SHREE VALLABH SEVA KENDRA,VALSAD V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, EXEMPTION, AHMEDABAD, AHMEDABAD

MA 44/AHD/2025

AI Insights

The case revolves around Shree Vallabh Seva Kendra's application for rectification of an order that denied them exemption under section 10(23C)(vi) of the Income Tax Act, 1961, for the Assessment Year 2018-19. The Tribunal's initial decision, dated 11.02.2025, was challenged by the assessee through a Miscellaneous Application (MA No. 44/Ahd/2025), claiming that there were mistakes apparent from the record in the Tribunal's order. The Tribunal, after reviewing the submissions and the record, concluded that the issues raised were already considered and adjudicated upon in the original order, and thus, no rectifiable mistake was present.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791656 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 16-05-2025
• Other Referred Cases: Director of Income Tax (Exemptions) vs Ahmedabad Management Association [2014] 366 ITR 85 (Gujarat), Mudra Foundation for Communications Research & Education vs Chief Commissioner of Income Tax, Ahmedabad [2016] 237 Taxman 139 (Gujarat), New Noble Educational Society vs. CIT, [2022] 6 NYPCTR 1179 (SC), Shree Ahmedabad Lohana Vidyarthi Bhavan Vs. ITO (E), 96 Taxman 251 (Ahd Trib.), Laura Entwistle Vs. Union of India, 148 taxmann.com 251 (Bom), Shri Deshi Lohana Vidhyarthi Bhavan Vs. ITO (E), ITA Nos. 418 & 419/Ahd/2019, CIT Vs. M/s. Reliance Telecom Limited, 133 taxmann.com 41
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Rule of consistency; Charitable institution
• Section: 11

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER MA No. 44/Ahd/2025 (In ITA No. 201/Ahd/2024) Assessment Year: 2018-19 Shree Vallabh Seva Kendra, Vallabh Ashram, N.H. No.48, Killa Pardi, Valsad-396125 [PAN : AABTS 3393 R] Vs. Deputy Commissioner of Income-tax, Circle-2, Exemption, Ahmedabad (Applicant) .. (Respondent) Applicant represented by : Shri Nitesh S. Joshi, AR & Shri Mehul K. Patel, Advocate Respondent represented by: Shri Abhijit, Sr DR Date of Hearing 26.09.2025 Date of Pronouncement 09.12.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This Miscellaneous Application is filed by the Assessee under section 254(2) of the Income Tax Act, 1961 (“the Act”) seeking rectification of the order dated 11.02.2025, passed by the Tribunal in ITA No. 201/Ahd/2024, pertaining to the Assessment Year 2018-19. 2. At the time of hearing before us, the Ld. AR submitted that the following mistakes have crept into the Tribunal’s order dated 11.02.2025, which are as follows:- “a. The primary issue arising for consideration of the Tribunal in the present case was with respect to the Applicant's eligibility to claim exemption under section 10(23C) (vi) of the Act. This position is also made clear by a bare perusal of the grounds of appeal as raised by the AO before the Tribunal. Therein, the Revenue was urging for denial of such exemption on the grounds that the entire income of the applicant trust was in violation of seventh proviso to the said section. Further, the activity of providing hostel accommodation to children below six years of age was in violation of regulatory guidelines as laid down by the National Commission for the protection of children's rights. Lastly, referring to the vision statement, it was alleged that the applicant trust was not solely for the purposes of education. A bare perusal of the impugned order shows that, the said issue has remained unadjudicated by the Tribunal. It is well settled by now that, non-adjudication of a ground arising in the appeal discloses a mistake apparent from the record. Hence, Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 2– the Tribunal may be pleased to re-call its order dated 11.02.2025 and adjudicate on the sole ground as arising in the appeal. b. The entire discussion in the said order of the Tribunal is with respect to application of the first proviso below section 2(15) of the Act to the present case. In this regard, the following is relevant: I. As per 18th proviso below section 10(23C) (vi), the assessee's claim for exemption as per sub-clause (iv) or sub-clause (v) are to be denied if the provisions of first proviso to section 2(15) becomes applicable to such trust or institution, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded. The proviso below section 2(15) has no application to a case governed by sub-clause (vi) thereof, which is relevant to the present case. It is hence submitted that, the first proviso below section 2(15) has no relevance to the primary issue as arising in this appeal. If at all, this aspect would be relevant to adjudicate on the alternative claim raised by the