ITAT: AOP running Educational Institution eligible for Exemption under Section 10 (23C) (VI) of Income Tax Act

Income tax appellate Tribunal Law Insider

Munmun Kaur

Published On: February 22, 2022 at 16:30 IST

Recently, the Income Tax Appellate Tribunal (ITAT) Bench of Mumbai ruled that an unregistered Association of Persons (AOP), formed by an agreement merging two charitable Trusts, is eligible for exemption under Section 10 (23C) (vi) of the Income Tax Act, 1961.

The observation was made in the Case of Sharda Mandir High School v. CIT by the Bench consisting of members Kuldip Singh (Judicial Member) and Prashant Maharishi (Accountant Member).

The facts of the Case were that the Assessee in the present Case was an educational institution that was formed as an AOP.

It filed an Application seeking approval for exemption under Section 10 (23C) (vi) of the Income Tax Act for the relevant assessment years which was rejected by the Commissioner of Income Tax, Mumbai (CIT) on the ground that an AOP is not eligible for exemption under Section 10 (23C) (vi) of the Act. The Assessee then filed an Appeal against the said Order before the ITAT.

The Assessee contended that the CIT did not appreciate the charitable nature of the AOP running the educational institution.

Further, it was asserted that since any ‘person’ can be exempted under Section 10 (23C) (vi) of the Act, an AOP cannot be denied exemption. Besides this, it was also submitted that an AOP was not required to be registered with a Government agency under any Law.

On the other hand, the CIT contended that the AOP was formed by an agreement merging two Trusts and cannot be termed an educational institution since it was not registered with any authority. In addition to that, there was no evidence available that the AOP was in fact running the educational institution.

The ITAT referred to the decision of Madras High Court in CIT versus Sengunthar Matriculation Higher Secondary School (2020) wherein the High Court held that an AOP was entitled to exemption under Section 10(23C)(vi) of the Act irrespective of whether it had a separate registration under any other Law. The reason is that Section 10(23C)(vi) does not require the applicant to be a juristic person.

While applying the above-stated Judgment, the ITAT held that the Assessee was an “Institution” covered by Section 10(23C)(vi) of the Act.

Therefore, the Appeal was allowed alongwith a direction to the CIT to grant exemption to Assessee under Section 10 (23C) (vi) of the Act.

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