Case Law Details
ST Josephs FCC Province Thalassery Vs ITO (Kerala High Court)
Introduction: In a recent judgment, the Kerala High Court addressed an assessment order issued by the Income Tax Officer, Exemption Ward, Kannur. The case involves St. Joseph’s FCC Province Thalassery, the petitioner, who challenged the order dated 22.03.2023. The order by the Income Tax Officer determined the petitioner’s turnover for the Assessment Year 2016-17 to be Rs.1,02,85,571. The issue centered around whether the petitioner’s income qualified for an exemption under Section 10(23C)(iiiad) of the Income Tax Act, 1961.
1. Exemption Eligibility: Section 10(23C)(iiiad) of the Income Tax Act 1961 provided an exemption for income received by a person on behalf of any university or educational institution exclusively dedicated to educational purposes and not for profit. To qualify for this exemption, the aggregate annual receipts should not exceed Rs. 1 crore.
2. Inclusion of Previous Year’s Balance: The petitioner’s annual receipts were calculated by the Assessing Officer to be Rs.1,02,85,571. This calculation included a significant amount of Rs.9,45,475.96 from the previous year, which consisted of bank deposits and cash at hand. The petitioner argued that excluding this sum, which did not represent receipts for the current year, would bring their annual receipt for the Assessment Year 2016-17 below the Rs. 1 crore threshold.
3. Acknowledgment of Error: The counsel for the Revenue, Mr. Christopher Abraham, did not contest the fact that the amount of Rs.9,45,475.96 was erroneously included in the calculation. As a result, the Assessing Officer’s decision appeared to be incorrect due to a clear mistake in considering the previous year’s balance when computing the total receipt for the Assessment Year 2016-17.
Conclusion: The Kerala High Court, recognizing the apparent error in the assessment order, proceeded to set aside the order in question. By correcting the assessment and excluding the previous year’s balance, the annual receipt for the petitioner fell below the exemption threshold of Rs. 1 crore. This case serves as a reminder of the importance of precise and accurate assessments in the context of income tax law, ensuring that no extraneous or incorrect elements are included in determining an entity’s eligibility for exemptions.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition has been filed by the petitioner assessee impugning the order dated 22.03.2023 (Ext.P5) passed by the Income Tax Officer, Exemption Ward, Kannur, whereby the petitioner’s turnover as per the receipts and payments statement has been taken to be Rs.1,02,85,571/- for the Assessment Year 2016-17, and found it to be a fit case for issuing of notice under Section 148 of the Income Tax Act, 1961. Section 10(23C)(iiiad) of the Income Tax Act 1961, at the relevant time, provided that any income received by a person on behalf of any university or other educational institution existing solely for educational purposes and not for purposes of profit, and if the aggregate annual receipts did not exceed Rs. 1 crore, it should be exempted from payment of income tax.
2. Learned Counsel for the petitioner submits that the annual receipt taken by the Assessing Officer of 1,02,85,571/- would include bank deposits of the previous year of Rs.9,45,475.96, including some cash at hand. He, therefore, submits that if this Rs.9,45,475.96 is excluded, which is not the receipt of the current year, the annual receipt for the Assessment Year 2016-17 would be less than Rs. 1 crore.
3. Mr Christopher Abraham, learned Standing Counsel for the Revenue, does not dispute the fact that Rs.1,02,85,571/- include the deposit balance of the previous year of 9,45,475 .96.
4. Since there is a mistake apparent on the face of the record as the Assessing Officer has taken the previous year’s balance into account while computing the total receipt in the Assessment Year 2016-17, the orders impugned (Exts.P5 and P6) appear to be incorrect. Therefore, the same are set aside.
The present writ petition, therefore, stands allowed.
