Bihar Board’s Tax Exemption Appeal Gets a Second Chance

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Case Name:

Bihar Combined Entrance Competitive Examination Board vs. Commissioner of Income Tax and Anr. (High Court of Patna)

Civil Writ Jurisdiction Case No.16839 of 2011

Date: 3rd December 2020

Key Takeaways:

• The court quashed the previous order denying tax exemption to the Bihar Board.
• The case was remanded for fresh consideration, allowing the Board to present more evidence.
• The decision emphasizes the importance of complete material and evidence in tax exemption cases.

Issue

Is the Bihar Combined Entrance Competitive Examination Board entitled to tax exemption under Section 10 (of Income Tax Act, 1961)(23-C)(vi) of the Income Tax Act?

Facts

The Bihar Combined Entrance Competitive Examination Board applied for tax exemption under Section 10 (of Income Tax Act, 1961)(23-C)(vi), which is meant for educational institutions existing solely for educational purposes and not for profit. The competent authority initially rejected this application, leading to the Board’s appeal.

Arguments

• Petitioner’s Argument: The Board, represented by D.V. Pathy, argued that it qualifies for the exemption as it exists solely for educational purposes. They cited previous court decisions supporting similar claims.
• Respondent’s Argument: Archana Sinha, representing the Commissioner of Income Tax, relied on a Supreme Court decision that might suggest otherwise.

Key Legal Precedents

• Bihar State Text Book Publishing Corporation vs. Commissioner of Income Tax-I, Patna: Cited by the petitioner to support their claim for exemption.
• Visvesvaraya Technological University vs. Assistant Commissioner of Income Tax: Cited by the respondent to argue against the exemption.
• Islamic Academy of Education vs. State of Karnataka: Another precedent referenced by the petitioner.

Judgement

The court decided to quash the previous order denying the exemption and remanded the case back to the competent authority for fresh consideration. The Board was given the opportunity to present additional evidence, and the authority was instructed to comply with principles of natural justice and decide the matter expeditiously.

FAQs

Q1: What does this decision mean for the Bihar Board?

A1: The Board gets another chance to prove its eligibility for tax exemption by presenting more evidence.

Q2: Why was the previous decision quashed?

A2: The court found that the authority did not have complete material to make an informed decision.

Q3: What is Section 10 (of Income Tax Act, 1961)(23-C)(vi)?

A3: It is a provision in the Income Tax Act that allows tax exemption for educational institutions existing solely for educational purposes and not for profit.

Q4: What happens next?

A4: The Board will present its case again to the Principal Commissioner of Income Tax (Exemption) Patna, who will reconsider the application.

(i) Petitioner has prayed for the following relief(s): the order dated 26.7.2011 passed by the respondent no.1 (as contained in Annexure-(4) under Section 12AA (of Income Tax Act, 1961) be quashed.

(ii) the respondent no.1 be directed to grant registration under Section 12AA (of Income Tax Act, 1961).

(iii) for granting any other relief(s) to which the petitioner is otherwise found entitled to.

2. We have heard the learned counsel for the parties at length.

3. The primary issue which arises for consideration is as to whether the present petitioner, namely Bihar Combined Entrance Competitive Examination Board would be entitled for exemption under the provisions of Section 10(23)(vi) (of Income Tax Act, 1961) which partly reads as under:-

Section 10 (of Income Tax Act, 1961)(23-C)(vi)

10. Incomes not included in total income.-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-

(23-C) any income received by any person on behalf of-

(vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or

4. We notice that vide impugned order dated 26th of July, 2011, the competent authority has rejected the petitioner’s claim for grant of such exemption.

5. In support of his submission, Shri Pathy, learned counsel for the petitioner invites our attention to the decision rendered by this Court in C.W.J.C. No. 20296 of 2010, titled as Bihar State Text Book Publishing Corporation Versus the Commissioner of Income Tax-I, Patna & anr. on 04.09.2020 as also earlier decision rendered by this Court in M.A. No.425 of 2010 titled as Bihar State Text Book Publishing Corporation Vs. The Commissioner of Income Tax-I, Patna, referred to therein. Also reliance is placed upon the decision rendered by the Delhi High Court in Council for the Indian School Certificate Examinations versus Director General of Income-Tax (Exemptions), [2014] 362 ITR 436 (Del).

6. On the other hand, Mrs. Archana Sinha @ Shahi seeks reliance upon the decision rendered by Hon’ble the Apex Court in Visvesvaraya Technological University versus Assistant Commissioner of Income Tax, 2016(12) SCC 258,

7. However, in response thereto, Shri D.V.Pathy, learned counsel for the petitioners refers to and relies upon the other decisions rendered by Hon’ble the Apex Court in Islamic Academy of Education vs. State of Karnataka, (2003) 6 697; Assam State Text Book Production and Publication Corporation Limited versus Commissioner of Income Tax, (2009) 17 SCC 391; and in Queen’s Educational Society Versus Commissioner of Income Tax (2015) 8 SCC 47;.

8. Having perused the impugned order, we are of the considered view that the authority below, while concluding that the petitioner was not an educational institution, did not have complete material, including as to whether it was generating any profit by taking fees for conducting the examination.

9. After the matter was heard for some time, learned counsel for the parties were ad-idem that the matter can be remanded back to the authority for consideration afresh, by affording opportunity to the parties to place all material, enabling the authority to arrive at a decision in accordance with law.

10. We have no hesitation in acceding to such request. As such, dispose of the petition in the following terms:

(a) The impugned order dated 26.7.2011 passed by Commissioner of Income Tax-I, Patna in the matter of Bihar Combined Entrance Competitive Examination Board, is quashed and set aside;

(b) The matter is remanded back to the appropriate/competent authority for consideration of the petitioner’s application afresh;

Here only Mrs. Archana Sinha clarifies that now the nominated authority is the Principal Commissioner of Income Tax (Exemption) Patna.

(c) The parties are directed to appear before the said authority on 17.12.2020 when a date shall be fixed, enabling the parties to place on record additional material.

(d) Adequate opportunity of hearing shall be afforded with full compliance of principles of natural justice and the authority shall decide the matter afresh by passing a speaking order, copies whereof shall be supplied to the parties.

(e) Proceedings can be got conducted through a digital mode, if so found necessary.

(f) Liberty reserved to the parties to take recourse to such remedies, if so required and desired, as per law.

(g) We only hope and expect the authority to decide the matter expeditiously and preferably within the current financial year and positively before 31st March, 2021.

(h) All issues are left open.

11. The writ petition stands disposed of in the above terms.

12. Interlocutory Application, if any, shall stand disposed of.

(Sanjay Karol, CJ)

( S. Kumar, J)