2024 (9) TMI 976 - HC - Income Tax

University wins exemption case as authorities failed to assess educational purpose under Section 10(23C)(vi)

M/s Shaheed Nand Kumar Patel Vishwavidyalaya Versus Commissioner of Income Tax (E), Bhopal, M.P.

The HC set aside orders rejecting a university's application for exemption under Section 10(23C)(vi) of the IT Act. The court held that both lower ... Rejection of application u/s 10(23C)(vi) - Charitable activity or not? - HELD THAT:- Both the authorities have failed to record a specific finding that the appellant University is not existing solely for educational purposes and is existing for purposes of profit, which was sine qua non for rejecting the application for registration under the provisions of Section 10(23C)(vi) of the IT Act. Both the authorities in order to consider the application would have considered the fact whether the University is solely existing for educational purposes or it is existing for purposes of profit and in case it is affirmative, it could have granted the application and in case it is negative, it could have rejected the application. Both the authorities have failed to go through the objects of the University and failed to record finding with respect to education or educational activities. No express finding has been recorded by both the authorities that the appellant University does not satisfy the objects and the genuineness of its activities as required under the 2nd proviso to Section 10(23C) of the IT Act. Orders impugned passed by both the authorities are hereby set aside and the matter is remitted to the CIT(E), Bhopal to consider and decide the application under Section 10(23C)(iii) afresh in light of the decision of the Supreme Court in New Noble Educational Society [2022 (10) TMI 855 - SUPREME COURT]. Issues:Challenge to the order passed by the Income Tax Appellate Tribunal affirming the order of the Commissioner of Income Tax, Exemption, regarding rejection of application under Section 10(23C)(vi) of the Income Tax Act, 1961.Analysis:1. The appellant filed an application under Section 10(23C)(iii) for registration, which was rejected by the Commissioner of Income Tax, Exemption, and the ITAT. The appellant argued that the authorities misdirected themselves, and the Supreme Court's decision in New Noble Educational Society v. Chief Commissioner of Income Tax was relevant.2. The respondent contended that both authorities properly considered the application and concurred with the rejection. The High Court heard both parties and examined the record.3. Section 10(23C)(vi) of the IT Act was crucial, and the Supreme Court's interpretation in New Noble Educational Society case was referenced. The Court summarized the conclusions from the case, emphasizing the requirement for educational institutions to solely engage in educational activities and not for profit.4. The Court found that the authorities failed to specifically determine if the appellant University existed solely for educational purposes or for profit, as required by Section 10(23C)(vi). The Court set aside the orders and remitted the matter to the CIT(E) for a fresh decision in light of the Supreme Court's ruling within two months.5. The Court clarified that it did not express any opinion on the application's merits, and the CIT(E) was directed to decide after hearing the parties and in accordance with the law. The tax case was allowed as per the outlined directions.