MOA & AOA is not required for an AOP to get exemption U/S 10(23C)(vi)

Commissioner of Income Tax, Trichy v. Sengunthar Matriculation Higher Secondary School, Salem.

Tax Case (Appeal) No.467 of 2017

25th September, 2020

Counsel for Appellant: Mr. J. Narayanasamy, Senior Standing Counsel.

Counsel for Respondent: Mr. D.G. Hariprasath representing Mr.Niranjan Rajagopalan

The Hon'ble High Court of Judicature at Madras with the bench consisting of Justices Vineet Kothari And Krishnan Ramasamy held that where the Revenue has filed this Tax Case under Section 260-A of the Income Tax Act aggrieved by the order passed by the Income Tax Appellate Tribunal on 19.2.2016 allowing the Appeal of the Assesse, Sengunthar Matriculation Higher Secondary School, Salem, which was filed against the order of the learned Chief Commissioner of Income tax, Trichy dated 12.8.2015 and directed the learned Commissioner to grant exemption to the Appellant/Assesse School under Section 10(23C)(vi) of the Income Tax Act, 1961 held that the "Institution" as an AOP was entitled to exemption irrespective of the fact whether it had separate registration under other law as an Institution or Society or not.

The learned counsel for the Appellant submitted that since the Assesse School is controlled by the Sengunthar Education Board, which is a separate Society registered under the Societies Registration Act, that Board alone could have applied for exemption under Section 10(23C) of the Act and the School or the Institution run by the said Board or the Assesse itself could not apply for such exemption and therefore, the learned Commissioner was justified in refusing such exemption by order dated 12.8.2011. It was stated that without independent Constitution, Bye Laws or Document registered with the Competent Authority, the Educational Institution or the School could not claim an independent exemption under Section 10(23C) of the Act relying upon the observation of the learned Chief Commissioner in the impugned order which observes that since the assesse is not having independent existence with clear cut objectives, it cannot be considered for granting exemption.

The learned counsel for respondent, supporting the impugned order of the learned Tribunal submits that there is no requirement for the Assesse to file an Application under section 10(23C) of the Act to be registered with the Respondent as it is duly registered with the Educational Authorities of the State and are undertaking educational activities and therefore, they are entitled to exemption under Section 10(23C) (vi) of the Act.

The issue raised before this court based on the contentions is as follows:

1. Whether on facts and circumstances of the case and in law, Tribunal was right in directing the Chief Commissioner of Income Tax to grant the approval for exemption u/s.10(23C)(vi) of the Act?

The court held that there is no substantial question of law arising in this present appeal. It also observed that since the AOP is recognized as a "person" for the purpose of Income Tax Act, 1961 and Section 10(23C) of the Act also grants exemption to a person engaged in deriving income from specified sources including the University or Educational Institution, covered by this provision and that the appellant Educational Institution was duly registered with the State Registered Authorities and was only engaged in the educational activities.

Per contra, the learned counsel Mr.Hariprashanth representing Mr.Niranjan Rajagopalan supported the impugned order of the learned Tribunal. He submitted that there is no requirement for the Assessee to file an Application under section 10(23C) of the Act to be registered with the Respondent as it is duly registered with the Educational Authorities of the State and are undertaking educational activities and therefore, they are entitled to exemption under Section 10(23C)(vi) of the Act. (Para 6)

Since the AOP is recognised as a "person" for the purpose of Income Tax Act, 1961 and Section 10(23C) of the Act also grants exemption to a person engaged in deriving income from specified sources including the University or Educational Institution, covered by this provision and on these facts, there is no dispute before us that the appellant Educational Institution was duly registered with the State Registered Authorities and was only engaged in the educational activities. Therefore, we do not find any reason to deny the exemption or registration under Section 10(23C) of the Act which was denied by the learned Chief Commissioner. (Para 9)

"The Tribunal has rightly discussed the relevant provisions of the Act and finding that the Appellant Educational Institution is undoubtedly, an "Institution" covered by the provisions of Section 10(23C) (vi) of the Act and therefore, as an AOP, it was entitled to exemption irrespective of the fact whether it had separate registration under other law as an Institution or Society or not. The requirement of the Applicant being a registered Body or juristic person is not there in Section 10(23C) of the Income Tax Act. The definition of 'Person' who is entitled to exemption under Section 10(23C)(vi) of the Act is clear enough and it specifically covers Association of Persons (AOP), which need not be a registered Body." (Para10)

The court hence held that

"Therefore, unless the finding of facts are given on the basis of evidence that the Assesse does not meet the parameters of Section 10(23C) of the Act, the exemption claimed by the Assesse cannot be denied on the ground that it does not have independent Memorandum of Association, Bye laws, etc. and this is not a sustainable ground to deny the exemption as required under Section 10(23C) of the Act and the definition of "person" as under Section 2(31)" (Para 11)

Hence, the appeal filed by the Revenue stands dismissed.

View/Download Judgment: Commissioner of Income Tax, Trichy v. Sengunthar Matriculation Higher Secondary School, Salem

M. Maheswari