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TMI Blog2016 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 by the AO. The learned CIT(Appeals) did not appreciate the fact that the assessment was re-opened merely the basis of change of opinion I reapplication of mind when there was no change in the factual matrix. 2. The learned CIT (Appeals)-I, Pune erred in law and on facts in confirming the action of the learned AO in denying the benefit of exemption u/s 10(23C)(vi) of the ITA, 1961. The learned CIT(Appeals)-I, Pune ought to have appreciated that the very same issue was decided in favour of the appellant trust for the A.Y. 2005 -06 by the Hon'ble ITAT , Pune vide order dated 31-05-2011. 3. The learned CIT(Appeals) further erred in law and on facts in not appreciating the fact that the appellant has been submitting form 56D (for claiming exemption u/s 10(23C)(vi) of the ITA, 1961) from time to time to the Chief Commissioner of Income Tax, Pune through the office of Commissioner of Income Tax, Pune. The learned CIT(A) ought to have appreciated that the procedure adopted by the appellant was in tandem with the footnote & action point given at the end of form 56D. 4. The learned CIT(Appeals)-I, Pune has also erred in law and on facts in confirming the action of AO in decidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessment of the earlier years were completed on the assumption that the income of the assessee had arisen from non-taxable source and the same could not be set off against taxable source. Further, sums received by the assessee by way of capital outlay contribution were treated as revenue receipt against the assessee's claim that these were capital receipts. The Assessing Officer thus, was of the view that the assessee's claim for exemption under section 10(23C)(vi) of the Act in the earlier years needs to be withdrawn. In the assessment year 2002-03, for which the permission for reopening the assessment was being sought, the assessee had returned a deficit of (-) Rs. 33,60,746/-. In the said year, the assessee had received capital outlay contribution of Rs. 48,43,750/-, which was treated as capital receipts by the assessee. Since the said contribution part took the nature of revenue receipts, the Assessing Officer had recorded reasons for reopening the assessment since the same had to be brought to tax and the excessive losses allowed to the assessee had to be reduced. For assessment year 2002-03, where the assessment was sought to be reopened beyond the period of four yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer also rejected the plea of the assessee with regard to capital outlay contribution, wherein it was claimed that since the assessee trust was existing solely for the purpose of education, its assumption as to the eligibility of exemption under section 10(23C)(vi) of the Act was never incorrect and hence, that is why the capital outlay contribution was not treated as revenue receipts. The Assessing Officer held that in the absence of any approval under section 10(23C)(vi) of the Act, capital outlay contribution ought to be treated as receipts in the hands of the assessee. With these, the objections raised by the assessee against the notice under section 148 of the Act were rejected. Thereafter, the Assessing Officer noted that the assessee was managing an international school by the name Mercedes Benz Education Academy at Hinjewadi, Pune. In the return of income filed by it, the assessee had claimed deficit of Rs. 33,60,746/-. The assessee failed to produce the exemption certificate granted under section 10(23C) of the Act and mainly relied on the application moved by the assessee under section 10(23C) of the Act. The Assessing Officer held that where the exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deciding the appeal for assessment year 2002-03 noted that no assessment was made under section 143(3) of the Act before the issue of notice under section 148 of the Act on 25.03.2009. Thus, the contention of the assessee that there was no failure on its part to file return of income under section 139 of the Act and/or to disclose fully and truly all material facts necessary for assessment and hence, the reopening of assessment was bad in law, was held to be not legally sustainable. Reliance in this regard was placed on the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC). The second contention of the assessee that the reasons recorded for the reopening of assessment appears to be in an exercise of application of mind to the same factual matrix, which was already considered by the Department was also rejected in view of the fact that the intimation, if any, under section 143(1) of the Act, was not an order of assessment and therefore, the question of change of opinion does not arise. Reference in this regard was again made to the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01.10.2012, wherein also the plea of the assessee that the application in Form No.56D was filed for assessment year 2002-03 and 2007-08 was also rejected. The copy of the letter is annexed as Annexure - B to the appellate order. The CIT(A) held that where the Form No.56D filed by the assessee has been rejected by the CIT-V, Pune and CCIT, Pune, then in the absence of any order granting approval under section 10(23C)(vi) of the Act, no exemption in respect of the income chould be allowed to the assessee. The CIT(A) further noted that the CCIT, Pune vide letter dated 01.10.2012 had categorically stated that the application in Form No.56D was not filed before the CCIT, Pune and in the absence of any evidence being produced to show that the application was filed either with the CIT or CCIT, the