TaxTMI 
TaxTMI 
2003 (12) TMI 306
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....l be solely for educational purposes and not for the purpose of profit. In furtherance to the above object, the society will carry out the following: (i) Teach literary, scientific, social, cultural, moral, religious, industrial, technical, commercial and other useful educational knowledge. (ii) Conduct classes, seminars, workshops, debates, symposiums, meetings and other activities considered necessary for the promotion of the education. (iii) Give loans, scholarships, freeships, prizes and monetary assistance to students to meet the cost of their education. (iv) Print and publish any news-letters, periodicals, journals, leaflets, books, etc., that the society may consider necessary for the furtherance of its objects. (v) Establish libraries, reading rooms and equip them with the necessary supply of books, newspapers, periodicals, furnitures etc., for the purpose of educational activities. (vi) Establish, construct, organize, consolidate, support, develop, acquire, takeover, conduct, equip, endow, improve, alter, extend, maintain and administer educational institutions of their branches in India or any part thereof, ir....
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....now perused the accounts filed for financial years ending on 31-3-1999, 31-3-2000 and 31-3-2001 and noted that huge surplus were being generated every year. From the perusal of College account which was said to be the main account, the CIT-I noted the excess of income over expenditure of Rs. 21,09,644 for financial year 1998-99, Rs. 31,34,715 for financial year 1999-2000 and Rs. 44,20,504 for financial year 2000-2001. He also noted from Form No. 10B of the Report of Auditors that excess so generated had been applied in formation of capital assets. The CIT-I also observed that substantial amounts have been generated from College account to Society account and he gave an amount of Rs. 4 lakhs in financial year 1999-2000 and Rs. 50,000 in financial year 2000-2001. In the same way, CIT-I noted the figures from accounts of the School which was found running on smaller scale and excess of income over expenditure was Rs. 26,760, Rs. 60,333 and Rs. 18,867 in financial years 1998-99 to 2000-2001. The CIT-I also noted that there were revenue surplus in these three financial years out of which substantial amount was applied for land/building capitalization. On all these factual position, the ....
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....Enclave Education Society and 'charitable purpose' in the Explanation attached to that section was found to have the same words as used in section 2(15) of the Act. The CIT-I further noted that fee being charged from students was in the range of Rs. 400 to Rs. 600 per month and the same was noted to be on higher side resulting into excess of income over expenditure each year. The CIT-I also noted that surplus has been used to create huge capital infrastructure and every year the surplus was being generated. The assessee society was found fed out of students' fee which was a fact not fit well in the matrix of claim of the assessee society for charitable purposes. The CIT-I also referred to the ratio of the Apex Court decision in the case of Safdarjung Enclave Education Society in which their Lordships had given out that assessor who levied municipal tax on that society found that society was run commercial line. Secondly instead of society feeding school, assessor found that school was feeding the society; and thirdly the donations were not voluntary but being forced on students. The CIT-I was of the view that the first few observations of the Lordships were fully applic....
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....n which the Lordships observed that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object, as education has acquired a wider meaning in the modern day, CIT-I was of the view that judgment of Their Lordships is an example of dynamic nature of law. It takes into account the fact that today meaning of 'education' has become very wide and this aspect has to be kept in view while giving the meaning to it. The CIT-I was of the view that Their Lordships have taken a note of present day scenario where running of school has become business for many. The CIT-I opined that there cannot be a charity where parents are subjected to unusually high fees merely to create huge surplus to be used in constructing huge buildings. The CIT-I distinguished the case law referred to by the learned counsel for the assessee and on the basis of above, he was of the view that the object of the assessee society which is running the educational institution on commercial principles are not charitable. The assessee society was not conducting any charitable activity and does not exist for a charitable purpose. It is not fit for registration and applicat....
