NATIONAL CENTRE FOR THE PERFORMING ARTS ,MUMBAI vs. CIT EXEMPTION , MUMBAI

Calling into question correctness of the order dated 14th October 2019 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11 Appearances by: J D Mistri, Sr Advocate, along with Sonali Godbole, CA, for the appellant Rahul Raman, Commissioner (DR) for the respondent Date of concluding the hearing : 28/09/2021 Date of pronouncing the order : 03/12/2021 O R D E R Per bench:

1.

3. While learned senior counsel has addressed us at length on the questions as to what are the connotations of expression „education‟ under Section 2 (15) of the Income Tax Act, 1961, and as to what is the point of time when a charitable institution loses its character as a Assessment year: 2010-11 Page 2 of 3 charitable institution by being engaged in the carrying out “an activity in the nature of trade, commerce or business, or any activity in the nature of service to trade, commerce or business”, and while learned senior counsel has urged us to decide this basic issue, we are of the considered view that this appeal can be decided on a much narrower ground i.e. whether once an exemption under section 10(23C)(iv) is granted by the Chief Commissioner of Income Tax, vide notification no. F No Mum/CC/HQ/Tech/10/(23C)(iv)/143/2010-11/956 dated 24th March 2011, can it still be open to the Assessing Officer to examine as to whether or not activities of the institution can be held to be not “charitable” in nature and on that basis decline to give effect to an exemption notification. We must, therefore, remain confined to this issue, on which as well we have heard both the parties, and leave the larger issue raised by the learned senior counsel for adjudication at a later stage, as and when necessary. To adjudicate on this issue, we have to take note only of some basic facts of the case. The assessee before us is registered as a charitable trust registered under section 12A of the Income Tax Act 1961, and has also been granted an exemption under section 10(23C)(iv) by the Chief Commissioner of Income Tax vide notification no. F No Mum/ CC/ HQ/ Tech/ 10/(23C)(iv)/ 143/2010-11/956 dated 24th March 2011. On 29th September 2010, the assessee filed a NIL return of income, claiming exemption under section 10(23C)(iv). An alternative claim of exemption under section 11 was also made later. The Assessing Officer, however, proceeded to decline the exemption under section 10(23C) by holding that the provisions of proviso to Section 2(15) are violated in this case, and that, therefore, even if the tax exemption is granted by the Chief Commissioner under section 10(23C), the benefit of exemption cannot be granted. It was observed that “even after granting the approval under section 10(23C)(iv), Assessing Officer is required to verify and scrutinize the real and actual activities for the year under consideration and whether same are complying with the provisions of the Act or not”. The Assessing Officer also declined an alternative claim of exemption under section 11. Aggrieved, the assessee carried the matter in appeal before the learned Commissioner (Appeals) but without any success. The assessee is not satisfied and is in further appeal before us.

Assessment year: 2010-11 Page 3 of 3 education for music was examined at length by the Chief Commissioner, and accepted as such. Given this situation, the proviso to Section 2(15) does not come into play. Yet, the Assessing Officer has proceeded to disregard the approval granted by the learned Chief Commissioner. Such an approach cannot meet any judicial approval. We, therefore, hold that the Assessing Officer should have granted exemption under section 10(23C)(iv) on the facts of this case. The stand of the authorities below is reversed on this point, and the Assessing Officer is directed to grant exemption under section 10(23C)(iv). The assessee gets the relief accordingly.