TMI Blog2018 (11) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... ns run by the assessee are existing solely for educational purposes and not for the purpose of profit coupled with the fact that the aggregate receipt of such institution is less than ₹ 1 crore then the AO may consider to grant the benefit of exemption u/s 10(23C)(iiiad) of the Act. - Decided in favour of revenue for statistical purposes. - ITA No. 923 /Ind/2016 - - - Dated:- 6-11-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri B.J Boricha, Sr. DR For The Assessee : Shri Sumit Neema, Sr.Adv And Ayush Gupta, Adv. ORDER PER SHRI MANISH BORAD, AM This appeal of Revenue pertaining to A.Y. 2004-05 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-31, New Delhi, Camp Bhopal (in short CIT(A) ), dated 29.06.2016 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the Act ) framed on 29.12.2006 by ACIT, 1(1), Bhopal. 2. The revenue has raised following grounds of appeal; 1. Whether on the facts and circumstances of the case Ld.CIT(A) was justified in deleting the addition of ₹ 90, 31, 280/- made by A.O on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval has been made on 23.12.2004 and the approval is still awaited. With this discussion the Ld.A.O completed the assessment denying the benefit of exemption u/s 11 as well as section 10(23C)(vi) of the Act and assessed income at ₹ 90, 31, 280/- which comprised of income earned by Ayushmati Educational Social Society at ₹ 5, 70, 882/- and income earned by Bhabha Engg. Research Institute at ₹ 84, 60, 398/-. 4. Aggrieved assessee preferred appeal before Ld.CIT(A) who allowed the assessee s appeal observing that as the application of the assessee for approval u/s 10(23C)(vi) of the Act has neither been approved nor declined after lapse of so much time therefore the assessee shall be deemed to have received the approval u/s 10(23C)(vi) of the Act, therefore eligible for exemption. Thereafter the Revenue filed an appeal before I.T.A.T, Indore. The Tribunal vide order dated 21.4.11 (I.T.A. No. 449/Ind/2007) set aside/restore the matter back to the file of Ld.CIT(A) to verify the factual position with regard to the application of the assessee pending for approval u/s 10(23C)(vi) of the Act before CCIT, Bhopal. 5. In the set aside proceedings Ld.CIT(A) allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhabha Engineering Institute Reg.No.01/01/MP/DEG/2003/005 74, 32, 264 Bhabha Pharmacy Research Institute Reg. No.01/01/MP/PHAR/2004/007 36, 43, 120 Bhabha Engineering Research Institute (MCA) Reg. No.PG/MCA/MP/2003/08 1, 47, 720 Bhabha Management Research Institute Reg. No.PG/MBA/MP/2003/02 9, 20, 630 Total 1, 21, 43, 734 Thus it is evident that the gross receipts of each college is less than the prescribed threshold limit of 1 crore and therefore there the income of each of the collage is exempt u/s 10(23)(C)(iii)(ad). Consequentially the income of the society is also exempt. Reliance is placed on the following decisions: ( 2013) 358 ITR 373 (Karnataka) CIT vs. Children's Education Society (para 22) Thus in view of the aforesaid submission the income of the assessee is exempt u/s 10(23)(C)(iii)(ad) as each colleges gross receipts less than 1 crore . 9. Ld. Senior Counsel for the assessee further added that before con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT vs. Children s Education Society (supra) for its contentions. 12. In order to adjudicate the issue we would like to go through the relevant portion of the judgment of the Hon'ble High Court of Karnataka in the case of CIT vs. Children s Education Society (supra) which is mentioned below; 11. In order to appreciate the aforesaid contentions, it is necessary to have a look at the statutory provisions. Chapter III deals with incomes which do not form part of total income. Section 10 deals with income not included in total income, which reads as under: Section 1 0 - In computing the total income of a previous year of any person, any income falling within any of the following clause shall not be included. 12. Sub-section (22) before deletion read as under: Any income of a University or other educational institution, existing solely for educational purposes and not for purposes of profit. 13. By deleting the aforesaid provision, the provisions which are now substituted are sub-section 23-C of Section 10. Sub-section 23-C reads as under: Any income received by any person on behalf of ( iii)(a) the National Foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Section 10 was deleted is found in the Budget Speech of the Minister of Finance for 1998-99, where it is stated as under: Moderate rates and large concessions do not go hand in hand. I have, therefore, carried out a review of the various concessions and exemptions under the Income- Tax Act. I find that many of them are no longer necessary and some of them are also being used for tax avoidance. L. therefore, propose to withdraw many of these provisions. These include; exemption to the Export Import Bank of India and exemption in respect of certain perquisites on foreigners employed in India. The blanket exemption in respect of educational and medical institutions which is being misused, is proposed to be withdrawn, compelling such institutions to come under a discipline. However, safeguards are being provided to ensure that the institutions genuinely serving the social cause in either field do not lose the existing benefits. 