9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1702 - AT - Income TaxDenial of exemption u/s 10(23C)(vi) - assessee did not file the income tax return as mandated u/s 139(4C) - Scope of amendment in section 10(23C) - HELD THAT - We can safely conclude that the amendment in section 10(23C) by way of insertion of 20th proviso prescribing dis-entitlement of exemption u/s 10(23C)(vi) for non-filing of return is applicable from AY 2023-24 and the same was not applicable to AY 2017-18 under consideration. Therefore in present case the lower- authorities are wrong in denying exemption to assessee on the premise of non-filing of return. Assessee has also filed justification for non-filing of return and the assessee s justification could not be controverted by department. Therefore the condition imposed by CIT(E) for filing of return as relied by DR cannot be said to be acceptable for AY 2017-18 with which are concerned in present appeal. We hold that the assessee is eligble for exemption u/s 10(23C)(vi) as per approval granted by CIT(E) vide order dated 10.08.2018 for AY 2017-18 under consideration. Accordingly we direct the AO to allow exemption u/s 10(23C)(vi) after necessary verification as he may consider appropriate. Assessee appeal is allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Availability of exemption under section 10(23C)(vi) despite non-filing of return under section 139(4C) Relevant legal framework and precedents: Section 10(23C)(vi) provides exemption to certain educational institutions subject to approval by the CIT(E). Section 139(4C) mandates filing of return by such institutions claiming exemption under section 10(23C). The Finance Act 2022 introduced the 20th proviso to section 10(23C) making filing of return under section 139(4C) a condition for exemption, effective from AY 2023-24. Prior to this amendment, no such disqualification existed for non-filing of return. Precedents include ITAT decisions in United Educational Society vs. JCIT and Anjuman E Khadimul Muslimeen Refah-E Aam vs. DCIT, which held that prior to the insertion of the proviso, non-filing of return did not disentitle exemption under sections 11 and 12. The ITAT Kolkata decision in Haringhata Mahavidyalay also supports the position that late or non-filing of return does not disentitle exemption under section 10(23C) before the proviso's introduction. Court's interpretation and reasoning: The Court observed that the assessee had obtained approval from CIT(E) for exemption under section 10(23C)(vi) for AY 2017-18. The denial of exemption by AO and CIT(A) was solely on the ground of non-filing of return under section 139(4C). The Court noted that the proviso making filing of return mandatory for exemption was introduced only from AY 2023-24 and was not applicable to AY 2017-18. The Court accepted the assessee's explanation that the application for approval was pending with CIT(E) beyond the due date for filing the return, making it practically impossible to file a return incorporating the exemption claim. The Court found no mala fide or deliberate attempt by the assessee to evade filing. Key evidence and findings: The assessee filed the application for approval on 18.08.2017 before the due date of 30.09.2017 but the CIT(E) granted approval only on 10.08.2018, beyond the time limit for filing even a belated return. The assessee did not file the return but submitted the CIT(E)'s approval order during assessment proceedings. Application of law to facts: Since the proviso mandating return filing for exemption was not in effect for AY 2017-18, the Court held that non-filing of return could not disentitle the assessee from exemption. The Court distinguished this from cases involving deductions under section 80P, where filing of return is a statutory pre-condition. Treatment of competing arguments: The Revenue argued that filing of return is mandatory under section 139(4C) and conditions imposed by CIT(E) must be complied with. The Court rejected this, holding that the condition in the approval order could not override the statutory position applicable for AY 2017-18. The Court also found the reliance on the Supreme Court decision in Wipro Ltd. inapplicable as it involved different provisions and circumstances. Conclusions: The Court concluded that the assessee is eligible for exemption under section 10(23C)(vi) for AY 2017-18 despite non-filing of return, given the absence of any statutory provision denying exemption on that ground at that time and the bona fide reasons for non-filing. Issue 2: Applicability of precedents on non-filing of returns and exemption/deduction claims Relevant legal framework and precedents: The Court examined decisions including ITAT Indore in Akshay Academy, ITAT Delhi in United Educational Society, ITAT Hyderabad in Anjuman E Khadimul Muslimeen Refah-E Aam, and ITAT Kolkata in Haringhata Mahavidyalay. These cases discussed the interplay of filing returns and entitlement to exemption/deduction under various sections of the Act. Court's interpretation and reasoning: The Court distinguished the present case from cases involving section 80P deductions, where filing return on time is a statutory pre-condition. It relied on precedents holding that prior to the legislative