Income Tax Appellate Tribunal - Lucknow
Income Tax Officer -(Exemption), ... vs Saraswati Vidya Mandir Siksha Samiti, ... on 12 April, 2017
ITA No. 516/Lkw/2016 1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW "B" BENCH LUCKNOW
BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND
SHRI AMARJIT SINGH JUDICIAL MEMBER
ITA No.516/Lkw/2016
Assessment Year 2013-14
Income Tax Officer (Exemption) Vs Saraswati Vidya Mandir Shiksha
Lucknow Samiti, Gopinath Puram, Shuklaganj
Unnao - 241 501
PAN AAJTS 5288 B
(Appellant) (Respondent)
Appellant by Shri Rajnish Yadav, CIT DR
Respondent by Shri Surendra Kohli, Advocate
Date of hearing 05/04/2017
Date of pronouncement 12/04/2017
ORDER
PER: AMARJIT SINGH: JM
1. The present appeal has been filed by the assessee against the order passed by the Ld. CIT(A), Lucknow dated 22.06.2016 relevant to the Assessment Year 2013-14.
2. The Revenue has raised the following grounds:
1. The Ld. Commissioner of Income Tax(Appeals) erred in law deleting the addition of Rs. 22,78,766/- made on account undisclosed fee and allowing the appeal of the assessee on the ground that the assessee was not required to file return of income whereas the assessee was required to furnish the return of income as per provision of section I39(4C) of the I.T. Act, 1961 w.e.f 1.4.2006 as per Tax Law (Amendment) Act, 2006.
2. The Ld. Commissioner of Income Tax(Appeals) erred in law deleting the addition of Rs.6,42,608/- u/s 40(a)(ia) of the IT.ITA No. 516/Lkw/2016 2
Act, 1961 towards payment made to labour contractor namely Shri Kailas Mistry in contravention to the provisions of chapter XVIIB of the IT. Act, 1961.
3. The Ld. Commissioner of Income Tax(Appeals) erred in law in allowing exemption u/s 10(23C)(iiiad) of the IT. Act, 1961 as the receipt of the assessee is above one crore as per 'Receipt & Payment A/c."
3. The brief facts of the case are that the assessee filed the return of income on 05.09.2014. The case was selected for scrutiny through CASS. Thereafter notice u/s 143(2) of the Act was issued on 01.09.2015 by the Income Tax Officer, Range 1(1), Kanpur which was served upon the assessee. Thereafter, the case was transferred to the present Assessing Officer due to creation of CIT(A), Lucknow charge and notice u/s 142(1) of the Income Tax Act, 1961 dated 09.10.2015 along with questionnaires was issued, which was also served upon the assessee. The assessee society was registered with Registrar of Society, Uttar Pradesh and registration was renewed from time to time. The assessee society was not approved u/s 10(23C) of the Act and was also not registered u/s 12A of the Act during the year consideration. The assessee society is running an educational institute in the name and style of Saraswati Vidya Mandir Inter College in Unnao. Under the year consideration, assessee has disclosed total receipts at Rs.90,60,061/- and excess of income over expenditure has been shown at Rs.22,35,282/- in the income and expenditure account. In the return of income, the assessee society has shown income under the head profit and gain of business or profession at Rs.22,35,282/-. The assessee did not raise any claim or exemption in its return of income. Under the year consideration, i.e. Assessment Year 2013-14, the assessee has shown at Rs.22,78,766/- in the receipt and payment account. Since the assessee did not file the return of income prior to Assessment Year 2013-14, therefore, the claim of the assessee was disallowed and the said advance was added to the income of ITA No. 516/Lkw/2016 3 the assessee and accordingly taxed. The assessee has also made the payment to Shri Kailash Mistry, labour contractors, amounting to Rs.6,42,608/- without deducting of tax at source, as per provisions of chapter XVIIB of the Act. Therefore, the said income was also added to the income of the assessee. Aggrieved assessee has preferred an appeal before the CIT(A) who has allowed the claim of the assessee. Therefore, the Revenue has filed the appeal before us.
