AI Drafter 
TaxTMI 
TaxTMI 
2013 (3) TMI 484
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.... circumstances of the case, the Tribunal was correct in law in holding that the amendment of a deed of a codicil has a retrospective effect and consequently the benefits of section 11 were available to the trust for the assessment years 1986-87 and 1987-88 ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was not incorrect in law in not holding that the absolute discretion vested in the trustees by virtue of the trust deed would dis-entitle the trust for the benefits of section 11 of the Income-tax Act in the light of the decision of the Supreme Court in the case of Yogiraj Charity Trust v. CIT [1976] 103 ITR 777 (SC) ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income of the trust is exempt under section 10(22) of the Income-tax Act in spite of the fact that the benefits of the trust enure to the members of the trust and, consequently, the trust was not existing solely for educational purposes ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the trust was entitled to the benefits of section 11 o....
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....bmit that the Commissioner of Income-tax (Appeals) and the Appellate Tribunal ignored the violations and allowed the exemption under section 10(22), which is erroneous and contrary to the law laid down by the Supreme Court. He placed strong reliance on a decision of this court to which one of us (V. V. S. Rao J.) is a member in Aurora Educational Society v. Chief CIT [2011] 339 ITR 333 (AP). 5. The senior counsel for the assessee made the following submissions. Questions Nos. 2 and 3 are academic, because as noticed by the Com-missioner of Income-tax (Appeals), the memorandum of association was amended ; question No. 6 is based on finding of fact, which is not challenged and, therefore, it does not fall for consideration ; the Assessing Officer did not give reasons in coming to the conclusion that the assessee violated section 11(5) and 13(1)(c) ; and that there is nothing in the memorandum of association to show that the assessee exists for profits. He would urge that there is also no finding in the assessment order to that effect. Even if rule 3 of the memorandum of association initially restricted membership to the members of the family, it does not in any manner violat....
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....here was violation of the provisions of section 11(5) of the Income-tax Act and section 13(1)(c) of the Income-tax Act ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the income of the trust is exempt under section 10(22) of the Income-tax Act in spite of the fact that the benefits of the trust enure to the members of the trust and consequently the trust was not existing solely for educational purposes ?" 7. The question that would arise for consideration is whether the assessee is a charitable institution that solely exists for the purpose of education. 8. Incidentally, the question would also arise whether during the assessment years 1986-87, 1987-88 and 1988-89, the assessee incurred any disqualification so as to deny their benefit under section 11 of the Act. We considered these issues with reference to the order of the Assessing Officer, which appears to be the basis for the Revenue to seek the refer-ence. 9. The Assessing Officer issued notice under section 148 on October 27, 1987, referring to a letter dated September 30, 1987, issued by the Commissioner of Income-tax, wherein it was opi....
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....lding donation fund as a revenue receipt. 10. As rightly contended by the assessee's counsel, the Assessing Officer does not give any clear finding regarding violation of section 11(5) except making such a comment. Details therefor are not forthcoming in the assessment order. In so far as the alleged violation of section 13(1)(c) and 13(2) are concerned, the Assessing Officer no doubt took into consideration the fact that the funds of the assessee were invested in Vijaya Vani Printers, Maabadi and Patasala. These findings did not find favour with the Commissioner of Income-tax (Appeals). 11. The Appellate Commissioner recorded the finding, which we may quote verbatim. (i) In re investment I also find considerable force in the counsel's argument that the mistake, if any, was a bona fide one and could have been rectified. I am also of the opinion that the investments made towards "Maabadi", "Patasala" and "Vijaya Vani Printers" did not violate the provisions of section 11(5) of the Income-tax Act, 1961. These amounts were spent for fulfilling the objects of the trust. (ii) In re profit motive From the material brought to my notice that the ap....
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.... Associa-tion Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). (2) 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)). (3) The emphasis in section 10(23C)(vi) is on the word "solely". "Solely" means exclusively and not primarily (CIT v. Gurukul Ghatkeswar Trust (R. C. No. 35 of 1996, dated October 8, 2010) since reported in [2011] 332 ITR 611 (AP), CIT v. Maharaja Sawai Man-singhji Museum Trust [1988] 169 ITR 379 (Raj)). In using the said expression, the Legislature intends to exempt the income of institutions established solely for educational purposes, and not for com-mercial activities (Oxford University Press v. CIT [2001] 247 ITR 658 (SC)). This requirement would militate against an institution pursuing objects other than education (Vanita Vishram Trust v. Chief CIT [2010] 327 ITR 121 (Bom)). Even if one of the objects enables the institution to undertake commercial activ....
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....erely ancillary or incidental to the dominant purpose would not disentitle the institution from the benefit. (8) The test which has, therefore, to be applied is whether the object, which is said to be non-educational, is the main object of the institution or it is ancillary or incidental to the dominant object which is "educational" (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)). The test is the genuineness of the purpose tested by the obligation created to spend the money exclu-sively on "education". If that obligation is there, the income becomes entitled to exemption (Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC)). (9) 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 Asso-ciation [1980] 121 ITR 1 (SC) ; American Hotel and Lodging Associa-tion Educationa....
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....constitutes a benefit to him or if clauses (a) to (h) of section 13(2) are attracted. (14) The threshold conditions are aimed at discovering the actual existence of an educational institution and approval of the prescribed authority for which an application in the standardised form, in terms of the first proviso, has to be given by every applicant. If the prerequisite condition, 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)). (15) "Charitable purpose", under section 2(5) of A. P. Act 30 of 1987, brings within its ambit, amongst others, education also. To find out the object for which a society has been established, the provisions of section 2(5) of A. P. Act 30 of 1987, whi....