Application of the annual receipts threshold to each educational institution allows exemption under section 10(23C)(iiiad) where each falls below the limit.

For the year under appeal the ITAT applied statutory interpretation of section 10(23C)(iiiad), its Explanation and Rule 2BC to hold that the annual receipts threshold must be applied to each educational institution separately rather than on aggregated receipts of the society; where each institution's receipts fell below the prescribed limit the exemption applied. The Tribunal relied on coordinate bench precedent and the assessee's later decision on identical facts, and treated the Finance Act, 2021 amendment as inapplicable to the assessment year under consideration, allowing the appeals accordingly.

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Issues: Whether the assessee-society is eligible for exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 by applying the annual receipts threshold separately to each educational institution run by the society rather than aggregating receipts of all institutions.

Analysis: The Tribunal examined the statutory text of section 10(23C)(iiiad) and the Explanation thereto, the applicable Rule 2BC of the Income-tax Rules, 1962 for the relevant assessment year, and relevant judicial precedents addressing whether the threshold of annual receipts is to be computed per educational institution or on the aggregate receipts of the person (society). The Tribunal noted that for the year under consideration the prescribed limit under Rule 2BC was Rs. 1 crore and that each institution run by the society had annual receipts below that limit. The Tribunal relied on coordinate bench decisions, including the assessee's own decision for a later assessment year on identical facts, and authoritative interpretations which treat each educational institution as a separate entity for applying the threshold in section 10(23C)(iiiad). The Tribunal also observed the legislative amendment by the Finance Act, 2021 effective from A.Y. 2022-23 which changed the rule thereafter, but held that for the year under appeal the pre-amendment position applied.

Conclusion: The Tribunal allowed the appeals and directed that the claim of exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 be allowed by applying the Rs. 1 crore annual receipts threshold separately to each educational institution run by the society. The appeals are allowed.

Ratio Decidendi: For the assessment year under consideration, the threshold in section 10(23C)(iiiad) of the Income-tax Act, 1961 is to be applied by considering the annual receipts of each educational institution separately, and where each institution's receipts are below the prescribed limit the exemption applies to the society for that institution's income.

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