SHIKSHAN PRASARAK MANDAL,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “H(SMC)” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1233/MUM/2026 (AY: 2017-18) (Physical Hearing) ShikshanPrasarak Mandal ITO (Exem) Ward – 2(3), Mumbai Mulund Vidya Mandir, Jawaharlal Vs ITAT, Mumbai, Maharashtra – Nehru Road, Mulund-West, 400020. Mumbai – 400080. [PAN: AAATS8099M] Appellant / Assessee Respondent / Revenue

Assessee by Shri Dharan Gandhi a/w Ms. Vinita Nara & Ms. Aanchal Vyas, Advocate. Revenue by Shri PravinSalunkhe, Sr. DR Date of Institution 03.02.2026 Date of hearing 30.03.2026 Date of pronouncement 11.06.2026

Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 20.01.2026 for Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. The Ld. CIT(A) has erred in confirming the action of Ld. A.O in making additions to the income of the trust by overlooking the fact that the appellant trust is an educational institution substantially financed by the government to the extent of about 71% (3,35,40,246/4,74,82,554 100) and thus, the income of the trust is exempt from tax u/s 10(23C)(iiiab).

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal deposits in two bank accounts (Rs. 1,39,42,308/-) held by the trust with ShamraoVithal Co-operative Bank. 3. The Ld. CIT(A) has erred in confirming the action of Ld. A.O in making addition of Rs. 48,68,102/- being the excess of gross receipts (Rs. 4,74,82,554/-) over expenditure (Rs. 4,26,14,452/-) by overlooking the fact that the trust is substantially financed by the government to the extent of about 70% (3,31.75.600,1,4,74,82,554 100) and thus, the income of the trust is exempt from tax u/s 10(23C)(iiiab). 4. Without prejudice to the above ground that the exemption u/s 10(23C)(iiiab) has been denied. The Ld. CIT(A) has erred in confirming the actions of Ld. A.O in denying exemption u/s 11(1) to the tune of Rs. 48,68,102/- only on the reason of not filing the Return of Income. 2. Rival submissions of both the parties have been heard on record produced. The learned authorised representative(AR) of the assessee submits that assessee is State Government aided educational School, set up solely for the purpose of education and not for the purpose of benefit. As per assessment order, the total gross receipt of the assessee for the relevant financial year were of ₹ 4.75 crore, out of which the Government grants received by the Appellant is ₹ 3.35 crore. The government grant constitutesmore than 70% of total gross receipts of the assessee. As per application to section 10(23)(iiib) read with Rule 2BBB of Income Tax Rules-1962. An educational institution is considered to be “substantially financed by the Government” if the Government grants exceed 50% the total receipt during the relevant previous year. Since the Government grant in case of assessee is more than 70%, the assessee squarely falls within the ambit of section 10(23(iiib) of the Act. Such position is not disputed by lower authorities. There is no provision in the Income Tax Act, unlike the provisions governing trust registered under section 12A, which expressly provides mandatorily for filing of return of income within

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal the due date specified under section 139 (4A) to claim such exemptions. There was no such corresponding statutory precondition under section 10(230(iiib) for relevant assessment year which is assessment year 2017 – 18.The learned AR of the assessee submits that substantive right to claim exemption under section 10(23) (iiib) is absolute upon satisfying twin conditions, that is (i) the assessee was set up solely for educational purpose and (ii) being wholly and substantially financed by the Government. Both the conditions are satisfied in the present case. The amendment made by of inserting 20th Proviso to section 10(23) is inserted by Finance Act 2022 which is prospective. Bare perusal of 20th Provisoto section 10(23) reveals that it is explicitly applies to the funds, institution, trust, Universities or Hospitals referred to in sub-clause(iv), sub clause (v) or sub-clause(via), there is no reference of sub-clause(iiib) which is intentionally left. Such position was also clarified by Central Board of Direct Taxes (CBDT) in its Circular No. 23/2022 dated 3rd November 2022 that amendment is strictly prospective and effective only from 1st April 2023 which is applicable for assessment year 2023- 24 and subsequent assessment years. The learned AR of the assessee submits that all the grounds of appeal raised by him squarely covered by the decision of the Delhi Tribunal in Chaudhary Charan Singh Haryana Agriculture University versus ITO (Exemptions) (2025) 174 taxmann.com 917(Delhi Tribunal). The Delhi Tribunal categorically held that filing of return of income by assessee for claiming exemption under section 10(23)(iiib) is not mandatory. There is no such mandate in the provision of section 10(23C) (iiib) and section 139(4C)(e) for claiming benefit of exemption under section 10(23)(iiiab). It was also held

