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2023 (12) TMI 336 - AT - Income TaxRevision u/s 263 - CIT alleging that the order u/s 143(3) is erroneous and prejudicial to the interest of revenue as the AO had not made proper verification of applicability of approval u/s 10(23C)(vi) to the trust particularly for unit of school of science - Error in the assessment order found by the ld. CIT(Exemptions) was grant of exemption u/s. 10(23C)(vi) of the Act to an institute run by the assessee-trust which was not granted approval u/s. 10(23C)(vi) HELD THAT - The fact that the School of Science was not included in the list of institutes run by the assessee-trust which was granted approval u/s. 10(23C)(vi) vide order dated 17.04.2012 is not disputed. Assessee had explained the non-inclusion of this institute in the list of institute which was granted approval u/s. 10(23C)(vi) as being addition of this institute in the assessee-trust subsequent to the grant of approval i.e. in the year 2014 this institute was added to the trust while the approval u/s 10(23C)(vi) of the Act was granted in the year 2012. Argument of assessee that the approval originally granted is to be presumed to apply to this institute also considering the prevailing position of law that only one-time approval was required to be taken u/s. 10(23C)(vi) we find and hold, has been correctly rejected by the CIT(Exemptions). His finding that this relaxation provided by the legislature of seeking only one time approval does not imply that new institutions can be added by the assessee and the approval will suo moto will apply to the said institute, we hold is correct. We are in complete agreement with the ld. CIT(Exemptions) that the approval granted to the assessee-trust in the year 2012 cannot apply to a new institution added to the trust subsequently. Therefore, the argument of assessee that the approval u/s. 10(23C)(vi) of the Act would apply to the new institute also and hence there was no error in the order granting exemption to the income of the new institute is dismissed. The findings of the ld. CIT(Exemptions) in this regard are confirmed by us. The contention of assessee before us that the approval is granted to a trust and not a specific institute is also rejected since the certificate granting approval specifically mentions each institute which was being run by the assessee-trust at the relevant point of time. The approval obviously is specifically granted to the institutes mentioned . CIT is required to grant approval after examining the genuineness of activities carried out and therefore specifically having examined the activities of the then existing institutes the approval letter mentions each institute of the assessee trust found by him eligible to exemption u/s 10(23C) (vi) - This institute, i.e. School of Science added to the trust subsequent to grant of approval its activities needed to be examined and the assessee ought to have applied afresh for grant of approval to this specific institute. We agree with the ld. CIT(Exemptions) that the approval could not have extended to the new institute added subsequently. We see no reason to disagree with the ld. CIT(Exemptions). Undoubtedly, the assessee had not claimed its income exempt u/s 11 of the Act and merely because it has been granted registration u/s 12A of the Act, exemption u/s 11 of the Act is not automatic and the same needs verification. Assessee cannot contend that since it has been granted registration u/s 12A of the Act, its entire income is exempt by virtue of Section 11 of the Act and no prejudice therefore is caused to the Revenue. We agree with the ld. CIT(Exemptions) that this claim of the assessee, that it was not liable to pay any tax on account of its income being exempt u/s 11 of the Act, needed to be verified and in the absence of the same, it cannot be said that there was no prejudice caused to the Revenue. On this account, we agree with the ld. CIT(Exemptions) s rejection of this contention of the ld. Counsel for the assessee. Contention of the assessee is not acceptable since the CBDT vide its Circular No.1/2015 dated 21.01.2015 has debarred assessees from making alternative claim of exemption u/s. 10(23C)(vi) and Section 11 - As we hold assessee is not correct. We have gone through the relevant CBDT circular and we find that what has been debarred by virtue of the said circular, which is explanatory notes to the provisions of the Finance Act, 2014, is that assessees claiming exemption of their income u/s. 10(23C)(vi) of the Act or Section 11 of the Act are debarred from claiming exemption of such income under any other provision of Section 10 of the Act. What has been introduced by virtue of amendment made by Finance Act, 2014 is that assessees claiming exemptions of their income on account of carrying out charitable activities or running educational institutions are entitled to claim exemption under the relevant sections 11 and 10(23C)(vi) of the Act only subject to fulfillment of conditions specified therein. Such assessees have been disentitled/debarred from claiming their incomes as exempt by virtue of any other provisions exempting income provided in Section 10 of the Act. Therefore, this argument of the ld. DR, we find, is incorrect that the assessee cannot alternatively seek exemption of their income u/s. 10(23C)(vi) and Section 11 of the Act. Thus CIT(Exemptions) has rightly found the assessment order to be erroneous in granting exemption u/s. 10(23C)(vi) of the Act to the income of an institute run by assessee-trust which was not granted approval for the said purpose and finding that as a consequence prejudice has been caused to the Revenue. Assessee appeal dismissed.
Issues Involved:
1. Validity of revisionary jurisdiction exercised by the CIT(Exemptions). 2. Whether the approval under Section 10(23C)(vi) applies to all institutions under the trust. 3. Whether the assessment order was erroneous and prejudicial to the interest of the revenue. 4. Applicability of Section 11 exemption to the trust's income. Summary: 1. Validity of Revisionary Jurisdiction: The assessee challenged the revisionary jurisdiction exercised by the CIT(Exemptions) under Section 263 of the Income-tax Act, 1961, arguing that the Assessing Officer (AO) had made a full inquiry and was satisfied with the submissions. However, the CIT(Exemptions) noted that the AO erroneously allowed exemption under Section 10(23C)(vi) to an institution not approved for such exemption. 2. Approval Under Section 10(23C)(vi): The CIT(Exemptions) found that the School of Science was not included in the approval granted to the assessee-trust under Section 10(23C)(vi). The assessee argued that the approval was a one-time grant applicable to all institutions under the trust, including those added later. The CIT(Exemptions) rejected this, stating that new institutions added post-approval cannot automatically be considered approved. 3. Erroneous and Prejudicial Assessment Order: The CIT(Exemptions) held that the AO's order was erroneous and prejudicial to the revenue because it granted exemption to an unapproved institution. The assessee's contention that the approval applied to the entire trust and not specific institutions was dismissed. The CIT(Exemptions) emphasized that each institution's activities must be examined for approval. 4. Applicability of Section 11 Exemption: The assessee claimed that its income was exempt under Section 11 since it was registered as a charitable trust under Section 12A. The CIT(Exemptions) rejected this, noting that the assessee had not claimed this exemption in its return and that such claims required verification. The CIT(Exemptions) also clarified that the CBDT Circular No.1/2015 did not bar alternative claims under Section 10(23C)(vi) and Section 11. Conclusion: The CIT(Exemptions) correctly found the assessment order erroneous and prejudicial to the revenue, as the AO granted exemption to an unapproved institution. The appeal of the assessee was dismissed, and the CIT(Exemptions)'s order was upheld. The judgment emphasized the need for specific approval for each institution under Section 10(23C)(vi) and the requirement for verification of claims under Section 11.
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