TaxTMI 
TaxTMI 
2017 (11) TMI 1740
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....r for exemption was rejected by the respondent vide the impugned order dated 20.9.2013, inter alia, on the ground that the Society had disproportionate fee structure which was devised to earn maximum money for the purpose of expansion of the institution. It is stated in the impugned order that the expansion of institution may not fall into the ambit of charitable activity. 2. Learned Counsel for the petitioner has argued that the respondent authority has erred in law in giving finding against the petitioner society. Petitioner society has to levy the fee as per law and the surplus amount, if any, is required to be invested for increasing the infrastructure and wherewithal. Construction of building is a sine qua non for imparting education. The school is also required to run buses to ferry the students. The school is also required to levy the computer fee. The primary purpose of the society is to impart education. Other ancillary objects are to be overlooked in view of the principal/main object. Learned counsel for the respondent has justified the impugned order. 3. The questions raised in this petition are no more res integra in view of the law laid down by their Lordships of....
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....d, therefore, it is not entitled to approval. For the aforestated reasons, according to the learned counsel, no interference is called for in the present case. 33. We also quote hereinbelow Section 11(1)(a) of the 1961 Act, which reads as follows: "11. Income from property held for charitable or religious purposes.-(1) Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; 38. In deciding the character of the recipient, it is not necessary to look at the profits of each year, but to consider the nature of the activities undertaken in India. If the Indian activity has no correlation with education, exemption has to be denied (see judgment of ....
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....iced that Section 10(23-C)(iii-ad) has three requirements - (a) the educational institution must exist solely for educational purposes; (b) it should not be for purposes of profit; and (c) the aggregate annual receipts of such institution should not exceed the amount of annual receipts as may be prescribed. Such prescription is to be found in Rule 2-CA being an amount of Rs. 1 crore. 6. The said Section 10(23-C)(iii-ad) was inserted by Finance Act 2 of 1998 with effect from 1-4-1999. Prior thereto, the Income Tax Act had a corresponding section, namely, Section 10(22) which was as follows: "10. Incomes not included in total income.-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- * * * (22) any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit;". 11. Thus, the law common to Sections 10(23-C)(iii-ad) and (vi) may be summed up as follows: (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it m....
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....plying the said judgment including the judgment which had been rendered by the Hon'ble Supreme Court in Children Book Trust11, it lost sight of the amendment which had been carried out with effect from 1-4-1999 leading to the introduction of the provisions of Section 10(23-C) of the Act. Lastly, that view is not consistent with the law laid down by the Hon'ble Supreme Court in American Hotel & Lodging Assn. Educational Institute9." It then summed up its conclusions as follows: (Pinegrove International Charitable Trust case2, SCC OnLine P&H para 8.13) "8.13. From the aforesaid discussion, the following principles of law can be summed up: (1) It is obligatory on the part of the Chief Commissioner of Income Tax or the Director, which are the prescribed authorities, to comply with proviso thirteen (un-numbered). Accordingly, it has to be ascertained whether the educational institution has been applying its profit wholly and exclusively to the object for which the institution is established. Merely because an institution has earned profit would not be the deciding factor to conclude that the educational institution exists for profit. (2) The provision....
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.... of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess income has been applied or accumulated for application wholly and exclusively for the purpose of education. (6) The judgment of Uttarakhand High Court rendered in Queen's Educational Society1 and the connected matters, is not applicable to cases which fall within the provisions of Section 10(23-C)(vi) of the Act. There are various reasons, which have been discussed in para 8.8 of the judgment, and the judgment of the Allahabad High Court rendered in City Montessori School13 lays down the correct law." And finally held: (SCC OnLine P&H paras 8.15 & 8.16) "8.15. As a sequel to the aforesaid discussion, these petitions are allowed and the impugned orders passed by the Chief Commissioner of Income Tax withdrawing the exemption granted under Section 10(23-C)(iv) of the Act are hereby quashed. However, the Revenue is at liberty to pass any fresh orders, if such a necessity is felt after taking into consideration the various propositions of law culled out by us in para 8.13 and various other paras. 8.16. The writ petitions stand disposed of in the abov....
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....he institution exists solely for educational purposes and not for profit, the test is met." 5. The Division Bench of Bombay High Court in 2010 (327) ITR 121 in the matter of 'Vanita Vishram Trust v. Chief Commissioner of I.T.' has held that the Trust is vested with primary object to provide education. Other objects mentioned in Trust are not relevant. Their Lordships have held as under: - "12. In so far the aspect of surplus is concerned, one must in addition, advert to the provision which has been made by Parliament in the third proviso to Section 10(23C). By the third proviso, it has been clarified that in the case inter alia of Universities or other educational institutions which have applied its income or accumulated it for application wholly and exclusively to the objects for which it is established and in a case where fifteen per cent of income is accumulated on or after 1 April 2002, the period of the accumulation of the amount exceeding fifteen per cent, shall in no case exceed five years. This provision would establish that Parliament did not regard the accumulation of income by a University or educational institution governed by subclause (vi) as a disabling f....
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....of the society after meeting all the expenses incurred towards imparting the education'. A reference was made to the judgment of the Supreme Court in Aditanar (supra). The judgment of the Supreme Court was, however, distinguished on the ground that the objects clause of the assessee indicated that while there were other objects to be achieved, the assessee had done nothing except to pursue the main object of providing education and earning profit. Moreover, with the profit earned, the assessee had strengthened its capacity to earn more, rather than to undertake any other activities to fulfill the other objects for which the trust was constituted. Though the Trust had made an investment in fixed assets like furniture and buildings which may be connected with the imparting of education this, the High Court held, was with a view to expanding the institution and to earn more income. 15. If the facts as they appear in the judgment of the Uttarakhand High Court are considered, the case would be entirely distinguishable. The judgment of the High Court would indicate that the assessee in that case was construed to be one which existed with the object of enhancing the income an....
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....r an application can be rejected on the ground that the memorandum of association of the society provides for various other objects apart from educational activities. In this regard, the argument of learned counsel for the petitioner is that even though under the unamended bye-laws of the society, various other aims and objects were mentioned but according to application for approval and the material on record, the society is only carrying on educational activities. In this regard, specific assertion has been made in para 2 of the application for approval. In para 7 of the application, there is a specific assertion that the only source of income of the society is the nominal fees being charged from students and it has no other source of income. Learned counsel for the petitioner has placed strong reliance on the judgment of this Court in the case of C.P. Vidya Niketan Inter College Shikshan Society (supra). We find that there the petitioner was a society which had made an application for approval under s. 10(23C)(vi) and its application for approval was rejected on the ground that benefit of s. 10(23C)(vi) is available only to an educational institution existing solely for the purp....