Issue No.1
4. Under this issue, the Revenue has challenged the deletion of the addition to the tune of Rs.22,78,766/- made on account of undisclosed fee. Ld. Representative of the assessee has also argued that the CIT(A) has wrongly held that the assessee was not under obligation to file the return under the provisions of Section 139(4C) of the Act w.e.f. 01.04.2006 as per Tax Law Amendment Act, 2006 therefore, in the said circumstances deletion of addition is bad in law hence the finding CIT(A) in this regard is liable to be set aside. However, on the other hand, Ld. Representative of the assessee has relied upon the order passed by the CIT(A) in question. Before going further it is necessary to advert the finding of the CIT(A) on this issue which is hereby reproduced as under:-
"9.1 Grounds of appeal No. 2,4, 6,7,8 and 12All these grounds of appeal relate to addition of Rs. 22,7S,766/- made by the AO. AO noted that appellant had received "fees in advance" in receipt and payment account but has not shown in Income and Expenditure Account. It was held that appellant had not filed ITR prior to A.Y, 2013- 14, therefore, the said amount of Rs. 22,78,766/- was added back as "undisclosed fees."
9.2 On examination of facts it was found that this fees pertained to F.Y. 2013-14 and relates to A.Y. 2014-15. The ITA No. 516/Lkw/2016 4 appellant prior to/the close of FY charges "Advance Fees"
from the students and the amount so received is reflected on the liability side of the balance sheet and is accounted for in the next financial year. On examination of liability side of balance sheet as on 31.03.2013 this amount is shown under the head "Current liabilities". This fees relates to A.Y. 2014- 15 and not to A.Y. 2013-14, therefore, it cannot be taxed in A.Y. 2013-14.
9.3 The AO has made the addition for the reason that appellant had not filed 1TR for the period prior to A.Y. 2013-14. The gross annual receipts of the appellant for AY. 2011-12 and AY 2012-13 were Rs.53.82 lacs and Rs.74.60 lacs respectively i.e. below Rs. 1 crore. Thus, the appellant was statutorily not required to file its ITR's for that period as the income is exempt u/s 10(23C)(iiiad). Thus, it is not a valid reason for making the said addition.
9.4 Due to reasons outlined in para 9.2 and 9.3 above the addition of Rs.22,78,766/- made by the AO is deleted. Grounds of appeal No. 2,4,6,7,8 and 12 are allowed. Grounds of No. 1 is routine and general."
5. On appraisal of the above said finding, it is not in dispute that the assessee has filed the return of income first time in the Assessment Year 2013-14 in which he received the advance fee to the tune of Rs.22,78,766/-. These advance fees was belonging to the Assessment Year 2014-15 and in the said Assessment Year the exemption has been granted under order u/s 10(23C) (vi) of the Act dated 24.09.2015. The exemption was applicable for the Assessment Year 2014-15 to onwards. Since this fees was belonging to the Assessment Year 2014-15 in which the exemption has been granted by the authorities by virtue of order dated 24.09.2015 in the Assessment Year 2014-15. Therefore, in the said circumstances, the CIT(A) has rightly disallowed the said addition in accordance with law. There is no need to revert the finding discussed by the CIT(A) on this issue specifically when we find nothing contrary to the finding of the CIT(A). No distinguishable fact has been placed on record. In view of the said circumstances, we are of the view ITA No. 516/Lkw/2016 5 that the CIT(A) has passed the order correctly justifiably which is not required to be interfered with at appellate stage. Accordingly, this issue is decided in favour of the assessee against the Revenue.
Issue No.2
6. Under this issue in connection with deletion of the addition of Rs.6,42,608/- u/s 40(a)(ia) of the Act towards payment made to labour contractor namely Shri Kailas Mistry.
7. The Ld. Representative of the Revenue has argued that the assessee made the payment to the tune of Rs.6,42,608/- to Shri Kailas Mistry labour contractor without deducting at source. Therefore, the Assessing Officer has rightly made the addition of the said amount u/s 40(a)(ia) of the Act. The Ld. CIT(A) has wrongly deleted the same so far the finding of the CIT(A) is wrong against the law and is liable to be set aside. However, on the other hand, Ld. Representative of the assessee has placed reliance on the order passed by the CIT(A) in question. Before going further, it is necessary to advert the finding of the CIT(A) which read as under:
"8.1 Grounds of appeal No. 9,10 and 13AO noted that appellant had made payment to Shri Kailash Mistry, labour contractor amounting to Rs.6,42,608/- without deducting TDS. Therefore, this amount was disallowed u/s 40(a)(ia) of the Act and added to total income of the appellant. The appellant contended that payment was made to Kailash who was the head mistry for payment to the daily laborers employed. It was stated that Kailash was not a labour contractor and provisions of IDS were not applicable in respect of this transaction.
