2023 (3) TMI 1554 - HC - Income Tax

Revision u/s 263 - development fees from its students had been directly carried to the balance sheet under the nomenclature Development Fund instead of being routed through the income and expenditure account and this was then treated as part of the Revenue and therefore the taxable income u/s 11 (1) - HELD THAT - CIT (E) simply stated that the impugned assessment order was erroneous and prejudicial in the interest of Revenue. ITAT has in the impugned order discussed in detail the explanation offered by the Assessee regarding application of funds. Inter alia it was noticed that CIT (E) had taken the total revenue earned granted 15% accumulation without considering the capital expenditure to the tune of Rs.258 crores. As noted by the ITAT if the said bill taken into account the taxable income would be a loss. It would have been observed the 15% accumulation granted to the Assessee. Further even after treating the development fees of Rs.111 crores as revenue income the net figure would still be a loss. As noted by the ITAT if only the CIT (E) had undertaken an inquiry he would have come to the above conclusion and there would have been no need to act to the taxable income of the Assessee. The Court is satisfied that no error has been committed by the ITAT in concluding that the order of the CIT (E) is unsustainable in law. No substantial question of law arises.

Summary

The High Court allowed the delay in filing the appeal and dismissed the Revenue's appeal against the ITAT order favoring the Assessee, a Trust running an educational institution, for the AY 2017-18. The ITAT found that the CIT (E) had not properly considered the Assessee's explanation and failed to account for capital expenditure, resulting in a loss even after treating development fees as revenue income. The High Court upheld the ITAT's decision, stating no substantial question of law arises.