IT: Benefit under section 11 cannot be denied on ground that assessee has not obtained exemption from prescribed authority under section 10(23C)
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[2013] 38 taxmann.com 227 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
Indian Institute of Engineering Society*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 297 OF 2008†
NOVEMBER 6, 2012
Section 11, read with section 10(23C), of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under [Conditions precedent] - Assessment year 2001-02 - Assessee was an educational institution registered under section 12A - Exemption under section 11(1) was denied to assessee on ground that it had not obtained exemption from prescribed authority under section 10(23C) - Whether both section 10(23C) and section 11 are independent sections and as assessee was registered under section 12A, as such, it was entitled to benefit under section 11 - Held, yes [Para 6] [In favour of assessee]
Dhananjay Awashthi for the Petitioner. R.R. Agrawal for the Respondent.
ORDER
Ram Surat Ram (Maurya), J. - This appeal has been filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act) from the order of the Income Tax Appellate Tribunal, New Delhi dated 22.06.2007 passed in ITA No. 5708/Del/ 2003. The Revenue has proposed the following Substantial Questions of Law being involved in the appeal:—
| "(1) | Whether on the facts and circumstances of the case, the Hon'ble Tribunal is justified in confirming decision of the CIT(A) who deleted the addition of Rs. 16,56,285/- made on account of unexplained investment u/s 69 of the I.T. Act, 1961, being excess of investment in the cost of construction of building of institution as determined by the DVO (Technical experts) over the value declared by the assessee? | |
| (2) | Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is justified in law in confirming decision of the Ld. CIT(A) who held that claim of exemption under Section 11 cannot be denied even if the assessee is not granted exemption u/s 10 (23C) of the Act. Since the gross receipts of the assessee society exceed Rs. 1 crore, the approval of the prescribed authority u/s 10 (23C), the entire surplus of Rs. 3,09,71,070/- was liable to tax?" |
2. M/S Indian Institute of Engineering Society (the assessee) is an 'educational institution' registered under Section 12A of the Act, as a charitable institution. The assessee filed it's return under Section 139 (1) (a) of the Act 28.03.2002 for the Assessment Year 2001-02, in which total receipt of Rs. 3,09,71,070/- was shown. Net recurring and non-recurring expenditure of Rs. 1,81,22,666/- and taxable income nil was shown, claiming exemption under Section 11 (1) (a) of the Act, on the ground that the income earned was related to educational institution, established solely for the charitable purposes. In the meantime, the Commissioner Income-tax (A), Ghaziabad by order dated 30.05.2002 granted exemption certificate under Section 80G of the Act with retrospective effect from 19.03.2001 to the assessee.
3. The Assessing Officer proceeded under Section 143 (1) (a) of the Act and obtained a survey report from the ITO (TDS & Survey) Ghaziabad who in his report dated 11.12.2000, submitted for referring the matter to the Valuation Cell (I.T. Department). The matter was referred to District Valuation Officer, Income-tax Department (the DVO), who in his valuation report dated 22.03.2002 assessed the costs of construction of the building as Rs. 3,08,28,641/-. Thereafter the DVO furnished a revised valuation report dated 24.02.2003 assessing the costs of the construction as Rs. 1,97,78,951/-. The Assessing Officer therefore made addition of Rs. 16,56,285/-. The Assessing Officer by his order dated 17.03.2004 held that as in the previous Assessment Year claim of exemption under Section 11 was not accepted as the assessee has not obtained exemption under Section 10(23C) of the Act from the prescribed authority as such total taxable income was assessed as Rs. 3,26,27,360/-.
4. The assessee filed an appeal from the aforesaid order. The appeal was heard by the Commissioner of Income-tax (Appeal), Ghaziabad who by order dated 17.03.2004 held that the Assessing Officer had illegally ignored the books of account of the assessee which was duly supported by the documentary evidence without pointing out any discrepancy in it. As the assessee was registered under Section 12A of the Act as a charitable society as such it is entitled to exemption under Section 11 of the Act. Accordingly the appeal was allowed and the order of Assessing Officer was set aside. The Revenue preferred an appeal before the Income Tax Appellate Tribunal, New Delhi from the aforesaid order which was registered as I.T.A. No.5708/(Dl)/2004. The Tribunal vide impugned order dated 22.06.2007 dismissed the appeal.
5. We have heard Sri Dhananjay Awasthi, Standing Counsel for the Revenue and Sri R.R. Agrawal, learned counsel appearing for the respondent-assessee.
6. Sri Awasthi, learned counsel, submitted that as the assessee claimed exemption, being an educational institution as such it was required to obtain exemption from the prescribed authority under Section 10(23C) of the Act, which is mandatory. Since no exemption from the prescribed authority under Section 10(23C) of the Act has been obtained as such the assessee was not entitled to claim benefits under Section 11 of the Act. The submission is wholly misconceived. Admittedly, the assessee is an educational institution and was established for charitable purposes for running educational institutions and imparting education. Section 10 of the Act deals with the income not liable to be included in total income of the assessee while Section 11 deals with the income from property held for charitable or religious purposes. Both Section 10(23C) and Section 11 of the Act are independent sections. The assessee was registered under Section 12A of the Act. As such the assessee was rightly granted benefits under Section 11 of the Act.
7. In view of the aforesaid discussion, we do not find any error in the impugned orders passed by CIT (A) and the Income Tax Appellant Tribunal, New Delhi. The appeal fails and is dismissed.
USP †Arising out of order of ITAT in IT Appeal No. 5708 of 2003, dated 22-6-2007.
