The Income Tax Appellate Tribunal of Ahmedabad bench has recently ruled that the benefit u/s 10(23C) of the Income Tax Act, 1961 should not be denied to a Trust even if the assessee has any other activities other than education in their “Memorandum of Association.”
The assessee in the instant case is a public charitable trust and registered with Charity Commissioner, Bharuch since 1977. It is holding registration no.B-839. The assessee has been getting its accounts audited ITA No.477/Ahd/2015 under the Bombay Public Trust Act, 1950. It has also been registered under section 12A and 12AA of the Income Tax Act vide letter no./Baroda/CITIII/ Tak/12(K)/110 (76-S)/2012-13 dated 28.6.2013. During the accounting year for the Assessment Year 2010-11, the assessee was not enjoying registration under section 12A of the Income Tax Act. It has filed its return of income on 9.12.2010 declaring total income at NIL. In the computation of income, the assessee has filed return, as if it was enjoying registration under section 12A of the Income Tax Act, but later on it has changed its computation and contended that since it is a charitable trust solely existing for the purpose of education, it is entitled to exemption under section 10(23C)(iiiad) of the Income Tax Act. The claim of the assessee was rejected by the AO on the ground that section 10(23C)(iiiad) of the Act contemplates that the assessee should solely be existing for educational purpose. A perusal of the trust-deed, would indicate that apart from education, the assessee could undertake work of social welfare of Sunni Muslim Vohra Community. In other words, the stand of the AO was that apart from education, the assessee has other objects also, therefore, it is not entitled for exemption under section 10(23C)(iiiad) of the Act. The ld.AO further observed that assessee had total receipt of Rs.52,45,736/-. It has claimed deduction of Rs.31,650/- as establishment expenses, Rs.42,56,507/- as school fees and Rs.56,895/- as trust expenses. The AO has treated the assessee as an Association of Persons. He debited a sum of Rs.43,45,052/- from the gross receipt of Rs.52,45,736/- and worked out a sum of Rs.9,00,684/-. He made an addition of this amount. Similarly, he observed that the assessee has made addition of Rs.14,58,500/- in reserve fund viz. Unity School Building Fund. Since the assessee was not registered under section 12A, thus, according to the AO, the assessee cannot claim this amount. He accordingly made addition of Rs.14,58,500/-. The AO has determined total taxable income of the assessee at Rs.23,59,184/- as against ITA No.477/Ahd/2015 NIL income disclosed by the assessee. Appeal to the ld.CIT(A) did not bring any relief to the assessee.
The assessee has submitted before the Tribunal that in various authoritative judgments at the end of the Hon’ble High Courts, it has been held that a trust or society might have various objects in their memorandum of association, but in if any particular year they are existing solely for the purpose of education, then, exemption under section 10(23C) should not be denied to such societies.
The Tribunal placed reliance on a catena of decisions in which it was held that if the assessee has not carried out any other activities except education, then, the benefit of section 10(23C) cannot be denied.
While concluding, the Single bench observed that “the details of expenditure would indicate that the
assessee has not incurred any expenditure except small amount on any other activities than the education. The ld.CIT(A) has highlighted masjid expenses of Rs.21,900/- which is a very meager amount, which is not a deciding factor for the activities of the assessee. All these facts are to be seen in the light of subsequent years where registration under section 12A has been granted to the assessee. Taking into consideration all these facts and circumstances, I allow the claim of the assessee and direct the AO to grant exemption under section 10(23C)(iiiad) of the Income Tax Act.”
Read the full text of the order below.
