DCIT (Exemptions) Vs Mahindra International School Academy (ITAT Pune)
No denial of exemption u/s 10(23C) if AO failed to intimate prescribed authority about contravention of same
Conclusion: Where AO did not act as per the foregoing statutory stipulation intimating the prescribed authority about the contravention of the registration/ approval u/sec.10(23C); no assessment order regarding total income or loss; as the case may be could be made. Therefore, assessee-educational institution was eligible to claim exemption under section 10(23C)(vi).
Held: Assessee had claimed a tax exemption under Section 10(23C)(vi) which allowed tax exemptions for educational institutions provided certain conditions prescribed by the Chief Commissioner of Income Tax (CCIT) were met. AO disallowed the exemption, arguing that the school had not complied with these prescribed conditions, particularly regarding merit-based admissions and running the school without commercial intent. Upon appeal by assessee, CIT(A) ruled in favor of the assessee, which led the Revenue to file an appeal before the Pune Bench of ITAT. Revenue argued that the school violated the CCIT’s conditions, specifically non-discriminatory admission policies based on merit, and also pointed out that the school charged high fees and hired a marketing manager, indicating commercial operations, which contradicted the purpose of a charitable educational institution. It was held that till the time an AO did not act as per the foregoing statutory stipulation intimating the prescribed authority about the contravention of the registration/ approval u/sec.10(23C); no assessment order regarding total income or loss; as the case may be could be made. There was also no indication in the Revenue’s instant appeal about the foregoing compliance of sec.143(3) 1st proviso (i) and (ii) by AO. Therefore, Tribunal dismissed revenue’s appeal and upheld CIT(A)’s decision in favor of assessee.
