Corpus contributions towards capital expenditure like school construction excluded from aggregate annual receipts under section 10(23C)(iiiad); educational institution eligible for exemption if receipts below Rs.1 Crore threshold and activities substantiated.

आदेश/ORDER

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 22.09.2025 for Assessment Year (AY) 2019-20. The grounds raised by the assessee are as under:

“1. The order of the Learned Commissioner of Income Tax (Appeals), NFAC, is contrary to the law, facts and circumstances of the case.

2. For that the Learned Commissioner of Income Tax (Appeals), NFAC, had erred in confirming the action of the Assessing Officer in treating the contribution of the trustees amounting to Rs.20,50,000/- as donation instead of liabilities as shown in the Balance Sheet, thereby increasing the annual gross receipts to Rs. 1,18,29,371/- as against the actual gross receipts of Rs. 97,79,371/-, shown in the Income and expenditure account and consequently holding that the gross receipts exceeded Rs.1 Crore and denying the appellant's claim for exemption under section 10(23C)(iiiad) of the Income Tax Act, 1961.

3. For that the Learned Commissioner of Income Tax (Appeals), NFAC, erred in further holding that the appellant did not have valid approval from Competent Authority of running the said educational institutions, when actually the appellant had duly obtained approval to run educational institutions up to the Primary level (up to V Standard) from the Primary Education Officer, Nagapattinam, which was submitted to the CIT(A) in the appellate proceedings.

4. For that the Learned Commissioner of Income Tax (Appeals), NFAC, erred in upholding the Assessing Officer's action of bringing to tax the surplus of Rs.38,65,595/-, shown in Income and Expenditure Account is not for application for educational purposes.

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to direct the Assessing Officer to accept the returned income and grant exemption under section 10(23C)(iiiad) ofthe Income Tax Act, 1961 and quash the assessment order dated 16.03.2021 and the CIT(A), NFAC order dated 22.09.2025.”

2. The assessee is a charitable trust and filed a return of income for A.Y 2019-20 on 28.06.2020 declaring Nil income. The assessee subsequently filed the revised return of income on 08.07.2020 and in the said revised return the assessee has claimed Rs. 97,79,371/- as exempt income u/s. 10(23C)(iiiad) of the Act. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O called on the assessee to furnish details pertaining to expenditure towards educational activity during the year under consideration and the details as to how the assessee is entitled to claim exemption u/s. u/s. 10(23C)(iiiad) of the Act when the receipts of the assessee during the year under consideration are more than Rs.1 Crore. The assessee submitted before the A.O that the assessee is in the process of development and construction of school building and the gross receipts along with trustees contributions and bank loans were fully utilized towards the object of the trust. The assessee further submitted that the receipts during the year is less than Rs.1 crore and the contributions towards corpus cannot be considered for the purpose of exemption u/s.10(23C)(iiiad) of the Act. The assessee also submitted that the assessee has obtained provisional approval for running of kinder garden school on 13.04.2018 and that the No O