TaxTMI 
TaxTMI 
2018 (2) TMI 1347
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.... asked vide show cause notice dated 3.9.2012 to furnish the information/documents. Petitioner supplied the information, as asked for. 2. The gist of the reply filed by the petitioner-Society was that the surplus of the Society was utilized for the expansion/addition of school building. It was also stated that the building constitutes an integral part of educational institution and addition to the building would further advance the object of the Society. 3. The case of the petitioner Society was rejected by the impugned order dated 13.09.2012 passed by the respondent-Chief Commissioner of Income Tax. 4. Learned counsel for the petitioner has argued that the respondent authority has erred in law in giving findings against the petitioner society. On the other hand, learned counsel for the respondent has justified the impugned order. 5. Petitioner society was running 08 school buses to ferry the students. The case of the petitioner society was rejected primarily on the ground that the assessee could not produce any evidence that buses were being used for the school only. It was also stated while rejecting the case of petitioner that other than imparting educational, tourism....
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.... it has utilised its income in India in the year ending 31-3-1999. In this connection, learned counsel referred to Section 11(1)(a) which states that certain incomes shall not be included in the total income of the previous year of the person in receipt of such income if such income is derived from property held under trust, wholly for charitable or religious purposes, to the extent of which such income is applied to such purposes in India. The learned counsel submits that under Section 10(23-C)(vi) as well as the third proviso thereto, the words "in India" are not there but to give purposive interpretation to the said section the court should read those words into Section 10(23-C)(vi) to stop shifting of the "income"/profits accruing in India from being transferred to US. According to the learned counsel, when the appellant herein expatriated a sum of Rs. 1,30,30,288 or Rs. 1.14 crores (approx.) after taking into account expenses incurred by the HO to USA, it is clear that the appellant Institution has failed to comply with the requirements of Section 10(23-C)(vi) and, therefore, it is not entitled to approval. For the aforestated reasons, according to the learned counsel, no inte....
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....ion 10(22), which words also find place in Section 10(23-C)(vi), came for consideration. This Court held that location of the university is not relevant, what is relevant is-whether there is imparting of education in India. Therefore, the test formulated by this Court to decide the character of the recipient of income under Section 10(22) is whether there is in fact existence of an activity which is in the nature of "imparting of education in India". This is how the words "in India" have come into judgment and not by incorporation from Section 11(1)(a) of the 1961 Act, as contended on behalf of the Department." 9. Their Lordships of Hon. Supreme Court in 2015 (8) SCC 47 in the case of Queen's Educational Society v. Commissioner of Income Tax have held that the dominant object is to be applied whether the educational institution exists solely for educational purposes and not for purposes of profit. Their Lordships have also explained the application of three requirements to seek exemption u/s 10(23-c)(vi) of the Income Tax Act as under: - "5. It will be noticed that Section 10(23-C)(iii-ad) has three requirements - (a) the educational institution must exist solely for ed....
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....nal Society1. There are variety of reasons to support our opinion. Firstly, the scope of the third proviso was not under consideration, inasmuch as, the case before the Uttarakhand High Court pertained to Section 10(23-C)(iii-ad) of the Act. The third proviso to Section 10(23-C)(vi) is not applicable to the cases falling within the purview of Section 10(23-C)(iii-ad). Secondly, the judgment rendered by the Uttarakhand High Court runs contrary to the provisions of Section 10(23-C)(vi) of the Act including the provisos thereunder. Section 10(23-C)(vi) of the Act is equivalent to the provisions of Section 10(22) existing earlier, which were introduced with effect from 1-4-1999 and it ignores the speech of the Finance Minister made before the introduction of the said provisions, namely, Section 10(23-C) of the Act. (See observations in American Hotel & Lodging Assn. Educational Institute case9.) Thirdly, the Uttarakhand High Court has not appreciated correctly the ratio of the judgment rendered by the Hon'ble Supreme Court in Aditanar Educational Institution8 and while applying the said judgment including the judgment which had been rendered by the Hon'ble Supreme Court in Children Boo....
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....h 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 not be reopened. However, after grant of approval if it comes to the notice of the prescribed authority that the conditions on which approval was given, have been violated or the circumstances mentioned in 13th proviso exists, then by following the procedure envisaged in 13th proviso, the prescribed authority can withdraw the approval. (3) The capital expenditure wholly and exclusively to the objects of education is entitled to exemption and would not constitute part of the total income. (4) The 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(23-C)(vi) of the Act. (See para 8.7 of the judgment in Aditanar Educational Institution case8.) (5) Where more than 15% of income of an educational institution is accumulated on or after 1-4-2002, the period of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess inco....
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.... the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income Tax Act, 1961 does not condition the grant of an exemption under Section 10(23-C) on the requirement that a college must maintain the status quo, as it were, in regard to its knowledge-based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23-C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23-C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met....
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.... Supreme Court observed, is whether on an overall view of the matter, the object is to make a profit. In evaluating or appraising the issue, the Supreme Court noted that one should bear in mind the distinction between the corpus, the objects and the powers of the concerned entity. 14. The First Respondent while rejecting the applications of the Petitioner has adverted to the judgment of the Uttarakhand High Court in Commissioner of Income Tax v. Queens' Educational Society MANU/UC/0174/2007 : (2009) 319 ITR 160 The statement of facts as recited in the judgment of the High Court is to the effect that the assessee had a profit of thirty per cent in Assessment Year 200001 and twenty seven per cent in Assessment Year 200102. The assessee was conducting an educational institution. The Tribunal held that the assessee was entitled to the benefit of the exemption under Section 10(23C). The High Court observed that 'the law is well settled that if the profit is proved by an educational society then that will be the income to the Society as the surplus amount remains in the account books of the society after meeting all the expenses incurred towards imparting the education&#....
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.... was constituted. Were the assessee to pursue other objects, it would clearly run afoul of subclause (vi). The assessee must exist solely for educational purposes. In this view of the matter, while we hold that the facts of the present case are distinguishable, we have also recorded our reservations about the correctness of the statement of legal principle in the judgment of the Uttarakhand High Court. The attention of the Court has also been drawn to the fact that a Division Bench of the Punjab and Haryana High Court in Pinegrove International Charitable Trust v. Union of India CWP 6031 of 2009 decided on 29 January 2010 has also expressed reservation about the view of the Uttarakhand High Court in Queens' Educational Society (supra)." 11. The Division Bench of Allahabad High Court in (2013) 36 Taxmann.com 105 (Allahabad) in the matter of 'Neeraj Janhitkari Gramin Sewa Sansthan v. CCIT' has held that the application was maintainable to seek exemption on behalf of the society. Their Lordships have held as under: - "12. The next question which now arises for consideration is whether an application can be rejected on the ground that the memorandum of association of th....