2012 (3) TMI 263 - HC - Income Tax

Educational institution whether Seminary teaching students for priesthood is an educational institution entitled to exemption from tax u/s 10(23C)(iiiad) whether such exemption can be granted at the appellate stage Held that - There is nothing to indicate that S.10(23C)(iiiad), requires the educational institutions to impart education in any particular subject or in any manner whatsoever. The term education should enjoy a wide connotation covering all kinds of coaching and training carried on in a systematic manner leading to personality development of an individual. Thus, we hold that religious teaching in the seminary is also education and seminary is therefore an educational institution entitled for exemption u/s 10 (23C)(iiiad). In view of decision in case of National thermal Power Corporation Vs. CIT (1996 - TMI - 5626 - Supreme Court), pure question of law can be raised at any stage of the proceedings Decided in favor of assessee.

Summary

Issues:
1. Whether a seminary teaching students for priesthood qualifies as an educational institution for tax exemption under section 10(23C)(iiiad) of the Income Tax Act.
2. Whether the respondent can claim exemption under section 10(23C)(iiiad) for the first time at the appellate stage.

Issue 1: Seminary as an Educational Institution for Tax Exemption:
The main issue in this judgment revolves around determining whether a seminary providing coaching and training for priesthood qualifies as an educational institution for tax exemption under section 10(23C)(iiiad) of the Income Tax Act. The Tribunal referred to the decision of the Allahabad High Court in City Montessori School (Regd.) v. Union of India to establish that education encompasses instruction, schooling, or training preparing individuals for life's work. The seminary in question, operated by the Malankara Catholic Church, offers extensive coaching in religious studies to prepare individuals for priesthood. The court recognized that religious teaching is a constitutionally protected right under Article 25, essential for propagating religious beliefs to future generations. The court concluded that religious teaching qualifies as education under section 10(23C)(iiiad) due to the comprehensive coaching and training required for priesthood, thus deeming the seminary an educational institution eligible for tax exemption.

Issue 2: Claiming Exemption under Section 10(23C)(iiiad) at the Appellate Stage:
The second issue addressed in this judgment pertains to whether the respondent, a religious institution, can claim exemption under section 10(23C)(iiiad) for the first time during the appellate stage after forfeiting their claim under section 11 due to a lack of registration under section 12A. The respondent initially raised the alternate claim for exemption at the first appellate authority, which was allowed but later recalled. However, the Tribunal, in the second appeal, granted the exemption on merits. The court cited the decision in National Thermal Power Co. Ltd. v. Commissioner of Income Tax, emphasizing that pure questions of law can be raised at any stage of proceedings under the Income Tax Act. Since the issue of exemption under section 10(23C)(iiiad) was a pure question of law and found in favor of the respondent, the court upheld the respondent's right to raise the additional and alternate ground for exemption at the appellate stage. Consequently, the court ruled in favor of the respondent, dismissing the appeals brought by the Revenue.

This comprehensive analysis of the judgment highlights the court's interpretation of the law regarding the eligibility of a seminary as an educational institution for tax exemption and the respondent's right to claim exemption under section 10(23C)(iiiad) at the appellate stage.