2017 (12) TMI 1354 - HC - Income Tax

Exemption under Section 10(23C)(vi) - exemption was denied holding that the assessee did not satisfy the condition contained in Section 10(23C)(vi) of the Act to the effect that it was existing solely for educational purposes and not for purposes of profit - 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. - Decided against revenue

Issues:
1. Appeal against denial of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961.
2. Interpretation of conditions for granting registration under Section 10(23C)(vi).
3. Assessment of genuineness of activities of the assessee.
4. Applicability of Right to Education Act on unaided societies.
5. Judicial precedent regarding interest-free loans for educational institutions.

Analysis:

1. The appellant-Revenue filed an appeal against the denial of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal. The Tribunal directed the Principal Chief Commissioner of Income Tax to grant registration to the respondent-assessee as the only reason for denial of exemption could be the lack of satisfaction regarding the genuineness of the activities of the assessee.

2. Section 10(23)(vi) of the Act specifies that educational institutions must exist solely for educational purposes and not for profit to be eligible for approval by the prescribed authority. The key requirement for registration under this section is the satisfaction of the prescribed authority regarding the genuineness of the activities of the assessee.

3. The Tribunal observed that the assessee, a Trust registered under Section 12AA of the Act, was engaged in charitable activities. Since the Principal Chief Commissioner did not doubt the genuineness of the society's activities, the Tribunal directed the grant of registration under Section 10(23C) of the Act.

4. The Tribunal clarified that the Right to Children to Free and Compulsory Education Act, 2009 did not apply to the assessee as it was an unaided society. Non-compliance with the RTE Act would be addressed by the appropriate authority, and the Income Tax Department could not withhold approval under the Income Tax Act based on such non-compliance.

5. The appellant-Revenue failed to identify any error in the Tribunal's order. Reference was made to a judgment stating that the receipt of an interest-free loan for establishing an educational institution did not indicate a profit motive. However, the circumstances in the present case differed, and the Revenue could not benefit from that decision.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose from the case, and finding no merit in the appeal.

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