HAMSAVAHINI EDUCATIONAL SOCIETY,,KAKINADA vs. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS),, HYDERABAD

आयकर अपीऱीय अधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री िी. दुगाा राि,न्याययक सदस्य एिं श्री डड.एस. सुन्दर ससंह, ऱेखा सदस्य के समऺ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अऩीऱ सं./I.T.A.No.570/Viz/2018 (ननधधारण वषा/Assessment Year : 2017-18) M/s Hamsavahini Educational Society Vs. Commissioner of Income Tax 3-282, Vakalapudi (Exemptions) Kakinada Hyderabad East Godavari Dist. [PAN :AAAAH0287P] (अपीऱार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अऩीऱधथी की ओर से/ Appellant by : Shri P.Prabhakara Murthy, AR प्रत्यधथी की ओर से/ Respondent by : Shri D.K.Sonowal, CIT DR सुनवधई की तधरीख / Date of Hearing : 30.04.2019 घोषणध की तधरीख/Date of Pronouncement : 29.05.2019 आदेश /O R D E R Per D.S. Sunder Singh, Accountant Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)], Hyderabad vide F.No.CIT(E)/Hyd/10(23C)/10/2017-18 dated 28.09.2018 for the Assessment Year (A.Y.) 2017-18.

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for exemption u/s 10(23C) of the Act. The assessee had filed Form 56D on

21.09.2017 seeking exemption u/s 10(23C) of the Income Tax Act, 1961 (in

short ‘Act’) from the A.Y.2017-18 onwards. Subsequently the Ld.CIT(E)

sought for certain details and on the date of hearing there was no response

from the assessee. Therefore, the Ld.CIT(E) decided the application of the

assessee in Form No.56D ex-parte treating the application as non-est.

originally vide application dated 26.09.2014 which was rejected by the

Ld.CCIT vide his order dated 30.09.2015. The Ld.CCIT had rejected the

application of the assessee, since, the objects of the assessee include non-

educational objects which are opposed for grant of exemption u/s 10(23C)

of the Act. As per section 10(23C), exemption is granted to the institutions

existing solely for educational purposes. On appeal before ITAT, the ITAT

confirmed the order of the Ld.CCIT vide order in ITA No.390/Viz/2015

dated 18.04.2018.

duly amending the objects of the society, solely for educational purposes.

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During the second round of application, the Ld.CIT(E) observed that since

the first application of the assessee was rejected by the ITAT, issue had

reached finality, hence he is of the view that the assessee would not be

entitled for approval u/s 10(23C) for approval for a period of three years.

The Ld.CIT(E) has taken the support of Rule 2CA, wherein, it was stated

that the approval granted before the first day of December 2006 shall have

effect for a period of not exceeding three assessment years. Further, the

Ld.CIT(E) also has taken support of CBDT Circular No.7/2010 dated

27.10.2010 and found that the assessee has to apply once in three years for

getting approval u/s 10(23C), accordingly, held that the application filed by

the assessee dated 21.09.2017 is non-est. For the sake of clarity and

convenience, we extract relevant part of the order of the Ld.CIT(E) in para

No.4 which reads as under:

“4. The Rule 2CA was amended In the year 2006. The amended provision is asunder:-

"the approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the first day of December 2006 shall at any one time have affect for a period of not exceeding three assessment years" The CBDT issued clarificatory circular No. 7/2010 dated 27.10.2010. Thus, after 2006 amendment, assessee has to apply only, once for getting approval u/s. 10(23c)(v). In the case of the assessee, the assessee had applied for approval u/s. 10(23C)(vi) and the CCIT, Visakhapatnam vide his order dated 30.09.2015 rejected the application. Assessee filed an appeal against the said order and the Hon'ble ITAT has upheld the order of the CCIT, Visakhapatnam as mentioned in earlier part Therefore, the application filed by the assessee

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u/s. 10(23C)(ñ) has attained finality. Now, at this juncture, this office do not have any jurisdiction to interfere in the order of the CCII, Visakhapatnam dated 30.09.2015. Therefore, the application filed by the assessee 21.09.2017 becomes non-est. Therefore, the application filed by the assessee is hereby rejected.”

before this Tribunal. During the appeal hearing, the Ld.AR argued that the

assessee has filed the application for grant of approval u/s 10(23C) duly

amending the objects of the society. After amending the objects of the

society, the society is existing solely for the purpose of educational objects,

hence, argued that the assessee is entitled for exemption u/s 10(23C)(vi) of

the Act. The Ld.CIT(E) has misunderstood the Board Circular as well as the

Rule 2CA which was amended in the year 2006. The Ld.AR argued that

Rule 2CA is applicable for the institutions which are granted approval

u/s 10(23C), but not applicable to the cases, where the application seeking

grant of approval u/s 10(23C) was rejected by the authorities. It is

unreasonable and unjustified to say that once the CIT(E) rejects the

application u/s 10(23C), the assessee is not permitted to make fresh

application amending the objects. This view is incorrect and would cause

injustice to the institutions which are rendering the services of education to

the society and are charitable in nature. Therefore, submitted that once the

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objects are amended and the assessee made the revised application, the

