TMI Blog2016 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account. Accordingly, capital outlay contribution was treated as revenue receipts of the assessee.In view of the factual findings of the Assessing Officer in this regard and in the absence of approval being granted to the assessee under section 10(23C)(vi) of the Act, the capital outlay contribution is to be treated as revenue receipt in the hands of assessee, against which the deficit claimed by the assessee is to be adjusted. Whether 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? - Held that:- 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, then w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 deciding the status of the appellant as that of an Association of Persons (AOP) instead of an institution solely existing for imparting education. 5. Alternatively and without prejudice, the learned CIT(A) has erred in law and on facts in not granting benefit of set off of past years deficits (losses) against the taxable income of the appellant. 6. The appellant craves leave to add / modify / delete all or any of the grounds of appeal. 4. In the appeals relating to assessment years 2002-03, 2003-04 and 2004-05, the assessee has raised the ground of appeal No.1 against the validity of reopening of the assessment under section 147 r.w.s. 148 of the Act. 5. The second issue raised in all the appeals i.e. assessment years 2002-03, 2003-04, 2004-05 and 2007-08 is in relation to the claim of exemption under section 10(23C)(vi) of the Act. An alternate plea has been raised by the assessee that without prejudice, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 years, where the income escaping the assessment was above ₹ 1,00,000/- and the assessment under section 143(3) of the Act had been completed, the Assessing Officer sought permission from Commissioner to reopen the assessment. Thereafter, reasons were recorded for reopening the assessment and notice under section 148 of the Act was issued to the assessee. Consequent thereto, notices under section 143(2) and 142(1) of the Act were issued. The assessee sought reasons for reopening the assessment which were forwarded by the Assessing Officer and on the basis of the same, the assessee requested to drop the proceedings initiated under section 148 of the Act. The claim of the assessee before the Assessing Officer was that the applications earlier to assessment year 2008-09 were pending for approval with the CCIT, Pune. The assessee had not made any default in submitting the requisite information / forms in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d claimed deficit of ₹ 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 section 10(23C)(vi) of the Act was not automatic and was only available to educational institutions approved by the prescribed authority, hence, the income of the assessee became chargeable to tax and was to be computed under the head Income from business or profession in accordance with the provisions of section 28 to 43D of the Act. For the year under consideration, the assessee had received sum of ₹ 48,43,750/- against capital outlay contribution, which as per the assessee was required in view of the fact that the said school was un-aided and un-recognized in India and it needs funds to provide education of international standards. The assessee had treated the said contribution of ₹ 48,43,750/- as contribution received as capital receipts. However, the same was treated as revenue receipt by the Assessing Officer. As per the Assessing Officer since the funds coming in the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected 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 Brokers Pvt. Ltd. (supra). The CIT(A) noted that the reasons for reopening the assessment were recorded prior to the order passed by the Tribunal in assessment year 2005-06 on 31.05.2011, wherein the claim of the assessee was allowed. The CIT(A) also noted that there was prima facie reasons to believe that the income had escaped assessment since the assessee had been claiming exemption under section 10(23C)(vi) of the Act without obtaining the necessary approval from the prescribed authority for availing the said exemption. Consequently, there were not only reasons for formation of belief that income had escaped assessment but also the reasons had rational connection or nexus with the material that had come to the notice of the Assessing Officer for formation of belief. Where the Assessing Officer had recorded appropriate reasons for formation of belief that the income escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer instead of an institution engaged in providing education. In view of the assessee having not filed the necessary approval from the prescribed authority, the CIT(A) upheld the order of Assessing Officer in adopting the status of assessee as AOP. The assessee was also aggrieved by the order of Assessing Officer making an addition of ₹ 48,43,750/- by treating the capital outlay contribution as taxable revenue receipts. The CIT(A) elaborately discussed the issue under paras 10.2 to 10.4 and observed that the contributions were collected by the assessee from the applicants seeking admission in the institutions for the reasons that the institution run by the assessee was un-aided and un-recognized and it did not get government grant for running academy. The CIT(A) observed that there was no merit in the claim of the assessee that the said receipts were do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 further period after expiry of period of earlier application dated 28.12.1999. The assessee further vide letter dated 24.12.2002 addressed to the CIT pointed out that the application for exemption under section 10(23C)(vi) of the Act was initially filed on 11.03.2002 and renewed application dated 31.10.2002. A request was made for oral and written submissions to be filed before the CIT, copy of which is placed at page 98 of the Paper Book. The learned Authorized Representative for the assessee pointed out thereafter with regard to the notice issued under section 142(1) of the Act and questionnaire raised by the Assessing Officer which is placed at pages 99 and 100, in which the Assessing Officer requested the assessee to file copy of application in Form No.56D made on 28.12.1999 under section 10(23C)(vi) of the Act and the copy of the renewal application dated 31.