TaxTMI 
TaxTMI 
2010 (12) TMI 1031
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....gistrar of Societies. The objects, after amendment, are said to be as under : (a) To start educational institutions, libraries and law colleges, etc. (b) To organize seminars, workshops, debates, camps and forums etc., to students ; (c) To encourage educational activities among the students ; (d) To open, run and continue primary, secondary and high schools for students ; and (e) To help poor people to study. 4. The petitioner claims to be running various educational institutions including P. G. colleges, engineering colleges, etc., after obtaining necessary approval from the appropriate authorities. They also claim to have filed income-tax returns seeking exemption under the Act contending that their existence is solely for educational purposes and not for profit. 5. The petitioner claims to have submitted an application on May 31, 2005, in Form 56D seeking exemption for the assessment year 2004-05, along with all necessary enclosures, before the Director of Income-tax (Exemption) as their gross collections were likely to exceed Rs. 1 crore. They also claim to have filed another application in Form 56D on March 26, 2007, along with ....
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....ted that the petitioner's application dated September 24, 2008, was rejected by an order dated September 24, 2009, on the ground that the application was submitted beyond the time limit specified in the fourteenth proviso to section 10(23C) ; the objects of the petitioner-society, as amended on August 13, 2009, would be applicable only from the assessment year 2010-11 ; the petitioner did not furnish particulars of their having filed their return of income, with necessary evidence such as inward number, date of filing, etc., and, as such, their claim that they existed solely for educational purposes, from the assessment year 2004-05 onwards, was not correct. 9. In their rejoinder, the petitioner would submit that their primary object is to provide education without profit motive, their objects are all related to educational purposes only ; they had amended their objects only at the instance of the authorities ; in so far as the application dated March 26, 2007, is concerned, the second respondent was taking inconsistent stands ; the petitioner had filed their application on the said date, and had obtained acknowledgment in the office copy and the second respondent had given....
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....el of colleges and schools, it should be regarded as an "educational institution" (Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 (SC)). 6. Educational institutions, which are registered as a society, would continue to retain their character as such and would be eligible to apply for exemption under section 10(23C)(vi) of the Act (Pinegrove International Charitable Trust v. Union of India [2010] 327 ITR 73 (P&H)). 7. To be eligible for exemption, under section 10(23C)(vi) of the Act, it is necessary that there must exist an educational institution. Secondly, such institution must exist solely for educational purposes and, thirdly, the institution should not exist for the purpose of profit (CIT v. Sorabji Nusserwanji Parekh [1993] 201 ITR 939 (Guj)). 8. The recipient of the income must have the character of an educational institution to be ascertained from its objects. If the activity has no co-relation to education, exemption has to be denied (Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 (SC)). 9. The emphasis in section 10(23C)(vi) is on the word "solely". "Solely" means exclusively and not primarily (CIT v. Gur....
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....ion" must exist "solely" for educational purposes (CIT v. Maharaja Sawai Mansinghji Museum Trust [1988] 169 ITR 379 (Raj)). 13. The element of imparting education to students, or the element of normal schooling where there are teachers and taught, must be present so as to fall within the sweep of section 10(23C)(vi) of the Act. Such an institution may, incidentally, take up other activities for the benefit of students or in furtherance of their education. It may invest its funds or it may provide scholarships or other financial assistance which may be helpful to the students in pursuing their studies. Such incidental activities alone, in the absence of the actual activity of imparting education by normal schooling or normal conduct of classes, would not suffice for the purpose of qualifying the institution for the benefit of section 10(23C)(vi) (CIT v. Sorabji Nusserwanji Parekh [1993] 201 ITR 939 (Guj)). 14. Section 2(15) is wider in terms than section 10(23C)(vi) of the Act. If the assessee's case does not fall within section 2(15), it is difficult to put it in section 10(23C)(vi) of the Act (CIT v. Maharaja Sawai Mansinghji Museum Trust [1988] 169 ITR 379 (Raj)).....
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....1. The activities of the institution, its objects, its source of income and its utilisation, must be analysed by the prescribed authority to ascertain whether it exists solely for education and not for profit, and it is his duty to ascertain whether the income is applied wholly and exclusively for the educational objects for which the applicant is established (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) ; American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). 22. The test of predominant object of the activity is to be seen, whether it exists solely for education and not to earn profit (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC), American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC), Pinegrove International Charitable Trust v. Union of India [2010] 327 ITR 73 (P&H)). The decisive test is whether, on an overall view of the matter, the object is to carry on educational activities or to make profit (Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310 (SC)). 23. While the object of establishing an education....
