2019 (5) TMI 1947 - AT - Income Tax

Appeal granted, exemption approved under section 10(23C)(vi) for 2006-07

Mercedes Benz Education Academy Versus The Income Tax Officer, Ward 11 (1), Pune

The Tribunal allowed the appeal, condoning the delay in filing and directing the Assessing Officer to grant the exemption under section 10(23C)(vi) for ... Benefit of exemption u/s 10(23C)(vi) - denial of claim as assessee has not submitted requisite form for claiming the aforesaid exemptions - appellant has been submitting form 56D (for claiming exemption u/s 10(23C)(vi)) from time to time - CIT(A) ought to have appreciated that the procedure adopted by the appellant was in tandem with the footnote & action point given at the end of form 56D - whether appellant is existing solely for imparting education? - HELD THAT:- Tribunal vide different orders relating to assessment years 2005-06 and 2007-08 have held that it is case of deemed approval where the application was not disposed of within stipulated time and hence, the assessee was eligible to claim exemption under section 10(23C)(vi) of the Act. The year under appeal before us is assessment year 2006-07 and the assessee is also relying on the said application dated 13.03.2006 filed before the Commissioner which was not disposed of within time and the case of assessee is that deemed approval is thus, granted to the assessee and the assessee is eligible to claim exemption under section 10(23C)(vi) of the Act. We find merit in the plea of assessee. Rule 2 provides that application for approval shall be made in Form 56D by the institution and clause 3 provides that approval of CBDT or the Chief Commissioner or the Director General, as the case may be, shall at any one time have effect for a period not exceeding three assessment years. Explanation to Rule 2CA provides that for the purpose of this rule, the Chief Commissioner or Director General means the Chief Commissioner or Director General to whom the Assessing Officer having jurisdiction to the assessee, is subordinate. It is also provided that application has to be made to the Commissioner, who in turn, shall forward the same to Chief Commissioner or the Director General. Taking the stock of the factual aspects of the case, application in Form No.56D was filed before the CIT-5, Pune on 13.03.2006, under which the assessee is seeking exemption for block of three years starting from assessment year 2005-06 and 2007-08. The Tribunal for assessment years 2005-06 and 2007-08 have already held the assessee entitled to the aforesaid exemption. Consequently, we hold that the assessee is also entitled to claim the aforesaid deduction for the intervening year i.e. for assessment year 2006-07 and direct the Assessing Officer to compute the income in the hands of assessee after allowing exemption under section 10(23C)(vi) of the Act. Thus, the grounds of appeal raised by assessee are allowed. Issues Involved:1. Condonation of Delay in Filing the Appeal2. Denial of Exemption under Section 10(23C)(vi) of the Income-tax Act, 19613. Deemed Registration and Validity of Application in Form No. 56D4. Status of Assessee as AOP vs. Charitable TrustIssue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The appeal was filed after a delay of 1784 days. The assessee argued that the delay was due to multiple proceedings before different authorities, which caused inadvertent oversight. The Tribunal considered the factual aspects and found the plea bona fide. The delay was condoned, referencing the Hon'ble Bombay High Court's decision in Vijay Vishin Meghani Vs. DCIT and the Hon'ble Supreme Court's ruling in Collector, Land Acquisition Vs. Mst. Katiji & Ors., emphasizing that substantial justice should be preferred over technicality.2. Denial of Exemption under Section 10(23C)(vi) of the Income-tax Act, 1961:The assessee managed an international school and claimed exemption under section 10(23C)(vi) for the assessment year 2006-07. The Assessing Officer denied the exemption as the assessee failed to produce the order granting approval. The CIT(A) upheld this decision, noting that the assessee did not furnish a valid application in Form No. 56D within the stipulated time. The Tribunal reviewed prior decisions and found that the assessee had filed the application on 13.03.2006, which was not disposed of within the prescribed time, leading to deemed approval.3. Deemed Registration and Validity of Application in Form No. 56D:The Tribunal examined whether the assessee was entitled to deemed registration. It was noted that the application for exemption was filed on 13.03.2006 but was not acted upon by the Chief Commissioner within the statutory period. Referencing the Tribunal's earlier decisions and the Hon'ble Supreme Court's ruling in CIT & Anr. Vs. Society for the promotion of Education, the Tribunal concluded that the assessee was entitled to deemed approval due to the inaction of the Chief Commissioner. The Tribunal directed the Assessing Officer to treat the assessee as having deemed approval for the assessment year 2006-07.4. Status of Assessee as AOP vs. Charitable Trust:The CIT(A) had upheld the Assessing Officer's decision to treat the assessee as an Association of Persons (AOP) rather than a charitable trust. However, the Tribunal noted that in earlier years, the status of the assessee was considered as a trust engaged in educational activities. Given the deemed approval for exemption under section 10(23C)(vi), the Tribunal implicitly recognized the assessee's status as a charitable trust for the assessment year 2006-07.Conclusion:The Tribunal allowed the appeal, condoning the delay in filing and directing the Assessing Officer to grant the exemption under section 10(23C)(vi) for the assessment year 2006-07, treating the application as having deemed approval. The Tribunal's decision was based on the factual matrix, previous Tribunal orders, and relevant judicial precedents, ensuring substantial justice over procedural technicalities.