Exemption u/s 10(23B) of Income Tax Act cannot be denied for Mere Technical Violation: ITAT [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the exemption under Section 10(23B) of Income Tax Act 1961 could not be denied for mere technical violation.

The assessee, Vivekananda Resham Khadi Gramodyog Sangha admittedly, was a society registered under the societies, registration act and was also registered with the Khadi and Village Industries Commission and was engaged in the promotion and development of khadi and had also been granted approval for the purpose of claiming deduction under Section 10 (23B) of the Income Tax Act.

The CPC while processing the return of income of the assessee denied the exemption claimed by the assessee . Being aggrieved, the assessee filed appeal before the CIT (A), the CIT (A), however, observed that the assessee had not filed the return of income in the prescribed form under Section 139(4C) of the Income Tax Act, whereas the assessee had filed the return of income in the form prescribed under Section 139(4A) of the Income Tax Act.

However, without prejudice to the above, the CIT(A), further observed that as per the second proviso to Section 10(23B) of the Income Tax Act, the Khadi Commission, was not supposed to grant approval at any one point of time for more than three consecutive assessment years. He, in this respect observed that in the case of the assessee, the approval/ renewal of approval was granted for 5 consecutive years. He, therefore, held that the case of the assessee was hit by violation of second proviso to section 10 (23B) of the Income Tax Act.

Sanjib Kr. Das Sarma, appearing on behalf of the assessee submitted that it was not within the control of the assessee to get the approval or renewal for three years only. That it was the prerogative of the Commission to grant approval/renewal for the period as per the policy of the Commission.

That the assessee was registered with the Khadi and Village Industries Commission since the year 1974 and it had been granted approval and thereafter renewal of the approval from time to time and the renewal was granted for consecutive five years at one point of time and there was nothing in the control of the assessee to get the renewal of approval for three years only. It had been further submitted that the assessee had been granted deduction from time to time.  He relied upon the decision of the Delhi Bench of the Tribunal in the case of Barapur gram, Udyog Vikas Samiti vs. ITO(E) W

The two-member Bench of Sanjay Garg, (Judicial Member) and Girish Agrawal (Accountant Member) observed that the issue was squarely covered by the decision of the Tribunal in the case of “Barapur Gram Udyog Samiti” (supra), wherein, the coordinate Bench of the Tribunal, under similar facts and circumstances had observed that the time period for which the certificate had to be granted was not within the control of the assessee. That, in any case, was only a technical violation for which the assessee could not be penalised by denying the exemption, which otherwise was allowable to the assessee.

The Bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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