Rental Income Intended for Charitable & Educational Purposes Eligible for Section 10(23C)(vi) Exemption

 

 

Facts:

1. The Durgapur Society of Management Science, primarily involved in educational activities, underwent scrutiny as its gross receipts for the year amounted to Rs. 3,97,86,089, with building rent surpassing 50% at Rs. 2,02,34,592.

2. Significantly, there was a lack of separate accounting for rental income and expenses. The CIT (E) pointed out that rental income not originating from educational activities did not qualify for exemption under Section 10(23C)(vi) of the Income Tax Act, 1961.

3. The revenue maintained that seeking exemption under Section 10(23C)(vi) of the Income Tax Act, 1961, requires strict adherence, particularly focusing on profits derived exclusively from educational activities.

ITAT Kolkata held as below:

1. The judgment in New Noble Educational Society has to be prospectively applied and, therefore, it did not impact the assessment order.

2. The society’s intention was to generate revenue for charitable purposes and that the rental income was applied for the society’s educational objectives.

3. The AO, in accepting the claim under Section 10(23C)(vi), did not commit an error, as the rental income was directly related to the society’s educational activities.

4. Thus, the income derived from educational activities is eligible for exemption under section 10(23C)(vi) of the IT (Income Tax) Act, 1961.

 

The copy of the order is as under:

 

1702034411-DURGAPUR SOCIETY OF MANAGEMENT SCIENCE