2022 (11) TMI 661 - AT - Income Tax

Disallowance of exemption u/s 11 - assessee rectified the intimation u/s 143(1) and informed that the assessee is only eligible exemption as an educational trust - Whether assessee is eligible for exemption u/s 10(23C)(iiiad)? - HELD THAT - The claim of the assessee is very specific purpose. The criterion for claiming exemption u/s 10(23C) (iiiad) are that running the educational institution and the turnover should be below Rs. 1 crore. The assessee accumulated both the conditions for getting exemption u/s 10(23C) (iiiad). We set aside the order of the CIT(A). The addition made by the ld. AO amount u/s 143(1) is liable to be quashed. Accordingly, the appeal of the assessee is allowed.

Summary

Issues:
1. Eligibility for exemption u/s 10(23C)(iiiad) of the Income Tax Act 1961.
2. Correct application of provisions for educational trusts.
3. Rejection of exemption u/s 11 and rectification of intimation u/s 143(1).

Analysis:
The appeal before the Appellate Tribunal ITAT Amritsar concerned the eligibility of an educational trust for exemption under section 10(23C)(iiiad) of the Income Tax Act 1961 for the assessment year 2017-18. The trust, which had been regularly claiming exemption under section 10(22) and later under section 10(23C)(iiiad) after the abolition of section 10(22), erroneously claimed exemption under section 11 for the relevant assessment year. The Assessing Officer disallowed the exemption under section 11, despite the trust's turnover being below Rs. 1 crore, making it eligible for exemption under section 10(23C)(iiiad). The trust rectified the intimation under section 143(1) to clarify its eligibility, but the Assessing Officer did not consider this. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, leading to the trust filing an appeal before the Tribunal.

The trust's counsel argued that the trust was indeed an educational trust with a turnover below Rs. 1 crore for the assessment year and was registered under section 12AA of the Act, making it eligible for exemption under section 10(23C)(iiiad). The Tribunal considered the arguments presented and the documents on record. The trust's counsel also cited a relevant order of the ITAT, Cochin Bench, emphasizing that specific provisions applicable to educational institutions should be considered for claiming exemption, rather than general provisions. The Tribunal noted that the trust met the criteria for exemption under section 10(23C)(iiiad) by running an educational institution with turnover below Rs. 1 crore. Consequently, the Tribunal set aside the Commissioner's order and allowed the trust's appeal, quashing the addition made by the Assessing Officer under section 143(1).

In conclusion, the Tribunal ruled in favor of the trust, allowing the appeal and granting the exemption under section 10(23C)(iiiad) for the relevant assessment year. The judgment highlighted the importance of correctly applying specific provisions related to educational activities for claiming exemptions under the Income Tax Act, ultimately providing relief to the educational trust in question.