assessee, on which neither the AO nor the CIT(A) had given any finding. If the applicant's claim for exemption under section 10(23C)(vi) was upheld, then, as held by the CIT(A), issue relating to grant of exemption under section 11 of the Act would be academic and infructuous. Assuming that the Tribunal took a view that the applicant is not entitled to claim exemption under section 10(23C)(vi) of the Act, then, the matter may have to be set aside to the AO/CIT(A) for reconsideration as none of the authorities had applied their mind to the same. Adjudication of an issue which represented an alternative claim without adjudicating on the primary issue and also without allowing an opportunity to the parties to place the necessary facts and submissions on record, is with respect submitted, discloses a mistake apparent from the record. ii. Application of the said proviso below section 2(15) of the Act would be relevant only while adjudicating the assessee's claim of exemption under section 11 of the Act. The said clause would apply only to a case which is governed by the last limb of the definition of 'charitable purpose' and not to a case of the present type where the applicant is pursuing the object of education. This legal position is clear from a bare perusal of the provisions, clarification issued by the CBDT by way of circular No. 11 of 2008 dated 19.12.2008 and various Judgments/orders including of the jurisdictional High Court in Director of Income Tax (Exemptions) vs Ahmedabad Management Association [2014] 366 ITR 85 (Gujarat) and Mudra Foundation for Communications Research & Education vs Chief Commissioner of Income Tax, Ahmedabad [2016] 237 Taxman 139 (Gujarat). Also, there was nothing in support of the Revenue's case except bare assertions of the AO which stood reversed in view of a favorable order passed by the CIT(A). In such circumstances reversing the finding given by the CIT(A) without verifying the applicable legal position and veracity of these facts, it is respectfully submitted, discloses a mistake apparent from the record. iii. For reaching its conclusion with respect to application of first proviso below section 2(15) of the Act, the Tribunal has proceeded on the basis of factual findings given in the assessment order overlooking the Applicant's submission that those findings are factually incorrect and have no basis. Conclusion reached by the Tribunal on the basis of erroneous facts and overlooking the relevant facts, it is respectfully submitted, reflects a mistake apparent from the record. Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 3– iv. The following facts referred to by the Tribunal in their order do not represent the correct position and, hence, also disclose a mistake apparent from the record:  In the second bullet point of para 8 at page 7 of the Tribunal's order, it is stated \"The assessee is running pre-primary school to tribal students. The tribal school at village Balda provided education to students from Standard I to VIII. The pre-primary school was run by the applicant at Killa Pardi, which is at a distance of five kilometres from the other school.  In the fourth to the seventh bullet points of para 8 at page 7, it is stated that the hostel facilities as provided by the Applicant were not for its own students. Hence, the said two activities should be considered separately. It is submitted that, the Tribunal has overlooked the finding reached by the CIT(A) wherein he has referred to the fact that the hostel facility is made available to the students of the sister trust. His finding with respect to the Applicant's entitlement of exemption under section 10(23C)(vi) was based on the principle of consistency and his analysis of the importance of hostel accommodation for students coming from remote tribal areas or distant places or who want to also pursue extracurricular activities. Despite holding in second bullet point of para 8.10 at page 14 of the Order that \"The provision of hostels to the students in an integrated manner is a charitable activity\", the Tribunal has failed to apply this position to the facts of the present case, where activities of the Applicant trust cannot be considered in isolation, but has to be looked at in an integrated manner. It is submitted that, overlooking these facts represents a mistake apparent on record.  In the eighth bullet point of para 8 at page 8, the Tribunal has stated that the hostellers are different from the pre-primary children as the pre- primary education involved children in the age group of 3.5 to 6 years while hostels can admit only children of 6 years and above. This fact has been again emphasized by the Tribunal in paragraph 8.9 at page 13 of its order. The Tribunal has overlooked that the said facility is only allowed to students pursuing their education with Sister Trust, where, it is submitted, the activities of both the trusts has to be considered in an integrated manner.  