2020 (3) TMI 784 - AT - Income Tax

Application for approval u/s 10(23C)(vi) rejected - assessee is already granted registration u/s 12AA - HELD THAT - On going through the decision in the case of Reva (Sunil) Educational Society 2019 (11) TMI 1099 - ITAT INDORE and examining the facts of the instant appeal we are of the considered view that the issues raised before us are same and therefore following our own decision we restore the issue of approval u/s 10(23C)(vii) of the Act to Ld. CIT(Exemption) for necessary examination. Further registration u/s 12AA of the Act granted to the assessee should not be a bar for granting approval u/s 10(23C)(vii) of the Act. Needless to mention that opportunity of being heard should be provided to the assessee and all the issues raised in this appeal are restored to Ld. CIT (Exemption) for deciding afresh as per terms indicated above. - Decided in favour of assessee for statistical purpose.

Summary

Issues Involved:
1. Rejection of application for approval under Section 10(23C)(vi) of the Income Tax Act.
2. Basis for rejection being the existing registration under Section 12AA of the Income Tax Act.
3. Examination of the objects of the assessee society.
4. Legality of the rejection of the application.

Detailed Analysis:

1. Rejection of Application for Approval under Section 10(23C)(vi):
The primary issue in this case is the rejection of the assessee's application for approval under Section 10(23C)(vi) of the Income Tax Act by the Commissioner of Income Tax (Exemption). The assessee argued that the rejection was erroneous and needed to be deleted. The Tribunal noted that the assessee society is engaged in educational activities and had applied for approval under the specified section on 02.08.2017.

2. Basis for Rejection Being the Existing Registration under Section 12AA:
The Commissioner of Income Tax (Exemption) rejected the application on the grounds that the assessee was already granted registration under Section 12AA. The Tribunal observed that the Commissioner questioned the need for approval under Section 10(23C)(vi) when the assessee already had registration under Section 12AA. This issue was previously addressed in the case of Reva (Sunil) Educational Society, where it was held that the provisions of Section 10(23C)(vi) and Section 12AA operate independently and obtaining registration under one does not preclude obtaining approval under the other.

3. Examination of the Objects of the Assessee Society:
The Tribunal noted that the Commissioner did not pinpoint any defects in the objects of the assessee society. The objects included promoting educational services, providing modern technical education, and working in the fields of environment, sports, social, health, cultural, and moral science education. The Tribunal emphasized that the Commissioner should have focused on examining the activities undertaken by the assessee and whether they fulfilled the conditions for getting approval under Section 10(23C)(vi).

4. Legality of the Rejection of the Application:
The Tribunal referred to Circular No. 14 of 2015 issued by the Central Board of Direct Taxes, which clarified that registration under Section 12AA is not a mandatory precondition for approval under Section 10(23C)(vi). The Tribunal also cited the jurisdictional High Court's decision in 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) erred in rejecting the application for approval under Section 10(23C)(vi) solely based on the existing registration under Section 12AA. It was held that both provisions operate independently, and the assessee should be granted an opportunity for a fresh examination of their application. The Tribunal restored the issue to the Commissioner for a fresh adjudication, ensuring that the assessee is provided a reasonable opportunity of being heard. Consequently, the appeal was allowed for statistical purposes.