CIT(E) is not permitted to reject the application as non-est and has to

decide the case on merits, since, the objects are amended. Accordingly, the

Ld.AR requested to set aside the order of the Ld.CIT(E) and grant

exemption u/s 10(23C) of the Act.

the application originally in 2014 which was rejected by the CCIT vide

order dated 30.09.2015 and confirmed by the Hon’ble ITAT, thereby, the

orders of the CCIT had reached finality. Once the application is made by the

assessee seeking grant of approval u/s 10(23C) is reached finality, the

assessee is barred from making any further application for 3 years as per

Rule 2CA of I.T.Rules and which was clarified by the CBDT Circular

No.7/2010 dated 27.10.2010. Thus, the Ld.DR contended that once the

application is made and rejected, the assessee is not permitted to make

application for further 3 years. Therefore, argued that the Ld.CIT(E) has

rightly rejected the application and no interference is called for in the order

of the Ld.CIT(E).

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record and gone through the relevant provisions of the Act as well as the

circular cited. In the instant case, the assessee has made the application for

grant of approval u/s 10(23C) originally vide application dated 26.09.2014

in Form No.56D. The said application was scrutinized by the CCIT,

Visakhapatnam and on scrutiny of the application, the Ld.CCIT found that

the objects of the society include educational objects and non educational

objects. As approval u/s 10(23C) is granted only for the purpose of

educational objects and non educational objects does not qualify for grant

of approval u/s 10(23C), the Ld.CCIT had rejected the application of the

assessee which was confirmed by the ITAT vide order dated 18.04.2018.

Subsequently, the assessee had amended the objects. As per the amended

objects, the society is existing solely for educational purposes. For the sake

of clarity and convenience, we extract relevant part of the objects of the

Society which is furnished in page No.11 of the paper book and reads as

under :

Existing Amended (i) (i) To establish schools in To impart education Andhra Pradesh and to without profit motive. promote literacy

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(ii) (ii) To provide facilities To establish schools and for indoor and outdoor colleges in Andhra gamets for the Pradesh for imparting recreation of members education (iii) (iii) --- To provide facilities for indoor and outdoor games for the recreation of pupils.

It is observed from the above, that the assessee had duly amended

the objects and after amending the objects, the objects of the society are

solely for the purpose of education and the assessee qualifies for grant of

approval u/s 10(23C) of the Act. The question before us is whether the

assessee is permitted to make a fresh application, once the original

application was rejected. The Ld.CIT(E) has taken the support of Rule 2CA

which was amended in the year 2006, which reads as under :

"the approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the first day of December 2006 shall at any one time have affect for a period of not exceeding three assessment years"

Plain reading of Rule 2CA shows that once the approval is granted it

will have effect for a period of not exceeding 3 assessment years, which

shows that if the approval for exemption u/s 10(23C) is granted, the same

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is valid for three assessment years. If the application of the assessee for

grant of approval u/s 10(23C) is rejected there is no specific bar for

making fresh application as per Rule 2CA or the Board Circular No.7/2010

dated 27.10.2010, on which the Ld.CIT(E) has placed heavy reliance. It is

unjustified and unreasonable to hold that the assessee is barred from

making fresh application, if it is qualified for exemption subsequent to

rejection of original application. The assessee is an educational institution

which is rendering the educational services to the society and should be

given proper support for betterment of services. Therefore, we are of the

considered opinion that there is no reason for placing bar on the assessee

for no fault of the assessee. Having amended the objects, the assessee is

qualified for exemption and would be entitled for the grant of approval and

treating the application of the assessee as non-est is unjustifiable. Hence,

we hold that the application of the assessee is valid and the Ld.CIT(E) must

consider the grant of exemption u/s 10(23C) on merits. Accordingly, we

set aside the order of the Ld.CIT(E) and remit the matter back to the file of

the CIT(E) with a direction to consider the application of the assessee on

merits and decide the issue afresh. It is needless to say that the CIT(E)

should give sufficient opportunity to the assessee before deciding the

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application. Accordingly, appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open court on 29th May 2019. Sd/- sd/- (िी.दुगाा राि) (डड.एस. सुन्दर ससंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याययक सदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER ववशधखधऩटणम /Visakhapatnam ददनधंक /Dated : 29.05.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. अऩीऱधथी / The Appellant - M/s Hamsavahini Educational Society, 3-282, Vakalapudi, Kakinada, East Godavari Dist. 2. प्रत्यधथी / The Respondent - Commissioner of Income Tax (Exemptions), Hyderabad 3. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 4.गार्डफ़ाईि / Guard file आदेशािुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, Visakhapatnam