In the twelfth to the fourteenth bullet point of para 8 at page 8, the Tribunal has observed that minimum wages in Gujarat in the year 2018-19 were Rs. 329.20 for skilled, Rs. 320 for semi-skilled and Rs. 312 for unskilled workers, whereas, the rate charged by the assessee for girls hostel was Rs. 370 per day and boys hostel was Rs. 430 per day. Based thereon it is alleged that the Applicant is not operating hostel for poor students. That the said hostels are not run on a charitable basis but are being run on commercial terms. It failed to appreciate that for the purposes of claiming exemption under section 10(23C) (vi) of the Act, it has to only show that it was existing solely for the purposes of education and not for the purposes of profit. In the present case, the CIT(A) had found its activities of providing hostel accommodation to be an integral part of imparting of education. There is also nothing in the section 10(23C) (vi) suggesting that it will only apply to trusts or institutions providing education to poor students. Hence, the Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 4– Tribunal has referred to and relied upon facts which were not germane or relevant to the issue, thereby disclosing a mistake apparent from the record.  In paragraph 8.10 at pages 13 and 14 of its Order the Tribunal has stated that activities incidental for providing education could include providing textbooks, hostel, bus facilities for their students or organizing educational camps. However, activities like renting out the premises for external events would not qualify as activities incidental to education. It is thereafter observed that the provision of hostels to the student in an integrated manner is a charitable activity. However, running such hostels separately on a commercial basis is a business activity. It failed to appreciate the facts of the present case, which fell within the qualifying category, which also discloses a mistake apparent from the record.” 3. Thus, the Ld. AR submitted that there is a mistake apparent on record, and the Tribunal should recall its order dated 11.02.2025 and place the appeal for fresh hearing. 4. The Ld. DR supported the order dated 11.02.2025 passed by the Tribunal and further submitted as under:- “Para 9 of MA “The primary issue of exemption u/s 10(23C)(vi) on grounds that hostel activity violated proviso, provided accommodation to children below six years, and trust was not solely for educational purposes has remained unadjudicated by Tribunal. Non-adjudication discloses mistake apparent from record.” This contention is factually incorrect. The Tribunal’s order specifically analysed: * Hostel fees vs. school fees (₹13.23 Cr vs. ₹1.84 Cr). * Surplus of ₹6.12 Cr from hostel operations. * Age criteria under RTE and separation of pre-primary stream from hostel residents. * That hostel residents were mostly outsiders, not assessee’s own students. These findings directly address whether the assessee exists “solely for educational purposes.” Hence, the issue was adjudicated on merits. Merely because the decision is adverse does not render it “non-adjudication.” Ground (b)(i) of MA “Application of first proviso below section 2(15) has no relevance to institutions governed by section 10(23C)(vi). Tribunal erred in invoking it.” Incorrect in law. Section 2(15) is a definitional clause, applicable to the entire Act, including s.10(23C). Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 5– The Tribunal’s reference to the proviso was only to demonstrate that profit-oriented activities cannot be dressed up as charitable, even if objects mention education. Core finding remains under s.10(23C)(vi) that hostel activity was commercial and not incidental to education. Hence, no error apparent; the reliance was contextual, not determinative. Ground (b)(ii) of MA “Application of proviso to s.2(15) is relevant only for s.11 cases, not for 10(23C)(vi).” This is a misreading of law. Section 2(15) governs the meaning of “charitable purpose,” which is the foundation of both s.11 and s.10(23C). The Tribunal did not decide exemption under s.11; it applied the test of “solely for educational purpose” under s.10(23C)(vi), with reference to definition in s.2(15). Hence, no error apparent; the ground is a legal fallacy. Ground (iii) of MA “Tribunal proceeded on erroneous factual findings in AO’s order and overlooked applicant’s submissions; conclusion is based on incorrect facts.” Tribunal relied on figures and facts borne out of record—fees collected, hostel receipts, surplus