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 Representative for the assessee in this regard on the ratio laid down by the Hon ble High Court of Orissa in Padmashree Krutarth Acharya Institute of Engineering Technology Vs. CCIT (2009) 309 ITR 13 (Ori), where the issue was decided by way of Writ Petition. The learned Departmental Representative for the Revenue pointed out that in view of full Bench decision of the Hon ble Allahabad High Court (supra), the decision of the Tribunal in assessee s own case was not good law. He further stated that rightly or wrongly, if the CIT does not grant approval, exemption could not be allowed to the assessee. Referring to the approval granted by the CIT in assessment year 2008-09, the learned Departmental Representative for the Revenue pointed out that the said approval was for future and for earlier years, there was no such order of CIT. With regard to the assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 issued by the CCIT, Pune recognizing the assessee under section 10(23C)(vi) of the Act. In view of no assessment being completed under section 143(3) of the Act, we find merit in the order of CIT(A) in holding that the reopening of assessment was valid, in view of the ratio laid down by the Hon ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra). The plea of the assessee that recording of reasons under section 147 of the Act was not allowed as there was change in the opinion by issue of notice under section 148 of the Act does not stand in view of no assessment order being passed under section 143(3) of the Act. Even the reasons for reopening the assessment were recorded prior to the order passed by the Tribunal in assessment year 2005-06 on 31.05.2011, wherein the claim of the assessee was allowed by applying deeming provisions. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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. Now, coming to the reliance placed upon by the learned Authorized Representative for the assessee on the ratio laid down by the Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd. (supra). The claim of the assessee for exemption of deduction under section 10(23C)(vi) of the Act without appropriate approval from the concerned authority and making disclosure that it had the requisite approval, cannot be held to be full and true disclosure made by the assessee. In view thereof, there is no merit in the reliance placed upon by the learned Authorized Representative for the assessee on CIT Vs. Kelvinator of India Ltd. (supra). Accordingly, we reject the ground of appeal No.1 raised by the assessee in assessment years 2002-03, 2003-04 and 2004-05 vis- -vis the validity of reopening of the assessment under section 147 / 148 of the Act. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 of the Paper Book. Thereafter, on 22.10.2002, the assessee filed Form No.56D along with the return of income for assessment year 2002-03, copy of the said Form No.56D is attached at pages 95 to 97 of the Paper Book. The assessee claims that follow up letter was filed before CIT-V, Akurdi, Pune with respect to the application for exemption under section 10(23C)(vi) of the Act on 28.12.1999 and renewal application filed on 31.10.2002 with the return of income, on 24.12.2002, copy of which is placed at page 98 of the Paper Book. The assessee further claims that during the assessment proceedings relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcessive 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 and under the Act, the power to give such approvals vested with CIT / CCIT only and they were not with the Assessing Officer. Hence, till approval was given by the CIT / CCIT, mere applying for approval in Form No.56D could not tantamount to approval under section 10(23C)(vi) of the Act and till such time, the assessee had to be mandatorily treated to be without approval. The objection of the assessee in this regard was thus, dismissed. 22. The CIT(A) upheld the order of Assessing Officer vis-a-vis claim of exemption under section 10(23C)(vi) of the Act and rejected the plea of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh 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. Commissioner of Income Tax (2008) 216 CTR (All) 167 holding that the effect of non consideration of the application for registration within the time fixed by Section 12AA(2) would be deemed grant of registration, is legally correct. 25. The Hon ble High Court further elaborating upon the issue at length had observed that where the Legislature had not made any provision to the effect that the application for registration should be deemed to have been granted, if it is not disposed off within six months with an order in writing either allowing registration or refusing to grant it, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the assessee had credited sum of ₹ 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 the contribution was for admission i.e. entry of the student into the school, it was not for continuation of the students in the school, which dependent upon entirely different set of conditions as laid down in the Rules and Regulations of the school. The assessee was charging ₹ 2 or ₹ 3 lakhs as may be applicable from each student at the time of admission to the academy. Further, the parents who were contributing did not state specifically as to how the contribution should be utilized whether for creating infrastructure facilities or for incurring d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icit 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, then where the assessee has claimed the said capital outlay to be exempt under section 10(23C)(vi) of the Act, the losses arising therefrom cannot be set off against the income of the present assessment years. The Assessing Officer is directed to carry out the necessary verification and decide the issue in line with our direction after affording reasonable opportunity of hearing to the assessee. 30. The issue raised by the assessee in all the appeals before us is with regard to reopening of assessment and assessability of income in its hands. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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