2022 (10) TMI 456 - AT - Income Tax

Exemption u/s 11 - recognition as a charitable institution for granting exemption u/s 10(23C)(vi) denied - HELD THAT - Every assessment year is a separate unit and the activities of the taxpayer are to be evaluated for each of the assessment year, before granting exemption u/s 10(23C)(vi). These are factual aspects which need verification of facts. The assessee has not even filed before us the audited financial statements for the impugned AY s . CCIT while rejecting application of the assessee for grant of approval u/s 10(23C)(vi) has not exhaustively dealt with all the aspects of the matter in a comprehensive manner. The matter needs to be restored back to ld. CCIT for passing a detailed and exhaustive order by going through various activities carried on by the assessee , and then arriving at decision as to the allowability of claim of the assessee seeking approval u/s 10(23C)(vi). CCIT shall also consider recent decision in the case of PCIT v. Wipro Limited 2022 (7) TMI 560 - SUPREME COURT as the assessee in the instant case before us is already claiming benefit of exemption u/s 11 and 12 of the 1961 Act for all these years , on strength of registration u/s 12A , and accordingly returns were filed by assessee with Revenue for all those years. It is also claimed by assessee that exemption provisions are to be liberally construed , however we draw attention to case of Commissioner of Customs(Imports) , Mumbai v. Dilip Kumar Co. 2018 (7) TMI 1826 - SUPREME COURT wherein Hon ble Supreme Court held that exemption provisions are to be strictly construed. We clarify that we have refrained ourselves from commenting on merits of the issue s in this appeal, so that ld. CCIT can decide the issue unhindered by any of our observations. We are setting aside the common order passed by ld. CCIT u/s 10(23C)(vi) holding that the assessee does not qualify to be accorded recognition as a charitable institution for granting exemption u/s 10(23C) (vi) for assessment year s (ay s) 2000-01 to 2003-04 , 2006-07 and 2007-08, for denovo determination of the issue after granting proper and adequate opportunity to the assessee. All the evidences/submissions filed by the assessee in its defense shall be admitted by CCIT , and then adjudicated on merits in accordance with law.

Summary

Issues Involved:
1. Whether the assessee qualifies as an educational institution for exemption under Section 10(23C)(vi) of the Income-tax Act, 1961.
2. Whether the delay in filing the appeals should be condoned.

Issue-Wise Detailed Analysis:

1. Qualification as an Educational Institution for Exemption under Section 10(23C)(vi):

The primary issue revolves around whether the assessee qualifies as an educational institution under Section 10(23C)(vi) of the Income-tax Act, 1961, which provides exemption to institutions existing solely for educational purposes and not for profit.

Arguments by the Assessee:
The assessee argued that it has been engaged in educational activities since its inception in 1910, including conducting examinations (Prathama, Madhyama, Uttama, and Visharad) and awarding degrees recognized by various universities and boards. It also maintains a significant Hindi library and publishes educational material. The assessee contended that its activities fall within the definition of "educational purposes" as it promotes the Hindi language and conducts educational examinations.

Arguments by the Revenue:
The Revenue countered that the assessee's activities do not constitute "normal schooling" or "actual imparting of knowledge" as required under Section 2(15) of the Act. The Chief Commissioner of Income Tax (CCIT) relied on the Supreme Court's decision in Sole Trustee Lok Shikshan Trust v. CIT (1975) 101 ITR 234 (SC) and the Gujarat High Court's decision in CIT v. Sorabji Nusserwanji Parekh (1993) 201 ITR 939 (Guj HC), which held that conducting examinations without imparting education does not qualify as educational activities for exemption purposes.

Tribunal's Observations:
The Tribunal noted that the term "educational institution" should be interpreted in the context of "University" and should involve systematic instruction or schooling. The Tribunal acknowledged the various judicial precedents cited by both parties and emphasized the need for a detailed examination of the assessee's activities to determine if they qualify as educational under Section 10(23C)(vi).

Conclusion:
The Tribunal set aside the CCIT's order and remanded the matter back for a detailed and exhaustive examination of the assessee's activities. The CCIT was directed to consider all evidence and judicial precedents and determine whether the assessee qualifies for exemption under Section 10(23C)(vi).

2. Condonation of Delay in Filing Appeals:

The assessee filed the appeals with the Tribunal beyond the prescribed time limit, citing a bona fide belief that the correct remedy was to file a writ petition with the High Court.

Arguments by the Assessee:
The assessee argued that it pursued the writ petition in good faith and without delay. The High Court, while dismissing the writ petition on the ground of alternate remedy, directed the Tribunal to consider the delay condonation application sympathetically.

Tribunal's Observations:
The Tribunal noted that the assessee filed the writ petition within a reasonable time and pursued the legal remedy diligently. The Tribunal also considered the High Court's direction to sympathetically consider the delay condonation application.

Conclusion:
The Tribunal condoned the delay in filing the appeals, acknowledging that the assessee pursued the legal remedy in good faith and without undue delay.

Final Order:
The Tribunal allowed the appeals for statistical purposes, setting aside the CCIT's order and remanding the matter for a fresh examination of the assessee's eligibility for exemption under Section 10(23C)(vi). The Tribunal directed the CCIT to provide a detailed and comprehensive order after considering all relevant evidence and judicial precedents.

Order Pronounced:
The order was pronounced on 11/10/2022 at Allahabad.