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2016 (7) TMI 27 - ITAT KOLKATA

2016 (7) TMI 27 - ITAT KOLKATA - TMI - Entitlement to exemption u/s 10(23C)(iiiab) - need of approval u/s 35(1)(ii) - whether an approval is required under section 35(1)(ii) of the Act for the assessee to claim exemption under section 10(23C) of the Act or not? - Held that:- The assessee is not a university or college or any other institution incurring expenditure for any scientific research to claim exemption under section 10(23C)(iiiab) of the Act. It is only an educational institution establi .....

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, pending approval, the assessee is entitled to claim exemption under section 10(23C) (iiiab) of the Act. Accordingly, we hold that in order to claim exemption under section 10(23C)(iiiab) of the Act, the approval under section 35(1)(ii) of the Act is not necessary in the present case. By applying the observation of Hon’ble HIGH COURT in DIRECTOR OF INCOME TAX vs. INDIAN NATIONAL SCIENCE ACADEMY [2010 (1) TMI 40 - DELHI HIGH COURT ] to the facts of the case on hand, we hold that the assessee is .....

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hat on the facts and in circumstances of the case, The Ld. CIT (A)/Jalpaiguri had erred in accepting the assessee's contention that the exemption has been claimed u/s 10(23C)(iiiab) of the IT Act which has been allowed to the assessee all through. 2. That on the facts and in the circumstances of the case, The Ld. CIT (A)/Jalpaiguri had erred in allowing exemption u/s 10(23C)(iiiab) of The IT. Act in disregard of the fact that the assessee had been filing return as scientific research associa .....

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. 5. That Ld. CIT(A) had erred in taking decision on fresh plea of claiming exemption u/s 10(23C) (iiiab) of the IT Act without affording opportunity to the Assessing Officer in violation of the provision of Rule 46A of the I T Rules 1962. 6. That the appellant craves leave to add to and/or alter, amend, rescind or modify the grounds here in above before or at the hearing of this appeal. 3. The brief facts of the case are that the assessee filed its original return for the assessment year on 19. .....

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xplained. It was submitted that the assessee is an institution for non-formal education in science and is a non-profit autonomous organization fully funded by Govt. of India under the Ministry of culture. It was stated that the assessee is registered under the W.B. Societies Registration Act XXVI of 1961 vide no. S/21927 of 1978-79. It was approved for the purpose of section 35(1)(ii) of the Act read with Rule 6 of Income Tax Rules1962 for the period from 01.04.2001 to 31.03.2004. The assessee s .....

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.2011 that there is no approval for claiming exemption u/s 10(23C) was available with the assessee. The AO found that the assessee is not registered u/s 12A of the Act, but however, noticed that the assessee got renewal of recognition of Scientific and Industrial Research Organizations (SIROS) from Deptt. of Science and Ind. Research for short DSIR for the period from 01.04.2007 to 31.03.2010 vide No.11/80/88-TV dt.08.06.2007. AO of the view that such recognition of DSIR is not an approval u/s 3 .....

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received. ₹ 2,00,00,000/- ₹ 80,05,53,122/- Expenses allowed. Less: Establishment expenses (receipt & payment statement) Rs.30,40,52,565/- Other administrative expenses (receipt payment statement) Rs.16,48,00,201/- Depreciation allowed as per Income & Expenditure A/c (Depreciation claimed to be as per IT. Act.) ₹ 10,02.46,670/- Rs.56,90,99.436/- Total income Rs.23,14,53,686/- 5. The CIT-A was of the view that the assessee receives funds from Government of India and Gover .....

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ii) of the Act is necessary to claim exemption under section 10(23C)(iiiab) of the Act and failed to appreciate section 10(21) of the Act as the AO rightly added the said amount of ₹ 23,14,53,686/- taking into consideration section 10(21) of the Act and relied on the AO s order. The Ld.AR submits that the assessee is fully funded by the Government of India and said claim has been allowed for all the previous years and drew our attention to the Page no 119 and 121 of paper book to show that .....