contention of the assessee that the application filed in Form No.56D had not reached finality, is de void of merit. In the absence of any approval being granted by the prescribed authority, the CIT(A) upheld the order of Asses sing Officer in denying the exemption claimed under section 10(23C)(vi) of the Act. 10. The offshoot of the issue was the status of appellant taken as AOP by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the application in requisite form was filed, but no order was passed by the statutory authorities. The learned Authorized Representative for the assessee referred to the application dated 27.12.1999 filed through the office of CIT, Pune, which is placed at page 68 of Paper Book, along with requisite information in Form No.56D, Memorandum of Association / Trust Deed, Note on activities of the trust and the registration under the Societies Registration Act and BPT Act. The learned Authorize d Representative for the assessee further claimed that it had written a letter dated 11.03.2002 to the CIT, Akurdi, Pune in relation to its application moved under section 10(23C)(vi) of the Act that the approval for its institution had not been received, the said letter was filed on 13.03.2002. Thereafter, the assessee furnished the Form No.56D along with return of income, copy of which is placed at pages 95 to 97 of Paper Book and in the Note, it was mentioned that the assessee had submitted an application on 28.12.1999 for grant of registration w.e.f. assessment year 1999-2000 and request was made to grant the exemption for a further period as under law. The next application was made for furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is squarely applicable. The learned Authorized Representative for the assessee further drew our attention to the Miscellaneous Application disposed of by the Tribunal in assessee's own case relating to assessment year 2005-06. In the above said background, the learned Authorized Representative for the assessee pointed out that the income declared by the assessee is exempt from tax as the approval is deemed to have been granted under section 10(23C)(vi) of the Act. 14. The learned Departmental Representative for the Revenue in reply, stated that there were no words like deeming exemption to be allowed to the assessee in section 10(23C)(vi) of the Act. Reliance in this regard was placed on the ratio laid down by the full Bench decision of Hon'ble Allahabad High Court in CIT Vs. Muzafar Nagar Development Authority in Income Tax Appeal No.348 of 2008, order dated 05.02.2015. It was further pointed out by the learned Departmental Representative for the Revenue that where the CIT had not exercised its power correctly, a remedy available to the assessee was by way of Writ before the jurisdictional High Court. Reference was made to the reliance placed upon by the learned Authorized Repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio laid down by the Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) and stated that where the assessee had made full disclosure, there was no merit in the reopening of the assessment. 16. We have heard the rival contentions and perused the record. The first issue raised in assessment years 2002-03, 2003-04 and 2004-05 is against the validity of reopening of the assessment under section 147 / 148 of the Act. In ITA No.1913/PN/2013, the assessee had furnished return of income declaring loss of Rs. 33,60,746/-. The return was processed under section 143(1) of the Act and no scrutiny assessment under section 143(3) of the Act was completed against the assessee for captioned assessment year. The Assessing Officer further re corded reasons for reopening the assessment, issued notice under section 148 of the Act on 25.03.2009 i.e. within the period of six years from the end of assessment year. The Assessing Officer recorded reasons for reopening the assessment on the ground that deduction under section 10(23C)(vi) of the Act was claimed by the assessee in the return of income, which was not allowable to the assessee in the absence of certificate issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 148 of the Act on 25.03.2009. In respect of assessment year 2004-05, the said notice under section 148 of the Act was issued within period of four years. However, the notice under section 148 of the Act was issued beyond four years, but within six years in relation to assessment year 2003-04. In both the years, the assessee had claimed the deduction under section 10(23C)(vi) of the Act without complying with the conditions of the said provision i.e. in the absence of any approval from the prescribed authority exempting the institution, and the same had resulted in escapement of income in the hands of assessee and where the said error had occurred because of the conduct of assessee in making the wrong claim, we hold that the Assessing Officer was within his jurisdiction to record the reasons for reopening the assessment under section 147 of the Act and further, issue notice under section 148 of the Act. In view thereof, we uphold the reopening of the assessment under section 147 and issue of notice under section 148 of the Act in line with our reasons vis-a-vis reopening of assessment relating to assessment year 2002-03 under section 147 / 148 of the Act. 18. