2023 (2) TMI 764 - AT - Income Tax

Exemption u/s 10(23C)(iiiad) - assessment of trust - as per revenue assessee has not fulfilled the requirements of Section 10(23C)(iiiad) - as submitted assessee is existing solely for educational purposes and not for purpose of profit and its annual receipts during the year is less than Rs. 1 crore - HELD THAT - As the assessee has surplus approximately 53.65% of receipts for the purpose of future application which was accumulated in order to set up schools and educational institutions after applying 38% of the gross receipt in running and maintenance of the educational institution. Provisions of Section 10(23C)(iiiad) are applicable and consequently the income of the institution is exempt as the assessee trust has satisfied all the conditions as prescribed under the provisions of Section 10(23C)(iiiad) of the Act. Besides there is no allegation by the CIT(E) that the assessee is involved in any other activity for profit and not for educational purposes. Accordingly we set aside the order of Ld. CIT(E) and allow the appeal of the assessee.

Summary

Issues:
- Appeal against order of Ld. CIT(E) under Section 263 of the Income Tax Act, 1961 for AY 2017-18.
- Assessment of exemption under Section 10(23C)(iiiad) of the Act for educational institution.

Analysis:
1. The appeal pertains to the order of Ld. CIT(E) under Section 263 of the Income Tax Act, 1961 for AY 2017-18. The assessee challenged the order based on the issue of exemption under Section 10(23C)(iiiad) of the Act. The Ld. CIT(E) held that the assessee did not fulfill the requirements of the said section, leading to the revisionary power under Section 263 being exercised.

2. The Ld. CIT(E) observed that the assessee had derived income from various sources but claimed exemption under Section 10(23C)(iiiad) for educational purposes. The Ld. CIT(E) found discrepancies in the assessment, leading to the conclusion that the exemption was wrongly allowed. The assessee argued that the exemption was valid as the aggregate annual receipts from educational activities were below the specified limit of Rs. 1 crore as per Section 10(23C)(iiiad).

3. Upon detailed examination, it was found that the assessee trust was solely engaged in running an educational institution for philanthropic purposes. The trust had not charged fees from students due to the poverty in the area, focusing on uplifting educational standards. The trust's surplus was accumulated for future infrastructure development and school construction, aligning with its objectives. The Co-ordinate Bench's decision in a similar case supported the trust's position under Section 10(23C)(iiiad).

4. The trust's activities were found to meet all conditions under Section 10(23C)(iiiad), with no profit motive or deviation from educational purposes. The trust's surplus accumulation and application for educational development were deemed justifiable. Consequently, the order of Ld. CIT(E) was set aside, and the appeal of the assessee was allowed.

5. In conclusion, the judgment favored the assessee's eligibility for exemption under Section 10(23C)(iiiad) based on the trust's educational focus, philanthropic nature, and compliance with statutory conditions. The decision highlighted the importance of assessing activities in line with the specified provisions to determine tax exemptions accurately.