M/S SHAHEED NAND KUMAR PATEL VISHWAVIDYALAYA, vs. COMMISSIONER OF INCOME TAX (E),

Facts

The appellant, M/s Shaheed Nand Kumar Patel Vishwavidyalaya, Raigarh, filed an application under Section 10(23C)(iii) of the Income Tax Act, 1961, for approval. The Commissioner of Income Tax (Exemption), Bhopal (CIT(E)), issued notices and called for documents to verify the university's objects and activities. After physical verification and receiving replies to a show cause notice concerning audited accounts, vehicle expenses, examination expenses, and fund details, the CIT(E) rejected the application. The Income Tax Appellate Tribunal (ITAT), Raipur Bench, affirmed the CIT(E)'s order, holding that the appellant failed to furnish necessary information. The assessee then filed a tax case before the High Court.

Held

The High Court held that both the CIT(E) and ITAT failed to record a specific finding on whether the appellant University exists solely for educational purposes and not for purposes of profit, which is a prerequisite for rejecting an application under Section 10(23C)(vi). The Court noted that the authorities should have considered the university's objects and activities to determine if it was solely for educational purposes or for profit. No express finding was recorded regarding the satisfaction of objects and genuineness of activities as required by the second proviso to Section 10(23C). Consequently, the impugned orders were set aside. The matter was remitted to the CIT(E) to decide the application afresh in light of the Supreme Court's decision in New Noble Educational Society, particularly paragraph 82, within two months. The Court clarified that it had not expressed any opinion on the merits of the application.

Key Issues

1. Whether both the Commissioner of Income Tax, Exemption, Bhopal and the Income Tax Appellate Tribunal, Raipur Bench, Raipur are justified in rejecting the application preferred by the appellant under Section 10(23C)(vi) of the Income Tax Act, 1961, by recording a finding perverse to the record? 2. Whether the authorities were justified in rejecting the application without recording a finding that the appellant University is not existing solely for educational purposes and without recording the satisfaction required under Section 10(23C)(vi) of the Income Tax Act, 1961, read with the second proviso appended to it, by recording a finding perverse to the record? Assessee's Contention: The assessee argued that both the CIT(E) and ITAT erred by overlooking Section 10(23C)(iii) which mandates consideration of whether the university exists solely for educational purposes and not for profit. The assessee relied on the Supreme Court decision in New Noble Educational Society v. Chief Commissioner of Income Tax. Revenue's Contention: The revenue contended that both authorities considered the application, made inquiries, and concurred with the CIT(E)'s finding, leading the ITAT to dismiss the appeal.