Appeal granted, exemption under Sec 10(23C)(iiiad) allowed for AY 2010-11. AO's additions set aside.

The Tribunal allowed the appeal, directing the AO to grant exemption under Section 10(23C)(iiiad) of the Income Tax Act for the assessment year 2010-11. The additions of Rs. 9,00,684/- and Rs. 14,58,500/- made by the AO were set aside.

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Issues Involved:
1. Denial of exemption under Section 10(23C)(iiiad) of the Income Tax Act.
2. Addition of Rs. 9,00,684/- by the Assessing Officer (AO).
3. Addition of Rs. 14,58,500/- in reserve fund by the AO.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Section 10(23C)(iiiad):
The primary issue was whether the assessee, a public charitable trust registered since 1977, was entitled to exemption under Section 10(23C)(iiiad) of the Income Tax Act for the assessment year 2010-11. The AO denied this exemption on the grounds that the trust's deed indicated purposes beyond education, specifically for the social welfare of the Sunni Muslim Vohra Community. The AO argued that the trust did not exist solely for educational purposes as required by the statute. The assessee contended that despite having multiple objects in its memorandum, it exclusively engaged in educational activities during the relevant year. The Tribunal referred to authoritative judgments, including those from the Allahabad High Court (C.P. Vidya Niketan Inter College Shikshan Society) and Karnataka High Court (Geetanjali Education Society), which held that exemption should not be denied if the trust solely engaged in educational activities during the year. The Tribunal found that the assessee's major income and expenditure were related to education, with only minimal amounts spent on other activities. Consequently, the Tribunal directed the AO to grant the exemption under Section 10(23C)(iiiad).

2. Addition of Rs. 9,00,684/- by the AO:
The AO treated the assessee as an Association of Persons (AOP) and computed a taxable income of Rs. 9,00,684/- by debiting various expenses from the gross receipt of Rs. 52,45,736/-. The AO made this addition on the grounds that the assessee was not registered under Section 12A during the relevant year. The Tribunal, however, noted that the assessee had subsequently obtained registration under Section 12A, indicating that the trust's objects were not doubted by the department. Given the Tribunal's decision to grant exemption under Section 10(23C)(iiiad), the addition of Rs. 9,00,684/- was rendered moot, as the income was exempt.

3. Addition of Rs. 14,58,500/- in Reserve Fund:
The AO also made an addition of Rs. 14,58,500/- to the assessee's income, which was transferred to the Unity School Building Fund, arguing that the assessee was not entitled to claim this amount without registration under Section 12A. The Tribunal's decision to grant exemption under Section 10(23C)(iiiad) also covered this aspect, as the entire income, including the reserve fund, was considered exempt. Therefore, the addition of Rs. 14,58,500/- was not sustained.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the AO to grant exemption under Section 10(23C)(iiiad) of the Income Tax Act for the assessment year 2010-11. Consequently, the additions of Rs. 9,00,684/- and Rs. 14,58,500/- made by the AO were also set aside. The order was pronounced in the court on 15th July 2016 at Ahmedabad.

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