ITAT: NLU Delhi Not Engaging In Business; Quashed Rs. 1.5 Lakh Penalty

Nithyakalyani Narayanan. V

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) quashed the Rs.1.5 lakh penalty imposed on NLU Delhi as per Section 271B of the Income Tax Act, stating that the University is not engaged in business but rather exists for educational purposes only. The penalty was imposed after the University had declared its income as ‘nil’ for the financial year 2018-19, claiming exemption under Section 10(23C) (iiiab) of the Act.

Mr R S Ahuja appeared for the University and Ms Kriti Sankratyayan appeared for the respondent.

The case was designated for faceless assessment and notice was issued. The Assessing Officer (AO) was not convinced by the exemption claim. The reply given by the University was also unsatisfactory and the AO held that the exemption is not applicable because although the total income is calculated under the Act without giving effect to the provisions of Section 12, it exceeds the maximum amount that is not chargeable to income tax in the Financial Year of 2017-18. Hence, the penalty as per Section 271B must be initiated. The Section penalises the assessee who fails to get their accounts audited or furnish the tax audit report within the time limit.

The Court observed that it was mandatory to see if the University can be said to be engaged in business as per Section 2(13), to invoke the conditions of Section 44AB. Section 2(13) defined business as any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce, or manufacture.

Name of the Case: NLU Delhi v. Additional Commissioner of Income Tax

Case Number: ITA No. 2288/Del/2022

Bench: Anubhav Sharma (Judicial Member) and Anil Chaturvedi (Accountant Member).

Click here to access the order.