Income Tax Appellate Tribunal (ITAT) Chandigarh in a recent judgment while allowing exemption u/s 10(23C)(iiiad) has held that e ven if the assessee himself does not claim any benefit, if it is eligible for such benefit and fulfils all the conditions provided under the Act, it incumbent on the authorities to give him such benefit and the Income Tax Department must not take advantage of the ignorance of an assessee as to his rights.

Case Details:
ITA No.318/Chd/2013 AY: 2009-10 ITA No.380/Chd/2014 AY: 2010-11
Income Tax Officer (Appellant) vs Shri Balaji Prem Ashram & Nikhil Vidyalaya (Respondent)
Date of Order: 27-10-2015

Case Laws referred:
i) Birla Vidhya Vihar Trust vs. CIT (1982)136 ITR 445(Cal-HC)
ii) CIT vs St.Xaviers(1990) 184 ITR 284 (Pat)
iii) Director of IT (exemption) Vs. Institute of Franciscan Clarist Sister of the Most Blessed Sacrament (2005) 196 CTR (del) 582
iv) CIT vs. Vidya Vikas Vihar (2004)265 ITR 489(BOM)
v) U.S Srivastava educational memorial Society vs. Asstt.CIT(2004)82ITJ(luck-trib)471.
vi) Digember Jain Society for child welfare Vs.Director General of Income Tax(Exemptions).
vii) CIT vs St.Mary's Malankara Seminary.
viii) ITO vs. Baba Dhall Educational Society of India (2009) 27 SOT 391(Del) (ITAT-F.Bench)

Brief Facts of the Case:
The assessee was a trust. For AY 2009-10, it had surplus of income over the expenditure Rs.32,52,148/- which was claimed as exempt in the return of income without specifying the section thereof. Alongwith the return, the assessee had also filed Audit Report under section 12A(b) of the Income Tax Act, 1961 (Act). The Assessing Officer (AO) observed that the assessee had been granted registration under sect ion 12A for assessment year 2009-10 onwards, therefore, the assessee was not eligible for exempt ion under section 11 in the relevant assessment year. The assessee submitted that the society was running a school and the receipts of the same were below Rs.1 crore. Therefore, it was eligible for exemption under section 10(23C)(iiiad) of the Act. However, the AO did not agree with the said submission of the assessee. He was of the view that as per the trust deed, the assessee had objects other than advancement of education alone and, therefore it could be said that it existed solely for the purposes of education. He further observed that for claiming exempt ion under section 10(23C)(iiiad) as per Rule 16CC Audit Report in Form No.10BB was required to be furnished along with return of income which was not filed. Thus AO held that the assessee was not eligible for exempt ion either under section 11 or even under section 10(23C)(iiiad).

Aggrieved by the order of the Assessing Officer, the assessee preferred appeal  before CIT (Appeals) and submitted that the assessee trust was running school and receipts of the trust were below Rs.1 crore and as such, exemption under section 10(23C)(iiiad) may be allowed to the assessee. Assessee referred to CBDT Circular No.14(XL-35) dated 11.4.1955 to point out that no exemption under section 10(23C)(iiiad) can be denied just on the ground of multiple objects.

CIT (Appeals) observed that the assessee trust was carrying out only educational activities during the year and since the receipts during the year were below Rs.1 crore, it was eligible for exempt ion under section 10(23C)(iiiad). CIT (Appeals) also observed that the Audit Report in Form No.10B is not required to be filed in assessee’s case. In view of these findings, CIT(A) deleted the addition made by AO.

Before ITAT, Revenue’s main argument was that the assessee itself had not claimed exemption u/s 10(23C)(iiiad) and the assessee had filed audit report in Form No.10B which in fact indicates that assessee intended to avail exemption under section 11. Since it had no registration u/s 12A, neither exemption u/s 10(23C) nor section 11 was available to the assessee.

Important Excerpts from ITAT Judgment
Undoubtedly, the annual receipt during the relevant assessment year of the assessee does not exceed Rs.1 crore. The only issue to be seen is whether the assessee is existing solely for educational purposes and not for the purpose of profit. Since the assessee has been granted registrat ion under sect ion 12A of the Act in the future as on 26.5.2011, it cannot be denied that it did not exist for earning of profits....... The fact of educational activities being carried out by the assessee has been confirmed by the Assessing Officer himself in the Remand Report dated 18.2.2014 filed by him before the learned CIT (Appeals) during the appellate proceedings for the assessment year 2010-11........The assessee may be having many other objects in its trust deed but during the year no other activity other than education has been pursued by it. The exempt ion under sect ion 10(23C)(iiiad) of the Act is available on the educational activities of an assessee and if the assessee is carrying on only this sole activity during the year, the exempt ion cannot be denied to it on the basis that it has other objects also in its trust deed. There is no allegation by the Assessing Officer that the assessee has deviated from its objects...... On the perusal of the order of the Assessing Officer , it appears that the charitable nature of the activities carried on by the assessee has not been doubted by him. Therefore the Assessing Officer cannot deny the benefit of exempt ion under section 10(23C) of the Act to the assessee on the ground that it has objects other than education also. In this regard, reliance placed by the learned counsel for the assessee on the judgment of Hon'ble Calcutta High Court in the case Birla Vidhya Vihar Trust Vs. CIT (1982) 136 ITR 445 (Cal) is not out of place, whereby it has been held that a trust may have income from several sources but the sole object is the educational and the income has not diverted for personal profit, the trust is entitled for the benefit under section 10(23C)(iiiad) of the Act . The contention of the Assessing Officer that the assessee itself has claimed exempt ion under section 11 of the Act while filing its return of income and not exempt ion under section 10(23C)(iiiad) of the Act cannot be the basis for disallowing the claim as it is a trite law by now that even if the assessee himself does not claim any benefit if it is eligible for any such benefit and fulfils all the conditions provided under the Act, it incumbent on the authorities to give him such benefit. It has been very clearly provided in the Circular No.14(XL-35) dated 11.4.1995 (supra) issued by the CBDT, whereby it has been instructed that the officers of the Department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. In this view, as the assessee is carrying on the educational activity only during the year, it has to be given exempt ion under section 10(23C)(iiiad) of the Act.

Since the assessee is claiming exemption under section 10(23C)(iiiad) of the Act, there is no need to file Audit Report in Form No.10BB. In view of the above, the assessee has complied with all the conditions of section 10(23C)(iiiad) of the Act.

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