generation, age restrictions. The finding that hostel charges were ₹370–₹430/day (non-nominal) is based on record. That ~900 hostel residents were not assessee’s school students was also evidenced. Tribunal is the final fact-finding authority; re-agitating facts cannot be clothed as “mistake apparent.” Ground (iv) of MA “Tribunal misread facts: (i) pre-primary school at different place, (ii) hostel not for own students, (iii) hostel charges wrongly compared with minimum wages.” The order carefully compared school and hostel activities, noting: * Pre-primary admits 3.5–6 years; hostels admit 6+ years → different streams. * Hostel largely caters to outsiders, not own school children. * Charges compared with minimum wages to highlight commercial character, not to fix tariff. These are reasoned evaluations. Even if assessee disagrees, it is not a “mistake apparent.” Ground (v) of MA “Tribunal ignored principle that hostel integrated with education is charitable activity.” Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 6– Tribunal did not dispute that hostels for own students, run on nominal basis, can be incidental. What it found is that assessee’s hostels were separate, revenue-heavy and largely for outsiders, generating huge surplus. Such activity fails “solely educational” test. Hence, no oversight—this was expressly decided. Ground (vi) of MA “Surplus ploughed back into charitable objects; Tribunal failed to consider this.” Tribunal expressly held: Plough-back cannot convert a commercial activity into charitable if it is not incidental to education. What matters is nature of activity, not application of income. This principle is well settled. Hence, no mistake apparent. Ground (vii) of MA “Tribunal wrongly concluded that provision of hostels to students in integrated manner is charitable, but failed to apply that to present case.” Tribunal correctly distinguished between hostel for own students in integrated manner (charitable) and running hostels commercially for outsiders (business). In assessee’s case, latter fact situation existed. The Tribunal applied the correct principle. No inconsistency, no error apparent. Overarching Legal Rebuttal Assessee’s misconception: It claims that it merely needs to “show” that it is for charitable purpose. This is wrong. Law mandates that the institution must actually exist solely for charitable/educational purpose. Objects in trust deed are not conclusive; real conduct is determinative. Section 2(15): Being a basic definition, it pervades the entire Income-tax Act, including s.10(23C). The assessee’s plea that it applies only to s.11 cases is misconceived. Speaking order: The Tribunal’s order dated 11.02.2025 is a speaking, seasoned, reasoned order, adjudicating all contentions of both sides. Scope of s.254(2): MA lies only for patent, obvious mistakes. It does not permit review, re-hearing, or re-arguing on merits. Conclusion The assessee’s MA is an attempt to seek review under the guise of rectification. All grounds raised were already considered and adjudicated by Tribunal. No “mistake apparent from record” exists. Prayer: It is therefore respectfully submitted that the Miscellaneous Application filed by the assessee deserves to be dismissed in limine.” Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 7– 5. We have heard both the parties and perused all the relevant material available on record. From the perusal of the order dated 11.02.2025 passed by the Tribunal, more specifically the findings given by the Tribunal from paragraph Nos. 8 to 8.11, the contention of the Ld. AR that the primary issue arising for consideration of the Tribunal in the present case was with respect to the applicant’s eligibility to claim exemption u/s 10(23C)(vi) of the Act, has been dealt with by the Tribunal by clearly stating why the applicant-trust’s eligibility to claim exemption u/s 10(23C)(vi) of the Act does not sustain. The activity of providing hostel accommodation to children below six years of age was in violation of regulatory guidelines as laid down by the National Commission for the Protection of Children's Rights, as mentioned in applicant’s own MA in paragraph No. 9 (a). The observations of the Tribunal that the applicant-trust was not solely for the purpose of education has been categorically dealt with in paragraph No.8 itself, wherein its 3rd and 5th bullet points state that there is a pre-primary school as well as hostel facility separately operated by the applicant-trust. Thus, the contention of the Ld. AR that the Tribunal is not adjudicated the said issue is not justified. 