2016 (5) TMI 816 - AT - Income Tax

Grant of approval under section 10(23C)(vi) rejected - schools governed by RTE Act - Held that - A bare perusal of the provisions of Section 2(n) read with Section 2(f) would reveal that the schools which are covered by the provisions of RTE Act are those which impart elementary education, meaning education from class 1 to class 8. In the present case it is an undisputed fact that the school run by the assessee society is imparting education below class 1. Clearly the asessee society is not a school as per the definition given in the RTE Act in section 2(n) and is therefore not covered by the provisions of the RTE Act. Further the provisions of Section 12(1)(c) read alongwith the proviso reveals that the where schools imparting elementary education are also imparting pre school education, the provision of compulsory admission to 25% students belonging to the weaker section of the society, shall apply to the pre school education admission also. In the present case the school run by the assessee society is not imparting elementary education in the first place therefore the question of attracting the provision of section 12(1)(c) and the proviso thereto does not arise at all. Therefore in our considered opinion the school is not governed by the provision of RTE Act at all and the basic premise of the Ld. Principal Chief Commissioner of Income Tax for denying approval of the assessee society therefore fails. Thus as the school is not covered under the RTE Act, we set aside the order of the Principal Chief Commissioner of Income Tax and direct him to grant registration to the assessee society under 10(23C)(vi). - Decided in favour of assessee.

Summary

Issues:
1. Denial of approval under section 10(23C)(vi) of the Income Tax Act, 1961 based on non-compliance with the Right of Children to Free And Compulsory Education Act, 2009 (RTE Act).

Analysis:
The appeal was filed against the order of the Principal Chief Commissioner of Income Tax rejecting the assessee's application for approval under section 10(23C)(vi) of the Income Tax Act, 1961. The Principal Chief Commissioner based the rejection on the assessee's alleged non-compliance with the RTE Act, specifically regarding the enrollment of students from economically weaker sections. The assessee argued that the RTE Act provisions did not apply to their society as they were not imparting education from class 1 to class 8, which is the scope of elementary education under the RTE Act. The assessee contended that since their school did not fall under the RTE Act's definition of a school, the denial of approval was unjustified.

The assessee further cited a previous decision by the Chandigarh Bench of the ITAT in a similar case, where it was held that non-compliance with the RTE Act cannot be the sole basis for denying approval under section 10(23C)(vi) of the Act. The ITAT emphasized that the Income Tax Act is self-contained and does not mandate compliance with other Acts for granting approval. The ITAT also highlighted that the genuineness of educational activities should be the determining factor for approval, not compliance with external statutes.

Upon review, the ITAT found that the assessee society was not covered under the RTE Act as they were not imparting elementary education falling within the Act's purview. The ITAT reiterated that the denial of approval solely based on RTE Act compliance was erroneous. Relying on the precedent and the lack of doubt regarding the genuineness of the society's activities, the ITAT directed the Principal Chief Commissioner to grant registration to the assessee society under section 10(23C)(vi).

In conclusion, the ITAT allowed the appeal, setting aside the Principal Chief Commissioner's order and directing the grant of registration to the assessee society under section 10(23C)(vi) of the Income Tax Act, 1961.