2019 (11) TMI 1099 - AT - Income Tax

Approval u/s 10(23C)(vi) denied - registration under section 12AA has already granted to the assessee - HELD THAT - Assessee society is having the object both in the nature of performing charitable activities and also running for educational purpose without any purpose of earning profits. Claiming exemption for the profits earned from performing educational activities is provided in Section 10(23C)(vi) and the benefit of claim of exemption for receipts/income from charitable activities is provided u/s 11. For getting both the exemptions assessee needs to be separately registered u/s 10(23C)(vi) and registration u/s 12AA. Both the provisions work independently and there is no provision of law which shows that if the assessee is registered u/s 12AA it cannot be granted claim u/s 10(23C)(vi) of the Act or vice versa. CIT (Exemption) should have focused on examining the activities undertaken by the assessee and if assessee society fulfill the conditions for getting the registration u/s 10(23C)(vi) it should not be denied merely because the assessee society enjoys registration u/s 12AA of the Act. Set aside the issue of approval u/s 10(23C)(vi) to CIT (Exemption) for afresh examination after giving reasonable opportunity of being heard to the assessee as per the terms indicated above. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Rejection of application for approval under section 10(23C)(vi) of the Income Tax Act.
2. Consideration of registration under section 12AA as a pre-condition for approval under section 10(23C)(vi).
3. Examination of the objects and activities of the assessee society.

Detailed Analysis:

1. Rejection of Application for Approval under Section 10(23C)(vi):
The assessee's appeal challenges the rejection of its application for approval under section 10(23C)(vi) by the Commissioner of Income Tax (Exemption). The assessee argued that the rejection was based on the erroneous assumption that the society's objects were not solely educational. The Tribunal noted that the assessee society, registered on 29.09.2015, is engaged in charitable activities and running a school named Saket International School. The Tribunal observed that the society’s objects included educational purposes and other charitable activities like water conservation and village development.

2. Consideration of Registration under Section 12AA as a Pre-condition for Approval under Section 10(23C)(vi):
The Commissioner of Income Tax (Exemption) rejected the application for approval under section 10(23C)(vi) on the grounds that the society was already granted registration under section 12AA. The Tribunal highlighted that section 10(23C)(vi) does not stipulate registration under section 12AA as a mandatory pre-condition. The Tribunal referred to the Central Board of Direct Taxes Circular No.14 of 2015, which clarifies that sections 11 and 10(23C) are parallel regimes and operate independently. The Tribunal emphasized that obtaining prior registration under section 12AA is not necessary for approval under section 10(23C)(vi).

3. Examination of the Objects and Activities of the Assessee Society:
The Tribunal noted that the Commissioner of Income Tax (Exemption) did not pinpoint any defects in the objects of the society but rejected the application based on the existence of registration under section 12AA. The Tribunal observed that the society’s objects included running a school and other educational activities, which align with the requirements of section 10(23C)(vi). The Tribunal also referred to the judgment of the Hon’ble Jurisdictional High Court in the case of CIT v. Franciscan Clarist Society, which held that exemption cannot be denied merely based on the bye-laws without considering the actual activities undertaken by the society.

Conclusion:
The Tribunal concluded that the Commissioner of Income Tax (Exemption) should have focused on examining the activities undertaken by the assessee. The Tribunal set aside the issue of approval under section 10(23C)(vi) to the Commissioner of Income Tax (Exemption) for fresh examination, directing that a reasonable opportunity of being heard be given to the assessee. The Tribunal allowed the appeal for statistical purposes, emphasizing that both sections 10(23C)(vi) and 12AA operate independently and the assessee should not be denied approval under section 10(23C)(vi) merely because it is registered under section 12AA.

Order Pronounced:
The order was pronounced in the open Court on 21.11.2019.