Kumar Memorial Educational Trust Vs ITO (ITAT Chennai)
Section 10(23C)(iiiad) Exemption Cannot Be Denied by Clubbing Receipts of Multiple Institutions — Amendment Prospective from AY 2022-23
The Chennai Bench of the ITAT allowed the appeal of a charitable educational trust for AY 2021-22, holding that exemption under section 10(23C)(iiiad) cannot be denied by clubbing the annual receipts of all educational institutions run by the trust.
The assessee had claimed exemption on the ground that each individual educational institution run by it had annual receipts below ₹1 crore. However, CPC while processing the return under section 143(1) denied the exemption by aggregating receipts of all institutions. The rectification application under section 154 was also rejected, and the NFAC upheld the denial by treating the Finance Act, 2021 amendment as retrospective.
The ITAT rejected this approach and held that:
- As per the binding decision of the Karnataka High Court in Children’s Educational Society, the ₹1 crore limit applies institution-wise and not trust-wise.
- The amendment introduced by the Finance Act, 2021, which provides for aggregation of receipts and enhancement of limit to ₹5 crore, is expressly prospective and applicable only from AY 2022-23 onwards.
- Treating the amendment as clarificatory and retrospective for AY 2021-22 was contrary to the statutory scheme and the memorandum explaining the Finance Bill.
Accordingly, the Tribunal set aside the NFAC order and directed the Assessing Officer to amend the intimation and allow exemption under section 10(23C)(iiiad). The appeal was allowed in full, providing significant relief to small and medium educational trusts running multiple institutions.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
