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2018 (5) TMI 1843 - HC - Income TaxGrant exemption u/s 10(23C)(vi) - CIT(E) declined to grant registration under Section 10(23C)(vi)by holding that no evidence of accumulation of income after following the due process had been adduced - Tribunal directed CIT(E) to grant exemption under Section 10(23C)(vi) from the date of application - HELD THAT - Excess accumulation has to be applied for the objects of the society and if the percentage of income applied for educational purpose is less than the limit prescribed under Clause (a) of third proviso to Section 10(23C) then the exemption can be declined. In the present case, the amount of receipt during the assessment years in question exceeded more than ₹ 1 crore. The assessee utilized the amount for purchase of land for further extension of school building, which was for educational purpose only. Thus, the exemption under Section 10(23C)(vi) of the Act was rightly granted to the assessee. - Decided in favour of assessee.
Issues:
1. Appeal under Section 260A of the Income Tax Act against ITAT order 2. Grant of exemption under Section 10(23C)(vi) and registration requirements 3. Interpretation of educational institution registration for exemption 4. Validity of ITAT order based on evidence and material 5. Allegations of non-application of mind and arbitrariness in ITAT order Analysis: Issue 1: Appeal under Section 260A of the Income Tax Act against ITAT order The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT) dated 11.08.2017. The appeal raised substantial questions of law regarding the direction of exemption under Section 10(23C)(vi) by the ITAT. Issue 2: Grant of exemption under Section 10(23C)(vi) and registration requirements The respondent-assessee applied for registration under Section 10(23C)(vi) of the Act, seeking exemption for the financial year 2014-15. The CIT(E) denied approval, stating that the society could not claim to be a university or educational institution if the school was not registered as such. The ITAT, however, allowed the appeal, directing the grant of registration and exemption under Section 10(23C)(vi) from the date of application. Issue 3: Interpretation of educational institution registration for exemption The Tribunal found that the respondent-assessee's receipts exceeded ?1 crore during the relevant assessment years, and the funds were utilized for educational purposes, justifying registration under Section 10(23C)(vi). The Tribunal emphasized that excess accumulation must be applied for the society's objects, and since the funds were used for educational expansion, the exemption was rightfully granted. Issue 4: Validity of ITAT order based on evidence and material The Tribunal's decision was based on a thorough examination of the evidence, including the utilization of funds for educational activities. The Tribunal concluded that the appellant met the criteria for exemption under Section 10(23C)(vi) and directed the CIT(E) to grant the exemption from the date of application. Issue 5: Allegations of non-application of mind and arbitrariness in ITAT order The appellant-revenue did not point out any infirmity or illegality in the Tribunal's findings. Consequently, the High Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's decision. The Court found no basis to challenge the Tribunal's reasoned decision regarding the grant of exemption under Section 10(23C)(vi). In conclusion, the High Court upheld the ITAT's decision to grant registration and exemption under Section 10(23C)(vi) to the respondent-assessee, emphasizing the importance of utilizing accumulated funds for educational purposes to qualify for the exemption.
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