15. The Apex Court had an occasion to consider the Sub-section (22) of Section lO in the case of Aditanar Educational Institution v. Addl. CIT [1997J 224 ITR 310/90 Taxman 528 (SC), has held as under: Counsel for the Revenue mainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g within section 10(22) of the Act. We hold accordingly. In our view, the judgment of the High Court does not merit interference. The plea of the Revenue to the contrary is untenable and we repel the same. All the appeals filed by the Revenue shall stand dismissed, but there shall be no order as to costs. 16. The aforesaid provision as it stood then and the interpretation placed on it by the various High Courts as well as the Apex Court gave total exemption in respect of the income derived from running such educational institutions. As the said provision was abused by some persons, the said provision was deleted and thus new provisions have been inserted. However, it is made clear, the intention of such amendments was not to deny the benefit to the institutions genuinely serving the social cause and to deny the existing benefits. Therefore, the real test is whether the assessee who claiming these exemptions is running educational institutions solely for education purposes and not for purpose of profit. If the said fact is established, he is entitled to exclude the income from such institution under Section 10. However, as intention of the deletion of Section 10(22) and intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an educational institution is less than one crore, the income from such educational institution in the hands of the assessee, is not taken into consideration in computing the total income of the assessee. 19. Sub-clause (vi) provides that any University or other educational institution existing for educational purposes and not for the purpose of profit other than those mentioned in sub-clause (iii)(ab) and sub-clause (iii)(ad) and which may be approved the prescribed Authority, they are also entitled to the said benefit. In other words, sub-clause (iii)(ab), sub- clause (iii)(ad) and clause (vi) applies to three categories of institutions. 20. Now, we are concerned with the meaning to be attached to the word aggregate annual receipt . The argument is, other educational institution referred to in the said sub-clause refers to all educational institutions run by the assessee and aggregate annual receipts of such other educational institutions means the aggregate of annual receipts of all such educational institutions put together. Otherwise, the use of the word aggregate loses its meaning. We find it difficult to accept the said argument. 21. Firstly, if the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext of the first word i.e., the University. Both in the University and any educational institutions, education is imparted. The University is a statutory body. But there are a number of educational institutions which are not run by a statutory authority which are imparting education, the word other educational institution has to be understood in the context of other than any University. If so understood, all that it means is every educational institution existing solely for educational purpose and not for the purpose of profit, if the aggregate annual receipts of such educational institution exceeds ₹ 1 crore, then the income from such educational institution received by the assessee is excluded from his total income. In an educational institution the amount are calculated periodically. It may be calculated under different heads. All such amount received constituted receipts and those receipts may be received throughout the year. Therefore, the word annual has been inserted. But to be eligible for exemption, aggregate of annual receipts should not exceed ₹ 1 crore i.e. the total annual receipts of a year if it does not exceed Rs.I crore, then the income derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of no use at all. Especially, if the society is running a medial college or any engineering college or other professional courses, then the annual receipt of each institution would run to few crores and therefore, the very object of granting exemption to such genuine institution would be lost. Therefore, the word aggregate annual receipt has to be understood with the context in which it is used and the purpose for which the said provision was inserted, keeping in mind, the Scheme of the Act. Therefore, if an assessee is running several educational institutions, if any of them is wholly 01 substantially financed by the Government, then the income from such educational institution received by the assessee is not included while computing his total income. Similarly, income from each educational institution if they are not receiving any aid from the Government wholly or substantially in respect of which the aggregate annual receipt do not exceed Rs.l crore received by the assessee, is also not included while computing annual total income of the assessee. 24. Clause (vi) makes it clear that if educational institution do not fall under either of those two categories and still suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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