ITAT Sets Aside CIT Order Denying 10(23C) Registration, Cites Lack of Opportunity and No Evidence Against Educational Purpose [Read Order]

The Income Tax Appellate Tribunal (ITAT) Lucknow bench has overturned an order by the Commissioner of Income Tax (Exemptions) that denied registration under Section 10(23C) of the Income Tax Act to Aanya Learning Foundation, citing violation of natural justice principles and absence of material proving non-educational activities. The tribunal directed fresh consideration of the foundation's application for tax-exempt status.

Aanya Learning Foundation, an educational institution based in Rampur, Uttar Pradesh, had applied for registration under Section 10(23C)(vi) in April 2018 shortly after its incorporation. The CIT(E) rejected the application in July 2018, claiming insufficient evidence of educational activities and allegedly affording only one hearing opportunity where the foundation's adjournment request was denied.

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The ITAT noted critical flaws in the CIT's order, observing that the rejection was based solely on the foundation's purported failure to submit adequate documentation, without any finding that its proposed activities were non-educational. Kul Bharat (Vice President) and Anadee Nath Misshra (Accountant Member) emphasized that the foundation, being newly established, deserved proper consideration of its proposed educational objectives rather than evaluation of actual operations.

The bench relied on Supreme Court precedent in Ananda Social and Educational Trust vs CIT, which held that registration applications must be decided based on proposed activities when institutions are in their initial years. The tribunal found the CIT(E) committed procedural errors by denying adequate hearing opportunities and making incorrect references to the foundation as a "trust" or "society" despite its corporate registration.

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The order remands the matter back to the CIT(Exemptions) with instructions to re-examine the application afresh, particularly verifying whether the foundation subsequently obtained registration in later years. The ITAT clarified that its decision shouldn't be construed as automatic approval, leaving the merits for the CIT to determine after proper evaluation.

The fresh proceedings will determine whether Aanya Learning Foundation meets the stringent criteria for Section 10(23C) benefits accorded to educational institutions.

To Read the full text of the Order CLICK HERE

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