TaxTMI 
TaxTMI 
2011 (11) TMI 470
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.... Ordinance No.4 of 2009. Thus the petitioner is a University constituted on 27.01.2009 with the objective to pursue educational activities. The petitioner sought registration in Form No.56D under Section 10(23C)(vi) of the Act on 29.01.2009 vide Annexure P-3. The Commissioner of Income Tax vide its report dated 20.10.2009 submitted that in terms of clause (iiiad) and clause (vi) of Section 10 (23C) of the Act, the income and expenditure, to prove the existence of the university or other educational institutions, must come from educational activities. The words 'aggregate annual receipts' appearing in clause (iiiad) implies that the annual receipts must be from educational activities and not out of other sources or donations. It was thus reported that though the petitioner has received a sum of Rs.3,11,48,350/- during the financial year 2008-09, but that will not make the University eligible for exemption either under clause (iiiad) or under clause (vi) of Section 10(23C) of the Act. In response to the said report, vide letter dated 10.12.2009 (Annexure P-4), the Petitioner inter alia asserted that any income received by the University or other educational institutions whi....
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.... Whether a university is existing for the purpose of education will have to be determined not with reference to its intentions but with reference to the actual work done in the field of education. By its own admission educational activities have yet to commence. Unless these activities commence it cannot be held that the university is existing solely for the purposes of donation. 7. In view of the above, the primary condition laid down in the act having not been satisfied, the application of the applicant for approval under Section 10(23C)(vi) is not maintainable and is, therefore, rejected." In the present writ petition, challenging the said order, the petitioner relies upon Public Notice dated 09.11.2009 published by the University Grants Commission informing the general public that the Petitioner-University is competent to award degrees as specified under Section 22 of the University Grants Commission Act, 1956. Learned counsel for the petitioner has vehemently argued that the fact whether the petitioner is an educational institution is required to be determined keeping in view the objective for which the petitioner has been established in terms of Section 3 ....
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....tution but not actually engaged in imparting education does not satisfy the parameters for approval under Section 10(23C) of the Act. In Devi Educational Institution case (supra), the Division Bench of Madras High Court has held that taking of preliminary or necessary steps for the establishment of an educational institution cannot amount to actual bringing to existence of an educational institution. Learned counsel for the Revenue has also relied upon the judgment of Hon'ble Supreme Court reported as M/s Oxford University Press Vs. Commissioner of Income Tax AIR 2001 SC 886, wherein it has been held that an assessee has to establish that he is engaged in some educational activities in India and its existence in this country is not for profit only. We have heard learned counsel for the parties at some length, but found that the impugned order is not sustainable. But before we consider the respective contentions, certain statutory provisions need to be extracted. The same are as under: "2. In this Act, unless the context otherwise requires - xxx xxx xxx (24) "income" includes - xxx xxx xxx (iia) voluntary contributions r....
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....ase may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:" Rule 2CA incorporates the guidelines for approval as contemplated under sub-clauses (vi) and (via) of Section 10(23C). The relevant guidelines are as under: 2CA. (1) The prescribed authority under sub-clauses (vi) and (via) of clause (23C) of Section 10 shall be the Chief Commissioner or Director General, to whom the application shall be made as provided in sub-rule (2). xxx xxx xxx (3) The approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the 1st day of December, 2006 shall at any one time have effect for a period not exceeding three assessment years. {Sub-Rule (3) Prior to its substitution by the Income Tax (Fourteenth Amendment) Rules, 2006 w.e.f. 24.11.2006, reads as under: (3) The approval of the Central Board of Direct Taxes....
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....t the petitioner is a University established solely for educational purposes and not for the purposes of profit. But having found so, still the question; whether the petitioner has to actually work in the field of education before its request under Section 10(23C) (vi) considered, is required to be examined. The entire stress of the arguments of learned counsel for the Revenue is on the expression 'existing' appearing in Section 10 (23C) of the Act. The argument is that unless an institution is active in the field of education, mere fact that it is in the process of establishing itself would not make such institution as eligible for approval. In fact, it is argued that unless educational activities commence, it cannot be said that the University is existing solely for the purposes of education. The main stress of learned counsel for the Revenue was on the judgment of Devi Educational Institution case (supra), wherein, it has been observed as under: "...The Tribunal has merely proceeded on the basis that since the assessee-society has already taken steps to set up an educational institution, it should be taken to come within the scope of Section 10 (22). As al....
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....tion 10(22) of the Act. The High Court answered the question against the assessee by holding that the assessee was Oxford University Press and not the University of Oxford nor it did carry on activities in India. The only activity carried on by the Oxford University Press in India was the activity of printing and publishing books and selling and supplying the same as well as books published by other publishers for the purpose of profit. The assessee did not carry on its activities as a University or educational institution in India. Therefore, it could not be regarded as University or educational institution existing solely for educational purposes and hence income derived by it from any other activity would not qualify for exemption under Section 10(22) of the Act. It is the said reasoning, which was accepted by the Hon'ble Supreme Court, when it was held to the following effect: "36. Giving a purposeful interpretation of the provision it will be reasonable to hold that in order to be eligible to claim exemption from tax under Section 10(22) of the Act, the assessee has to establish that it is engaged in some educational activity in India and its existence in this countr....
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....re any such finding that the assessee is imparting any education or has any educational activity in India. In this view the assessee is not entitled to claim exemption. Any other interpretation would be absurd and manifestly unjust. The absence of word 'India' in this provision is inconsequential. It has to be read into Section 10(22). The literal construction would lead to manifestly unreasonable and absurd consequences as indicated above." A Division Bench of Calcutta High Court in Doon Foundation case (supra), was examining the question of exemption of an income of the University or other educational institution existing solely for educational purposes and not for profit. In the aforesaid case, the assessee had just begun its activity and during the year under consideration had started preparation of regular classes for teaching of Hindi and purchase some books and periodicals for laboratory. It was held to the following effect: "....The condition precedent for claiming exemption under Section 10(22) is, whether the educational institution exists solely for educational purposes and not for purposes of profit. There is no dispute nor can it be disputed that the asses....
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.... of education as and when necessary. The income derived from the activities mentioned above was treated as that of an educational institution and exempted." The income of Rs.3,11,48,350/- during the assessment year 2008-09 consist of endowment of Rs.3 crores received by the petitioner in terms of the provisions of the Haryana Act and the remaining amount is interest income from the said endowment. The petitioner has applied for approval on 29.01.2009 soon after the petitioner was included in the schedule on 27.01.2009. The petitioner has delineated steps taken by the petitioner for setting up of the University and has categorically averred that a Global Law College has started in September, 2009. Thus, in a period of 8 months, the petitioner was able to obtain recognition from the Bar Council of India; University Grants Commission and has also set up infrastructure for starting law courses. Therefore, in view of the judgments referred to above, the petitioner is existing educational institute. The expression 'existing' has to be interpreted keeping in view the social goal and objective of public interest to give incentives to an institution engaged in education. The expre....