On rejection of approval u/s 10(23C) no bar in making fresh application, treating application of the assessee as non-est was unjustifiable
ABCAUS Case Law Citation:
ABCAUS 2994 (2019) (06) ITAT
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)] on rejection of application for exemption u/s 10(23C) of the Income Tax Act, 1961 (the Act).
The assessee had filed Form 56D seeking exemption u/s 10(23C) of the Act. Subsequently the CIT(E) sought for certain details and on the date of hearing there was no response from the assessee. Therefore, the CIT(E) rejected the application, since the objects of the assessee included non educational objects which were opposed for grant of exemption u/s 10(23C) of the Act.
On appeal before ITAT, the ITAT confirmed the order of the CCIT.
Subsequently, the assessee filed a fresh application duly amending the objects of the society, solely for educational purposes.
During the second round of application, the CIT(E) observed that since the first application of the assessee was rejected by the ITAT, issue had reached finality, hence he was of the view that the assessee would not be entitled for approval u/s 10(23C) for approval for a period of three years.
The CIT(E) took the support of Rule 2CA, wherein, it was stated that the approval granted before the first day of December 2006 shall have effect for a period of not exceeding three assessment years. Further, the CIT(E) also took support of CBDT Circular No.7/2010 and found that the assessee had to apply once in three years for getting approval u/s 10(23C), accordingly, he held that the application filed by the assessee was non-est.
Before the Tribunal, the assessee argued that it had filed the application for grant of approval u/s 10(23C) duly amending the objects of the society. After amending the objects of the society, the society was existing solely for the purpose of educational objects, hence the assessee was entitled for exemption u/s 10(23C)(vi) of the Act.
It was submitted that the CIT(E) had misunderstood the Board Circular as well as the Rule 2CA which was amended in the year 2006. It was argued that Rule 2CA is applicable for the institutions which are granted approval u/s 10(23C), but not applicable to the cases, where the application seeking grant of approval u/s 10(23C) was rejected by the authorities.
It was further submitted that it is unreasonable and unjustified to say that once the CIT(E) rejects the application u/s 10(23C), the assessee is not permitted to make fresh application amending the objects. This view is incorrect and would cause injustice to the institutions which are rendering the services of education to the society and are charitable in nature.
Therefore, it was submitted that once the objects were amended and the assessee made the revised application, the CIT(E) was not permitted to reject the application as non-est and had to decide the case on merits, since, the objects were amended.
The Tribunal observed that the assessee had duly amended the objects and after amending the objects, the objects of the society were solely for the purpose of education and the assessee qualified for grant of approval u/s 10(23C) of the Act. The only question was whether the assessee was permitted to make a fresh application, once the original application was rejected?
The Tribunal opined that if the application of the assessee for grant of approval u/s 10(23C) is rejected there is no specific bar for making fresh application as per Rule 2CA or the CBDT Circular on which the CIT(E) had placed heavy reliance.
The Tribunal opined that it is unjustified and unreasonable to hold that the assessee is barred from making fresh application, if it is qualified for exemption subsequent to rejection of original application. The assessee in the instant case was an educational institution rendering the educational services to the society and should be given proper support for betterment of services.
The Tribunal opined that there was no reason for placing bar on the assessee for no fault of the assessee. Having amended the objects, the assessee was qualified for exemption and would be entitled for the grant of approval and treating the application of the assessee as non-est was unjustifiable.
Hence, the Tribunal held that the application of the assessee was valid and the CIT(E) must consider the grant of exemption u/s 10(23C) on merits.
Accordingly, the Tribunal set aside the order of the CIT(E) and remit the matter back to the file of the CIT(E) with a direction to consider the application of the assessee on merits and decide the issue afresh.
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