2014 (7) TMI 1241 - HC - Income Tax

Grant of registration under Section 10(23C) - proof of charitable activities - Held that - The only requirement for granting registration under this Section is the satisfaction of the prescribed authority with regard to the genuineness of the activities of the assessee. It has been categorically recorded by the Tribunal that the assessee is a Trust registered under Section 12AA of the Act which makes it quite clear that the assessee is pursuing the charitable activities. It was further observed that the provisions of the Right to Children to Free and Compulsory Education Act, 2009, are not applicable to the assessee being an unaided Society. Since the Pr. CCIT had not doubted the genuineness of the activities of the Society, the Tribunal correctly directed the Pr. CCIT to grant registration under Section 10(23C) of the Act. Learned Sr. Standing Counsel for the appellant-Revenue has not been able to point out any error in the order passed by the Tribunal. - Decided against revenue

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the ITAT order.
2. Denial of exemption under Section 10(23C)(vi) of the Act.
3. Requirement of existing solely for educational purposes and not for profit.
4. Tribunal's direction to grant registration to the respondent-assessee.
5. Interpretation of Section 10(23)(vi) of the Act.
6. Compliance with the Right to Children to Free and Compulsory Education Act, 2009.
7. Applicability of RTE provisions to an unaided society.
8. Tribunal's findings and direction to grant registration under Section 10(23C) of the Act.
9. Comparison with a previous judgment regarding interest-free loan for educational institution.

Analysis:

1. The appellant-Revenue filed an appeal under Section 260A of the Income Tax Act against the order of the ITAT, challenging the denial of exemption under Section 10(23C)(vi) of the Act. The Tribunal directed the Principal Chief Commissioner of Income Tax to grant registration to the respondent-assessee as it did not doubt the genuineness of the activities of the Society, which is a crucial factor for granting registration under Section 10(23C) of the Act.

2. The controversy revolved around the condition that the assessee must exist solely for educational purposes and not for profit to qualify for exemption under Section 10(23C)(vi) of the Act. The Pr. CCIT denied exemption to the assessee on the grounds that it did not satisfy this condition. However, the Tribunal found that since the Pr. CCIT did not doubt the activities of the Society, registration should be granted under Section 10(23C) of the Act.

3. The interpretation of Section 10(23)(vi) of the Act was crucial in this case. The provision requires an institution to exist solely for educational purposes and not for profit to be eligible for exemption. The Tribunal emphasized that the satisfaction of the prescribed authority regarding the genuineness of the activities of the assessee is the primary requirement for granting registration under this section.

4. The Tribunal's decision was based on the fact that the assessee, being a Trust registered under Section 12AA of the Act, was engaged in charitable activities. It was noted that the Right to Children to Free and Compulsory Education Act, 2009, did not apply to the assessee as it was an unaided Society. Therefore, the Tribunal directed the Pr. CCIT to grant registration under Section 10(23C) of the Act due to the lack of doubt regarding the genuineness of the Society's activities.

5. The Tribunal's findings highlighted that the denial of exemption could only be justified if the officer was not satisfied with the genuineness of the activities of the assessee. The Tribunal clarified that non-compliance with the Right to Education Act would not be a valid reason to deny registration under the Income Tax Act, especially since the RTE provisions did not apply to the unaided society in question.

6. The comparison with a previous judgment emphasized that the mere receipt of an interest-free loan for establishing and running an educational institution did not indicate a commercial activity for profit. In this case, the Revenue could not benefit from the said decision as the circumstances were different, and no error was found in the Tribunal's order.

7. Ultimately, the Court found no substantial question of law arising from the appeal and dismissed it, upholding the Tribunal's decision to direct the grant of registration to the respondent-assessee under Section 10(23C) of the Income Tax Act.