The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the fine under Section 271B of the Income Tax Act because the NLU-Delhi is not engaged in business and functions with the intention of giving education only.
If the assessee university can supposedly be engaged in business as defined under Section 2(13) of the Act, where the word “business” includes any trade, commerce, or manufacture as well as any adventure or concern in the nature of trade, commerce, or manufacture, the bench made up of Anubhav Sharma (Judicial Member) and Anil Chaturvedi (Accountant Member) has noted that this is important to understand the instructions of Section 44AB.
The assessee university reported having earned zero rupees overall in its return of income for the assessment year 2018–19. In its income tax return for the year under consideration, the assessee sought an exemption under Section 10(23C)(iiiab). The matter was given over for a faceless assessment. After a notice was published, the case was investigated. AO did not justify the claim of exemption for Section 10(23C)(iiiab) r.w.r. 2BBB throughout the assessment proceedings.
The AO determined that the assessee does not fall within the category of exemption since the assessee’s response was not satisfactory. The AO noted that even though the assessee university’s total revenue as computed under the Act without applying the provisions of Section 12 is more than the maximum amount not subject to income tax in FY 2017–18, it has not audited its accounts under Section 12A(1)(b). As a result, it was decided to start the Section 271B penalty proceedings.
The Act of the Legislative Assembly of the National Territory of Delhi and Subsection (3) of Section 3 of the University Act both established the assessee university and also provides the establishment of universities. The preamble of the University Act makes it very clear that the goal of the development of a law university is to build an institution of excellence at the national level in the fields of legal instruction and research within the NCT (National Capital Territory) of Delhi.
The university is not engaged in any “business” as defined for the purposes of the act, according to the object of the university as stated in Section 4 of the university act and the powers and functions of the university as outlined in Section 5. It is in existence merely for educational purposes. Making a profit was not the purpose of the foundation of the university.
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The tax authorities’ approval of the directions, according to the judgement, lacked any sensible mind. The university has requested an exemption from taxation for income received under Section 10(23C)(iiiab). A penalty may be charged under Section 271B of the Act because the assessee has not had its account audited under Section 12A(1)(b) of the Act, according to AO, who incorrectly applied Section 12A(1)(b) provisions to the income of the assessee university and then considered the Proviso to Section 44AB.
| Case Title | National Law University Vs Additional/Joint/Deputy/Assistant Commissioner of Income Tax |
| Citation | ITA No. 2288/Del/2022 |
| Date | 24.05.2023 |
| Assessee By | Sh. R.S.Ahuja, CA |
| Revenue By | Ms. Kirti Sankratyayan, Sr. DR |
| Delhi ITAT | Read Order |