6. Further, the contention of the Ld. AR that as per 18th proviso below section 10(23C) (vi), the assessee's claim for exemption as per sub-clause (iv) or sub- clause (v) is to be denied if the provisions of first proviso to section 2(15) become applicable to such trust or institution, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded. The Ld. AR submitted in the MA that if the applicant’s claim for exemption u/s 10(23C)(vi) of the Act was upheld, then, as held by the CIT(A), the issue relating to grant of exemption under section 11 of the Act would become academic and infructuous. Assuming that the Tribunal took a view that the applicant is not entitled to claim exemption u/s 10(23C)(vi) of the Act, then the matter may have to be set aside to the Assessing Officer/CIT(A) for reconsideration. The contention of the Ld. AR that the alternative claim Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 8– should have been taken into account does not sustain, as from the perusal of the record and details, it was clearly set out in the facts of the applicant’s case that the applicant-trust is going beyond its objects and is engaging in activities other than educational ones, and because of the said activity, which is not as per its stated objects, the assessee is not entitled to the alternative claim as well. This aspect was already examined by the Tribunal through the details presented before it. Thus, there is no mistake apparent from the record. 7. The Ld. AR relied upon the following decisions:- • New Noble Educational Society vs. CIT, [2022] 6 NYPCTR 1179 (SC) • Shree Ahmedabad Lohana Vidyarthi Bhavan Vs. ITO (E), 96 Taxman 251 (Ahd Trib.) • Laura Entwistle Vs. Union of India, 148 taxmann.com 251 (Bom) • Shri Deshi Lohana Vidhyarthi Bhavan Vs. ITO (E), ITA Nos. 418 & 419/Ahd/2019. In respect of the Hon’ble Apex Court decision in the case of New Noble Educational Society (supra), the Hon’ble Apex Court has categorically held in paragraph no. 63 that, “at the stage of registration or approval therefore focus is on the activity and not the proportion of income. If the income generating activity is intrinsically part of education, the CIT or other authority may not on that basis alone reject the application.” 8. In the present case, the CIT(A) allowed the exemption after taking into account the financials. The Hon’ble Apex Court further stated that “to ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes”. Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 9– 9. The reasoning undoubtedly applies to newly set-up charity/trusts etc. The proviso to Seciton10(23C) is not confined to newly set-up trusts, but also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. 10. On the contrary, the decision of the Hon’ble Apex Court categorically mentions that each aspect of a charitable institution has to be examined by the authorities and a decision has to be taken accordingly. The contention of the Ld. AR that the pre-primary school was run by the applicant at Killa Pardi, which is at a distance of five kilometres from the other school and that the hostel facility was being made available to the students of the sister-trust, cannot be stated to be an activity of the assessee-trust itself. Providing facilities to students other than those of the assessee-trust cannot be termed as a charitable activity warranting exemption under Section 10(23C)(vi) of the Act. Thus, the bullet-pointwise observations made by the assessee-trust in the Miscellaneous Application also fail. 11. Furthermore, on this issue, we are guided by the judgement of Hon’ble Supreme Court in the case of CIT Vs. M/s. Reliance Telecom Limited, 133 taxmann.com 41, wherein it was held as under:- “…. The powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court….” Printed from counselvise.com MA No. 44/Ahd/2025 Shree Vallabh Seva Kendra Vs. DCIT Asst. Years : 2018-19 - 10– Since the order has been passed after considering entire facts on record, the plea of the assessee, if accepted, will result into revision of the order which is beyond the purview of the provisions of Section 254 (2) of the Act. 12. In fact, from the overall details verified by the Tribunal at the time of hearing, none of the details were denied by the assessee-trust at the time of hearing of this present Miscellaneous Application. Hence, the present Miscellaneous Application filed by the assessee is clearly in the nature of a review petition, which cannot be entertained by the Tribunal, as the Tribunal does not have the power to review its own order. Thus, the Miscellaneous Application is dismissed. 13. In the result, the Miscellaneous Application filed by the assessee is dismissed. The order is pronounced in the open Court on 09.12.2025 Sd/- Sd/- (SUCHITRA R. KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 09.12.2025 btk आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "