Tax Exemption Dispute: Bihar Exam Board vs. Income Tax Authority

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Case Name:

Bihar Combined Entrance Competitive Examination Board vs. Principal Chief Commissioner of Income Tax Bihar & Jharkhand (High Court of Patna)

Civil Writ Jurisdiction Case No.20319 of 2014

Date: 3rd December 2020

Key Takeaways:

• The court emphasized the need for a thorough examination of whether the Board qualifies as an educational institution solely for educational purposes.
• The decision highlights the importance of providing adequate opportunity for both parties to present their case.
• The case was remanded for fresh consideration, ensuring compliance with principles of natural justice.

Issue

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

Facts

The Bihar Combined Entrance Competitive Examination Board applied for tax exemption, claiming it operates solely for educational purposes. The Principal Chief Commissioner of Income Tax denied this exemption, leading to the Board’s appeal. The court found that the authority did not have complete information to make a decision, particularly regarding whether the Board was generating profit.

Arguments

• Petitioner (Board): Argued that it qualifies for exemption as it exists solely for educational purposes, citing previous court decisions supporting similar claims.
• Respondent (Income Tax Authority): Relied on a Supreme Court decision suggesting that the Board does not meet the criteria for exemption.

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: Referenced by the petitioner to bolster their argument.

Judgement

The court quashed the previous order denying the exemption and remanded the case to the Principal Commissioner of Income Tax (Exemption) Patna for fresh consideration. The court instructed that both parties be given the opportunity to present additional evidence and that the matter be decided expeditiously, preferably by the end of the financial year.

FAQs

Q1: What was the main legal question in this case?

A1: Whether the Bihar Combined Entrance Competitive Examination Board qualifies for tax exemption under Section 10(23C)(vi) (of Income Tax Act, 1961).

Q2: What does the court’s decision mean for the Board?

A2: The Board has another opportunity to present its case for tax exemption, with the chance to provide additional evidence to support its claim.

Q3: Why was the case remanded?

A3: The court found that the initial decision lacked complete information and that the Board should be given a fair chance to present its case.

Q4: What is the significance of this case?

A4: It underscores the importance of thorough examination and fair hearing in tax exemption cases, ensuring that decisions are made based on complete and accurate information.

1. Petitioner has prayed for the following relief(s):

i) that the order dated 26.9.2014 for the assessment year 2013-14 passed by the respondent (as contained in Annexure-4) under Section 10(23C)(vi) (of Income Tax Act, 1961) and (via) of the Income Tax Act be quashed.

(ii) for a direction to the respondent to grant approval under Section 10(23C)(vi) (of Income Tax Act, 1961) and (via) of the Income Tax Act.

(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 September, 2012, 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 26.09.2014 passed by Principal Chief Commissioner of Income Tax (Bihar & Jharkhand) in F.No.CCIT/Pat/Tech-II/10(23C)(vi) & (via)/14-15/, titled as 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)