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.... long as the purpose of accumulation is the application of the income wholly and exclusively for the purpose of education (Vanita Vishram Trust v. CIT [2010] 327 ITR 121 (Bom)). That the third proviso to section 10(23C)(vi) permits investment and deposits, of its surplus, in a fund means that the institution can have deposits on which it may earn interest (City Montessori School (Regd.) v. Union of India [2009] 315 ITR 48 (All)). 29. The idea underlying the twelfth proviso to section 10(23C) is to provide guidance to the prescribed authority as to the meaning of the words "application of income to the objects for which the institution is established" (American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). 30. In view of the twelfth proviso to section 10(23C) of the Act, money advanced to another educational institution cannot be treated as application of income to the objects for which the petitioner-society is established ; such a transaction would only mean that the funds of the applicant-society have not been utilised solely for the purposes of education and the applicant-society would, therefore, be disentitled from being g....
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....xemption is sought. 35. The fourteenth proviso to section 10(23C) has been inserted, inter alia, to provide for a period of limitation for entertaining an application, under section 10(23C)(vi) for grant of exemption, on or after the 1st day of June, 2006. The Legislature has, however, not made any provision for con-donation of the delay in presenting such an application. 36. The prescribed authority, being a creature of the statute, cannot travel beyond the statutory provisions and does not have the jurisdiction to entertain an application filed under section 10(23C)(vi) beyond the statutory period of limitation or to condone the delay in presenting the said application (Roland Educational and Charitable Trust v. Chief CIT [2009] 309 ITR 50 (Orissa)). 37. It is evident, from the provisos to section 10(23C)(vi), that there is a difference between stipulation of conditions and compliance thereof (Vanita Vishram Trust v. CIT [2010] 327 ITR 121 (Bom)). At the initial stage, when an application for exemption is submitted by an educational institution, the scope of inquiry is restricted only to ascertain the genuineness of the activities of such an institution. Such an ....
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....tion, of actual existence of the educational institution, is fulfilled then the question of compliance with the requirements, contemplated by various provisos, would arise. Only if the educational institution actually exists for educational purposes alone should it be permitted to operate subject to the monitoring conditions to be stipulated by the prescribed authority (American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC) ; Pinegrove International Charitable Trust v. Union of India [2010] 327 ITR 73 (P&H)). 42. Compliance with the monitoring conditions/requirements under the third proviso, like application, accumulation, deployment of income in specified assets, whose compliance depends on events that have not taken place on the date of the application for initial approval, can be stipulated as conditions by the prescribed authority subject to which approval may be granted, provided they are not in conflict with the provisions of the Act. 43. While imposing such conditions the prescribed authority may insist that a certain percentage of the accounting income should be utilised/applied for imparting education. He may grant....
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.... the matter to get the institution registered under the provisions of the Act is of no legal consequence (Secretary to Government, Revenue (Endowments), Department of A.P. v. Sri Swamy Ayyappa Co-operative Housing Societies Ltd. [2003] 6 ALT 62 (AP)). 50. While failure to register themselves under A. P. Act 30 of 1987 may attract the penal provisions therein, the said Act does not prohibit public charitable institutions from carrying on their activities even though they are not registered under the Act. 51. As "education" falls within the scope of "charitable purpose" both under section 2(5) of A. P. Act 30 of 1987 and section 2(15) of the Income-tax Act and, inasmuch as A. P. Act 30 of 1987 requires all charitable institutions in the State of A. P. to be registered, societies running educational institutions should register themselves under the provisions of A. P. Act 30 of 1987, as failure to so hold would result in one arm of the law being utilised to defeat another arm of the law which would not only be opposed to public policy but would also bring the law into ridicule (Bihari Lal Jaiswal v. CIT [1996] 217 ITR 746 (SC)). 52. Even in cases where a society is re....
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....hat the society concerned exists for the charitable purpose of carrying on educational activities. 11. The burden of establishing that an application in Form 56D was filed, as early as on May 31, 2005, lies heavily on the petitioner. The copy of the application placed before this court does contain the seal of the office of the Director of Exemption. However, in the light of the averment in the counter affidavit, that receipt of the said application dated May 31, 2005, is not borne out by the records, the conduct of the petitioner must also be noted. Having filed the application on May 31, 2005, it defies reason that the petitioner would not follow up the matter with the first respondent and would wait for nearly two years to make the subsequent application dated March 26, 2007, and to again wait for more than one year thereafter before submitting the application on September 24, 2008. We are, therefore, unable to brush aside the submission of Sri J. V. Prasad, learned standing counsel, that the applications, said to have been filed on May 31, 2005, and March 26, 2007, are created only to get over the amendment to the fourteenth proviso which came into force with effect fro....