The Income Tax Appellate Tribunal, Agra, has clarified that an educational society’s eligibility for exemption under Section 10(23C)(vi) of the Income Tax Act is not defeated by administrative delays in issuing the registration certificate, provided a binding tribunal order has already recognized the entitlement for the relevant assessment year. This ruling reinforces judicial discipline and the primacy of final orders over procedural technicalities.
Background & Facts
The Dispute
The appellant, St. Marks School Society, is a registered society under the Societies Registration Act since 14.06.1949, operating educational institutions. For the assessment year 2018-19, it filed its income tax return in Form ITR-7 on 15.10.2018, declaring nil income and claiming exemption under Section 10(23C)(vi) of the Income Tax Act. The Centralized Processing Centre (CPC) disallowed this exemption under Section 143(1) on 16.12.2019, treating the entire gross receipts of Rs. 2,09,28,719 as taxable income on the ground that the society was neither registered under Section 12A nor approved under Section 10(23C)(vi) at the time of filing.
Key Facts
- The society had applied for recognition under Section 10(23C)(vi) on 30.09.2018.
- The Commissioner of Income Tax (Exemptions), Lucknow, rejected the application by order dated 30.09.2019.
- The society filed an appeal before the ITAT Agra in ITA No. 366/Agr/2019.
- On 17.03.2020, the ITAT Agra allowed the appeal and directed the CIT (Exemptions) to grant recognition under Section 10(23C)(vi).
- Despite this order, the CIT (Exemptions) issued a registration order on 29.11.2023, incorrectly applying Sections 11 and 12 instead of Section 10(23C)(vi).
- The society challenged this error in ITA No. 28/Agr/2024, and on 13.02.2025, the ITAT Agra held that the CIT (Exemptions) had no jurisdiction to alter the statutory provision applicable and reaffirmed entitlement under Section 10(23C)(vi) for AY 2018-19.
- The CPC’s intimation under Section 143(1) was challenged before the National Faceless Appeal Centre (NFAC), Delhi, which partially allowed the appeal on 25.11.2022 but denied exemption under Section 10(23C)(vi) on the ground that gross receipts exceeded Rs. 1 crore under Rule 2BC - a provision the assessee never invoked.
Procedural History
- 15.10.2018: Assessee filed ITR-7 for AY 2018-19 claiming exemption under Section 10(23C)(vi).
- 16.12.2019: CPC issued intimation under Section 143(1) disallowing exemption.
- 14.01.2020: Assessee filed appeal before NFAC.
- 30.09.2019: CIT (Exemptions), Lucknow, rejected application for Section 10(23C)(vi) recognition.
- 17.03.2020: ITAT Agra, in ITA No. 366/Agr/2019, directed grant of recognition under Section 10(23C)(vi).
- 25.11.2022: NFAC order partially allowing appeal but denying exemption under Section 10(23C)(vi).
- 29.11.2023: CIT (Exemptions) issued registration under Sections 11 and 12, contrary to ITAT order.
- 13.02.2025: ITAT Agra, in ITA No. 28/Agr/2024, held that CIT (Exemptions) erred in applying Sections 11 and 12; reaffirmed entitlement under Section 10(23C)(vi) for AY 2018-19.
- 24.06.2025: ITAT Agra dismissed this appeal (ITA No. 198/Agra/2022) ex parte.
- 29.04.2026: Final order passed by ITAT Agra allowing the appeal.
Relief Sought
The assessee sought: (1) setting aside of the NFAC order dated 25.11.2022; (2) recognition of exemption under Section 10(23C)(vi) for AY 2018-19; (3) deletion of the addition of Rs. 2,09,28,719; and (4) direction to the AO to compute income after allowing legitimate expenditures.
The Legal Issue
The central question was whether an assessee is entitled to exemption under Section 10(23C)(vi) for the assessment year 2018-19 when a binding tribunal order had already directed recognition for that year, despite the registration certificate being issued belatedly and incorrectly.
Arguments Presented
For the Appellant
The appellant relied on the final orders of the ITAT Agra dated 17.03.2020 and 13.02.2025, which unequivocally held that it was entitled to exemption under Section 10(23C)(vi) for AY 2018-19. It argued that the CIT (Exemptions) had failed to comply with the tribunal’s directions, and the Revenue could not now rely on procedural delays or misapplication of law by its own officer to deny a right already adjudicated. The claim under Section 10(23C)(vi) was distinct from Section 10(23C)(iiiad), and the NFAC’s reliance on Rule 2BC was legally untenable.
For the Respondent
The Revenue contended that the application for recognition under Section 10(23C)(vi) was filed on 30.09.2018, and therefore, the benefit could only accrue from AY 2019-20 onwards, as per the statutory requirement that registration must precede the claim. It argued that the tribunal’s order could not operate retrospectively to validate a claim made in a year when no formal recognition existed.
The Court's Analysis
The Tribunal emphasized that judicial discipline requires coordinate benches to respect prior final orders in the same case. The order dated 17.03.2020, which directed the CIT (Exemptions) to grant recognition under Section 10(23C)(vi), was binding and final. The subsequent order dated 29.11.2023, which incorrectly applied Sections 11 and 12, was itself set aside by another tribunal order dated 13.02.2025, which explicitly confirmed that the assessee was entitled to exemption under Section 10(23C)(vi) for AY 2018-19.
"This Tribunal would be bound and governed by the order passed by the coordinate bench of Tribunal in assessee's own case for the year for assessment year 2018-19 itself."
The Tribunal rejected the Revenue’s argument that the date of application (30.09.2018) determined the effective date of exemption. It held that the statutory entitlement arises from the tribunal’s adjudication, not from the administrative issuance of a certificate. The delay in issuing the certificate was attributable to the CIT (Exemptions), not the assessee, and could not be used to defeat a right already established by judicial order.
The Tribunal further noted that the NFAC’s reliance on Rule 2BC was misplaced, as the assessee had never claimed exemption under Section 10(23C)(iiiad), which is subject to the Rs. 1 crore limit. The entire disallowance was therefore legally unsustainable.
The Verdict
The appeal was allowed. The ITAT Agra set aside the NFAC order dated 25.11.2022 and directed the Assessing Officer to compute the income for AY 2018-19 by allowing the exemption under Section 10(23C)(vi). The addition of Rs. 2,09,28,719 was deleted. The AO was further directed to allow all legitimate expenditures incurred for earning the receipts. The order was to be implemented within 6 weeks.
What This Means For Similar Cases
Judicial Orders Override Administrative Delays
- Practitioners must argue that once a tribunal has adjudicated entitlement under Section 10(23C)(vi), the assessee’s right is crystallized for the relevant assessment year, regardless of delayed issuance of the certificate.
- Revenue authorities cannot use procedural lapses by their own officers to deny benefits already confirmed by judicial orders.
Exemption Claims Must Be Treated by Statutory Provision, Not Misapplied Rules
- Claims under Section 10(23C)(vi) are distinct from those under Section 10(23C)(iiiad). The Rs. 1 crore limit under Rule 2BC is irrelevant if the claim is not made under the latter provision.
- Assessing Officers and CPCs must verify the specific provision invoked by the assessee before applying any conditions or limits.
Procedural Non-Compliance by Tax Authorities Cannot Prejudice the Assessee
- If a tax authority fails to comply with a tribunal order, the consequences of that failure cannot be visited upon the taxpayer.
- This judgment reinforces the principle that final judicial orders are binding and self-executing in tax matters, even absent formal documentation.
