By TIOL News Service

JAMMU, JAN 29, 2018: THE ISSUE is - Whether in so far as section 10 (23C)(iiiad) is concerned, if a society is running more than one educational institutions, the aggregate annual receipts of each of such educational institutions can be clubed up together. NO is the verdict.

Facts of the case

The Assessee-society, had two institutions namely, Vivekanand College of Education, Kathua, and Vivekanand Institute of Education, Training & Research. The Assessee believed that it had no taxable income in its hands and hence, had not filed its return for the relevant AY. However, the AO issued notice u/s 148 and in reply, the Assessee had filed a nil return. In the course of the assessment proceeding, the AO noted that both the institutions of the Assessee had individually aggregated annual receipts of less than the prescribed limit of Rs. 1 crore in the year under consideration. The AO clubbed the aggregated annual receipts of those institutions to arrive at the figure which was in excess of Rs. 1.00 crore and, thereby believed that the income in the hands of the Assessee on behalf of the stated institutions was to be included in the Assessee's total income. Consequently, after deducting the expenditures from the aggregated annual receipts, the AO arrived at the surplus figure as income in the hands of the Assessee. Further, the AO believed that since the sum total of the receipts of those two institutions clubbed together exceeded Rs. 1.00 crore, the said income was not of the kind mentioned in Section 10(23C)(iiiad). Hence, the same was taxable.

On Assessee's appeal, the CIT(A) held that the aggregate annual receipts of the two institutions could not be clubbed together for the purposes of Section 10 (23C)( iiiad). On further appeal, the Tribunal, after considering all the submissions of both Assessee and Revenue, set aside the order of the CIT(A) and passed order in favour of Revenue.

On appeal, the High Court held that,

++ on a plain reading of the provisions under consideration, it is clear that there is a distinction between the expression "any person" and "educational institution", and the two are not the same. Had it been the intention of the legislature to have limited the scope of the provision to the interpretation which had been given by the Tribunal, it could easily had said that, if the aggregate annual receipts of any person from all institutions do not exceed Rs. 1.00 crore then the income derived there from would not be included in the total income of that person. But, this was not the case here. The reference here was pointedly to the "aggregate annual receipts" of the educational institution. The expression, "educational institution" and "any person" did not refer to the same entity and were distinct and different insofar as Section 10 (23C)(iiiad) was concerned;

++ therefore, where there were more than one such institutions, which were under a particular society or trust, such as the Assessee, the aggregate annual receipts of each of the educational institutions would have to be considered separately and not together. Thus, if there are two institutions A and B and if the aggregate annual receipts of the Institution A is less than Rs. 1.00 crore, then the income received by a person (such as the Assessee) on behalf of the Institution A, would not be included in the total income of that person (such as the Assessee). At the same time, if the aggregate annual receipts of Institution B exceeds Rs. 1.00 crore, then any income received by any person on behalf of Institution B would be included in the total income of that person. Similarly, by taking this logic further, if neither Institution A nor Institution B has aggregate annual receipts of Rs. 1.00 crore or more, any income received by any person on behalf of these institutions, would not form part of the total income for the purposes of income tax;

++ the questions were answered in favour of the Assessee and against the Revenue. As a consequence, the decision of the Tribunal on this aspect of the matter was set aside and that of the CIT (A) was upheld. The result would be that the addition of Rs. 69,27,948/- made to the taxable income of the Assessee would stand deleted.

(See 2018-TIOL-162-HC-J&K-IT)