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2019 (8) TMI 559 - AT - Income TaxApproval u/s 10(23C)(vi) rejected - Reason for denial of approval primarily is, the assessee cannot be considered to be an Educational Institution, as it does not provide any formal education as is provided in Schools, Colleges, etc - HELD THAT - From the facts on record, it emerges that the assessee was incorporated in the year 1928 with the main object of imparting the study of theory of banking and for that purpose to institute a scheme of examination and to give certificates, scholarship and prizes. Further, to promote information on banking and kindred subjects by lectures, discussions, books, correspondences with public bodies and individuals otherwise. It is to be noted that the objects of the assessee have not undergone any material change over the years. Undisputedly, prior to introduction of section 10(23C)(vi), the assessee treating itself as an Educational Institution existing solely for the purpose of education and not for the purpose of earning profit, had claimed exemption u/s 10(22). Decisions of the Tribunal 2001 (2) TMI 1027 - ITAT MUMBAI holding the assessee to be a educational institution existing solely for the purpose of education and allowing its claim of exemption under section 10(22) will certainly have a crucial bearing while deciding assessee s claim of exemption under section 10(23C)(vi). Therefore, learned Commissioner (Exemp.) cannot simply brush aside the decisions of the Tribunal by taking shelter behind the adage principle of res judicata will not apply to tax proceedings . As in M/S. QUEEN S EDUCATIONAL SOCIETY VERSUS COMMISSIONER OF INCOME TAX 2015 (3) TMI 619 - SUPREME COURT held that if the surplus generated by an Education Institution is ploughed back for educational purpose, it has to be held that the institution exists solely for educational purpose and not for the purpose of profit. ADITANAR EDUCATIONAL INSTITUTION VERSUS ADDITIONAL COMMISSIONER OF INCOME-TAX 1997 (2) TMI 3 - SUPREME COURT held that a trust or other similar body running an Educational Institution solely for educational purpose and not for the purpose of profit can be regarded as other Educational Institution coming within the purview of section 10(22) - Availability of exemption under section 10(22) has to be evaluated each year to find out whether the institution existed solely for education purpose and not for the purpose of profit during the relevant year. The ratio laid down in the aforesaid decisions would also have a crucial bearing while deciding the issue whether the assessee is an Educational Institution existing solely for the purpose of education as per section 10(23C)(vi). On a perusal of the impugned order of learned Commissioner (Exemp.), we find that he has not examined the applicability of the ratio laid down in the aforesaid decisions to the facts of the assessee s case. Therefore, on overall consideration of the facts and material on record, we are of the view that the entire issue relating to assessee s application seeking approval under section 10(23C)(vi) needs to be restored back to the file of learned Commissioner (Exemp.) for de novo adjudication - Assessee s appeal is partly allowed for statistical purposes.
Issues Involved:
1. Rejection of approval under section 10(23C)(vi) of the Income Tax Act, 1961. 2. Deemed approval due to non-disposal of application within the stipulated period. 3. Determination of whether the assessee qualifies as an educational institution existing solely for educational purposes and not for profit. Detailed Analysis: 1. Rejection of Approval under Section 10(23C)(vi): The assessee, a company incorporated in 1928 as a charitable institution, sought approval under section 10(23C)(vi) for the assessment year 2016-17. The Commissioner of Income Tax (Exemption) rejected the application, stating that the assessee does not qualify as an educational institution because it does not provide formal education recognized by educational bodies of the Central/State Government. The Commissioner noted that the primary income source was examination fees and that the institution incurred significant expenditure on holding examinations, which he did not consider an educational activity. The Commissioner also observed that the institution generated a surplus, indicating a profit motive, which disqualified it from the exemption. 2. Deemed Approval Due to Non-Disposal of Application: The assessee argued that under the 9th proviso to section 10(23C)(vi), since the application for the assessment year 2015-16 was not disposed of within twelve months, approval should be deemed granted. The Departmental Representative countered that the provision is directory, not mandatory, and does not imply deemed approval. The Tribunal agreed with the Department, stating that neither the statutory provision nor the CBDT Circular suggests deemed approval for non-disposal within the stipulated period. The Tribunal cited various judicial precedents to support this view and dismissed the additional ground raised by the assessee. 3. Determination of Educational Institution Status: The assessee claimed that it existed solely for educational purposes, offering various courses related to banking and finance, and had been recognized as such in previous years under section 10(22). The Tribunal noted that the assessee's objects and activities had not materially changed over the years and that the Tribunal had previously allowed the assessee's exemption claims under section 10(22). The Tribunal emphasized that the core issue was whether the assessee existed solely for educational purposes and not for profit. The Tribunal criticized the Commissioner for not objectively considering the assessee's submissions and for not examining the applicability of judicial precedents that supported the assessee's claim. Conclusion: The Tribunal found that the Commissioner had not conducted an in-depth inquiry or properly examined the relevant materials. It highlighted that the surplus generated by the assessee was ploughed back for educational purposes, which aligns with the Supreme Court's ruling in Queens Educational Society that such institutions exist solely for educational purposes. The Tribunal restored the issue to the Commissioner's file for de novo adjudication, directing a thorough examination of the assessee's claim and the application of relevant judicial precedents. Order: The appeal was partly allowed for statistical purposes, with the issue remanded to the Commissioner for fresh adjudication.
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