×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
Both the appeals filed by the assessee are directed against the orders passed by Ld CIT(A), Mysore and they relate to the assessment years 2005-06 and 2006-07.
2. This is in second round before the Tribunal. In the first round, the appeals were numbered as ITA No.550 & 551/Bang/2009 and certain matters were restored to the file of the AO by the Tribunal, vide its order dated 30-11-2009. The assessment orders passed in the second round were also challenged by the assessee before Ld CIT(A) and the Tribunal. However, before the Tribunal, the assessee raised certain legal issues and the coordinate bench initially allowed the appeals, vide its order dated 09- 05-2014 on the legal issue, without adjudicating the grounds urged on merits. However, the orders of the Tribunal were reversed by Hon’ble High Court of Karnataka and hence the appeals were restored back to the Tribunal for adjudicating the grounds urged on merits. Consequently, a common order on merits was passed by the SMC bench on 26-10-2016 for both the years. Since the SMC bench did not adjudicate certain grounds the assessee moved miscellaneous applications seeking recall of orders and consequent thereto, vide order dated 13-04-2017 passed in M.A. No.715 & 716/Bang/2017, the SMC bench recalled the common order passed for both the years for the lim ted purpose of adjudicating ground nos.3 & 4 relating to claim of exemption u/s 10(23C) and ground Nos. 6 to 8 relating to disallowance made u/s 40(a)(ia) for nondeduction of tax at source u/s 194C of the Act. Accordingly, these appeals were heard now for adjudicating above said issues.
3. The first issue relates to the claim of exemption u/s 10(23C) of the Act. The Ld A.R submitted that the assessee is running educational institution and it is substantially financed by the Government. Accordingly he submitted that the assessee is eligible for exemption u/s 10(23C)(iiiab) of the Act. The Ld A.R, in the alternative, submitted that the assessee is also eligible for exemption u/s 10(23C)(iiiad) also, since its gross receipts do not exceed the prescribed limits in both the years under consideration.
4. On the contrary, the Ld D.R submitted that the assessee had obtained “works contract” from the Office of Commissioner of Social Welfare, Government of Karnataka to implement its scheme of conducting Vocational training courses in the fields of (1) Radio and TV repairs for 6 months; (2) training in electrical wiring for 6 months; (3) Fitter training for 6 months and (4) Training in Vehicle repairs for 6 months to people belonging to Scheduled Caste in various districts of the State of Karnataka. Accordingly, the assessee has appointed franchisees to conduct above cited training programmes on sub-contract basis.Accordingly, the Ld D.R submitted that the assessee cannot be consider d to be running an “educational institution”. It is only a contractor appointed by Government of Karnataka to implement its scheme. By placing his reliance on the decision rendered by Hon’ble Supreme Court in the case of Sole trustee Lok Shiksana Trust vs. CIT (101 ITR 234), the Ld D.R submitted that the word “education” used in sec.2(15) would refer to the systematic instruction, schooling or training given to young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The Ld D.R submitted that the “educational institution” referred in sec. 10(23C) should be one imparting ‘education’ as mentioned above and it should lead to awarding of degree or diploma as held in the case of Saurashtra Education Foundation vs. CIT (2005)(273 ITR 139)(Guj). The Ld D.R submitted that the activities of the assessee herein cannot be equated with the activities of an educational institution, which would offer systematic instruction or schooling or training. The assessee has obtained contract for giving short term training in vocational activities and it has only executed the contract by appoint franchisees on sub-contract basis. He further
submitted that the fee paid by the assessee to the sub-contractors (franchisees) has been held to be payment made for “work” by the co-ordinate bench in Paragraph 8 of its order passed in the first round in ITA Nos.550 & 551/Bang./2009. The assessee has accepted the said decision of the Tribunal by not challenging it before the Hon’ble High Court. Accordingly, the Ld D.R submitted that the assessee’s contention cannot be accepted by the Tribunal, lest it should be contrary to the decision already rendered. Accordingly he submitted that the activities of the assessee cannot be considered to be activities of an “Educati nal institution” in terms of sec.10(23C) of the Act. Accordingly he submitted that the assessee is not entitled for exemption u/s 10(23C) of the Act.
5. In the rejoinder, the Ld A.R submitted that the case laws relied upon by Ld D.R has explained the meaning of the word “education”. However, sec.10(23C) uses the expression “other educational institution”. Hence the assessee should be falling under the category of “other educational institution”. The Ld D.R placed his reliance on the decision rendered in the case of Mudra Foundation for Communications Research & Education vs. CCIT (2016)(237 Taxman 139) by Hon’ble Gujarat High Court in support of his contentions.
6. We have heard rival contentions on this issue and perused the record. We notice that the provisions of sec. 10(23C) uses the expression “University or other educational institution”. Since a University should be managing the education system of the