amendments, non-filing of return did not disentitle exemption claims under sections 10(23C), 11, and 12. The Court emphasized that the statutory scheme before AY 2023-24 did not impose denial of exemption for non-filing. Key evidence and findings: The Court noted that in Akshay Academy, exemption was allowed despite return not being filed initially but during assessment proceedings, due to registration granted during pendency. Similarly, in United Educational Society and Anjuman E Khadimul Muslimeen, non-filing of returns did not deny exemption prior to the relevant amendments. Application of law to facts: The Court found these precedents squarely applicable, reinforcing that the assessee's exemption claim for AY 2017-18 should not be denied solely on the ground of non-filing of return. Treatment of competing arguments: The Revenue's reliance on the Bangalore ITAT decision and Kerala High Court ruling regarding section 80P was rejected as not applicable to exemption claims under section 10(23C)(vi). Conclusions: The Court held that the precedents support the assessee's entitlement to exemption despite non-filing of return for AY 2017-18. Issue 3: Effect of condition imposed by CIT(E) requiring filing of return Relevant legal framework and precedents: The CIT(E) approval order contained conditions including filing of return. However, the statutory provisions in force for AY 2017-18 did not mandate denial of exemption for non-filing. Court's interpretation and reasoning: The Court held that conditions imposed by CIT(E) cannot override statutory provisions or create disqualification where none exists in law. The Court found that since the proviso to section 10(23C) mandating return filing was introduced only from AY 2023-24, the condition in the approval order could not be enforced retrospectively for AY 2017-18. Key evidence and findings: The assessee's inability to file return within time due to pending approval was accepted as bona fide. The Court noted the assessee's willingness to file physical return if directed. Application of law to facts: The Court concluded that the condition in the approval order was not legally enforceable for AY 2017-18 and could not be a ground to deny exemption. Treatment of competing arguments: The Revenue's argument that non-compliance with conditions nullified the approval was rejected. Conclusions: The condition requiring filing of return in the approval order was held not to disentitle the assessee from exemption for AY 2017-18. Issue 4: Consideration of deficiency/loss and disallowance of donations in computing total income Relevant legal framework and precedents: The AO computed total income by adding net surplus of the two educational institutions without adjusting the deficiency of the society. The AO disallowed certain donations. Court's interpretation and reasoning: The Court directed the AO to consider the deficiency of Rs. 15,17,865/- suffered by the society on account of revenue expenses while computing total income. The disallowance of donations was accepted by the assessee and need not be disturbed. Key evidence and findings: The society's accounts showed a loss, which the AO did not factor in. Application of law to facts: The Court held that the AO should adjust the deficiency while computing taxable income. Treatment of competing arguments: No significant dispute on this point. Conclusions: AO to consider the deficiency in income computation. Issue 5: Applicability of section 115BBE for taxation of addition Relevant legal framework and precedents: Section 115BBE applies to income chargeable under certain heads like unexplained income under sections 69, 69A, 69B, 69C, etc. Court's interpretation and reasoning: The Court held that section 115BBE was not applicable to the addition made in this case, as the addition was not under sections 69A or 69C or similar provisions. Application of law to facts: The Court directed the AO not to apply section 115BBE in computing tax liability if any taxable income remains after recomputation. Conclusions: Section 115BBE not applicable in the present case. 3. SIGNIFICANT HOLDINGS "We also find on a consideration of legal provisions of Income-tax Act that there is no authority to deny exemption u/s 10(23C)(vi) to assessee for the reason of non-filing of return. Ld. AR has successfully shown that the 20th Proviso to section 10(23C) denying exemption for non-filing of return u/s 139(4C) came into statute from AY 2023-24 only and prior to that there was no such provision." "The facts shown by Ld. AR do not lack bona fides and it cannot be said that the assessee has deliberately or for some ulterior purpose or for some mala fide purpose, did not file return." "The condition imposed by Ld. CIT(E) for filing of return, as relied by Ld. DR, cannot be said to be acceptable for AY 2017-18 with which are concerned in present appeal." "The AO should consider the deficiency of Rs. 15,17,865/- suffered by assessee-society by incurring expenses; to consider the disallowance of donations of Rs. 1,33,500/- and Rs. 3,705/- made in original assessment-order as agreed by Ld. AR and also not to apply section 115BBE which is not applicable to any taxable income as may be arrived at." Core principles established include:
Final determinations:
|