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....he learned counsel pointed out that Their Lordships have specifically mentioned in para 78 that ruling arising out of Income-tax Act may not be of great help because in the Income-tax Act 'charitable purpose' including the relief of the poor, education, medical relief and the advancement of any other object of general public utility, but the definition under the Delhi Municipal Corporation Act was narrower in scope. On the basis of these observations, the contention of the learned counsel for the assessee is that CIT-I, Lucknow was not justified to apply the same ratio to the facts of the present case, particularly when Their Lordships made it clear that provisions of Income Tax Act are wider in terms than to the provisions of Delhi Municipal Corporation Act. 11. The learned counsel further submitted that in the case of the assessee society, it is to be noted that the same was formed only and solely for the object of educational institution and that object is being followed, as the strength of students from 1997 onwards had been more than 1500 and numbers of staff is also around 50 numbers. The assessee society was running school from classes Pre-Nursery to V and college....
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....AT) 118-(Asr.), which are also on the same line. The learned counsel submitted that advancement of education by itself is a charitable purpose and for that learned counsel has referred to the decision of Commissioner v. University College of North Wales 5 Tax Cases 408 and that of Municipal Corpn. of Delhi . Children Book Trust [1992] 3 SCC 390. 14. The learned counsel also argued that in case there was excess of surplus, then the same fact was not found sufficient to deny the exemption as laid down in the case of CIT v. Gayathri Women Welfare Association [1993] 203 ITR 389 (Kar.) and Birla Vidya Vihar Trust v. CIT [1982] 136 ITR 445 (Cal). 15. On the basis of above submissions, the learned counsel for the assessee submitted that the view taken by the CIT-I based on the decision of the Apex Court in the case of Safdarjung Enclave Education Society is misplaced and not sustainable in the eye of law while the decision of the Jurisdictional High Court as well as other cases referred to above are fully applicable to the facts of the case and assessee was entitled for getting the registration. 16. So far as the learned D.R. is concerned, the order of CIT-I was read at length an....
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....d section 12AA of the Act was inserted from 1-4-1997 which provides procedure for registration and gives out scope of powers of the CIT while considering the application for registration moved by any Trust or Institution. We are reproducing the same as the same will give out the actual words used by the Legislator from which it can be gathered as to what is the scope of powers of the CIT while processing the application :- "Procedure for registration. 12AA. (1) The [***] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf, and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to regist....
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.... an application for registration under section 12A of the Act is actually carrying on the activities which are genuine or not. The second requirement is whether the object of the Assessee Society/ Institution is in consonance with the requirement of section 11/13 of the Act. No other enquiry is contemplated by this section of the Act. We have to abide by the words used by the Legislature. The Legislatures are wise enough and they must be fully aware about the applications of using words 'genuineness of the activities of the Trust or Institution'. If they were going to give more powers, the Legislatures must have used the other words clothing the CIT that other powers to verify as to whether assessee Trust or Institution is carrying on such activities which may prima facie indicate that he is entitled to get benefit under section 11/13 of the Act. Unless Legislatures have not used those words, it is not within the competence of the authorities to add or delete any words or infer any implied words in any provisions of the Act. It is well-settled proposition of law that fiscal statute are to be examined, as the same stand. The authorities concerned when interpreting the same a....
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....ct of the matter and followed the decision of Fifth Generation Education Society's case. The result is that all the case law referred to by the learned counsel for the assessee in respect of provisions of section 12A is not relevant for deciding this appeal of the assessee. 23. So far as reliance by the CIT-I on the observations of the Apex Court in the case of Safdarjung Enclave Education Society is concerned, we may refer that the Apex Court in the case of Sun Engg. Works (P.) Ltd. has observed as under :- "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision." 24. The same type of word o....
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.... to 68 of the above referred to judgment while discussing the order of the CIT-I. Their Lordships have given conclusion in paras 76 to 78 which are as under :- "76. In view of the above rulings, it would be clear that where the predominant object is to subserve charitable purpose and not to earn profit it would be a charitable purpose. However, the argument of the appellant is as per the Delhi School Education Act and the rules framed thereunder, if the society cannot utilize the fund and the school cannot be run for private gain in the absence of any profit, it would be a charitable purpose. 77. We have already seen that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object. Today, education has acquired a wider meaning, if education is imparted with a profit motive, to hold, in such a case, as charitable purpose, will not be correct. We are inclined to agree with Mr. B. Sen, learned counsel for the Delhi Municipal Corporation in this regard. Therefore, it would necessarily involve public benefit. 78. The rulings arising out of Income-tax Act may not be of great help because in the Income-tax Act &#....