IT: Benefit under section 11 cannot be denied on ground that assessee has not obtained exemption from prescribed authority under section 10(23C)
■■■
[2013] 38 taxmann.com 227 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
Indian Institute of Engineering Society*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 297 OF 2008†
NOVEMBER 6, 2012
Section 11, read with section 10(23C), of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under [Conditions precedent] - Assessment year 2001-02 - Assessee was an educational institution registered under section 12A - Exemption under section 11(1) was denied to assessee on ground that it had not obtained exemption from prescribed authority under section 10(23C) - Whether both section 10(23C) and section 11 are independent sections and as assessee was registered under section 12A, as such, it was entitled to benefit under section 11 - Held, yes [Para 6] [In favour of assessee]
Dhananjay Awashthi for the Petitioner. R.R. Agrawal for the Respondent.
ORDER
Ram Surat Ram (Maurya), J. - This appeal has been filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act) from the order of the Income Tax Appellate Tribunal, New Delhi dated 22.06.2007 passed in ITA No. 5708/Del/ 2003. The Revenue has proposed the following Substantial Questions of Law being involved in the appeal:—
| "(1) | Whether on the facts and circumstances of the case, the Hon'ble Tribunal is justified in confirming decision of the CIT(A) who deleted the addition of Rs. 16,56,285/- made on account of unexplained investment u/s 69 of the I.T. Act, 1961, being excess of investment in the cost of construction of building of institution as determined by the DVO (Technical experts) over the value declared by the assessee? | |
| (2) | Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is justified in law in confirming decision of the Ld. CIT(A) who held that claim of exemption under Section 11 cannot be denied even if the assessee is not granted exemption u/s 10 (23C) of the Act. Since the gross receipts of the assessee society exceed Rs. 1 crore, the approval of the prescribed authority u/s 10 (23C), the entire surplus of Rs. 3,09,71,070/- was liable to tax?" |
2. M/S Indian Institute of Engineering Society (the assessee) is an 'educational institution' registered under Section 12A of the Act, as a charitable institution. The assessee filed it's return under Section 139 (1) (a) of the Act 28.03.2002 for the Assessment Year 2001-02, in which total receipt of Rs. 3,09,71,070/- was shown. Net recurring and non-recurring expenditure of Rs. 1,81,22,666/- and taxable income nil was shown, claiming exemption under Section 11 (1) (a) of the Act, on the ground that the income earned was related to educational institution, established solely for the charitable purposes. In the meantime, the Commissioner Income-tax (A), Ghaziabad by order dated 30.05.2002 granted exemption certificate under Section 80G of the Act with retrospective effect from 19.03.2001 to the assessee.
3. The Assessing Officer proceeded under Section 143 (1) (a) of the Act and obtained a survey report from the ITO (TDS & Survey) Ghaziabad who in his report dated 11.12.2000, submitted for referring the matter to the Valuation Cell (I.T. Department). The matter was referred to District Valuation Officer, Income-tax Department (the DVO), who in his valuation report dated 22.03.2002 assessed the costs of construction of the building as Rs. 3,08,28,641/-. Thereafter the DVO furnished a revised valuation report dated 24.02.2003 assessing the costs of the construction as Rs. 1,97,78,951/-. The Assessing Officer therefore made addition of Rs. 16,56,285/-. The Assessing Officer by his order dated 17.03.2004 held that as in the previous Assessment Year claim of exemption under Section 11 was not accepted as the assessee has not obtained exemption under Section 10(23C) of the Act from the prescribed authority as such total taxable income was assessed as Rs. 3,26,27,360/-.
4. The assessee filed an appeal from the aforesaid order. The appeal was heard by the Commissioner of Income-tax (Appeal), Ghaziabad who by order dated 17.03.2004 held that the Assessing Officer had illegally ignored the books of account of the assessee which was duly supported by the documentary evidence without pointing out any discrepancy in it. As the assessee was registered under Section 12A of the Act as a charitable society as such it is entitled to exemption under Section 11 of the Act. Accordingly the appeal was allowed and the order of Assessing Officer was set aside. The Revenue preferred an appeal before the Income Tax Appellate Tribunal, New Delhi from the aforesaid order which was registered as I.T.A. No.5708/(Dl)/2004. The Tribunal vide impugned order dated 22.06.2007 dismissed the appeal.
5. We have heard Sri Dhananjay Awasthi, Standing Counsel for the Revenue and Sri R.R. Agrawal, learned counsel appearing for the respondent-assessee.
6. Sri Awasthi, learned counsel, submitted that as the assessee claimed exemption, being an educational institution as such it was required to obtain exemption from the prescribed authority under Section 10(23C) of the Act, which is mandatory. Since no exemption from the prescribed authority under Section 10(23C) of the Act has been obtained as such the assessee was not entitled to claim benefits under Section 11 of the Act. The submission is wholly misconceived. Admittedly, the assessee is an educational institution and was established for charitable purposes for running educational institutions and imparting education. Section 10 of the Act deals with the income not liable to be included in total income of the assessee while Section 11 deals with the income from property held for charitable or religious purposes. Both Section 10(23C) and Section 11 of the Act are independent sections. The assessee was registered under Section 12A of the Act. As such the assessee was rightly granted benefits under Section 11 of the Act.
7. In view of the aforesaid discussion, we do not find any error in the impugned orders passed by CIT (A) and the Income Tax Appellant Tribunal, New Delhi. The appeal fails and is dismissed.
USP †Arising out of order of ITAT in IT Appeal No. 5708 of 2003, dated 22-6-2007.
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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