Case Law Details
CIT (Exemptions) Vs Kalinga Institute of Industrial Technology (Orissa High Court)
On 12th January 2022, the CIT (E) issued a show cause notice (SCN) to the Assessee under Section 263 of the Act stating that a sum of Rs.1,11,54,33,001/- collected as development fees from its students had been directly carried to the balance sheet under the nomenclature “Development Fund’ instead of being routed through the income and expenditure account. This was then treated as part of the Revenue and therefore the taxable income under Section 11 (1) of the Act was taken to be Rs.51,97,46,092/-.
CIT (E) did not refer to the explanation offered by the Assessee in reply to the SCN. Nor had the CIT (E) undertaken an enquiry or made any calculation to indicate how the application of the fund towards capital expenditure had been accounted for.
The CIT (E) simply stated that the impugned assessment order was erroneous and prejudicial in the interest of Revenue.
The ITAT has in the impugned order discussed in detail the explanation offered by the Assessee regarding application of funds. Inter alia, it was noticed that CIT (E) had taken the total revenue earned, granted 15% accumulation, without considering the capital expenditure to the tune of Rs. 258 crores. As noted by the ITAT, if the said bill taken into account the taxable income would be a loss. It would have been observed the 15% accumulation granted to the Assessee. Further, even after treating the development fees of Rs. 111 crores as revenue income, the net figure would still be a loss.
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