8.2 The AO has made addition by invoking section 40(a)(ia) of the Act. Section 40 of the Act pertains to computation of income under the head "business or profession" under section 28 of the Act. Section 40 is ITA No. 516/Lkw/2016 6 applicable only when deduction under section 30 to 38 of the Act come into play while computing income under the head "Profit and Gains of business or Profession" u/s 28 of the Act. Section 40 of the Act is carved out only for the purpose of section 28 of the Act and not for computing the exemption of a society u/s 10 of the Act. The disallowance made u/s 40(a)(ia) will go on to enhance the business profit of an assessee whose income is chargeable to tax u/s 28 of the Act. This provision of Section 40(a)(ia) is not applicable to a charitable society claiming exemption u/s 10(23C)(iiiad) of the Act.
Without prejudice to above, the AO has just stated that Kailash Mistry is a labour contractor and provisions of TDS are applicable. He has not rebutted the version of the appellant that Kailash Mistry was a mistry who made payments to daily labourers employed and provisions of TDS were not applicable in respect of this transaction. There is no finding of fact that Kailash Mistry is a labour contractor liable to deduct TDS on these transactions.
8.3 In view of the above mentioned facts, the addition of Rs.
6,42,608/- is hereby deleted. Grounds of appeal No. 9,10 and 13 are allowed."
8. On appraisal of the above mentioned we find that the assessee is a charitable society claiming exemption u/s 10(23C)(iiiad) of the Act.
9. The CIT(A) has rightly held that the provisions of Section 40(a)(ia) of the Act pertains to the computation of income under the head profits and gains of business or profession Section 28 of the Act. Section 40 would be applicable only when the deduction u/s 30 to 38 of the Act come into play while computing the income under the head profit and gain or business or profession u/s 28 of the Act. Section 40 was carved out only for the purpose of Section 28 of the Act not computing the exemption u/s 10 of the Act. Disallowance u/s 40(a)(ia) will go on to enhance the business profit of the assessee whose income was chargeable to tax Section 28 of the Act. The ITA No. 516/Lkw/2016 7 said provision was not applicable to the charitable society claiming exemption u/s 10(23C) (iiiad) of the Act. Accordingly as on merit also there is no finding on record that the Kailas Mistry did not make payment to the laborers employed by him. Therefore, no provisions of Section 40(a)(ia) of the Act would be applicable to the assessee. Therefore in the said circumstances, we are of the view that the CIT(A) has rightly decided the issue which is not required to be interference in this appeal. Accordingly, this issue is decided in favour of the assessee against the Revenue.
Issue No.3
10. So far as issue no.3 is concerned, the contention of the Revenue is that the assessee was not entitled to get the exemption u/s 10(23C)(iiiad) of the Act as the receipt of the assessee more than one crore. The finding of the CIT(A) is reproduced below for ready reference:
"7.2 Ground of appeal No. 2 and 11The appellant is an educational institution run solely for educational purposes. The appellant is running an educational institution in the name of Saraswati Vidya Mandir at Unnao, The AO has not disputed this fact and has nowhere stated that this institute is being run for the purpose of profit. It is registered with Registrar of Societies, Uttar Pradesh and as per bye laws the books of accounts are maintained. Appellant had e-filed its retuiin of income showing Nil income after claiming exemption u/s 10 of the Act, These grounds of appeal pertain to the disallowance of claim of the appellant u/s 10 of the Act by the AO.
7.3 The receipts of the appellant for last 2 AY's and the present A.Y. are as under:-
A.Y. 2011-12 - Rs. 53.82 lacs A.Y. 2012-13 - Rs. 74.60 lacs A.Y. 2013-14 - Rs. 92.60 lacs.ITA No. 516/Lkw/2016 8
The gross receipts for the year under consideration are below Rs. 1 crore and as per the conditions outlined in section 10(23C) (iiiad) the appellant fulfills the conditions outlined for claim of exemption u/s 10(23C)(iiiad).