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal that 20th Proviso inserted by Finance Act 2022 does not apply to this particular clause of section 10(23)(iiib). On the basis of aforesaid submissions, the learned AR of the assessee submits that exemption claim by the assessee under section 10(23)(iiib) may be allowed to the assessee and all the addition may be deleted. 3. On the other hand, the ld Sr DR for the revenue supported the order of lower authorities. 4. We have considered the rival submissions of the assessee and have gone through the orders of lower authorities carefully. We have also deliberated on the case law relied by the ld AR of the assessee. We find that the assessee is a Charitable trust registered under Charity commissioner and also registered under section 12A of the Act. The assessee-trust is running an Educational institute in Mulund(west) namely Mulund Vidya Mandir. No return of income was filed by the assesse trust for the financial year under consideration. The assessing officer (AO issued notice u/s 142(1) issued on 29/03/2018 for filing return of income. The AO was of the view that as per the conditions and manner prescribed in Rule 12 of the Income Tax Rules, 1962, the assessee was required to file return of income on or before 31/03/2018. The assessee has failed to furnish return of income for A Y 2017-18 either under section 139 within due date or in response to notice issued under section 142(1) of the Act. The AO obtained information about the credit entry and other deposits in the bank account of assessee by issuing notice under section 133(6) and on the basis of such information and accounts of the assessee held that there was total gross receipt of Rs. 4.75 Crore, the assessee has

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal shown expenses of Rs. 4.26 Crore, thereby remaining of Rs.49,09,743/- was brought to tax in the assessment order dated 26.12.2019. Thus, the AO denied application of income under section 11 of the Act. On appeal before learned Commissioner(Appeals), the assessee claimed exemption under section 10(23)(iiib) by raising additional ground of appeal. The assessee before learned Commissioner (Appeals) claimed that they are substantially funded by Government and are eligible for deduction under section 10(23)(iiib). The learned Commissioner (Appeals) dismissed the claim of the assessee by taking view that for claiming exemption under section 10(23)(iiib) filing return of income is mandatory. Thereby upheld the action of AO in treating the surplus as income of the assessee. 5. Before us, the ld AR of the assessee made two fold submissions that Xxsubstantive right to claim exemption under section 10(23) (iiib) is absolute upon satisfying twin conditions, firstly that the assessee was set up solely for educational purpose and secondly it is wholly and substantially financed by the Government. Both the conditions are satisfied in the present case. It was also plea of the ld AR that amendment made by of inserting 20th Proviso to section 10(23) is inserted by Finance Act 2022 which is prospective as has been accepted by CBDT in its Circular (supra). We find that the ld Commissioner (Appeals) not accepted the additional claim of the assessee on the ground that no return was filed. We find that Delhi Tribunal in Chaudhary Charan Singh Haryana Agriculture University versus ITO (E) (supra)categorically held that filing of return of income by assessee for claiming exemption under section 10(23) (iiib) is not mandatory. It was held

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal that there is no such mandate in the provision of section 10(23C) (iiib) and section 139(4C)(e) for claiming benefit of exemption under section 10(23)(iiiab). The bench also held that held that 20th Proviso inserted by Finance Act 2022 does not apply to this particular clause of section 10(23)(iiib).It is also matter of fact that no return of income is filed by assessee but claimed exemption under section 10(23)(iiib) . Before ld Commissioner (Appeals) the assessee raised additional ground of appeal. 6. We are conscious of the fact that the AO has no power to accept and entertain revised claimed in absence of revised return of income, as has been held by Hon’ble Supreme Court in Goetz (India) Limited Vs CIT (2008) 284 ITR 383-SC. However, there is not restriction on the power of appellate authority in entertaining additional claim. We find that Hon’ble Jurisdictional High Court in CIT Vs. Prithivi Brokers & Share Holders (P) Ltd. 349 ITR 336/208 Taxman 498 (Bom)and Gujarat High Court in CIT Vs. Mitesh Impex (2014) 367 ITR 85 (Guj) held that Tribunal have jurisdiction to consider the additional claim and discretion to permit additional ground by way of additional claims. Such claims need not to be those which became available on account of change of circumstances of law but which was even available when return was filed. Thus, considering the specific facts of the case and the additional claim of assessee is admitted. Now adverting to the merits of the case. 7. We find that the assessee is educational institution and substantially financed by the Government, thus eligible for exemption under section 10(23)(iiib) of the Act. Hence, considering the facts of the case and the legal position as

ITA No. 1233/Mum/2016 (AY2017-18) ShikshaanPrasarak Mandal has been held by Delhi Tribunal in Chaudhary Charan Singh Haryana Agriculture University versus ITO (E) (supra) that filing of return of income by assessee for claiming exemption under section 10(23) (iiib) is not mandatory. There is no such mandate in the provision of section 10(23C) (iiib) and section 139(4C)(e) for claiming benefit of exemption under section 10(23)(iiiab). The bench also held that held that 20th Proviso inserted by Finance Act 2022 does not apply to this particular clause of section 10(23)(iiib). Thus, in view of the aforesaid factual and legal position, the grounds of appeal raised by the assessee are allowed. 8. In the result of appeal of the assessee is allowed

Order was pronounced in open court on 11/06/2026. Sd/- Sd/- MAKARAND VASANT MAHADEOKAR PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 11/06/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file.

By order

Assistant Registrar ITAT, Mumbai