2018 (11) TMI 1496 - HC - Income Tax

High Court rules exemption under Income Tax Act applies to trust as a whole, not institution-specific

The Commissioner of Income Tax (Exemptions), Pune Versus Deccan Education Society

The High Court upheld the Tribunal's decision regarding the exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961, for educational ... Exemption u/S. 10(23C)(iiiab) - whether the exemption under Section 10(23C)(iiiab) is specific to the assessee trust or whether such exemption can be examined by further bifurcating the position of different institutions which are run by the assessee trust? - Held that:- Section 10(23C)(iiiab) grants exemption in relation to any income received by any person on behalf of any university or other educational institution existing solely for educational purposes and not for the purpose of profit, and which is wholly or substantially financed by the Government. This provision, thus, exempts the income received by a person on behalf of the institutions specifying the requirements of the said clause. The exemption is not relatable to the individual institution run under the common umbrella of a Trust. Therefore, if the assessee trust satisfies the statutory requirement noted above, the exemption provision would apply, irrespective of the fact that in isolated cases of a few institutions runs by such Trust, the requirement may not be seen to have been fulfilled. From the above, it is very clear that it is the trust or the society that has to apply for registration and claim exemption. Had it been the intention of the legislature to grant exemption only to the institutions individually or independently and not to the society as a whole, the language would have been different. The society or trust may run more than one institutions. Therefore, the argument of the Revenue that it should be institution specific and not the society as a whole in our opinion is not correct. No question of law arises Issues:Challenge to Tribunal's judgment on exemption u/S. 10(23C)(iiiab) for educational institutions under a trust.Analysis:The appeal before the High Court challenged the Tribunal's judgment related to the Assessment Year 2008-09 concerning the exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961. The appellant, the Revenue, questioned whether the Tribunal was correct in holding that the exemption was available to the entire society despite some institutions under the assessee trust being unaided and falling outside the purview of the Act. The respondent, a registered Public Charitable Trust, operated various educational institutions, including schools, colleges, and vocational institutions in Maharashtra. The assessing officer allowed exemption for institutions receiving government grants or with total receipts under Rs. One Crore but disallowed it for three institutions with receipts exceeding the threshold. The CIT (Appeals) upheld this decision, leading to the appeal before the Tribunal, which ruled in favor of the assessee, citing the Supreme Court's judgment in the Aditanar case.The central question revolved around whether the exemption under Section 10(23C)(iiiab) applied to the entire trust or could be analyzed institution-wise. The High Court rejected the Revenue's argument that the trust did not exist solely for educational purposes, emphasizing that generating a surplus did not disqualify an institution. The Court highlighted that the exemption was for institutions existing solely for educational purposes and substantially financed by the Government, not specific to individual institutions under a trust. Therefore, if the trust met the statutory requirements, the exemption applied, regardless of individual institutions not meeting the criteria. The Court clarified that the legislative intent was to grant exemption to the society or trust as a whole, not to individual institutions, even if multiple institutions were operated by the same trust. Consequently, the argument that exemption should be institution-specific was deemed incorrect.In conclusion, the High Court upheld the Tribunal's decision, dismissing the Income Tax Appeal as no question of law arose. The judgment emphasized that the exemption under Section 10(23C)(iiiab) applied to the trust or society as a whole, and the Revenue's contention for institution-specific exemption was unfounded based on established legal principles and statutory interpretation.