2022 (5) TMI 1152 - AT - Income Tax

Grant of exemption u/s 10(23C)(vi) - Denial of exemption as objects clause in the trust deed contains/mentions objects other than educational activities - whether if the trust deed mentions/contains activities other than educational activities, whether the Commissioner of Income Tax (Exemptions) has validly denied grant of exemption under section 10(23C)(vi)? - HELD THAT - We are of the considered view that the Commissioner of Income Tax (Exemptions), in the instant set of facts has not taken note of the factual position of the assessee in the correct perspective. The assessee has been engaging solely in educational activities. There is admittedly nothing on record to demonstrate that the assessee has engaged in activities other than educational activities. The assessee trust has been registered since 1986. DR has stated that the revenue has not doubted the genuineness of the activities of the assessee trust. The assessee has placed on record the affidavits of trustees to the effect that the assessee trust has solely engaged in educational activities. We are the considered view that since the assessee trust only carried out educational activities, a fact which has also not been disputed by the Revenue, the Commissioner of Income Tax (Exemptions) has erred in fact and law in denying exemption under section 10(23C)(vi) of the Act to the assessee trust in the instant set of facts. Appeal of assessee allowed.

Summary

Issues:
Validity of denial of approval under section 10(23C)(vi) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions) based on the objects clause of the trust deed.

Analysis:
The appeal before the Appellate Tribunal ITAT Rajkot pertained to the denial of approval under section 10(23C)(vi) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions) to a charitable trust. The trust sought approval for carrying out educational activities, but the Commissioner observed that the trust also engaged in medical facilities, social welfare, and other general activities as per the trust deed. The Commissioner held that since the trust had non-educational objects, it did not qualify for the exemption under section 10(23C)(vi).

The counsel for the assessee argued that despite the trust deed mentioning other activities, the trust solely engaged in educational activities. The Department Representative contended that the trust's existence for educational purposes under section 10(23C)(vi) is not solely dependent on carrying out educational activities, but on the trust's objects clause. The Tribunal noted that the trust had not conducted any activities other than educational ones, and the genuineness of its educational activities was undisputed.

Referring to judicial precedents, the Tribunal highlighted cases where trusts were granted approval under section 10(23C)(vi) despite having other objects in their deeds. The Tribunal emphasized that as long as the trust exclusively carried out educational activities, denial of exemption was unwarranted. The Tribunal concluded that the Commissioner erred in denying the exemption based solely on the presence of non-educational objects in the trust deed. The Tribunal allowed the appeal, directing the grant of approval under section 10(23C)(vi) to the assessee trust for the relevant assessment year.

In light of the detailed analysis and judicial precedents, the Appellate Tribunal ITAT Rajkot overturned the decision of the Commissioner and granted the exemption under section 10(23C)(vi) to the charitable trust. The Tribunal emphasized the importance of the actual activities conducted by the trust in determining eligibility for the exemption, rather than the mere mention of other objects in the trust deed.