Single recognised school requires aggregation of all educational-section receipts, limiting exemption while preserving normal tax deductions.
Exemption under section 10(23C)(iiiad) cannot be rejected merely because section 11 was selected in the return or Form 10BB was not furnished, where the educational activity and receipts are already disclosed and the audit-report requirement does not apply. Pre-primary, primary and secondary sections within one statutorily recognised school constitute a single educational institution; their receipts must be aggregated, making the exemption unavailable where the prescribed threshold is exceeded. Denial of exemption requires taxable income to be computed under normal provisions after admissible revenue expenditure, depreciation and statutory allowances, while application of income and capital expenditure are not automatically deductible.
Issues: (i) Whether a claim for exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 could be rejected because exemption was mistakenly claimed under section 11 and Form 10BB was not furnished; (ii) Whether pre-primary, primary and secondary sections comprised separate educational institutions for applying the monetary threshold under section 10(23C)(iiiad) of the Income-tax Act, 1961; and (iii) Whether, after denial of exemption, the entire gross receipts could be assessed without computation of admissible expenditure under the normal provisions.
Issue (i): Whether a claim for exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 could be rejected because exemption was mistakenly claimed under section 11 and Form 10BB was not furnished.
Analysis: The alternative claim did not introduce a new source of income, since the material facts concerning educational activity and receipts were already available. For the relevant assessment year, the audit-report requirement under the relevant proviso to section 10(23C), read with Rule 16CC of the Income-tax Rules, 1962, applied to institutions covered by section 10(23C)(iv), (v), (vi) and (via), and did not govern an institution claiming exemption under section 10(23C)(iiiad).
Conclusion: The exemption claim could not be rejected merely because section 11 was selected in the return or Form 10BB was not furnished. This issue is decided in favour of the assessee.
Issue (ii): Whether pre-primary, primary and secondary sections comprised separate educational institutions for applying the monetary threshold under section 10(23C)(iiiad) of the Income-tax Act, 1961.
Analysis: Section 10(23C)(iiiad) of the Income-tax Act, 1961, read with Rule 2BC of the Income-tax Rules, 1962, requires satisfaction of the prescribed monetary threshold. Separate application of that threshold is available where there are distinct educational institutions having independent statutory identity. The approvals, affiliations and statutory recognitions were in the name of one school; no separate recognition existed for the three sections. Separate accounts and different premises were administrative arrangements and did not establish separate institutional status.
Conclusion: The three sections form one recognised educational institution, and their receipts must be aggregated. As the aggregate receipts exceeded the prescribed threshold, exemption under section 10(23C)(iiiad) is unavailable. This issue is decided against the assessee.
Issue (iii): Whether, after denial of exemption, the entire gross receipts could be assessed without computation of admissible expenditure under the normal provisions.
Analysis: Denial of exemption does not render every gross receipt taxable income. Taxable income must be determined under the normal computation provisions after allowing admissible revenue expenditure, depreciation and other statutory allowances. Application of income under the exemption regime is not automatically deductible under the normal provisions, and capital expenditure cannot be allowed as revenue expenditure.
Conclusion: Entire gross receipts cannot be assessed without normal computation of net taxable income. The limited computation issue is to be determined after verification of admissible expenditure and allowances, in favour of the assessee.
Final Conclusion: The procedural objections to examining the exemption claim fail, but the exemption remains unavailable because the receipts of the single recognised school exceed the statutory threshold. Taxable income must nevertheless be quantified after allowing lawful deductions and allowances under the normal provisions.
Ratio Decidendi: For the monetary threshold under section 10(23C)(iiiad), different educational levels within a single statutorily recognised school are not separate educational institutions merely because separate accounts or premises are maintained; their receipts must be aggregated.