Income Tax Exemption u/s 10(23C) available to Payments Received for Consultancy Services provided by University: ITAT remands matter to AO [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), remanded back matter to the Assessing Officer (AO) and ruled that Income Tax Exemption under Section 10(23C) of the Income Tax Act, 1961 is available to Payments Received for Consultancy Services provided by University.

When the assessee, M/s. Institute of Chemical Technology was part of Mumbai University, the income earned by it formed part of income of the Mumbai University and was exempt under Section 10(23C) of the Income Tax Act. For the A.Y.2013-14, the assessee filed its return of income under Section 139 of the Act declaring ‘nil’ income after claiming exemption under Section 11 of the Act.

The assessee contended that, out of the total fee received from such projects, only 1/3rd is taken by the assessee and the balance amount is paid to the faculty who undertakes the research project and the activities undertaken by the assessee is not in the nature of business but only for research and training purpose and therefore is part of its main activity of imparting education on the latest technical development.

The AO observed that, nowhere in the objects of the Institution the assessee is required to provide consultancy service and while making payment of consultancy fee, major companies have deducted tax under section 194C and 194J of the Act.

Accordingly, the AO disallowed assessee’s claim of exemption only with regard to its share in consultancy fee received. This action of the AO was upheld by the CIT(A).

A Coram comprising Balaganesh, Accountant Member and Kavitha Rajagopal, Judicial Member relied on the judgment in the assessee’s own case in ITA Nos. 6111& 6922/Mum/2016, wherein it was held that “The consultancy fee received by the assessee is an activity in the nature of trade, commerce or business or an activity of rendering any service in relation to any trade, commerce or business for a fee, hence, is covered under the proviso to section 2(15) r/w section 11(4) and 11(4A) of the Act.”

Remanding back the matter to the file of AO, the Tribunal in the above-mentioned case also noted that “Assessee’s claim of exemption u/ 10(23C)(iiiab) or 10(23C)(vi) of the Act also requires examination under section 10(23C)(vi) of the Act and also considering the fact that the assessee has been recognized as a deemed university Institute of Chemical Technology and receiving substantial grant from the Government.”

“In view of the aforesaid observations and respectfully following the judicial precedents, we deem it fit to restore this appeal to the file of the ld. AO to decide the issue” the Tribunal concluded.

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