The Pune Bench of Income Tax Appellate Tribunal dismissed the revenue appeal on Educational Institution’s Tax Exemption due to non-compliance with the requirements prescribed under Section 143(3) of the Income Tax Act, 1961.
The Commissioner of Income Tax (Exemption) filed an appeal challenging the tax-exempt status granted to Mahindra International School Academy (assessee) under Section 10(23C)(vi) of the Income Tax Act, 1961, for the assessment year 2013-2014.
The assesse had claimed a tax exemption under Section 10(23C)(vi) of the Income Tax Act, 1961, which allows tax exemptions for educational institutions provided certain conditions prescribed by the Chief Commissioner of Income Tax (CCIT) are met.
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The Assessing Officer (AO) disallowed the exemption, arguing that the school had not complied with these prescribed conditions, particularly regarding merit-based admissions and running the school without commercial intent
Upon appeal by the assessee, the Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, which led the Revenue to file an appeal before the Pune Bench of ITAT.
The Revenue’s counsel argued that the school violated the CCIT’s conditions, specifically non-discriminatory admission policies based on merit, and also pointed out that the school charged high fees and hired a marketing manager, indicating commercial operations, which contradicted the purpose of a charitable educational institution.
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The assessee’s counsel argued that hiring a marketing manager or charging fees implied commercial activity. The counsel argued that it had adhered to all the conditions for exemption, and the AO had failed to present concrete evidence showing any violation.
The two-member bench comprising Rama Kanta Panda (Vice President) and Satbeer Singh Godara (Judicial Member) observed that AO had not provided any specific evidence of non-compliance with the conditions for the exemption.
The tribunal emphasized that the CCIT’s approval for the exemption was still valid and that the AO did not follow the necessary statutory procedures under Section 143(3), which require notification to the prescribed authority (CCIT) before disallowing the exemption. Therefore, the tribunal dismissed revenue’s appeal and upheld CIT(A)’s decision in favor of the assessee.
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