Non-conflation of exemption regimes: retrospective registration does not convert an approval-based exemption claim; institution-wise receipts remand ordered.

ITAT examined whether retrospective registration under 12AA/12AB alters an assessee's election under the approval-based exemption regime and whether the aggregate receipts threshold for approval-based educational exemptions applies institution-wise. The Tribunal held that retrospective registration does not convert or displace an assessee's prior claim under the approval-based regime and therefore cannot be invoked to obtain registration-based benefits; outcome favours the assessee on non-conflation of regimes. The Tribunal also held the receipts threshold must be applied to each individual educational institution and remanded the matter to the AO for institution-wise verification and fresh adjudication.

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Issues: (i) Whether retrospective registration under section 12AA/12AB of the Income-tax Act, 1961 entitles the assessee to invoke provisions of section 11 and 12 when the assessee had claimed exemption under section 10(23C)(iiiad) in the return for the year under consideration; (ii) Whether the threshold limit of aggregate annual receipts for exemption under section 10(23C)(iiiad) must be applied institution-wise and whether the matter should be remanded for verification of receipts of individual institutions.

Issue (i): Whether retrospective registration under section 12AA/12AB of the Income-tax Act, 1961 confers entitlement to exemptions under sections 11 and 12 where the assessee had claimed exemption under section 10(23C)(iiiad) for the relevant year.

Analysis: The Tribunal examined the legal distinction between registration under section 12AA/12AB (or applicability of sections 11 and 12) and approvals under section 10(23C). It noted that the assessee had elected exemption under section 10(23C)(iiiad) in its return and that subsequent grant of registration by CIT(E) with retrospective effect did not automatically convert or modify the claim already made under section 10(23C). The Tribunal relied on precedents and the statutory scheme showing the independence of the two exemption regimes and observed that an assessee opting for section 10(23C) cannot thereafter seek to rely on section 11/12 benefits merely because registration under section 12AA was later granted.

Conclusion: The Tribunal concluded that retrospective registration under section 12AA/12AB does not entitle the assessee to invoke sections 11 and 12 where the assessee had claimed exemption under section 10(23C)(iiiad) for the assessment year; this conclusion is in favour of the assessee on the legal question of non-conflation of exemption regimes.

Issue (ii): Whether the threshold limit of aggregate annual receipts for exemption under section 10(23C)(iiiad) is to be applied on an institution-wise basis and whether the assessment requires remand for factual verification of receipts of each institution run by the assessee.

Analysis: The Tribunal reviewed the statutory language of section 10(23C)(iiiad), relevant rules and authoritative decisions holding that the test for the threshold limit is to be applied to receipts of each individual university or educational institution and not by clubbing receipts of multiple institutions run by a society or trust. The Tribunal found that the Assessing Officer and the CIT(A) did not verify, or record satisfaction on, whether the objects and activities of the institutions remained the same or whether the gross receipts of each of the 44 institutions exceeded the prescribed limit. Given the lack of factual adjudication and verification, the Tribunal held that the matter required fresh consideration by the Assessing Officer with opportunity to produce evidence and verification of receipts institution-wise.

Conclusion: The Tribunal concluded that the threshold limit under section 10(23C)(iiiad) must be applied institution-wise and that the matter is to be remanded to the Assessing Officer for fresh adjudication and verification of the receipts of each educational institution; this conclusion is in favour of the assessee as it requires reconsideration of disallowance.

Final Conclusion: The impugned assessment order and the order of the CIT(A) denying exemption under section 10(23C)(iiiad) are set aside and the matter is remanded to the Assessing Officer for fresh decision after verification of institution-wise receipts and after affording the assessee an opportunity of hearing.

Ratio Decidendi: Exemption under section 10(23C)(iiiad) must be determined by applying the aggregate annual receipts threshold to each individual educational institution separately; registration under section 12AA/12AB with retrospective effect does not negate the independence of the section 10(23C) regime or automatically convert claims made under section 10(23C) into claims under sections 11 and 12.

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