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as there was no such approval granted to the assessee for the year under consideration, but however, found that the approval u/s 35(1)(i) granted by CBDT is valid only upto 31-03-2004 and fresh application for approval is pending with the CBDT and treated the receipts by way of grants from the Government of India and Government of West Bengal as income and put to tax as computed therein to the income of assessee. 8. Therefore, it is clear that the assessee has been claiming exemption under sect .....

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with where the assessee has been claiming exemption for through past years and said provision reproduced here under for better understanding: CHAPTER III INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (23C) any income received by any person on behalf of- (i) the Prime Minister's National Relief Fund; or (ii) th .....

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t48; or (iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government48. 49[Explanation.-For the purposes of sub-clauses (iiiab) and (iiiac), any university or oth .....

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relevant previous year]; or 9. A plain reading of the above speaks the financial grants by the Government to any University or other educational institution existing solely for educational purposes without any element of profit does not include in total income. In the present case, the ld. AR drew our attention to page 119 of paper book. It clearly shows that the assessee is an autonomous society registered on 4.4.1978 and Union Minister of Education as its President. The assessee has taken over .....

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ion existing solely for education purposes. Therefore, we are of the view, that the funds granted by the Government of India does not come under the definition of income and thus, it cannot be included in total income in terms of the section 10(23C) of the Act. Therefore, we hold that section 10(23C) is application to the case of the assessee. 10. On the other hand, the AO disallowed the claim of exemption on the ground that no approval under section 35(1)(ii) from CBDT was not available for the .....

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penditure) laid out or expended on scientific research related to the business. Explanation.-Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [as defined in Explanation 2 below sub-section (5) of section 40A] to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the e .....

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ch or to a university, college or other institution to be used for scientific research : Provided that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government; (iia) an a .....

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association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research : Provided that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, univers .....

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nstitution referred to in clause (ii) or clause (iii) has been withdrawn; (iv) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub-section (2) : Provided that the research association, university, college or other institution referred to in clause (ii) or clause (iii) shall make an application in the prescribed form and manner to the Central Government for the .....

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ollege or other institution and that Government may also make such inquiries as it may deem necessary in this behalf : Provided also that any notification issued, by the Central Government under clause (ii) or clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before .....

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by the Central Government. 11. A thorough reading of the above provision explains about the deductions shall be allowed on expenditure incurred on scientific research subject to the condition contained therein, specifically clause (i) of (1) of 35 said expenditure shall not be in the nature of capital expenditure, but the incurred expenditure on scientific research should be relatable to the business. Whereas clause (ii) of subsection (1) of section 35 of the Act, any amount paid to put in use .....

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ortray the growth of science and technology and their application in industry and human welfare with a view to develop scientific attitude and temper and to create, inculcate and sustain a general awareness amongst the people and took us to page 121 of paper book drew our attention to the point no.3(iv) and (vii) of objects of the assessee as provided in memorandum of association of assessee. So point for consideration for us to decide whether an approval is required under section 35(1)(ii) of t .....

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d in the memorandum at page 121 of paper book. Therefore, in our opinion, an approval is not necessary under section 35(1)(ii) of the Act to claim exemption under section 10(23C)(iiiab) of the Act. The CIT(A) has rightly dealt with the issue involving approval under section 35(1)(ii) and finding thereon, stating in other words, pending approval, the assessee is entitled to claim exemption under section 10(23C) (iiiab) of the Act. Accordingly, we hold that in order to claim exemption under sectio .....

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rved, the relevant portion which is applicable is reproduced hereunder: 9. Before we part with, we would like to make certain comments. As noted above, the NISA had been allowed approval under s. 35(1)(ii) of the Act for the last twenty five years, i.e., till 31st March, 2003 as of "Scientific Research Association". Reason why the approval is now granted as "other institution", is not discernible. It was stated by the learned counsel for the assessee that application for reco .....

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lly funded by Department of Science and Technology, Ministry of Science and Technology, Government of India. If it is correct, it would be open to the INSA to press this fact before the Tribunal to support its plea that being an institution 100 per cent financed by the Central Government, it is not liable to pay any tax. The party shall appear before the Tribunal on 11th Feb., 2010. 13. Therefore, we find support from the Judgment supra, where the Hon ble HIGH COURT observed that when the assess .....

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