TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 376
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....als, we have heard Shri Sumit Nema, learned counsel for the assessee and Shri Darshan Singh, learned CIT DR. The crux of arguments on behalf of the assessee is identical to the ground raised by further submitting that the learned CIT(A) erred in taking a view that surplus of income over expenditure is a taxable business income, despite the fact, the institution was established for providing education to the general public and surplus, if any, generated by the institution must be applied solely and wholly for the purpose of expanding and promotion of education. The learned counsel placed reliance on the decision from Hon'ble Delhi High Court in the case of St. Lawrenace Educational Society & Others (WP(C) 1254/2010, WP (C) 2463/2010 - The Baptist Educational Society and others v. Chief CIT order dated 4th February, 2011 and placed the copy of the said order on record. Reliance was also placed upon the decision in Governing Body of Rangaraya Medical College v. ITO 117 ITR 284 (AP), American Hotels (301 ITR 86), Pine Grow International Charitable Trust; 188 Taxman 402 (P&H); Vanita Vishram Trust v. CCIT; 327 ITR 121 Bom; Maa Saraswati Trust [2010] 194 Taxman 84 (HP) and Bihar State Te....
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....had to the similitude of the issue involved in both the writ petitions, they were heard together and are being disposed of by a singular order. For the sake of clarity and convenience the facts in W.P. (C) 1254/2010 are adumbrated herein. 2. The assessee-petitioner, a society registered under the Societies Registration Act, 1860 filed an application in Form No. 56D for grant of approval for exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 (for brevity, the Act) on 30th September, 2008 for the financial year 2008-09 before the Chief Commissioner of Income Tax, Delhi (Central). The authorized representative on behalf of the assessee-petitioner appeared and a query was made by the authority why the application should not be rejected in view of the decision rendered by the Uttarakhand High Court in CIT v. Queens' Educational Society & Another [2009] 319 ITR 160. A written submission was filed contending, inter alia, that the assessee-society is basically engaged in imparting education inasmuch as it is running a school from nursery to 10th standard and the principal and primary objective of the society is to impart education and not to earn profit. It was al....
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....purpose of profit. Hence, the application for the assessee-applicant, seeking grant of approval for the purpose of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 for the financial year 2008-09 is hereby rejected." 4. Mr. V.P. Gupta, learned counsel for the petitioner submitted that the respondent has fallen into a grave error by expressing opinion solely on the basis of the decision rendered in Queens' Educational Society (supra). Learned counsel also submitted that the decision in the case of Queens' Educational Society (supra) has been distinguished by the Bombay High Court in Vanita Vishram Trust v. Chief Commissioner of Income-Tax and Another [2010] 327 ITR 121 (Bom.), Himachal Pradesh High Court in Maa Saraswati Trust v. Union of India and Punjab and Haryana High Court in Pinegrove International Charitable Trust v. Union of India and Others [2010] 327 ITR 73 (P&H). 5. Mr. Sanjeev Sabharwal, learned counsel for Revenue supported the order passed by the competent authority. 6. In Aditanars Educational Institution (supra) the Apex Court while dealing with the factum of exemption has held thus:- "The language of section 10(22) of the Act ....
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....be applied by posing the question whether it exists solely for education and not to earn profit [See 5-Judges Constitution Bench judgment in the case of Surat Art Silk Cloth Manufacturers Association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble the Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus, on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act. The parameters of earning profit beyond 15 % and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. The cases where exemption has been granted earlier and the assessments are complete with the finding that there is no contravention of the statutory provisions, need ....
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....t of the aforesaid decisions." 3.2 We find that while coming to a particular conclusion, the learned CIT(A) discussed the decisions in IIM, Bangalore v. CIT [2009] 121 TTJ (Bang.) 560; Maharashtra Rajya Sahkari Sangh v. ITO [2011] 7 ITR 675 (ITAT), ACIT v. Gold Mines Shares & Finance Pvt. Ltd. [2008] 302 ITR (AT) 208 and Queens Educational Society, etc. along with others. It is noted that the Hon'ble Bombay High Court in a later decision dated 6th May, 2010 in Vanita Vishram Trust distinguished the decision of Hon'ble Uttarakhand High Court in Queens Education Society; 319 ITR 160 and considered various decisions like Aditanar Educational Institution v. Addl. CIT; 224 ITR 310 (SC), Pinegrove International Charitable Trust; 327 ITR 73 (P&H), Trustees of Vanita Vishram v. CIT (280 ITR 345)(Bom.) and held that petitioner will be entitled to succeed by enlightening on the scope of section 10(23C) wherein investment of surplus from activities applied for educational purposes, rejection of approval u/s 10(23C)(vi) was held to be not valid. We have carefully gone through the order from Hon'ble Delhi High Court as reproduced hereinabove. The basic crux of the order by the Hon'ble High Cou....
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....therefore, we are summarizing such receipts hereunder: (Amounts in lacs) AY/FY Gross fees/other income Gross expenses Advance to exam carters consider as exp. Surplus Expenses Born by Govt. directly (estimated) Initial capital by Govt. of MP 1996-97 50 lacs FY-31.3.04 1017.87 407.05 101.17 509.65 82.50 No grant FY-31.3.05 973.15 451.91 107.13 414.11 82.50 No grant FY-31.3.06 879.38 1028.85 33.80 -183.27 82.50 No grant FY-31.3.07 1039.08 346.54 16.08 676.46 82.50 No grant FY-31.3.08 1666.98 1240.82 25.47 400.69 82.50 No grant FY-31.3.09 2459.67 384.77 77.79 19997.11 82.50 No grant If the language used in the section is analysed, it speaks about educational purposes and not for the purposes for profit and at the same time, it should be wholly and substantially financed by the Govt. If the aforesaid chart is analysed, one fact is clearly oozing out that there is huge profit generated which is as on 31.3.2009 at Rs. 1997.11 lacs. So far as the next condition of wholly and substantially financed by the Govt., we find that only during 1996-97, the amount of Rs. 50 lacs was granted by the Govt. and th....