Trust cannot claim section 10(23C)(vi) exemption for new institute added after original approval granted

ITAT Rajkot dismissed the assessee's appeal against CIT's revision order u/s 263. The trust claimed exemption u/s 10(23C)(vi) for a School of Science added to the trust in 2014, despite the approval being granted in 2012 for specific institutes. ITAT held that approval granted to existing institutes cannot automatically extend to new institutes added subsequently. The trust needed to apply afresh for approval for the new institute. The assessment order was correctly found erroneous and prejudicial to revenue.

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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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