2016 (12) TMI 548 - AT - Income Tax

Claim of exemption u/s 10(23C)(vi) denied - Held that - The assessee trust came to existence in 1954. It is running educational institutions. It has been registered under Section 12AA of the Act since 25.8.1998. It is also enjoying the exemption under section 80G. Thus, the department has never doubted about the genuineness of the activities of the trust and purpose of its existence. While rejecting the application of the Trust under section 10(23C), the ld.CCIT has not pointed out any specific aspect. He only harboured a belief that assessee might have some ancillary activities not associated with education. This is only a hypothetical observation. In all the decisions relied, it has been propounded that if the assessee has not taken other objections mentioned in the trust deed, and exclusively carried out activities of education, then approval under section 10(23C) will not be denied. Thus we allow the appeal of the assessee and direct the prescribed authority to grant approval under section 10(234C)(vi) to the assessee for the Asstt.Year 2013-14. - Decided in favour of assessee

Issues Involved:
1. Rejection of the application under section 10(23C)(vi) of the Income Tax Act.
2. Time-barred appeal and condonation of delay.
3. Maintainability of the appeal before the Tribunal.
4. Merits of the case concerning the educational purpose of the trust.

Detailed Analysis:

1. Rejection of the Application under Section 10(23C)(vi):
The assessee's primary grievance is the rejection of its application for exemption under section 10(23C)(vi) for the Assessment Year 2013-14. The Chief Commissioner of Income Tax (CCIT) rejected the application on the grounds that the trust's objectives included collecting and managing funds and other institutions, which could imply activities beyond educational purposes. The assessee argued that these were ancillary objects and not acted upon, emphasizing that their primary activity was solely educational.

2. Time-Barred Appeal and Condonation of Delay:
The appeal was filed 311 days late. The delay was explained through an affidavit detailing the procedural history: the initial appeal was dismissed as not maintainable, leading to a Special Civil Application in the Gujarat High Court. Subsequent amendments to the Income Tax Act allowed for an appeal to the Tribunal. The Tribunal found that the assessee was vigilant and serious in safeguarding its rights, with no dilatory tactics. Consequently, the delay was condoned.

3. Maintainability of the Appeal Before the Tribunal:
The Revenue argued that the appeal was not maintainable as the power to grant approval under section 10(23C)(vi) was conferred upon the Commissioner only after 15.11.2014, and the impugned order was passed by the CCIT. The Tribunal noted that section 253(1)(f) allows appeals against orders by the prescribed authority under section 10(23C)(vi), which includes the CCIT. The Tribunal concluded that the appeal was maintainable.

4. Merits of the Case Concerning the Educational Purpose of the Trust:
The Tribunal reviewed the trust's objectives and found that the primary purpose was educational. The CCIT's concern about ancillary objects was deemed hypothetical since the trust had not engaged in non-educational activities. The Tribunal cited several precedents, including judgments from the Allahabad High Court and Karnataka High Court, which supported the view that ancillary objects do not disqualify a trust if it exclusively conducts educational activities. The Tribunal directed the prescribed authority to grant approval under section 10(23C)(vi) for the Assessment Year 2013-14.

Conclusion:
The appeal was allowed, and the Tribunal directed the prescribed authority to grant the exemption under section 10(23C)(vi) of the Income Tax Act for the Assessment Year 2013-14. The decision emphasized that ancillary objects do not disqualify a trust from exemption if it solely engages in educational activities.

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