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2008-09 onwards. No approval was granted by the CCIT, Pune for any of the earlier years under section 10(23C)(vi) of the Act. However, the assessee from year to year, i n its return of income filed from assessment year 1999-2000 onwards had been claiming the exemption under section 10(23C)(vi) of the Act vis-a-vis in this regard, the donation received by the assessee was treated as capital receipts and the balance receipts were set off against the expenditure incurred and losses have been claimed on account of deficit for the respective years as under:- A.Y. Profit / (Deficit) for the year 1999-00 (3,896,994) 2000-01 (2,582,275) 2001-02 (1,449,601) 2002-03 (3,360,746) 2003-04 (4,946,947) 2004-05 (9,484,942) 20. The sequence of the compliances made by the assessee for getting the approval under section 10(23C)(vi) of the Act vis-a-vis was by way of petition before the CBDT Board on 28.12.1999 along with requisite documents, wherein Form No.56D was filed for assessment years 1999-2000 to 2001-02 i.e. in respect of all the years which are not appeal before us. The copy of the said application and documents are placed at pages 68 to 93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee's claim of exemption under section 10(23C)(vi) of the Act in the earlier years needs to be withdrawn. 21. The Assessing Officer noted that in assessment year 2002-03 for which permission for reopening of the assessment was being sought, the assessee had written a deficit of Rs. 33,60,746/-. Further, the assessee had received capital outlay contribution of Rs. 48,43,750/-, which was treated as capital receipts by the assessee. However, since the contributions part took the nature of revenue receipts, as per the Assessing Officer, the same needed to be brought to tax and the excessive losses allowed to the assessee need to be reduced. The claim of the assessee before the Assessing Officer was that it had applied for exemption in Form No.56D for various years, and till its applications were not disposed off by the CCIT, Pune, it could not be said that the assessee has no approval under section 10(23C)(vi) of the Act. The Assessing Officer rejected the said objection of the assessee being not tenable and observed that the deduction under section 10(23C)(vi) of the Act was not automatic. The same was available only when the appropriate authority had given its approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the said ratio is not applicable, in view of the appeal filed by the Revenue before the Hon'ble Bombay High Court being admitted against the order passed by the Tribunal. The Revenue had challenged the order of Tribunal in directing the Assessing Officer to be treated as deemed approval under section 10(23C)(vi) of the Act on the ground that the CCIT had failed to pass any order on the assessee's application made on 31.03.2006. The learned Departmental Representative for the Revenue further pointed out that the issue is decided by the larger Bench of Hon'ble Allahabad High Court in CIT Vs. Muzafar Nagar Development Authority in Income Tax Appeal No.348 of 2008, order dated 05.02.2015. The questions of law raised before the full Bench were as under:- (i) Whether the non disposal of an application for registration, by granting or refusing registration, before the expiry of six months as provided under Section 12AA(2) of the Income Tax Act, 1961 would result in deemed grant of registration; and (ii) Whether the Division Bench judgment of this Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o uphold the order of Assessing Officer in treating the assessee as AOP instead of an institution solely existing for imparting education. 27. The fall out of the denial of deduction under section 10(23C)(vi) of the Act is the taxability of receipts after adjustment of expenditure in the hands of the assessee. The Assessing Officer noted that the assessee was managing an international school by the name Mercedes Benz Education Academy at Hinjewade, Pune. In the return of income for assessment year 2002-03, the assessee had claimed deficit of Rs. 33,60,746/-. Further, the assessee had credited sum of Rs. 48,43,750/- under the head capital outlay contribution. The Assessing Officer noted that the said contribution was made by the parents of every student seeking admission to the academy, in view of the fact that the school was un-aided and un-recognized in India and academy needs funds to provide education of international standards. The break-up of the receipts classwise from different entities is provided under para 4.2 of the assessment order. The Assessing Officer treated the said receipts as revenue receipts since the same was credited to capital outlay contribution funds and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the deficit claimed by the assessee is to be adjusted. 29. The next plea of the assessee before us was that in the alternate, in case the receipts are held to be taxable in its hands then, the benefit of set off of brought forward losses should be given to the assessee. The tabulated details filed by the assessee for assessment years 1999-2000 to 2001-02 reflect that the assessee had shown deficit in its hands. Admittedly, the assessee was claiming its income as exempt under section 10(23C)(vi) of the Act. The assessee has furnished the deficit for the assessment years 1999-2000 to 2001-02. However, the perusal of the details furnished by the assessee does not clarify the objection raised by the CIT(A) whether the said returns of income were filed in time as the requirement of law is that the loss shall be allowed only if the return of income is filed within due date prescribed under section 139(1) of the Act. The second objection of the CIT(A) was that it was not clear whether the assessee has claimed exemption under section 10(23C)(vi) of the Act in the respective years. In case the capital outlay has not been brought to tax and only the deficit has been assessed as loss, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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