M D Education Society Vs DCIT (ITAT Delhi)
In M.D. Education Society vs DCIT, the ITAT Delhi allowed the assessee’s appeal holding that exemption u/s 10(23C)(iiiad) cannot be denied merely due to an inadvertent mistake in the return of income. The CPC had denied exemption and treated receipts of ₹49.95 lakh as taxable because the assessee mistakenly selected “No” against the column relating to educational institution eligibility in the ITR.
The Tribunal observed that the society was actually running a CBSE-affiliated school and its receipts were below ₹1 crore, satisfying the conditions of Sec 10(23C)(iiiad). It held that substantive exemption cannot be denied due to a procedural or clerical error and that rectification u/s 154 was not justified for such an issue. Accordingly, AO was directed to allow full exemption and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above captioned appeal is preferred by the assessee against the order dated 03.09.2025, passed by Ld. CIT(A)/NFAC, New Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2014-15.
2. The assessee has raised certain grounds of appeal which are as under:
1. That the Learned Deputy Commissioner of Income Tax, CPC is bad in law and on the facts of the case.
2. That the Learned Deputy Commissioner of Income Tax, CPC of Income tax erred in stating in the assessment orders that the assessee is not carrying any educational activities in the premises.
3. That the Learned Deputy Commissioner of Income Tax, CPC denial of exemption under section 10(23C)(iiiad),income received by a person by means of any university or any other educational institution existing solely for educational purposes and not for the purpose of profit and having aggregate annual receipts less than Rs. 1 Crore is exempt from income tax.
4. That the Learned Deputy commissioner of Income tax, CPC erred in stating in the assessment order that the receipts of Rs. 49,95,490/-is income.
5. That the Learned Deputy Commissioner of Income Tax, CPC erred in not eligible for exemption under section SECTION 10(23C) (IIIAD), 10(23C) this receipts for charitable activity covered u/s 2 (15) of the Income tax Act, 1961.
6. That the Learned Deputy Commissioner of Income Tax, CPC erred in ignoring the other expenses which was stated in the audited Profit and Loss accounts,
7. That the Learned Deputy Commissioner of Income Tax, CPC erred in not applying the receipts against other expenses incurred for the purpose of educational activity
8. That the Learned Deputy commissioner of Income tax eSecrred in not eligible for benefit of exemption u/s 10(23C) (iiiad) of the Income tax act 1961.
9. That the Learned Deputy Commissioner of Income Tax, CPC erred in passing an order u/s 154 without giving a reasonable opportunity of being heard to the assessee for explaining bills and voucher which was made.
10. That the Learned Deputy Commissioner of Income Tax, CPC of Income tax erred in not disclosing fully and truly all facts material to the assessment of its income
11. That the Learned Deputy Commissioner of Income Tax, CPC erred in charging interest u/s without any basis. 12 That the appellant may 234A/B/C/D add/amend/rectify/modify/delete any grounds of appeal either at the time of hearing or prior thereof.”
3. Brief facts of the case are that the assessee is a Charitable Society and is registered under the Societies Registration Act, 1860 on 15.05.2004. It was formed with the object of running an education institution. The assessee is affiliated with the Central Board of Secondary Education [CBSE] with effect from 29.10.2015 and was earlier affiliated with Haryana Board of Secondary Education since 2005. The assessee filed return declaring NIL income for year under consideration. The CPC, Bangaluru, issued a notice u/s 154 and held that the assessee was not utilizing the receipts for charitable/ educational purposes and, therefore, the entire receipts of Rs. 49,95,490/- were treated as taxable income, denying benefit u/s 10(23C)(iiiad) of the Act. The reason for disallowance was the incorrect selection of “No” against the column “University/Educational Institution” in the return of income – a purely clerical and inadvertent error– without appreciating the supporting documents and evidence filed along with the return. Aggrieved, the assessee preferred an appeal before Ld. CIT(A), against the order of the CPC.
