Case Law Details
Durgapur Society of Management Science Vs ITO (ITAT Kolkata)
The case of Durgapur Society of Management Science vs. ITO (Income Tax Appellate Tribunal, Kolkata) revolves around the tax implications of rental income earned by a society registered under Section 10(23C)(vi) of the Income Tax Act, 1961 (“the Act”). The society, engaged in promoting education, faced a challenge to its assessment order for the Assessment Year 2018-19. This article delves into the grounds of appeal, the contentions raised, and the subsequent decisions made by the Commissioner of Income Tax (Exemption) and the Income Tax Appellate Tribunal.
Background and Grounds of Appeal: The assessee society, registered under Section 10(23C)(vi) of the Act, filed its return for the Assessment Year 2018-19, declaring Nil income. The gross receipts included rental income from a building, which prompted a scrutiny by the Assessing Officer (AO). The AO, in his assessment order, accepted the Nil return without delving into the nature of the rental income and its implications.
The Commissioner of Income Tax (Exemption) (CIT(E)) invoked Section 263 of the Act, challenging the assessment order on the grounds that the rental income, forming more than 50% of total receipts, was not incidental to the objectives of the society. The CIT(E) argued that the AO failed to verify whether the income from letting out the building fell under the category of “business income” and whether it was incidental to the society’s objectives.
The grounds of appeal raised by the assessee include contentions against the CIT(E)’s jurisdiction, classification of rental income as business income, compliance with Section 11(4A), and the applicability of the 7th proviso to Section 10(23C)(vi).
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