7.4 The provisions of section 10(23C)(iiiad) of the Act are discussed as under:-
a) If the annual receipts of an educational institution do not exceed Rs. Icrore, then such institutions are covered u/s 10(23C)(iiiad) of the Act.
b) The tax treatment of such institutions is as under:-
• The income of such educational institutions will be fully exempt u/s 10(23C) (iiiad).
• The educational institutions should exist solely for educational purpose and not for the purpose of profit.
• Such educational institutions will not be required to make any changes in their existing pattern of investment. • Such Institutions need not file any return of income. • Subsequently there was amendment by Finance Act 2015. As per this amendment every educational institutions whose income is exempt u/s 10(23C) (iiiad) is required to file its return of income for the A.Y. 2016-17 and onwards.
c) Thus, as per the pre-amended provisions as they stand pre A.Y. 2016-17, the educational institutions whose annual receipts do not exceed Rs. 1 crore are covered u/s 10(23C) {iiiad). The income of such institutions will be fully exempt.
Such institutions need not file any return of incomeO The AO has not stated in the order whether appellant violates any condition for exemption u/s 10(23C)(iiiad).
d) The case of the appellant clearly falls in this category i.e. its annual receipts are less than Rs. 1 crore, therefore, it stands covered u/s 10(23C) (iiiad). The income of such educational institutions stands fully exempt. As the AY under consideration is pre A.Y. 2016-17, therefore, the appellant was not even required to file its return of income.
ITA No. 516/Lkw/2016 9e) Further, for claiming exemption u/s 10(23C)(iiiad) there is no condition precedent that registration has to be sought u/s 12AA which is a condition for getting exemption u/s 11.
f) The Finance Act 2015 made an amendment in Section 139 whereby an entity claiming exemption u/s 10(23C)(iiiad) of the Act should be required to file ITR w.e.f. 01.04.2016 as per Rule 12 of IT Rules 1962.Thus, an entity claiming exemption u/s 10(23C)(iiiad)was not statutorily required to file its ITR u/s 139 till 31.03.2016.
g) It is pertinent to point out that during the F.Y. 2013-14 i.e. A.Y. 2014-15 the receipts of the appellant exceeded Rs. 1 crore and appellant filed an application before Pr. CCIT, Lucknow for grant of certificates of exemption u/s 10(23C)(vi) of the IT Act. The requisite certificate was granted to the appellant vide order dated 24.09.2015.
The action of the AO in denying exemption u/s 10 of the Act is not justified due to following reasons.
i) The income of appellant was exempt u/s 10(23C)(iiiad) as its annual receipts were less than Rs. 1 crore.
ii) Appellant was not statutorily required to file its return of income for the A.Y under consideration. An entity claiming exemption u/s 10(23C)(iiiad) was statutorily required to file a return w.e.f. 01.04.2016 as per Finance Act 2015 after an amendment was made in Section 139 of the Act.
7.5 In view of the above facts, the exemption u/s 10 of the Act is allowable to the appellant. Grounds of appeal No. 2 and 11 are allowed."
11. On appraisal of the above mentioned finding the receipt of the assessee was found less than one crore after deducting advance fee. He was not entitled to file the return statutorily in the assessment year under consideration and entity claiming exemption u/s 10(23C) (iiiad) of the Act was statutorily required to file the return w.e.f. 01.01.2016 in accordance with the Finance Act, 2015 after amendment was made in Section 139 of the Act. The CIT(A) held that the case of the assessee falls under Section 10 of the Act as nothing to the contrary to the law provision was found.
ITA No. 516/Lkw/2016 10Nothing highlighted by the Revenue before us. Accordingly, we find that the CIT(A) has rightly dealt this issue and observing the fact that annual receipt was less than one crore. He was entitled to get the exemption u/s 10 of the Act. This figure mentioned in the order is not factually different with the finding of the CIT(A) and no contrary facts have been placed on record according to which it can be said that the finding of CIT(A) is wrong against the law and fact. In brief we uphold the order of the CIT(A) on this issue and decide this issue in favour of the assessee against the Revenue.
12. In the result, appeal of the Revenue is dismissed.
(Order was pronounced in the open court on the date mentioned on the caption page) Sd/- Sd/-
(P.K. BANSAL) (AMARJIT SINGH) Vice President Judicial Member Dated: 12/04/2017 Aks Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar