IMC OF ITI (GIRLS),NELLORE vs. ITO, WARD-1, GUDUR

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘SMC‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.174/Hyd/2026 (िनधा�रण वष�/Assessment Year: 2016-17) IMC OF ITI (GIRLS) Vs. ITO NELLORE Ward 1 PAN: AAAAI2622P Gudur (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: CA Swathi Sheela राज� व �ारा/Revenue by: Shri Laxmi Kanth, Sr. AR सुनवाई की तारीख/Date of hearing: 29/06/2026 घोषणा की तारीख/Pronouncement: 15/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by IMC OF ITI (GIRLS) (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 27.11.2025 for the A.Y. 2016-17. 2. The assessee has raised the following grounds of appeal:

according to the assessee was exempt under section 10(23C) of the Act. Since no return of income had been filed by the assessee, the Ld. AO denied the exemption claimed under section 10(23C) of the Act and treated the interest income of ₹23,53,086/- as taxable income under the head “Income from Other Sources”. Accordingly, the assessment was completed by the Ld. AO under section 147 read with sections 144 and 144B of the Act vide order dated 29.01.2024 assessing the total income of the assessee at ₹23,53,086/-.

covered under section 10(23C)(iv), (v), (vi) and (via) of the Act. It was contended that the denial of exemption for non-filing of return has been brought into the statute only with effect from Assessment Year 2023-24 and even then, the assessee’s case is not covered by the said proviso. Accordingly, it was submitted that there was no statutory requirement during the year under consideration mandating filing of return of income as a pre-condition for claiming exemption under section 10(23C)(iiiab) of the Act. In support of the aforesaid contention, reliance was placed on the decision of the Indore Bench of the Tribunal in the case of Harda Nagar Bal Vikas Samiti Harda Vs. ITO reported in 174 taxmann.com 680. It was therefore submitted that the addition made by the Ld. AO deserves to be deleted.

that the assessee, being an educational institution substantially financed by the Central Government, is covered under section 10(23C)(iiiab) of the Act. Be that as it may, in our considered opinion, our conclusion in the present appeal would remain the same irrespective of whether the assessee is covered under section 10(23C)(iiia) or section 10(23C)(iiiab) of the Act. In this regard, we have gone through the Twentieth Proviso to section 10(23C) of the Act, inserted by the Finance Act, 2022 with effect from 01.04.2023, which is to the following effect:

does not fall within the categories specifically covered by the aforesaid proviso. Consequently, notwithstanding the fact that the assessee may have been required to furnish a return of income under section 139(4C)(e) of the Act, the condition of filing of return of income for availing exemption under section 10(23C) of the Act cannot be read into the provision for the year under consideration when the statute itself did not prescribe such a requirement. We have also gone through para nos. 13 to 16 of the order of the Indore Bench of the Tribunal in the case of Harda Nagar Bal Vikas Samiti Harda Vs. ITO (supra), which is to the following effect:

“13. We have considered rival contentions of both sides and perused the orders of lower authorities as well as the material held on record to which our attention has been drawn. The core dispute in present case relates to the allowability of exemption u/s 10(23C)(vi). Admittedly, the assessee is having requisite approval granted by CIT(E) vide order dated 10.08.2018 for AY 2017-18 under consideration. The only reason for denial of exemption advanced by lower authorities is that the assessee has not filed return of income in terms of section 139(4C). It is a fact that the assessee has not filed any return of income to Income-tax Department for AY 2017-18 under consideration. But the Ld. AR for assessee has given a detailed justification as to why the assessee did not and could not file return. Ld. AR has submitted that the assessee's application filed to CIT(A) for grant of approval for exemption u/s 10(23C)(vi) was filed on 18.08.2017 before 30.09.2017 which was the due date for filing of return u/s 139(1) and such application was pending at the level of CIT(E) on 30.09.2017 rendering it difficult for the assessee to file return by due date. Thereafter, the CIT(E) disposed of assessee's application on 10.08.2018 but by that time, the time-limit for filing even belated return u/s 139(4) also expired. Ld. AR has submitted that Harda Nagar Bal Vikas Samiti Harda the assessee has no problem at all in filing physical return to AO, if the bench directs or the AO desires. The facts shown by Ld. AR do not lack bona fides and it cannot be said that the assessee has deliberately or for some ulterior purpose or for some mala fide purpose, did not file return. More importantly, we also find on a consideration of legal provisions of Income-tax Act that there is no authority to

deny exemption u/s 10(23C)(vi) to assessee for the reason of non-filing of return. Ld. AR has successfully shown that the 20th Proviso to section 10(23C) denying exemption for non-filing of return u/s 139(4C) came into statute from AY 2023-24 only and prior to that there was no such provision. We may gainfully refer certain judicial rulings holding so in the context of similar scheme of section 11/12 where the assessee was required to file return u/s 139(4A) but the provision dis- entitling exemption for non-filing of return was brought in section 12A(a)(ba) by Finance Act, 2017 from AY 2018-19. These ruling are: (i) ITAT, Delhi in United Educational Society Vs. JCIT, Ghaziabad, ITA No. 2733, 2734/Del/2018 for AY 2006- 07, 2007-08: "19. We have heard the rival submissions and perused the relevant findings given in the impugned order. The core issues here is whether the computation of income of the assessee society should be in accordance with section 11 or not; and whether, the filing of audit report alongwith the return filed in response to notice u/s 148 will entitle the assessee for benefit of computation of section 11. The AO has denied to compute the income in accordance with the provisions of section 11 of the Act on the reasoning that assessee has not filed the return under section 139 (4A) reads with section 12A (b) of the Act. Thus, what we have to adjudicate is, whether assessing officer was right in not applying the provisions of section 11 while computing income of the assessee. It is an admitted fact that the assessee is a society, who has been granted registration under section 12A of the Act by CIT looking to its objects of charitable purpose, i.e., it is engaged in imparting education and running various educational institutions. Thus, the registration u/s 12A is fait accompli and consequently the Harda Nagar Bal Vikas Samiti Harda computation of income has to be in accordance with sections 11 to 13 of the Act. The assessee society had not filed its return of income, and it was only in response to notice issued by the Assessing Officer under section 148, the assessee has filed its return of income alongwith the audited Balance Sheet and Profit & Loss Account. Now, whether the income of the assessee society is to be computed in accordance with the provisions of section 11 of the Act, as it has not filed the return as required under section 139(4A) of the Act, but has filed return in response to notice under section 148. 20. Section 139 falls under Chapter XIV-'Procedure for assessment' which provides procedures and conditions for filing of return of income. Section 139(1) mandates every person having income exceeding the maximum

amount not chargeable to tax to file return of income. Similarly, section 139(1) (4A) mandates that every person in receipt of income derived from property held under trust, i.e., charitable trust, etc., to file its return of income in case its total income exceeds the maximum amount not chargeable to tax without giving effect to the provisions of section 11 & 12 of the Act. In case of failure to file such return of income under this section 139, penalty has been prescribed. In case of failure to file return by any person under section 139(1) penalty has been prescribed under section 271F. Similarly, in case of failure to file return by charitable society under section 139 (4A) penalty has been prescribed under section 272A (2)(e). On a plain reading of the relevant provisions, in our opinion, failure to file the return under section 139(4A) cannot be interpreted to mean that income cannot to be computed in the case of a charitable trust under section 11 of the Act. During the relevant assessment years impugned in these appeals, there is no such provision in the Act that in case return is not filed by charitable society under section 139(4A), then its income cannot to be computed in accordance with the provision of the Act. XXX 25. Our above view gets further supported from the amendment made by the Finance Act, 2017 whereby a further clause (ba) has been inserted imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of section 11 & 12 in case return is not filed in time as per provision of section 139 (4A) of the Act. It is relevant to note that clause (b) has not been amended, but a new clause (ba) which has been inserted to put a further condition w.e.f 1.04.2018, which was not there for the assessment years under consideration. It is also important to note that this condition of furnishing the return within the time allowed under section 139(4A) has been made applicable from Harda Nagar Bal Vikas Samiti Harda A.Y. 2018-19 as has been specifically stated in the Finance Act, 2017 and not for the A.Y. under consideration. We are also not in agreement with the contention of the Ld. DR that this amendment is clarificatory in nature. As rightly pointed out by the Ld. Counsel that this

amendment has been made by the Finance Act, 2017 effective from A.Y. 2018-19, meaning thereby that this clause has not been made applicable even for the A.Y. 2017-18, the return of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment years onwards and not even to the current A.Y. 2017-18." [Emphsis supplied] (ii) ITAT, Hydrabad in Anjuman E Khadimul Muslimeen Refah-E Aam Vs. DCIT (2024) 167 taxmann.com 74 (Hyderabad - Trib.): "1. We have heard the rival contentions, perused the material available on record and gone through the order of the Ld. First Appellate Authority. The revenue authorities did not allowed the exemption claimed u/s 11 of the Act of Rs.82,83,576/- contending that the assessee had not filed the ROI and form 10B within the due date specified under the Act and finally raised a demand of Rs.34,47,810/-. As far as the delay in filing of form no.10B is concerned the Ld. CIT(E) has condoned the delay of filing of form 10B vide his order dated 06.08.2024. Therefore, in our considered opinion, on this issue there should not be any denial of exemption u/s 11 of the Act. However, with regards to delay in filing of ROI, section 12A(1)(ba) of the Act stipulates that to claim exemption u/s 11 of the Act, the return must be filed in accordance with the provisions of section 139(4A). However section 12A(1)(ba) have been inserted w.e.f. 01.04.2018 I.e. applicable w.e.f. A.Y.2018-19 only and hence the same is not applicable to the year under consideration. Therefore, in our considered view, due to delay in filing of ROI for the year under consideration also, there cannot be any denial of exemption u/s 11 of the Act. Hence, we are of the considered opinion that the assessee is eligible for exemption u/s 11 of the Act for the year under consideration and we direct the revenue authorities to allowed the exemption u/s 11 of the Act for the year under consideration to the assessee. Accordingly, we allowed the appeal of the assessee." [Emphsis supplied] 14. We also refer a recent decision dated 01.10.2024 of ITAT, Kolkata in Haringhata Mahavidyalay Vs. ITO, ITA No. 11/Kol/2024, which is a case for exemption u/s 10(23C)(iiiad) but equally applicable to section Harda Nagar Bal Vikas Samiti Harda 10(23C)(vi) because the legal provisions of section 139(4C) and 10(23C) are same. In this case, the Hon'ble Kolkata Bench held as under:

"2. The first issue involved in this appeal is as to whether the exemption u/s 10(23C)(iiiab) of the Act can be denied to the assessee trust for late filing of the income tax return i.e. beyond time specified u/s 139(1) of the Act and secondly, if the return is required to be mandatorily filed then whether, the filing of the return u/s. 139(4D) instead of section 139(4C) of the Act disentitles the assessee from claiming the exemption u/s. 10(23C)(iiiab) of the Act. 3. The Ld. Counsel for the assessee has contended that there is no provision under the Income Tax Act vide which the exemption u/s. 10(23C)(iiiab) of the Act can be denied to an assessee for non-filing or late filing of the income tax return as required u/s. 139 of the Act and within the period specified u/s 139(1) of the Act. 4. The Ld. DR could not point out any relevant provision or section under the Income Tax Act which disentitles the assessee from claiming exemption u/s. 10(23C)(iiiab) of the Act for non-filing/late filing of the income tax return. Therefore, the action of the lower authorities in denying the exemption to the assessee on this ground is not sustainable. 5. The second issue as to whether the filing of the return in wrong form i.e. Form u/s 139(4D) instead of Form u/s. 139(4C) becomes irrelevant. In view of the above stated legal position the action of the lower authorities in denying exemption to the assessee cannot be held to be justified. The impugned order of the Ld. CIT(A) is set aside and the Ld. AO is directed to grant exemption to the assessee as claimed u/s. 10(23C)(iiiab) of the Act. 6. In the result, the appeal of the assessee stands allowed." 15. From the judicial decisions discussed above, we can safely conclude that the amendment in section 10(23C) by way of insertion of 20th proviso prescribing dis-entitlement of exemption u/s 10(23C)(vi) for non- filing of return, is applicable from AY 2023-24 and the same was not applicable to AY 2017-18 under consideration. Therefore, in present case, the lower- authorities are wrong in denying exemption to assessee on the premise of non-filing of return. Needless to mention that the assessee has also filed justification for non-filing of return and the assessee's justification could not Harda Nagar Bal Vikas Samiti Harda be controverted by department. Therefore, the condition imposed by Ld. CIT(E) for filing of return, as relied by Ld. DR, cannot be said to be acceptable for AY 2017-18 with which are

concerned in present appeal. So far as reliance of Ld. DR for revenue on the decision of Hon'ble Supreme Court in Wipro Ltd. (supra) is concerned, that decision is not applicable in present case for the reasons that (i) the said decision involved deduction u/s section 10B whereas the present-appeal is concerned with exemption u/s 10(23C)(vi) and (ii) the said decision involved interpretation of sub-section (8) of section 10B which is a negative provision i.e. it provides that if the assessee did not want to apply section 10B, then the assessee had to file a declaration but this is not a case in section 10(23C)(vi). 16. In view of above discussions, we hold that the assessee is eligible for exemption u/s 10(23C)(vi) as per approval granted by CIT(E) vide order dated 10.08.2018 for AY 2017-18 under consideration. Accordingly, we direct the AO to allow exemption u/s 10(23C)(vi) after necessary verification as he may consider appropriate. We further direct the AO to consider the deficiency of Rs. 15,17,865/- suffered by assessee-society by incurring expenses; to consider the disallowance of donations of Rs. 1,33,500/- and Rs. 3,705/- made in original assessment-order as agreed by Ld. AR and also not to apply section 115BBE which is not applicable to any taxable income as may be arrived at.” 12. On perusal of the above, we find that the Tribunal, while dealing with an assessee covered under section 10(23C)(vi) of the Act for Assessment Year 2017-18, categorically held that the condition regarding filing of return of income as a prerequisite for claiming exemption under section 10(23C) of the Act became applicable only from Assessment Year 2023-24 pursuant to the amendment brought in by the Finance Act, 2022. Accordingly, exemption under section 10(23C) of the Act was granted despite non-filing of return of income by the assessee. Respectfully following the aforesaid decision of the Coordinate Bench, we hold that the condition of filing of return of income for claiming exemption under section 10(23C) of the Act is applicable only from Assessment Year 2023-24 and is not applicable to the year under consideration.

Copy to: S.No Addresses 1 IMC of ITI (Girls) Chittedu (Village) Kota(Mandal) Nellore 524439 2 Income Tax Officer Ward-1, Office of the Income Tax Officer Gudur Nellore 3 Pr. CIT ,Tirupati 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order Digitally signed by TUMMALACHARLA TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.07.15 12:10:38 +05'30'