Higher fees do not by themselves destroy charitable status, and authorised trade mark use does not create diversion of income.

Charging higher fees did not, by itself, change an educational institution's essential charitable character or justify cancellation of registration under section 2(15) of the Income-tax Act, 1961, because its objects remained educational in nature. The use of a trade mark by a licensee or authorised user did not, on that basis, amount to diversion of income under section 13(3), as the benefit from the mark was treated as accruing to the owner. The Revenue's challenge therefore failed on both issues, leaving the assessee's position undisturbed.

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Issues: (i) Whether the assessee's registration could be cancelled on the ground that charging high fees converted its educational activity into a service of general public utility under section 2(15) of the Income-tax Act, 1961. (ii) Whether the value arising from use of the trade mark and the associated goodwill amounted to diversion of income under section 13(3) of the Income-tax Act, 1961.

Issue (i): Whether the assessee's registration could be cancelled on the ground that charging high fees converted its educational activity into a service of general public utility under section 2(15) of the Income-tax Act, 1961.

Analysis: The assessee's essential objects remained unchanged and continued to be educational in nature. Mere charging of higher fees, by itself, was not sufficient to conclude that the purpose for which the institution was set up had changed or that its activities had become non-charitable.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether the value arising from use of the trade mark and the associated goodwill amounted to diversion of income under section 13(3) of the Income-tax Act, 1961.

Analysis: The use of a trade mark by a licensee or authorised user does not, by itself, confer the resulting benefit on that user; under section 40(2) of the Trade Marks Act, 1999, the benefit accrues to the owner. On that basis, the Tribunal's finding that no diversion of income arose was upheld.

Conclusion: The issue was answered in favour of the assessee.

Final Conclusion: The Revenue's challenge failed on both grounds, and the dismissal of the appeal left the assessee's position undisturbed.

Ratio Decidendi: Charging higher fees does not, without more, alter the charitable character of an educational institution, and the authorised use of a trade mark does not itself constitute diversion of income away from the owner.

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