Case Law Details
Gandharva Mahavidhyalaya Trust Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad has ruled in favor of Gandharva Mahavidhyalaya Trust, allowing the exemption claim of ₹57.57 lakh under Section 10(23C)(iiiad) of the Income Tax Act. The case involved the Centralized Processing Centre (CPC) Bangalore rejecting the trust’s exemption claim during the processing of its return for Assessment Year (AY) 2014-15. The trust, which has been providing music education since 1961, challenged this decision through rectification under Section 154, but the Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, citing the issue as debatable and beyond rectification.
The trust contended that its education in music falls under the definition of an educational institution as per Section 10(23C)(iiiad) and that the rejection of its exemption claim was erroneous. It argued that the CIT(A) misinterpreted the law, as Section 246A allows an appeal against an order under Section 154. Further, the trust maintained that its net surplus of ₹57.57 lakh was part of its educational activities and should not have been taxed. The revenue authorities, however, held that the matter involved a debatable issue and did not fall under rectification provisions.
The ITAT examined the trust’s credentials, noting that it has been recognized by the Gujarat Government, offers degree and postgraduate courses in music, and is registered under Section 12AA. The tribunal referred to Section 10(23C)(iiiad), which provides exemption to educational institutions with annual receipts not exceeding ₹5 crore, stating that the trust met these criteria. Judicial precedents have held that institutions solely engaged in education qualify for exemptions, and rectification can be sought where an error is apparent on record.
Based on these findings, the ITAT concluded that the exemption was wrongly denied and directed the revenue authorities to nullify the demand notice issued against the trust. The tribunal reiterated that an educational institution cannot be denied exemption merely on procedural grounds and that bona fide claims should be allowed at the appellate stage. The appeal was allowed, and the ruling was pronounced on January 21, 2025.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad vide order dated 20.08.2024 for the Assessment Year 2014-15.
2. The Assessee has taken the following grounds of appeal:-
1. The CIT(A) has incorrectly dismissed the appeal filed on order u/s. 154 passed by CPC on the reason that appellant cannot use proceeding u/s. 154 to file an appeal on a debatable issue which is incorrect and without referring to the provisions of section 246A of the I. Tax Act.
2. The appellant had correctly filed appeal against order u/s. 154 passed by CPC against intimation passed u/s. 143(1) which is allowed u/s. 246A of the I. Tax as per clause1(c) of the section. Therefore CIT(A) cannot deprived the right of appellant to file the appeal. Hence the appellant’s claim u/s. 10(23)(c) of Rs.57,57,960 be allowed.
3. The appellant has all the rights to file appeal when the CPC is not accepting the claim of the appellant which is not fresh claim/addition/reduction of income. The CIT(A) has all the authority to decide any debatable issue arising from the order passed. However, CIT(A) has refrained from following Income Tax Act and wrongly rejected the appeal of the appellant.
4.. The appellant trust is carrying out education activity from inception of trust which is teaching music to students and issuing certificates of passing the musical exam. Hence education income is exempt u/s.10(23)(c) of the income tax act. Therefore the appellant had claimed Rs.57,57,960 exempt u/s. 10(23)(c) being net surplus during the year in the return of income filed. Hence the wrong action of CPC for not granting eligible exemption of Rs. 57,57,960 should be rectified and claim should be allowed.
5. The appellant urges that any procedure defect can be rectified at the appellant stage. Hence the claim made u/s. 10(23)(c) under wrong head if any at the time of filing of ITR can be allowed at the appellant stage. Hence the deduction u/s. 10(23)(c) of Rs. 57,57,960 shown in ITR be allowed.
6. The appellant was under a bonafide belief that its income falls under the exemption u/s. 10 which was denied by CPC erroneously and therefore it preferred an application for rectification as there was no fresh claim. The appellant urges that it has challenged the denial of claim of exemption which was disallowed in intimation under 143(1) which is also confirmed in order u/s. 154. Thus, without going to merits of the case, the appeal is rejected statistically. Hence, such an order is liable to be set aside.
7. The appellant urges that though the CIT(A) has admitted that a debatable issue is involved but has not considered the detailed averments and has rejected appeal which order is required to be annulled.
8. That the appellant requests that they may be permitted to add, to alter to amend and/or to withdraw any of the Grounds of Appeal before the final hearing of the appeal.
3. The facts of the case are that assessee is a charitable trust registered u/s. 12AA of the Income Tax Act and is carrying activity of imparting Education in Music. The Trust had filed the return showing gross income of Rs. 82,20,640 out of which expenses claimed u/s. 11 was Rs. 30,62,684. The balance amount of Rs. 57,57,960 was claimed exempt 10(23C)of the Income Tax Act. CPC Bangalore while processing has not allowed exemption of Rs. 57,57,960 claimed u/s 10(23C). The assessee therefore requested for rectification under section 154 to allow claim of Rs. 57,57,960 as per of the provisions of section 10(23C) Income Tax Act. The CIT(A) has dismissed the appeal holding that that applicability of provisions of section 10(23C) is a debatable issue hence beyond the purview of rectification u/s.154.
4. We have gone through the entire contents of the appeal before us viz. the return of income, order of the CPC, rectification order and order of the Ld. CIT(A). The issue before us narrows down as to whether the assessee is eligible for exemption u/s.10 (23C) (iiiad) of the Act or not. The facts relating to adjudication of this issue are that the assessee is an organization running education in music from 1961, having approved for awarding degree and post graduate degree to the students by the Government of Gujarat. The syllabus has also been decided by Department of Education, Government of Gujarat. The assessee has been registered u/s.12AA of the Act.
5. The provisions of section 10(23C) (iiiad) of the Act read as under:
“…(iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual [receipts of the person from such university or universities or educational institution or educational institutions do not exceed five crore rupees]; or…”
6. From the facts on record and from the provision of section 10(23C) (iiiad) of the Act, it can be said that the institution is an educational institution existing solely for educational purpose having income less than Rs.5 crores. From the above, it apparent that the appellant is a charitable trust providing education and awarding degrees to the students who are the participants of its courses and the degrees are duly recognised by the state government. There is no doubt that the trust having education as its main object. In the entire history of the trust since 1962, education is the only activity undertaken by it, the fact of which is not been disputed by the revenue authorities.
Hence, the claim of exemption under section 10(23C) of Rs. 57,57,960/- is allowable and the revenue authorities are directed to nullify the demand notice issued.
7. In the result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 21.01.2025
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