sons vs. ACIT, Sinhagad Technical Education Society vs. CIT, Islamic Academy of Education vs. State of Karnataka, CIT vs. MAC Public Charitable Trust & Other Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.81/PUN/2021 िनधाᭅरण वषᭅ / Assessment Year : 2011-12 Jt. CIT (OSD) (Exemptions) Circle, Pune. Vs. Deccan Education Society, Fergusson College Campus, F.C. Road, Deccan Gymkhana, Shivaji Nagar, Pune- 411004. PAN : AAATD3141P Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of the ld. Commissioner of Income Tax (Appeals)-10, Pune [‘the CIT(A)’] dated 23.03.2020 for the assessment year 2011-12. 2. Briefly, the facts of the case are that the respondent-assessee is an Educational Institution registered as Public Charitable Trust Revenue by : Shri Keyur Patel Assessee by : Shri Sunil U. Pathak & Shri Nikhil S. Pathak Date of hearing : 12.12.2022 Date of pronouncement : 12.01.2023 ITA No.81/PUN/2021 2 under the Bombay Public Trust Act, 1950. It runs educational institutions in Pune, Mumbai, Sangli, Satara, Wai and Tirupati. The Return of Income for the assessment year 2011-12 was filed on 29.09.2011 along with audit report in Form No.10BB declaring Rs.Nil income after claiming exemption of income u/s 10(23C)(iiiab) of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax (OSD), Circle-1(2), Pune (‘the Assessing Officer’) vide order dated 26.03.2014 passed u/s 143(3) of the Act at a total income of Rs.112,69,25,149/-. The factual matrix of the case are as under : During the course of assessment proceedings, the Assessing Officer observed that the respondent-assessee received donations of Rs.8,06,74,462/- from 1600 people/donors, which are claimed to be voluntary and process with the admissions of the students in the educational institutions of the respondent-assessee. The Assessing Officer issued letters to 100 donors seeking the confirmation of the above-said donations. Out of whom, 20 donors had responded and out of them, only 6 persons/donors had confirmed that the donations were made in connection with the admission of their ward and relative, the details of which were set out by the Assessing Officer ITA No.81/PUN/2021 3 at para 17.6 of the assessment order. The Assessing Officer inferred that the respondent-assessee society was in receipt of capitation fess and, therefore, denied the exemption placing reliance on the decision of the Hon’ble Madras High Court in the case of P.S. Govindasamy Naidu & Sons vs. ACIT, 324 ITR 44 (Madras) and brought to tax the entire receipts. The Assessing Officer also was of the opinion that some of the institutions were not actually financed by the Government of India and, therefore, the respondent-assessee society is not eligible for exemption u/s 10(23C)(iiiab) of the Act. 3. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) contending that the Assessing Officer ought not to have reached the conclusion that the respondent- assessee society was in receipt of donation, based on the confirmations of some of the donors and without giving an opportunity of cross-examination. However, the ld. CIT(A) held that there is no requirement that each institution has to be fulfil the criteria laid down u/s 10(23C)(iiiab) of the Act placing reliance on the decision of the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier assessment years. As regards to the receipt of donations, the ld. CIT(A) held that the donations received by the respondent-assessee society form part ITA No.81/PUN/2021 4 of the corpus funds and not liable to tax. Accordingly, the ld. CIT(A) directed the Assessing Officer to delete the addition made and directed the Assessing Officer to allow the exemption u/s 10(23C)(iiiab) of the Act. 4. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 5. It is contended that the ld. CIT(A) erred in holding that the respondent-assessee trust is entitled for deduction u/s 10(23C)(iiiab) without appreciating the facts of the case that the respondent- assessee runs some institutions without any aid from the Government. He further submitted that when the donations were received have to nexus with admissions of students in institutions, it cannot be treated as “corpus funds” qualifying for exemption. 6. On the other hand, ld. AR submits that the eligibility of an institution for exemption u/s 10(23C)(iiiab) has to be examined as whole, not institution-wise placing reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of Sinhagad Technical Education Society vs. CIT, 139 taxmann.com 270 (Pune- Trib.). He further submitted that the Assessing Officer ought not to have held that the respondent-assessee society is in receipt of donations having nexus with admissions of students, based on the ITA No.81/PUN/2021 5 depositions given by some of the donors out of 100 donors to whom letters were issued by the Assessing Officer without giving an opportunity of cross-examination of the said depositions. 7. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to whether or not the ld. CIT(A) is justified in holding that the exemption u/s 10(23C)(iiiab) is available to the respondent-assessee as whole or whether there is any evidence of receipt of capitation fees, disentitling the respondent-assessee from exemption u/s 10(23C)(iiiab) of the Act. The provisions of section 10(23C)(iiiab) grant exemption of income earned by any person established for the purpose of imparting the education and not for the purpose of profits which are wholly or substantially financed by the Government of India. No doubt, the law is settled that the exemption u/s 10(23C)(iiiab) is not available for specific institution, but as whole. But, question is whether the institution is wholly or substantially financed by the Government of India or not, is a pure question of fact. The Assessing Officer gave a finding that the respondent-assessee was not wholly or substantially financed by the Government of India. The ld. CIT(A) without adverting the facts of the case, had merely relied upon the legal proposition, granted ITA No.81/PUN/2021 6 exemption u/s 10(23C)((iiiab) of the Act. Further, the ld. CIT(A) without dealing with the issue, whether the respondent-assessee was in receipt of donations having nexus with admissions of students or not, simply held that the donations received by the respondent- assessee form part of the corpus funds. It is pertinent to note that if the donations received had direct nexus with admissions of students in the institutions run by society, such donations does not qualify for exemption as held by the Co-ordinate Bench of this Tribunal in the case of Sinhagad Technical Education Society (supra), wherein, the Tribunal following the decision of the Hon’ble Supreme Court in the case of Islamic Academy of Education vs. State of Karnataka [Writ Petition (Civil) 350 of 1993 judgement dated 14.08.2003]. Even recently, the Madras High Court in the case of CIT vs. MAC Public Charitable Trust & Other Trust (Appeal No.303 to 310 of 2021 order dated 31.10.2022 also held to the same effect. Thus, it is apparent from the order of the ld. CIT(A) that the ld. CIT(A) had decided the issue in appeal in perfunctory manner. In the circumstances, we are of the considered opinion that the interest of justice would be met if the matter is restored to the file of the ld. CIT(A) to decide the issue in appeal afresh after adverting to the ITA No.81/PUN/2021 7 facts of the case in the light of legal proposition discussed above. We order accordingly, 8. In the result, the appeal filed by the Revenue stands partly allowed for statistical purposes. Order pronounced on this 12 th day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 12 th January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-10, Pune. 4. The CIT (Exemptions), Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.