Society running several Educational Institutions should show Annual Receipts of Each Institutions Separately for Tax Exemption: J&K HC [Read Judgment]

Charitable Society

While hearing the case of Vivekanand Society of Education and Research, High Court of Jammu and Kashmir recently held that if a charitable society is running several educational institutions, total annual receipts of each such institution should be taken separately for the benefit of tax exemption under the Income Tax Act, 1961.

The sole issue before the Court, in the instant case, was that “whether the aggregate annual receipts of the said two institutions are to be clubbed for the purposes of Section 10 (23C) (iiiad) or not”.

The assessee society has two educational institutions and both these institutions had aggregate annual receipts of less than Rs. 1 crores during the assessment year and also filed a return of income of the two institutions separately.

During the course of assessment proceedings, the Assessing Officer (AO) has clubbed the aggregate annual receipts of these two institutions to arrive at the figure of Rs. 1,62,04,515 which exceeded the limit of 1 crores. However, he was of the view that the said income was not of the kind mentioned in Section 10 (23C) (iiiad) of the Income Tax Act 1961 and the same is taxable in the computation of total income of the assessee society.

On appeal, CIT(A) granted relief to the assessee by holding the fact that the aggregate annual receipts of the two institutions cannot be clubbed together for the purposes of Section 10 (23C) ( iiiad) of the said Act. On appeal of the revenue Income Tax Appellate Tribunal (ITAT) set aside the order passed by the CIT(A) and also upheld the submission of the revenue.

Thereafter the assessee approached the Court on further appeal.

After analyzing the above narrated facts deeply, High Court Chief Justice Badar Durrez Ahmed and Judge Sanjeev Kumar observed that where there are more than one such institutions, which are under a particular society or trust, such as the assessee society in the present case, the aggregate annual receipts of each of the educational institutions would have to be considered separately and not together.

Court further held that institutions are independent entities and they generate income and when that income is received by the assessee, it becomes the income in the hand of the assessee and it is such income which is sought to be excluded while computing the total income of the assessee under Section 10 of the Act. And also declared that Clause (vi) makes it clear that if educational institution does not fall under either of those two categories and still such educational institutions are also entitled to the exemption, provided such institutions are approved by the prescribed authority, hence the issue was concluded by declaring that receipt of each institution should be taken separately for the purpose of tax exemption even though the society is running several institutions.

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