2023 (5) TMI 1363 - AT - Income Tax

Denial of exemption u/s 10(23C)(iiiab) - alternative claim under of S. 11(2) also rejected - charitable activity - as per DR assessee is not doing activity wholly and substantially for the purpose of the education activity and has earned substantial amount of the profit as it is evident from the receipt and payment account submitted by the assessee which is against the provision of the Act - DR also submitted that the assessee is not conducting any exam and merely publishing the books and that too on profit and therefore, the denial of the benefit by the lower authority is relied upon Assessee submitted that the financial analysis that the ld. DR is not coming from the order of the lower authority and therefore, the revenue cannot start putting the new facts on record. The jurisdictional High Court 2017 (11) TMI 2002 - RAJASTHAN HIGH COURT has already held that the activity of the assessee is already education purpose and the details that the ld. DR is arguing is already available on record. As regards the publication of books the assessee making available the books cost recovery basis. HELD THAT - It is not disputed by assessee that the order of the assessment is passed before the judgement given by the Jurisdictional High Court and there is no discussion in the order of the ld. CIT(A) about the Honourable High Court judgement on merits of the case. In view of the peculiar circumstances of the case wherein there is no discussion on merits of the case viz a viz the decision of the Honourable Jurisdictional High Court in the orders of the ld. CIT(A). Even the arguments that the revenue is raising was not arising from the order of the lower authorities. Based on these aspect of the case we feel that it would be in the interest of the justice to remand back the matter to the record of the ld. CIT(A) for deciding the appeal afresh on merits of the case after considering the judgement of the Honourable High Court in the case of the assessee for A. Y. 2010-11 after giving an opportunity of being heard to the assessee - Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Denial of exemption under Section 10(23C)(iiiab) of the Income Tax Act.
2. Rejection of alternative claim under Section 11(2) despite registration under Section 12A.
3. Compliance with procedural requirements for claiming benefits under Section 11(2).

Detailed Analysis:

1. Denial of Exemption under Section 10(23C)(iiiab):

The assessee, an autonomous body established by the State Government for the publication and production of books in Hindi and other regional languages, claimed exemption under Section 10(23C)(iiiab) of the Income Tax Act. The Assessing Officer (AO) denied this exemption on the grounds that the assessee's activities were not educational but commercial in nature, as it was involved in the trade, commerce, or business of publishing and selling books. The AO also noted that the assessee had invested surplus funds and earned interest, further supporting the view that its activities were not purely educational.

The CIT(A) upheld the AO's decision, stating that the assessee did not fulfill the conditions required for the exemption, as it was not solely engaged in educational activities and did not have the necessary approval from the prescribed authority. The ITAT also confirmed the denial of exemption, emphasizing that the assessee failed to provide evidence of approval from the Chief Commissioner or Director General, which is a prerequisite for claiming the exemption under Section 10(23C)(iv).

2. Rejection of Alternative Claim under Section 11(2):

The assessee argued that even if the exemption under Section 10(23C)(iiiab) was denied, it should be entitled to benefits under Section 11(2) of the Income Tax Act, as it was registered under Section 12A. The ITAT had previously allowed this alternate claim for the assessment year 2010-11. However, during the assessment proceedings for the current year, the AO rejected this claim on the grounds that the assessee did not file Form 10 within the stipulated due date and did not get its books of account audited in Form 10B, both of which are mandatory for claiming benefits under Section 11(2).

The CIT(A) concurred with the AO, stating that the necessary pre-conditions for Section 11(2) benefits were not fulfilled by the assessee. The CIT(A) emphasized that granting exemption without fulfilling these pre-conditions would lead to anarchy in tax administration and set a bad precedent.

3. Compliance with Procedural Requirements for Claiming Benefits under Section 11(2):

The assessee failed to comply with procedural requirements, such as filing Form 10 within the due date and getting its accounts audited in Form 10B. These procedural lapses led to the rejection of the claim under Section 11(2). The CIT(A) and AO both highlighted the importance of adhering to these requirements to maintain the integrity of tax administration.

Conclusion:

The ITAT remanded the case back to the CIT(A) for a fresh decision on the merits, taking into account the judgment of the Rajasthan High Court in the assessee's own case for the assessment year 2010-11. The ITAT emphasized that the CIT(A) should consider the High Court's judgment and the financial aspects of the assessee's activities for the current year. The decision to remand the case was made to ensure a fair and just resolution, without expressing any opinion on the merits of the dispute.

In summary, the appeal was allowed for statistical purposes, and the matter was sent back to the CIT(A) for a fresh adjudication, considering all relevant legal and factual aspects.