2019 (6) TMI 729 - AT - Income Tax

Exemption u/s 10(23C) - CIT(E) rejected the application of the assessee in Form No.56D ex-parte treating the application as non-est - whether the assessee is permitted to make a fresh application, once the original application was rejected? - HELD THAT - There is no specific bar for making fresh application as per Rule 2CA or the Board Circular No.7/2010 dated 27.10.2010, on which the CIT(E) has placed heavy reliance. It is unjustified and unreasonable to hold that the assessee is barred from making fresh application, if it is qualified for exemption subsequent to rejection of original application. The assessee is an educational institution which is rendering the educational services to the society and should be given proper support for betterment of services. Therefore, we are of the considered opinion that there is no reason for placing bar on the assessee for no fault of the assessee. Having amended the objects, the assessee is qualified for exemption and would be entitled for the grant of approval and treating the application of the assessee as non-est is unjustifiable. Hence, we hold that the application of the assessee is valid and the CIT(E) must consider the grant of exemption u/s 10(23C) on merits. Accordingly, we set aside the order of the CIT(E) and remit the matter back to the file of the CIT(E) with a direction to consider the application of the assessee on merits and decide the issue afresh - Appeal of the assessee is allowed for statistical purpose

Summary

Issues:
1. Rejection of application for exemption u/s 10(23C) of the Income Tax Act.
2. Interpretation of Rule 2CA and CBDT Circular No.7/2010 regarding the time limit for reapplication after rejection.
3. Consideration of grant of approval u/s 10(23C) based on amended objects of the society.

Analysis:
1. The appeal was filed against the rejection of the application for exemption u/s 10(23C) by the Commissioner of Income Tax (Exemptions). The initial application was rejected due to the inclusion of non-educational objects in the society's objectives, which did not qualify for exemption under section 10(23C) of the Act. The rejection was confirmed by the ITAT in a previous order.

2. The subsequent application, filed after amending the objects solely for educational purposes, was rejected by the CIT(E) citing Rule 2CA and CBDT Circular No.7/2010. These provisions were interpreted to imply that once an application is rejected and reaches finality, the applicant is barred from reapplying for three years. The CIT(E) considered the amended application as non-est based on this interpretation.

3. The Tribunal considered the amended objects of the society, which now focused solely on educational purposes. The Tribunal analyzed Rule 2CA and the CBDT Circular, concluding that there was no specific bar on reapplying after rejection if the applicant qualifies for exemption. The Tribunal held that barring the applicant from reapplying, despite amending the objects and meeting the criteria, would be unjustified.

4. The Tribunal set aside the order of the CIT(E) and directed a fresh consideration of the application on its merits. It emphasized that the applicant, being an educational institution, should be supported for the betterment of services. The Tribunal allowed the appeal for statistical purposes, ensuring the CIT(E) provides sufficient opportunity to the assessee before deciding on the application.

In conclusion, the Tribunal's judgment allowed the appeal, emphasizing the importance of considering the merits of the application for exemption u/s 10(23C) based on the amended objects of the society, despite previous rejections and the interpretation of Rule 2CA and relevant circulars.