The Raipur bench of the Income Tax Appellate Tribunal (ITAT) held that the society not being wholly/substantially financed by the government cannot raise a claim for exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961.
The assessee society, which was established with the Direction of the Education Department of the Chhattisgarh Government had filed its return of income in the status of an Association of persons (AOP)/ Body of individuals (BOI), declaring an income of Rs. Nil. The case of the assessee society was thereafter selected for scrutiny assessment under Section 143(2) of the Income Tax Act.
The Assessing Officer observed that the assessee had claimed exemption under Section 10(23C)(iiiab) of the Income Tax Act. On a perusal of the details, it was observed by the Assessing Officer that the assessee society had a total gross receipt of Rs.24.04 crore during the year under consideration.
The Assessing Officer was of the view that as the assessee society had not received any government grants during the year under consideration, thus, it had not fulfilled the basic condition laid down under Section 10(23C)(iiiab) of the Income Tax Act. The Assessing Officer declined the assessee’s claim for exemption of the excess of income over expenditure of Rs.5.24 crore.
The Authorized Representative submitted that though the registration u/s.12AA of the Act was earlier rejected/refused to the assessee society by the Commissioner of Income Tax (Exemption), Bhopal for the reason that it had failed to file within the stipulated time period the requisite replies to the queries raised by the latter, but the said order had thereafter been set aside by the Tribunal.
It was further submitted that as the CIT(Exemption) had granted approval to the assessee society under Section 12AA of the Income Tax Act, the Assessing Officer may be directed as per provisions of sub-section (2) to Section 12A of the Income Tax Act to allow an exemption under Section 11 & 12 of the Income Tax Act and exclude the income of the assessee society from the scope of its total taxable income.
The Departmental Representative relied on the orders of the lower authorities and submitted that the “2nd proviso” to Section 12A(2) of the Income Tax Act could not be pressed into service by the assessee society in the course of hearing of the present appeal wherein the issue involved was confined to declining of its claim of exemption under Section 10(23C)(iiiab) of the Income Tax Act.
The Two-member bench comprising of Ravish Sood (Judicial member) and Arun Khodpia (Accountant member) held that the assessee society which admittedly not being wholly and substantially financed by the government was disentitled from raising a claim for exemption under Section 10(23C)(iiiab) of the Income Tax Act, to have applied for registration and raised a claim of exemption under Section 10(23C)(vi) of the Income Tax Act.
The bench was of the considered view that as the said issue does not emanate from the orders of the lower authorities, therefore, they were refrain from dealing with the same. Thus, the additional ground of appeal raised by the assessee society being devoid and bereft of any merit was dismissed.
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