2017 (1) TMI 520 - HC - Income Tax

Assessee wins appeal for tax exemption on educational activities under Income Tax Act

The Court ruled in favor of the assessee, dismissing the department's appeal under Section 260-A of the Income Tax Act regarding Section 80G (5) benefit. ... Renewal of approval under Section 80G (5) denied - as for the previous three years, the assessee has shown surpluses and, therefore, the CIT drew the conclusion that the activities of the assessee were in the nature of commercial enterprises and no charitable activity whatsoever was being pursued - Held that:- The word education utilised in the section stands independently on its own and to suggest that the word may be confined either to the rich or poor or any other strata of the society is not acceptable. The word education has been used in its widest term. It cannot be confined to any section, indeed education is something which is the birth right of every individual. To confine it to a certain group would not be fair in view of the definition as given in Section 2 (15) of the Income Tax Act and in view of the provisions of Section 10 ( 23C) of the Income Tax Act. It is abundantly clear that the assessee was clearly entitled to be granted exemption under Section 80G (5) of the Income Tax Act for the current year as it has been done in the previous year in view of the law and in view of the findings recorded. - Decided in favour of assessee Issues:1. Appeal filed by the department under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal regarding Section 80G (5) benefit.Analysis:The primary issue in this case was whether the department's appeal against the order of the Income Tax Appellate Tribunal, which granted the assessee renewal under Section 80G (5) of the Income Tax Act, was valid. The Tribunal had found that the assessee fulfilled all conditions for exemption under Section 11 of the Act and that there were no violations of Section 13. It was noted that the assessee, an educational institution, had accumulated income for setting up new institutions, and there was no evidence of distributing surpluses as profits. The Tribunal concluded that the assessee was engaged in charitable activities and deserved the exemption.The second issue involved the interpretation of 'charitable purpose' under Section 2 (15) of the Income Tax Act. The department contended that the assessee's activities did not qualify as charitable purposes. However, the Court emphasized that the definition of charitable purpose includes education, which is a fundamental right for all individuals. The Court held that confining education to specific groups would not be fair, considering the broad definition in the Act. Therefore, the Court found that the assessee was entitled to the exemption under Section 80G (5) based on the law and the established facts.In conclusion, the Court ruled in favor of the assessee and dismissed the appeal by the department. The judgment reaffirmed the importance of considering the broad scope of charitable activities, especially in the context of education, when determining eligibility for tax exemptions under the Income Tax Act.